WORLD TRADE  
ORGANIZATION  WT/TPR/M/136 
18 January 2005 
 (05-0197) 
Trade Policy Review Body 
25 and 27 October 2004  
 
 
 
TRADE POLICY REVIEW 
 
THE EUROPEAN COMMUNITIES 
 
Minutes of Meeting  
 
Chairperson:  H.E. Mrs. Puangrat Asavapisit (Thailand)  
 
 
Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3  
II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE EUROPEAN 
COMMUNITIES  4  
III. STATEMENT BY THE DISCUSSANT 7  
IV. STATEMENTS BY MEMBERS 9  
V. REPLIES BY THE REPRESENTATIVE OF THE EUROPEAN COMMUNITIES AND ADDITIONAL COMMENTS 28
 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 37  
 
 
Note:   Advance written questions by WTO Member s and the replies provided by the European 
Communities are reproduced in document WT/TPR /M/136/Add.1 and will be available online 
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.  WT/TPR/M/136 
 Page 3 
 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The seventh Trade Policy Review of the Eu ropean Communities (EC) was held on 25 and 
27 October 2004.  The Chairperson (H.E. Mrs. Puan grat Asavapisit) welcomed the delegation of the 
EC, headed by Mr. Pierre Defraigne, and the discussant H.E. Mr. Don Stephenson (Canada).  As usual, the discussant would speak in his persona l capacity and, in accordance with established 
procedures, had made available in advance a broa d outline of the themes he intended to raise 
(document WT/TPR/D/110). 
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures