RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/177 
22 January 2007  
 
(07-0237) 
Trade Policy Review Body Original:  English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by 
 
THE EUROPEAN COMMUNITIES 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by the European Communities is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Re view Body on the Eu ropean Communities. European Communities WT/TPR/G/177 
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CONTENTS 
  Page 
I. INTRODUCTION   5 
 II. KEY DEVELOPMENTS IN THE EC (2004-06)   5 
 (1) I
NSTITUTIONAL DEVELOPMENTS  5 
 (2) D EVELOPMENTS IN THE INTERNAL MARKET AND CENTRAL POLICY AREAS  6 
 (3) E CONOMIC PERFORMANCE , INCLUDING TRADE  9 
 
III. KEY DEVELOPMENTS IN THE EC 'S TRADE POLICY (2004-06)   10 
 (1) M AIN TRADE POLICY OBJECTIVES  10 
 (2) I NSTITUTIONAL SET-UP FOR TRADE POLICY -MAKING  12 
 (3) M AIN COMPONENTS OF EC TRADE POLICY  12 
 (i) The EC and the WTO  12 
 (ii) Bilateral, bi-regional and autonomous trade policy initiatives 15 
 IV. THE EC'S COMMITMENT TO  SUSTAINABILITY AND DEVELOPMENT (2004-2006)   19 
 
V. CONCLUSION    21 
 
 European Communities WT/TPR/G/177 
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I. INTRODUCTION 
1. The last Trade Policy Review of the European  Communities (EC) in the WTO took place in 
October 2004. The beginning of the reference period for this Trade Policy Review, late 2004, 
coincided with a new European Commission (the EC 's Executive organ) taking up office for a five-
year period. This junction provided an opportunity to  confirm and also, in some cases, redefine the 
EC's overall policy objectives, including for trade policy. 
2. Trade policy is one of the EC's major common po licies and reflects the external dimension of 
the EC's customs union and Internal Market. Furt hermore, it holds a key role for accomplishing the 
EC's wider objective of pursuing sustainable deve lopment, both at home and abroad, with the EC 
accounting for roughly one fifth of all global me rchandise trade and almost one third of global 
services trade. As before, the EC continued to fo llow the multilateral approach via the WTO as its 
primary trade policy route. The EC firmly believes in the need for further multilateral liberalisation 
and a strengthening of the multilateral trade polic y rule book as the only guarantor of true 
development for all WTO Members. Consequently, the EC has acted as one of the main motors 
behind the Doha Development Agenda (DDA) negotiations during the last few years. The EC 
continued to subordinate its other trade policy instru ments and measures to the priority granted to the 
multilateral route. Only where appropriate and neces sary, new bilateral or bi-regional initiatives were 
used as complements. 
3. Among the most important trade-related accomplis hments during the reference period, apart 
from the leadership demonstrated in the DDA, we re further steps toward the completion of the 
Internal Market following the EC's enlargement of  May 2004, the continuation of the reform of the 
Common Agricultural Policy, the further development and reform of the EC's Generalised System of Preferences, a clear commitment to policy coherence for development, and the pledge for significantly 
increased contributions of Trade-relate d assistance for developing countries. 
II. KEY DEVELOPMENTS IN THE EC (2004-06) 
(1) I
NSTITUTIONAL DEVELOPMENTS  
4. Following the accession of ten new Member States in May 2004, the EU successfully started 
to operate as an entity of 25. This enlargement has be en the most ambitious in the history of the EU; it 
was the largest ever in terms of number of c ountries and population acceding to the EU, and the most 
complex, as it brought in ten countries which had experienced very diverse economic, social and 
political developments. After two years, this enla rgement has proved a clear success not only in terms 
of its political and strategic implications for reuni fying Europe – namely by extending peace, stability, 
security, human rights and the rule of law acros s Europe - but also economically. The stability 
provided by accession helped to multiply trade and investment between the EC-15 and the EC-10 as 
well as within the EC-10, creating a win-win situatio n for all involved by contributing to growth and 
employment in the EC-10; opening new opportunities for firms in the EC-15, thereby strengthening 
their competitiveness; and having a favourable imp act on consumers across the EC, who can benefit 
from a wider choice. In addition, the EC's trading pa rtners also largely gained from this enlargement, 
as the average tariff applied by the EC-10 to im ports from third countries decreased significantly 
when they joined the EC's Common External Tariff and through new opportunities for trade in 
services and investment. Following the enlargemen t, the EC carried forward the necessary WTO 
procedures under GATT Article XXI V.6 in 2006 and launched th e necessary WTO procedures under 
GATS Article V. WT/TPR/G/177 Trade Policy Review 
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5. The period has also been marked by preparations  for the next enlargement to Bulgaria and 
Romania, which both joined the EU in January 2 007 as foreseen by the European Council and their 
Treaty on Accession of April 2005. As had been the case for the previous  enlargement, this 
enlargement had also been prepared by so-called Europe Agreements with Bulgaria and Romania, 
providing for progressive integration into the EC, through co-operation in many policy areas as well 
as legislative convergence with EC legislation, in pa rticular in the areas re levant to the Internal 
Market, such as standardisation, competition, public procurement and protection of intellectual, industrial and commercial property. Bulgaria and Romania also benefited from significant assistance 
under the PHARE programme during the pre-accession period. In line with WTO provisions, the EC 
notified this next enlargement to the WTO follo wing a final positive assessment by the Commission 
in September 2006. EU accession negotiations were launched with Turkey and Croatia during 2005, 
and the Former Yugoslav Republic of M acedonia was accorded candidate status. 
6. The new European Commission which took office in the autumn of 2004 identified growth 
and jobs as the most urgent issues facing Europe . The new Commission thus focused its strategic 
objectives for the period 2005-09 on three core princi ples: prosperity, solidarity and security for the 
enlarged EU. Economic and social reforms and a th riving knowledge economy would have to be the 
foundations on which Europe could return to the pa th for long-term prosperity. Externally, the EU 
would strive to live up to its commitment to m eet the Millennium Development Goals and make the 
EU a leading global partner for global justice, sustainable development, growth and prosperity, 
including through its trade policy.  
7. In June 2004, the European Council agreed on the text for an EU Constitution, which 
represented the most significant revision of the existi ng treaties in the history of the EC, implying also 
changes for the conduct of the EC's external trade policy. Since then, the ratification process by the 
Member States has started and continues. Two Member States have, however, not been able to ratify. In June 2006, the European Council started an inte rnal consultation process on how to continue the 
reform process, it being understood that progress mu st be made during the second semester of 2008 at 
the latest. 
(2) D
EVELOPMENTS IN THE INTERNAL MARKET AND CENTRAL POLICY AREAS  
8. In early 2005, a package of measures was launche d to give new impetus to the Lisbon agenda, 
the ten year program to reform and renew the European economy, with, under the new European 
Commission, a new focus on growth and employment . An integrated industrial policy was proposed, 
comprising sectoral and cross-cutting initiatives for the coming years. Complementary to this, the 
Commission proposed a modern SME Policy, which will provide a coherent framework for action. 
This modern policy is built on the Lisbon framework: key actions include promoting 
entrepreneurship, improving access to markets, cutting red tape, improving SMEs’ growth potential 
and strengthening dialogue  and consultation.  
9. To support the reform agenda of the EC, an initiative was launched aimed at better regulation 
in the EC, placing it within the growth and jobs Lisbon agenda. The initiative includes using impact 
assessments in drafting new legislation, reviewin g all legislative proposals pending before the 
legislator since before 2004, withdrawing those no longer relevant, and se tting out a simplification 
agenda (for example, in 2005, legislation on mutu al recognition of qualifications was simplified). 
10. The Stability and Growth Pact aims at ensuri ng sound and sustainable public finances through 
a set of rules which focus on the avoidance of an  excessive budgetary deficit and the attainment of 
appropriate medium-term budgetary objectives. In ea rly 2005, it was reviewed and transformed into a 
better and more balanced framework. Improved desi gn of the rules increases their economic rationale, European Communities WT/TPR/G/177 
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enhances their preventive role and allows for a better reflection of the economic realities in the 
25 Member States. They also better incorporate th e need to face long term sustainability challenges 
mainly stemming from the budgetary impact of an ageing population. At the same time, there is a 
reinforced commitment of Member States to pursue sound budgetary policies throughout the 
economic cycle. Finally, it can reinforce the mo mentum for economic reform, since the new rules 
ensure greater consistency between the objectives of fiscal discipline and implementation of the 
reforms called by the Lisbon agenda. 
11. Further progress was also made with advancing the employment and social dimension of the 
relaunched Lisbon strategy for more and better jobs and growth. This includes improved 
implementation of the European Employment Stra tegy and a new framework for the EC social 
protection and social inclusion process. The EC is also intensifying its efforts for combining flexibility and security with the involvement of so cial partners. Within the EC, a new initiative was 
taken to help reintegrate into the labour market workers made redundant due to changing global trade 
patterns. Under the European Globa lisation Fund, €500 million will be available each year, starting in 
January 2007. While the already existing EC Structural Funds support the anticipation and 
management of change with a strategic and long-te rm perspective, the new Fund will provide one-off, 
time limited individual support geared to helping workers who are 'severely and personally affected 
by trade-adjustment redundancies', it being underst ood that the Fund cannot be used to subsidize 
ailing industries. This initiative in the EC demons trates Community action to help Member States' 
economies adjust to major structural changes in  world trade patterns. The EC has also been 
strengthening its contribution to promoting decent work internally  and externally. Decent work, as 
defined by the ILO, covers employment, rights at work, social protection, social dialogue and gender 
mainstreaming. The UN Summit of September 2005 endorsed the need for fair globalisation and 
resolved to include the promotion of productive employment and decent work for all among the objectives of national and international policies. Following up on this, the European Commission 
issued a Communication in May 2006 on 'Promoting decent work for all', which identifies certain 
actions that will be developed both in internal and external policies including in the framework of EU 
enlargement, European neighbourhood policy, regional, bilateral and multilateral relations,  
development cooperation,  external aid and trade policy. 
12. Several measures were taken towards consolida tion of the Internal Market, which further 
improved the European business environment, to the benefit of economic operators both from the 
Member States and third countries. During the refere nce period, important steps included the adoption 
of the Services Directive in December 2006, which,  once transposed and implemented, will remove 
the remaining obstacles to the free circulation of services in the EC. Further important accomplishments were a White Paper for Financia l Services (2005-10), a supervisory framework for 
reinsurance companies and proposals for a simple and reliable legal framework that will bring down 
existing barriers to a Single Payments Area across the EC by 2010. A new Directive on cross-border 
mergers made it much easier for companies establis hed in different EC countries to cooperate and 
restructure themselves within the Single Market, a nd proposals on cross-border shareholders' rights 
will enable investors to get relevant informa tion on time and vote without encountering unnecessary 
obstacles, wherever they are in the EC. Strengt hening the credibility of financial reporting and 
enhancing the EC's protection ag ainst financial crime was also a key achievement. The Statutory 
Audit Directive injected more rigour into the a udit process, while all listed companies have now 
started to apply the International Accounting Standards system. In addition, the 3rd Money 
Laundering Directive will further improve the stability and reputation of the fi nancial sector and boost 
the fight against terrorist financing and organised crime. The EC regulatory framework for electronic 
communications took effect in July 2003 and ai ms at establishing a ha rmonized regime across 
Member States, promoting more competitive mark ets and technology-neutral regulation, while 
guaranteeing basic consumer interests. An important  aspect of the regulatory package has been the WT/TPR/G/177 Trade Policy Review 
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obligation for Member States to conduct market reviews to determine whether or not they are 
competitive and to impose adequate remedies if a market is not found competitive. Currently, the 
European Commission is in the process of reviewing the functioning of the electronic communications framework. 
13. The consolidation of the Internal Market has now  come very far but gaps still remain. In the 
coming period, more emphasis on ensuring the proper  implementation and enforcement of all Single 
Market rules across the EC will be necessary, as well as identifying areas in which further 
approximation of national regulations is needed. 
14. Since the last EC TPR, further steps were taken in the field of intellectual property with 
relevance for external trade. In May 2006, the EC adopted a Regulation on compulsory licensing of 
patents relating to the manufacture of pharmaceutic al products for export to countries with public 
health problems, thereby creating a legal basis for the granting of compulsory licences for export 
purposes, as foreseen by the WTO General Counc il Decisions on TRIPS and public health of 
30 August 2003 and 6 December 2005. Being a mark et that traditionally invests in creativity, 
research, design and quality, and receiving consider able added-value for this effort, the EC is 
particularly affected by poor enforcement of inte llectual property rights, not least in third countries. 
The European Commission therefore continued to work towards the improvement of enforcement, 
both within the EC and at its external borders. To  efficiently fight against acts of counterfeiting and 
piracy, it also stepped up co-operation with its tr ading partners. The EC's public procurement regime 
was further refined during the reporting period, wi th the main objectives of simplifying the legal 
framework, making it more flexible and adapting it to  the electronic era. Public procurement in the 
EC is conducted in a transparen t and non-discriminatory manner. 
15. The far-reaching reform of the Common Agricu ltural Policy (CAP) which was launched in 
September 2003 continued. The revised CAP introduced the principle of "full decoupling", which implies that farmers will be free to decide wh ether they will produce or not, and what they will 
produce, allowing them to gear their production to  market signals. Member States only have the 
possibility to maintain a limited link on well-defi ned terms so as to prevent certain forms of 
production being abandoned. The aim of this 'dec oupling' is to increase the competitiveness of 
Europe's farmers while assuring them a stable income and eliminating trade distortions. The new system of payments will strengthen Community poli cies in favour of rural development and be linked 
to the observance of environmental, food safety a nd animal welfare standards. The single payment 
scheme entered into force in 2005. The CAP refo rm has also been the basis from which it was 
possible for the EC to make a far-reaching offer in the agricultural negotiations under the DDA in 
terms of reductions of aggregate levels of support, conditional upon a satisfactory outcome of the 
DDA negotiations in all areas of the Single Undertaking. 
16. In February 2006, a thorough reform of agri cultural support policy for sugar was decided 
upon and became operational in July 2006. For tob acco, olives, cotton and hops, reforms had already 
been decided upon in 2004 and have also entered in to force since then; similar reforms of wine and 
fruits and vegetables will now be the next steps. 
17. Reform of the Common Fisheries Policy (CFP) had already started in 2002 and included strict 
capacity management measures implying that the cap acity of the EC fleet will decrease steadily over 
time. The reform of the CFP also put an end to publ ic aid for the renewal of the fishing fleet and for 
the export of capacity to third countries. The new capacity management regime has been in 
application for more than three years and is judge d to be successful. The EC aims at a progressive 
implementation of an ecosystem-based approach to fisheries management, which contributes to 
efficient fishing activities within an economically viable and competitive fisheries industry, while European Communities WT/TPR/G/177 
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minimising the impact of fishing on marine ecosys tems. During the reference period, further steps 
towards this objective were taken. 
18. In June 2006, the Commission launched the first step towards an integrated maritime policy 
for the EC, which would develop a thriving maritime economy and the full potential of sea-based 
activity in an environmentally sustainable manner.  A Green paper on a European vision for the oceans 
and seas highlighted the interconnections and in terdependence of different policy areas and 
instruments. This includes, for example, the deve lopment of port infrastructure, which has to be 
weighed against the protection of local ecosystems,  the promotion of coastal aquaculture versus 
tourism development, and also the benefits of economic growth through foreign trade. 
19. In the period since the last EC TPR in 2004, th e EC has also devoted significant attention to 
the development of a more comprehensive energy po licy. At the strategic level, a Green Paper from 
the Commission of March 2006 identified the three main policy aims, namely the completion of a 
fully competitive internal market by 2007, assuri ng the security of energy supply, and achieving 
environmentally sustainable, clean and efficient en ergy supply and use. Specific measures to achieve 
these objectives will also include greater emphasis on external activities, including the trade-related 
aspects that can contribute to diversifying sour ce, supply and transit. In October 2006, in a 
Communication on the external aspects of compet itiveness, the Commission proposed to seek to 
improve transparency, governance and trade and inv estment in the energy sector in third countries 
through non-discriminatory conditions of tran sit and third party access to export pipeline 
infrastructure; and by helping to improve prod uction and export capacitie s and develop energy 
transportation infrastructure. 
(3) ECONOMIC PERFORMANCE , INCLUDING TRADE  
20. During the reference period and in particul ar in 2006, the European economies have 
performed markedly better than e xpected, despite oil prices rising by 80% since the beginning of 
2005. Real GDP growth accelerated from 1.7% in th e EC and 1.4% in the euro area in 2005 and is 
expected to reach 2.8% and 2.6% respectively in 2006, bringing the pace of growth well above 
potential.  
21. This robust acceleration reflected an increase in  the resilience of the European economies and 
a greater ability to rely on domestic demand. Compar ed to the previous period, the economic recovery 
appeared more broadbased, with domestic demand gaining momentum. The recovery was underpinned by an acceleration of investment (4 .9% higher than during 2005) , while private 
consumption rose more moderately .Growth diffe rences across Member States, although remaining 
sizeable, narrowed in the first half of 2006, par ticularly for euro-area Member States. However, 
differences between the recently acceded Member States and the EU-15 continue to be pronounced, 
largely due to the former's ongoing catching-up process in terms of GDP per capita. Among the larger Member States in the euro area, Spain posted the highest  average quarterly growth rate in the first half 
of 2006 (0.9%), followed by Germany, France and th e Netherlands (0.8%) and Italy (0.6%).. Overall, 
the external conditions remain supportive to economi c growth in the euro area and the EU, with the 
projections for GDP growth in 2007-2008 at 2.4% for the EU; for the euro area, growth is forecast to 
reach 2.1% in 2007 and 2.2% in 2008. The economic recovery has also reached the labour market, 
leading to a strong upturn in employment growth to 1.4% in 2006. This is the highest rate since 2000 and corresponds to 2.9 million new jobs in the EU. 
22. The EC's volume of external merchandise trade (e xcluding intra-EC trade) continued to grow 
in 2004 and 2005, reaching € 2,2 tr illion in 2005, which represented roughly one fifth of the global 
total trade flows. By comparison, intra-EC trade is almost twice as large. With total merchandise WT/TPR/G/177 Trade Policy Review 
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imports exceeding total exports, the EC continued to  run a trade deficit, amounting to € 116 billion in 
2005. The US was again the biggest single merchandise trading partner in 2005, providing around 14% of the EC's total imports a nd receiving around 24% of the EC's total exports. In 2005, China 
became almost as important as the US as a source of EC imports (13%), followed by Russia (9%) and 
Japan (6%). In addition to the US, other major de stinations for the EC's exports were Switzerland 
(8%), and Russia and China (both around 5%). The EC is the world's largest importer and exporter of agricultural products, with agricultural products acc ounting for 7% of total EC imports and 6% of 
total EC exports. As most of the EC's exports are directed to countries that grant MFN rather than 
preferential treatment, upholding the multilateral sy stem is of the utmost significance for the EC. 
23. In 2005, about 45% of all EC imports came from developing countries, and for agricultural 
and textiles, they accounted for almost 70% of all imports. Of total exports from the least developed 
countries (LDCs), the EC absorbed 62% which wa s more than double the volume of corresponding 
imports of the US, China, Japan and Canada comb ined. Looking at the composition of LDCs' exports, 
the EC received almost 60% of their agricultura l goods. The EC's favourable  conditions for imports 
from the poorest countries under the Everything-Bu t-Arms scheme and the Cotonou Agreement 
meant that more than 90% of EC imports from th e African LDCs entered the EC free of duties and 
quotas. 
24. Services are the cornerstone of the EC economy. They represent 77% of GDP and 
employment, an area of European comparative advantage with the greatest potential for growth in EC exports. During the reference period, the EC remain ed the world's largest trader of services with a 
share of 26% in total global trade in 2004 and a total volume of roughly €650 billion and a surplus of 
€37 billion. A significant part of this trade took  place in the GATS framework rather than under 
preferential conditions, with the US and Canada be ing the main suppliers and recipients of EC 
services trade, followed by the EFTA countries and Japan. 
25. Between 2002 and 2004, the EC accounted for r oughly one third of global Foreign Direct 
Investment (FDI) flows, with a share of 32% of total global outflows and 27% of inflows. As for 
trade, the US also remained the EC's largest part ner for FDI, accounting for 40% of total EC inflows 
and 24% of total outflows. The single main othe r FDI partners were Canada, Japan and China. 
III. KEY DEVELOPMENTS IN THE EC'S TRADE POLICY (2004-2006) 
(1) M
AIN TRADE POLICY OBJECTIVES  
26. The EC's main trade policy objectives, as rede fined at the occasion of the new Commission's 
taking up office in autumn 2004, are to promote prospe rity, social justice and sustainable development 
through open, rules-based trade, including the peaceful  settlement of disputes. The benefits of free and 
fair trade should be extended to a ll, especially the poorest. In the conduct of its trade policy, the EC 
accords priority to the multilateral route and the WT O. The EC continued to  subordinate its other 
trade policy instruments and measure s to this priority granted to the multilateral route. Only where 
appropriate and necessary, new bilateral or bi-re gional initiatives were used as complements. 
27. These guiding principles were further refined and set in the context of the EC's overall focus 
on the Lisbon agenda, growth and competitiveness  in October 2006 in a Communication from the 
Commission (Global Europe – competing in the world). Most importantly, this Communication commits Europe to ensuring that its own markets re main open, arguing that in a global market, with 
global supply chains, Europe needs to import to export. At the same time, it sets out a strategy for 
opening new markets abroad for EC companies to trade and ensuring that European companies are 
able to compete fairly in those markets. Creating and strengthening new areas of growth will require a European Communities WT/TPR/G/177 
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sharper focus on market opening and stronger rules in new trade areas of economic importance to the 
EC, notably intellectual property (IPR), services, investment, public procurement and competition. From autumn 2006 and through 2007, the Commissi on will set out the competitiveness agenda for EC 
trade policy with a series of linked initiatives. 
28. First and foremost, the EC remains entirel y committed to the WTO and the multilateral 
trading system is its first priority. Given its own success and experience with multilateral cooperation 
based on common rules, the EC views the multilate ral approach as its preferred instrument. In 
particular in trade policy, the benefits of the multila teral approach are clearly manifested in the size of 
economic gains, which dwarf what bilateral agreements could achieve , and the predictability created 
by common rules. The EC will work to resume a nd conclude negotiations in  the Doha Development 
Agenda as early as possible. In parallel, the Comm ission proposed a new generation of bilateral free 
trade agreements with key partners to build on WT O rules by tackling issues which are not ready for 
multilateral discussion and by preparing the ground fo r the next level of multilateral liberalisation. 
The key economic criteria for new FTAs should be market potential - particularly the emerging 
markets of Asia. The launching of these new nego tiations will complement the DDA and not interfere 
with it; the expected results are a "topping up" of the substantial liberalisation the DDA will achieve 
and not an alternative to it. 
29. As concerns individual aspects of trade policy, and building on what has been done so far, the 
Commission will launch the next stage of its global st rategy for protecting intellectual property rights, 
with tougher benchmarks for cracking down on coun terfeiting and new cooperati on with key partners. 
The Commission will further renew its Market Access Strategy to focus on non-tariff barriers and ask 
EC industry to identify key sectors and priority problems. These may include, for example, the 
services or other sectors or particular markets as well as issues related to norms and standards, procurement rules, restrictions on competition, and ot her regulatory issues. In addition, restrictions on 
access to resources such as energy, metals and scrap, and primary raw materials including certain agricultural materials, hides and skins must be a hi gh priority. Measures taken by some of our biggest 
trading partners to restrict access to their supp lies of these inputs are causing some EC industries 
major problems. Unless justified for security or  environmental reasons, restrictions on access to 
resources should be removed. The Commission will also produce a new strategy for ensuring better access for EC companies to major public procurem ent markets. The Commission plans to conduct a 
public consultation to help the EC reflect on the EC’s anti-dumping and other trade defence 
instruments. 
30. The pursuit of economic growth through trade can have environmental implications, 
particularly for biodiversity and our climate. Therefore, EC is committed to ensuring mutual 
supportiveness of the environment and trade policies through promoting the integration of the environmental dimension into international trade.  The EC will continue efforts to achieve its 
commitment to halter biodiversity loss by 2010, through inter alia mitigating the possible negative 
impacts trade can have on biodiversity in devel oping countries and in the EC by increasing demands 
on natural resources. In relation to climate cha nge, the EC's external competitiveness policies will 
need to encourage energy efficiency, the use of renewable energies including bio fuels, low emission 
technology and the rational use of energy in Europe and globally, both to reduce the growth in global 
energy demand and strengthen security of supply a nd to limit harmful effects on the environment. The 
EC has shown continued leadership in the area of cl imate change over the last few years, and the links 
between trade policy and climate change in particul ar will continue to be kept under examination by 
the EC so as to ensure that tr ade policy instruments positively contribute to the fight against climate 
change. WT/TPR/G/177 Trade Policy Review 
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(2) INSTITUTIONAL SET -UP FOR TRADE POLICY -MAKING  
31. Since the last EC TPR in 2004, there have been  no changes in the procedures and institutional 
set-up for the formulation of the EC's common comme rcial policy. Article 133 of the EC Treaty forms 
the basis for EC trade policy, according to which any measure to be taken within the Common 
Commercial Policy is proposed by the European Commission and decided by the Council of 
Ministers. The Commission ensures the uniform representation and exercise of EC trade policy at 
both bilateral and multilate ral level, assisted by a consulta tive Committee (Article 133 Committee) 
composed of representatives of the Member States,  which meets every Friday. The two new Member 
States who joined the EC in 2007 began to participat e fully in the work of this Committee already in 
April 2005. The day to day management of EC trade policy is the task of the Commission’s 
Directorate General for Trade, serving to the Trade Commissioner. The European Parliament is kept 
informed of trade policy developments, is consulted on a regular basis and also regularly debates trade 
policy issues. 
32. Over the reporting period, the EC's structured dialogue civil society on trade policy matters 
has matured further. A broad range of organisations from business associations, chambers of 
commerce, trade unions, NGOs, etc. participate in th e process and regularly participate in targeted 
sessions, which allow them to be kept updated on trad e policy developments and interact directly with 
policy makers and negotiators. Semi nars on trade policy-making were he ld in the new Member States 
to encourage a strengthened participation of civ il society organisations from these countries in the 
dialogue. In 2006, an evaluation of the dialogue has been launched to take stock of the process since 
its inception in 1998 and to strengthen it further. Su ch a system of regular dialogue can provide an 
important contribution to ensuring the openness of the trading system and may serve as a model for 
other countries. The EC also co-funded the WTO P ublic Symposium in 2006, which gathered civil 
society organisations from all over the world. 
(3) MAIN COMPONENTS OF EC TRADE POLICY  
(i) The EC and the WTO 
33. Since the last EC TPR in 2004, the EC continued to follow th e multilateral approach via the 
WTO as its primary trade policy route. The EC firm ly believes in the need for further multilateral 
liberalisation and a strengthening of the multilatera l trade policy rule book as the only guarantor of 
stability for business and of true development for all WTO Members. Consequently, the EC has acted 
as one of the main motors behind the Doha Deve lopment Agenda negotiations during the last few 
years. Throughout the course of the negotiations, th e EC tabled comprehensive proposals in all areas. 
In parallel, the EC has also continued to be the WTO's most active player in all ongoing WTO 
business. 
34. Market access – for goods and services – is one  of the WTO's main raisons d'être, and 
securing further market-access worldwid e in this framework is vital to foster global economic growth, 
in particular also for developing countries, by promoting their integration into the world trading 
system. Industrial goods, agriculture and services ar e all key areas. For goods, the DDA provides a 
unique opportunity to extend duty-free, quota-free access for the least developed countries (LDCs) to 
the markets of the developed and those deve loping countries in a position to offer it. 
35. On non-agricultural goods, the EC's objectives ha ve been threefold: cutting peaks and high 
tariffs in developed and developing countries’ mark ets; adjusting contributions to the capacity of 
Members so that weak and vulnerable economies undert ake lesser contributions than more advanced, 
competitive developing countries and excluding th e weakest Members such as LDCs from any European Communities WT/TPR/G/177 
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reduction commitments. One of the underlying reasons  for the EC's position in the negotiations has 
been to facilitate South-South trade, since developing Members face the highest market access barriers in other developing countries' markets. Ov er 75% of tariffs paid by developing countries are 
paid to other developing countries. After tabling a proposal to eliminate tariff peaks and high tariffs, 
and significantly reduce tariff escalation, the EC supported the proposal of a Swiss formula with 
separate coefficients for developed and developing countries. The EC supports the idea of flexibility 
for developing Members, which must be negotiate d in an integrated fashion with the formula 
coefficient for developing countries. The EC also tabled a proposal for all WTO Members to reduce 
tariffs on textiles, clothing, and footwear, as close to zero as possible. It has tabled horizontal and 
sectoral initiatives on non-tariff barriers (NTBs) as we ll as bilateral requests. As regards horizontal 
initiatives, the EC requests the creation of discip lines for export taxes which have an increasingly 
distortive effect, on many developing countries, including on the possibilities for LDCs to climb the ladder of value added by importing inputs at an affo rdable price. The EC has also tabled a proposal 
for a horizontal mechanism to redress non-tariff ba rriers without escalating to a dispute settlement 
procedure. As regards sectoral initiatives, it has also  tabled several submissions more specifically on 
textiles and clothing, electronics and electrical equipment, and automotive. 
36. The EC has remained the world' s largest agricultural trader a nd the EC also being the world 
largest importer of agricultural goods from devel oping countries and LDCs. The significant reform of 
the EC's agricultural policy, on its way since 2003 , has allowed the EC to make ambitious and 
founded contributions to the agricultural negotiations . In October 2005, the EC made a far-reaching 
offer including the complete elimination of expor t subsidies and a 70% reduction of trade distorting 
domestic subsidies. As to market access, the EC offered average cuts of 39% on import tariffs and 
proposed a limited number of sensitive products. In line with the July framework, even for those 
products, substantial new market access would be cr eated, inter alia through the expansion of tariff 
rate quotas. Subsequently, the EC also accepted 2013 as end date for all export subsidies at the Hong 
Kong Ministerial, conditioned on the parallel elimination of all forms of export subsidies and 
disciplines on all export measures with equivalent eff ect and, of course, on the overall success of the 
Round. The EC's particular interests in the agricult ural negotiations are the elimination of all other 
forms of export subsidies (in respect of food aid, export credits, and State-trading enterprises), a significant reduction in US trade-distorting dome stic support, extended protection for products 
designated by geographical names, as well as an  end to the abuse of those names by copycat 
producers; improved market access is also of particular interest to European farmers and the food 
industry. 
37. As the world's leading importer and exporter of  services, the EC has a key stake in the current 
GATS negotiations. The EC’s approach to service s combines openness to both domestic and foreign 
competition, with regulations to achieve public-int erest objectives, such as protection of the less well-
off, consumers, cultural diversity, health, safety and th e environment. In the first semester of 2006, the 
EC participated actively in the plurilateral negotiations on services mandated by WTO Members' 
Ministers at the Hong-Kong Summit. These negotiati ons allowed to identify and promote negotiating 
objectives shared by groups of WTO Members for market access and removal of barriers in specific services sectors and modes of supply. The EC co-sponsored collective requests on professional 
services (legal, architectural and engineering services); computer services; construction services; 
distribution services; postal and courier services; telecommunication services; environmental services; 
financial services; maritime transport services; ai r transport and energy services and on mode 3 
(commercial presence). The EC has made ambitious initial and revised offers in the negotiations, 
covering access to the EC market in sectors such as financial services, telecommunications, computer 
services, construction, transport, distribution, tour ism and professional services. The EC has sought to 
offer commitments of interest to developing countries, such as the temporary admission of foreign 
skilled personnel to provide services in the EC (mode  4). The 2005 revised offer covers for the first WT/TPR/G/177 Trade Policy Review 
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time the 25 EC Member States. The EC has been  an active supporter of a communication on the 
mechanism to assess the granting of sp ecial priority to sectors and modes of supply of interest to Least 
Developed Countries (LDCs) in the services offers of non-LDC Members. At the horizontal level, the EC has actively supported the negotiations on Se rvices Domestic Regulations and Government 
Procurement in Services. It has also contributed to the discussion on subsidi es and on the question of 
an emergency safeguard mechanism. 
38. The EC's approach to the multilateral trade ne gotiations has been to complement further 
market opening with stronger rules and disciplines. One of the most beneficial outcomes of the DDA 
may be a comprehensive agreement on Trade Facilita tion, both in terms of economic gains and the 
stability and predictability offered by common rules at th e multilateral level. It is to be expected that 
the reduction in transaction costs for all WTO Members stemming from such an agreement will be on 
par, or even beyond, the benefits from further market access commitments. 
39. As for the market-access aspects of the DDA ne gotiations, the EC has also been one of the 
most active supporters and driving force behind the different other rules negotiations, with numerous 
submissions and proposals contributed in all areas.  The EC favours amendments to the Anti-Dumping 
Agreement so as to clarify existing rules and ther eby prevent protectionist abuse; the EC equally 
supports amendments to the Agreement on Subsid ies and Countervailing Duties so as to strengthen 
current rules on three very substantial areas, namely  dual-pricing of gas, local content subsidies and 
long term financing below costs. In addition, the EC supports WTO discipline on fisheries subsidies. 
For Regional Trade Agreements, the EC has ac tively contributed on the establishment of a 
transparency mechanism and the clarification of ex isting rules. Geographical Indications are part of 
the Single Undertaking. The EC has supported th e implementation of the multilateral register on 
wines and spirits decided during the Uruguay Round. The EC also supports the extension of the protection given by the register to products other th an wines and spirits, and, for a limited number of 
well-known GIs, a prohibition of their use by othe rs than the right holders, regardless of the 
exceptions provided for in Article 24 of the TRIPS Agreement. On Trade and Environment, the EC 
actively contributed to the negotiations with a vi ew to ensuring that trade liberalisation and the 
protection of the environment are mutually supportive. 
40. The EC deeply regretted the suspension of the DDA negotiations in July 2006. At this stage, 
negotiations had already advanced far, and much was already on offer, including real cuts in tariffs in 
industry and agriculture in developed countries a nd thus a major boost to world trade, Duty Free 
Quota Free access for the LDCs to the markets of de veloped and developing countries in a position to 
do so, greater investment, and choice in the provision of services, which are the backbone of modern economies; an ambitious agreement on trade facilitati on, and the consolidation of fundamental reform 
programmes of farm subsidies in developed countries - something that ultimately only the WTO can 
deliver.  
41. Beyond these individual issues, the possible failure of the DDA could have important political 
and systemic implications for the multilateral tradi ng system and the cause of multilateralism at large. 
The EC thus remains fully committed to the DDA and will continues to strive for a result that would 
deliver real cuts in tariffs, effective cuts in subs idies, improved market access for services and real 
new trade flows. The EC hopes that all WTO Memb ers share this ambition and a final deal will 
become possible very soon. This will obviously  depend on a proportional contribution from all 
developed countries as well as emerging developing countries. In the meantime, the EC aims to 
ensure that the poorest developing countries do not fa ll victim of the current impasse and hopes that a 
comprehensive development package to their benef it can be secured despite the standstill in the DDA 
negotiations. European Communities WT/TPR/G/177 
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42. Apart from its exemplary commitment to and participation in the DDA negotiations, the EC 
has also remained one of the most active and s upportive Members in all other areas of WTO activity. 
In this sense, the EC continued to devote significant attention to the ongoing WTO accession 
negotiations, based on the belief that the largest po ssible number of countries should be integrated 
into the WTO system in order to maximise the benefits  for all. Over the past years, the EC has been 
instrumental in advancing the accession negotiations of inter alia Russia, Ukraine, and Vietnam. 
43. Further, the EC attached the greatest importance to the timely implementation and compliance 
with all WTO agreements, including also the plurilate ral agreements on civil ai rcraft and Government 
Procurement (GPA). For this, the EC has focused on strict coherence between the rules governing its 
Internal Market and the relevant WTO agreements , including, for example, the TBT, SPS and TRIPS 
agreements. In the past, third countries have been  concerned with some of the EC's legislative 
initiatives, for example on chemicals, genetically modi fied organisms, waste electrical and electronic 
equipment, and wine labelling, fearing possible trade implications. These measures have, however, the legitimate aim of ensuring a high level of protec tion of health and the environment and are by no 
means intended to impede circula tion of goods in the Internal Market or external trade. In the 
framework of the ongoing review of GPA, the EC  played a very active role by tabling several 
substantial submissions on the text to the GPA Co mmittee as well as an ambitious and comprehensive 
initial offer. 
44. Finally, the EC has actively participated in  the WTO's dispute settlement system, as a 
defendant, a complainant and as a respondent, with preference gi ven to negotiated settlements, 
whenever possible. The EC followed up on Di spute Settlement Unders tanding (DSU) Panel and 
Appellate Body rulings in a timely fashion, based on its belief that the opportunity for the peaceful 
settlement of trade disputes offered by the WTO system  represents one of its great assets. In addition, 
the EC has actively participated in the negotiations  related to the improvement of the DSU, based on 
the Doha mandate. 
(ii) Bilateral, bi-regional and auto nomous trade policy initiatives 
45. Living up to its convictions, the EC continued to  pursue its bilateral,  bi-regional and other 
trade policy instruments and measures in a comple mentary manner to the priority granted to the 
multilateral route. The broad geographical covera ge of the EC's existing preferential trade 
arrangements reflects the global ec onomic and trade reach of the EC. In total, the EC has concluded 
22 RTAs with 24 countries and territories. With the very generous market access offered to its trading 
partners, the EC is one of the most open economies in  the world, in particular vis-à-vis developing 
countries, which also benefit from the EC's Generali sed System of Preferences and, in the case of the 
Least Developed Countries, the "Everything-but- Arms" initiative. In many instances, the EC's 
bilateral and bi-regional agreements extend significan tly beyond the scope of the WTO's liberalization 
and rule-making agenda; many also pay tribute to the EC's ambitions for sustainable development, 
including environmental and social development concerns. 
Geographical vicinity of the EC 
46. A number of European countries are closely linked to the EC, including through trade 
arrangements. Norway, Iceland and Liechtenstein are associated to the EC's Internal Market through 
the European Economic Area (EEA). Beyond a trad e agreement, the EC has entered into seven 
sectoral agreements with Switzerland, amongst othe rs on free movement of persons, air and land 
transport, scientific and technological co-operati on, agriculture, conform ity assessment and public 
procurement, and co-operation agai nst fraud and taxation on savings. The EC also has customs unions 
with Andorra and San Marino and a Trad e Agreement with the Faroe Islands. WT/TPR/G/177 Trade Policy Review 
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47. While the last two enlargements of the EC of  2004 and 2007 had been prepared by so-called 
Europe Agreements, a similar process is now unde rway with the candidate countries Croatia and the 
Former Yugoslav Republic of Macedonia through St abilisation and Association Agreements (SAA). 
Other countries in the Western Balkans either have such agreements in place already as well (Albania 
– pending the ratification of the Agreement, an In terim Agreement on the trade aspects entered into 
force in December 2006) or are currently negotiati ng them (Bosnia and Herzegovina, Montenegro and 
Serbia). The Western Balkan countries also benef it from autonomous trade preferences granted by the 
EC, which will be in place until 2010. The countries w ill eventually participate in a zone of diagonal 
cumulation linking them to the EC, which is cu rrently under preparation. Complementary to the 
deepening of its own trade relations with the West ern Balkan countries, the EC has also acted as the 
motor of further regional integration through the 'Stability Pact for South Eastern Europe' and thereafter the creation of the new Central Euro pean Free Trade Area (CEFTA), combining the 
individual bilateral FTAs in a single one. 
48. Candidate country Turkey has been closely linked to the EC through a customs union since 
1995 already, which covers industr ial products and processed agricultural goods. It also foresees 
progressive liberalisation of agricultural goods, and the integration of coal and steel products is 
equally on the agenda for the near future.  The products covered by the customs union agreement 
benefit from the pan-Euro-Mediterranean system of (diagonal) cumulation of origin linking the EC, 
Turkey and other European and Mediterranean part ner countries with which both the EC and Turkey 
have free trade agreements allowing such cumulation. 
49. During the reference period, the EC continued to develop its European Neighbourhood Policy 
(ENP). In May 2004, a Communication from the Commission set out how the ENP would be implemented. Geographically, the ENP covers the Mediterranean countries (Maghreb, Mashrek and 
Israel), the three Western NIS countries (Ukraine, Moldova and Belarus) and the Caucasus (Georgia, 
Armenia, Azerbaijan). The trade and economic asp ects of the ENP are ambitious, aimed at closer 
integration, eventually to the point of the part ner countries sharing the EC's Internal Market. Along 
with deepening of trade relations, regulatory converge nce is highlighted to enable partner countries to 
make the most of their proximity to the Single Market. Since then, a number of country-specific Action Plans have been developed and adopted.  
50. While the ENP will lead to yet deeper integra tion of the concerned countries with the EC, the 
Mediterranean countries are already closely linked to the EC through the Euro-Med agreements, the 
trade parts of which are very comprehensive Associ ation Agreements. They are in force with eight 
Mediterranean partners (Tunisia, Morocco, Jord an, Egypt, Lebanon, Algeria, Israel and the 
Palestinian Authority), the Agreement with Syria is not yet in force. The Agreements foresee the 
progressive liberalisation also of services, and in  March 2006, negotiations on services and the right 
of establishment were formally launched. In add ition, it was decided to start new negotiations on 
reciprocal and asymmetrical liberalisation in ag ricultural trade and to strengthen the rules of 
procedures in the Association Agreements by  negotiating a dispute settlement mechanism. 
51. The EC is linked to Russia and Ukraine as well as to Armenia Azerbaijan, Georgia, 
Kazakhstan, Kyrgyzstan, Moldova and Uzbeki stan through Partnership and Co-operation 
Agreements. With Belarus and Turkmenistan, such Agreements are signed but not in force; with 
Mongolia, a Trade and Cooperation Agreement is in  force. Once of the main objectives of the 
Partnership and Co-operation Agre ements is the promotion of trade and investment as well as the 
development of harmonious economi c relations between the parties. The EU-Russia Summit of May 
2005 agreed Action Plans on the Four Spaces to develop jointly. Of these, the Common Economic Space Action Plan covers a range of trade-related ar eas and has an overarching objective of enhancing 
regulatory convergence to the EC acquis. The priori ty areas include investments, intellectual property European Communities WT/TPR/G/177 
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rights, public procurement, trade facilitation, etc. W ith Ukraine, the EC seeks to further develop trade 
relations through a comprehensive deep integratio n trade and economic agreement after Ukraine’s 
accession to the WTO. 
Developing countries 
52. The EC's relations with the 77 African, Cari bbean and Pacific countries (ACP) are governed 
by the Cotonou Agreement of June 2000, concluded for a period of 20 years. As foreseen by the 
Cotonou Agreement, the ACP countries and th e EC are negotiating Economic Partnership 
Agreements (EPAs), scheduled to enter into force by 1 January 2008. The EPAs will be WTO-
compatible trading arrangements promoting the gr adual integration of the ACP countries into the 
world economy. As such, their main aim is to serve as tools for the development of the ACP 
economies. 
53. EPA negotiations started in September 2002 w ith discussions on the level of all ACPs. The 
subsequent regional phase focussed on market buildi ng issues in the six EPA regions (West Africa, 
Central Africa, Eastern and Southern Africa, th e southern African Development Community, the 
Caribbean and the Pacific) Technical negotiations are ongoing, focussing on the text of the 
agreements and the approach to liberalisation in goods and services. Relations with South Africa 
continue to develop on the basis of the Agreemen t on Trade, Development and Co-operation of 1999. 
54. Apart from the EPAs, the EC has also promot ed the region-to-region approach in other 
agreements with developing countr ies. Based on its own experience of  deep regional integration, the 
EC believes that such an approach can bring importa nt additional benefits, with  large internal markets 
governed by common rules presenting bigger and be tter opportunities than small ones. Negotiations 
between the EC and MERCOSUR were launched in June 2000 with the aim of achieving a greater 
level of political and economic co-operation and in tegration, including, for trade, the substantial 
liberalisation of all trade in goods and services. Negotiations are to be concluded as soon as it is 
politically and technically feasible. Over the last fe w years, also the Central American region and the 
Community of Andean Nations manifested their st rong interest in bi-regional Free Trade Agreements 
with the EC. After carefully assessing these requests, th e intention to launch ne gotiations with Central 
America, was declared by both sides at the EU-La tin American and Caribbean summit in Vienna in 
May 2006. With the Community of Andean Nations, pr eparations to officially launch negotiations are 
ongoing. With Mexico and Chile, comprehensive Free Trade Agreements are already in place. Since the last EC TPR, negotiations with Mexico st arted under the Agreement's review clause on 
agriculture, services and investment. The bi-regiona l approach has also been applied to the 
negotiations between the EC and the Cooperation Council for the Arab States of the Gulf (GCC); over 
the last years, negotiations advanced on an am bitious FTA, covering also a number of regulatory 
issues. Negotiations for a Trade and Cooperation Ag reement with Iraq were launched in November 
2006. With Iran, the last round of the negotiations  for a Trade and Cooperation Agreement, which 
were launched in December 2002, took place in July 2005. 
Autonomous EC preferences 
55. Many developing countries are linked to the EC on a contractual basis. In addition to this, or, 
for those developing countries who do not have agr eements with the EC, the EC's Generalised System 
of Preferences (GSP) offers generous access to the EC's market on an autonomous basis. In 2005, a 
new GSP Regulation was approved for the peri od 2006-2008, improving market access for export 
products from developing countries and economies in  transition. Besides a general arrangement 
granted to all listed beneficiary countries, a ne w special incentive arrangement for sustainable 
development and good governance ("GSP+") provi des further extended duty preferences to 15 WT/TPR/G/177 Trade Policy Review 
Page 18 
 
 
vulnerable countries. As a third pillar, the alr eady existing "Everything-but-Arms" initiative, under 
which Least Developed Countries have duty-free-quota-free access across the board, was fully integrated into the GSP system. 
Relations with other partners 
56. In addition to the FTA, regional or autonomous  initiatives described above, the EC has also 
established frameworks with a number of developed countries for continued dialogue on trade issues, 
and certain more specific bilateral initiatives relate d to trade facilitation. The focus of co-operation 
with a number of developed countries has largel y been on tackling remaining regulatory barriers 
while preserving a high level of protection for health , safety, consumers and the environment. Mutual 
Recognition Agreements on product testing and certification requi rements, agreements or co-
operation in SPS and veterinary ma tters, and co-operation on customs and competition issues have all 
proven to be helpful instruments to remove barrier s or to prevent their creation. The EC has also 
sought to use such bilateral frameworks for preventi ng disputes. Co-operation with key industrialised 
country partners encompasses both bilateral a nd multilateral issues, and reflects the shared 
commitment to strengthen the multilateral trading system and to improve the bilateral regulatory 
environment. 
57. With the United States, trade by-and-large takes place under MFN conditions, with tariffs 
posing only relatively few market access problems, in  areas of US tariff peaks. Co-operation and co-
ordination on issues of relevance also for trade al ready takes place in a variety of bilateral fora, 
including the New Transatlantic Agenda, the Transatlantic Partne rship and the Positive Economic 
Agenda. In 2005, a new EC-US Economic Integrat ion and Growth Initiative was launched, which 
includes a high-level Regulatory Co-operation Foru m, intended to tackle remaining barriers in 
investment, public procurement, and services. At the end of November 2005, an EC-US IPR Working 
Group was set up resulting in the adoption in June 20 06 of an Action Strategy on IPR enforcement in 
third countries. With Canada, negotiations for a ne w type of bilateral agreement – the Trade and 
Investment Enhancement Agreement or TIEA – we re launched in May 2005. Focusing on the main 
challenges of the EC-Canada bilateral trade re lationship and thereby reflecting the decreasing 
importance of tariff barriers between  these two open trade economies, the TIEA intends to leave aside 
"classical" market access discussions and address the growing importance of barriers of a regulatory 
nature and the significant role of "two way" i nvestment in the transatlantic relationship. The 
negotiations were put on hold in May 2006 pending the outcome of the Doha Round. 
58. Bilateral relations with Australia were further refined during the last years, in particular 
through negotiations over a new wine agreement an d amendments to the already existing Mutual 
Recognition Agreement to simplify its operation and re move origin restrictions from the core of the 
Agreement. With New Zealand, agreements for mutual recognition and veterinary matters exist 
already, and the former is undergoing the same ch anges as in the case of Australia. Negotiations for a 
wine agreement are due to start shortly. With both countries, trade in goods and services is well 
developed. 
59. The EC already has well established dialogues with Japan, including on regulatory issues, as 
well as IPR and public procurement. The EC and Japan are also linked by a Mutual Recognition 
Agreement and an Agreement on Co-operation on An ti-competitive Activities. With Korea, similar 
co-operation exists on the basis of the Framewor k Agreement for Co-operation and Trade. The EU-
Korea Summit of September 2006 noted ongoing exploratory talks on a possible EC-Korea FTA. 
60. Throughout the reference period, the EC continue d its policy of construc tive engagement with 
China to help its smooth integration into the worl d trading system. In October 2006, the Commission European Communities WT/TPR/G/177 
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issued a Communication on a comprehensive approach  toward China, includ ing trade policy. As 
concerns trade in textiles, following the abolition of WTO textiles quotas at the end of 2004, the EC 
and the Chinese authorities agreed in June and September 2005 to ensuring a smooth transition 
towards free trade in textiles as from January 2008; for the interim, agreed levels were set. This allows 
the European industry to restructure while at the same time, the Chinese side benefits from a fair 
increase of exports during that period. In the same  vein of constructive cooperation, a working group 
to improve the enforcement of intellectual propert y rights was established. Preparations are ongoing 
for the negotiation of a new framework agreement w ith China which will be instrumental for shaping 
the EC’s future relations with this important pa rtner. The EC also attaches great importance to 
economic and commercial relations with Chinese Taip ei and Hong Kong, and contacts and exchanges 
are frequent. 
61. Relations with other Asian trading partners  were also advanced. The European Trade 
Commissioner and ASEAN trade ministers agreed  in 2005 to examine the feasibility of an 
EC-ASEAN FTA and a joint study group of senior officials recommended to establish such an FTA. 
The EU-India Summit of September 2005 adopted an Ac tion Plan with an ambitious trade chapter, 
intended to look at all ways to improve trade in  goods and services between the EC and India. In 
October 2006, the EU-India summit considered th e possibility to launch negotiations on a broad-
based trade and investment agreement. 
IV. THE EC'S COMMITMENT TO  SUSTAINABILITY AND DEVELOPMENT (2004-06) 
Sustainability 
62. The EU Treaty and the so-called 'Cardiff pro cess' call for the integration of sustainable 
development objectives in all EC policies. As to trad e, the EC's deep commitment to the promotion of 
sustainable development through its trade policy manifests itself in all of the EC's trade measures, at multilateral and bilateral level and in its autonomous initiatives. For this, the EC can also draw on its 
own experience, whereby the creation of the EC's  Internal Market and important joint economic 
reforms to foster growth and prosperity for all EC citizens have gone hand in hand with the 
development of ever higher environmen tal and social protection standards. 
63. Environmental and social considerations are t hus key issues for the EC, both internally and 
externally. In the EC's trade policy in particular , they have been pursued at the multilateral and 
bilateral levels as appropriate. The EC has thus b een an important proponent of the DDA negotiations 
on Trade and Environment, and has also taken account  of environmental objectives in bilateral trade 
policy initiatives. Concerning social development, a number of initiatives have been pursued, 
including through bilateral agreements and technica l assistance. The EC also supports closer co-
operation between the WTO and the ILO. Furthe rmore, as mentioned above, the European 
Commission's recent Communication on promoting decen t work also foresees fu rther initiatives in the 
area of trade policy. In addition, the reform of the EC's GSP system has provided an additional boost 
to the pursuit of sustainable development objectiv es in trade policy, as the new special incentive 
arrangement is directly linked to the respect fo r international standards on sustainable development 
and good governance. 
64. To ensure the objectives of fostering sustaina ble development are met in the trade policy-
making process, the European Commission has carried  out Trade Sustainability Impact Assessments 
(SIAs) for all major trade negotiations it is invol ved in since 1999, both multila teral and bilateral or 
bi-regional. These studies which are conducted duri ng trade negotiations aim to identify potential 
economic, social and environmental impacts and look at  the potential effects both in the EC and in the 
countries or regions with which the EC is conducting negotiations. They are circulated widely to all WT/TPR/G/177 Trade Policy Review 
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concerned in the public, private and not-for-profit sectors both in the EC and the partner countries 
during the different drafting phases of the studies. Th e findings can help to integrate sustainability 
into trade policy more effectively and may also provide material to design possible accompanying 
measures to maximise the positive effects and to mitigate any negative consequences of the future 
agreements. Trade SIAs are carried out by indepe ndent external consultants and therefore do not 
engage the European Commission but once the studies are delivered, it drafts a paper setting out its 
reactions. For example, as a result of a comprehensive Trade SIA on forestry in the DDA negotiations, the European Commission has recently  published a position pa per on this study. 
Trade and development 
65. Trade and development is one of the nine priori ty areas for EC aid as defined in the European 
Consensus on Development. At the multilateral level, development concerns have  been reflected in all 
of the EC's submissions to the DDA negotiations, often in the form of special and differential 
treatment. The positive outcome of the Hong Kong Mi nisterial of December 2005, and in particular 
the decisions related to duty-free and quota-free ma rket access for the least-developed countries, Aid 
for Trade, and intellectual property and public heal th, was largely inspired and pushed for by EC 
initiatives, e.g. the EC’s Everything But Arms initiative and the Commission President’s successful 
pledge for additional commitments on Aid for Trad e to the amount of €2 billion by the EC and 
Member States. 
66. The EC has been a major promoter of the con cept of policy coherence for development, and 
has supported such coherence also in and between  fora other than the WTO, such as the United 
Nations, UNCTAD, the ILO or the Bretton Woods in stitutions. At the policy level this implies the 
adoption of strategies for sustainable developm ent aimed at reconciling economic growth, social 
cohesion and environmental protection. 
67. In its bilateral relations, the EC, in partnershi p with developing and least-developed countries, 
seeks greater consistency and synergies between trad e and development initiatives. Efforts to assist 
the developing countries in achieving growth, al leviating poverty and improving social equality 
within a framework of sustainable development have to be undertaken through a range of policy 
tracks, including trade policy. In terms of trade po licy as such, carefully managed, progressive market 
opening and stronger multilateral rule s can support development and also provide an impetus to the 
domestic reform process. With the reform of its GSP system in 2005, the EC has taken a further 
important step by directly supporting sustainabl e development and good governance in the partner 
countries through the "GSP+"-track.  
68. Strengthening the trading capacities of devel oping countries can significantly contribute to 
growth and sustainable development by enhancin g the export earnings of developing countries, 
promoting the level of their industrialisation, and encouraging the diversification of their economies. 
However, it is but one instrument in the development tool box. The possibilities for reaping the 
maximum benefits from the different provisions a nd areas of co-operation of the EC's bilateral 
agreements are often hampered by the lack of in stitutional capacities or infrastructure. In many cases, 
the EC thus couples its agreements with significant fi nancial assistance to the partner countries to help 
with the implementation, including trade-related assistance. In parallel, the EC has engaged in 
substantive dialogue with the private sector, enc ouraging corporate social responsibility and the 
voluntary integration of social and environmental concerns in business activities world-wide. Since 
the last TPR, the European Commission has also furthe r refined its online Help Desk for exporters, in 
particular from developing countries. This free serv ice provides assistance to take better advantage of 
existing and future market access opportunities offered by the EC. European Communities WT/TPR/G/177 
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69. During the period of 2001-05, the EC delivered around € 4.3 billion in financial assistance of 
relevance to trade. About one third of the total va lue amount can be considered as assistance under the 
narrower category of support to trade policy/regulat ion while the remaining two thirds went toward 
trade development and trade-related support for the private sector. In terms of activities the EC has 
financed, support through the whole spectrum of trade policy/regulation and trade development 
categories was provided, ranging from supporting the preparation of countries for accession to WTO, to the compliance with quality standards, the deve lopment of export capacities and small and medium 
enterprises, trade facilitation and the implementation of international trade agreements. For its next 
cycle of development assistance, the EC plans to  include a yet more significant trade component. 
70. At the multilateral level, the EC and its Member  States are strong supporters of the Integrated 
Framework on Trade Related Technical Assistance. Se veral Member States and the EC are Donors of 
the IF. The EC also supports the r esults of the work of the task fo rce for Aid for Trade, which were 
presented in October 2006, will actively contribute to th e follow-up and strive to deliver on its pledges 
made at the Hong Kong Ministerial. 
V. CONCLUSION  
71. As demonstrated by the review of the main developments in the EC during the reference 
period 2004-06, trade policy is a key instrument fo r the EC to achieve sust ainability and growth at 
home and abroad.  
72. The EC continued its exemplary commitment to the multilateral approach, which it 
complemented with bilateral, bi-regional and other initiatives only when necessary and appropriate. 
The EC has and will remain a strong supporter of the developing countries and their advancement; in 
the area of trade, this commitment is also reinforced by the EC's resolve to significantly increase its 
trade-related assistance in the coming period. 
73. The EU is now facing a triple challenge of e quipping Europe for globalisation, dealing with 
enlargement and preparing for a new round of institu tional reform. Trade policy is a crucial tool for 
meeting the first of these three challenges. While glob alisation has been highly beneficial to the EC in 
the past, and can continue to be so, it needs to  be managed carefully. Through and also beyond the 
DDA, the main focus of the EC's trade policy fo r the coming years will be on boosting the EC's 
competitiveness in a sustainable way and ther ewith that of all its trading partners. 
__________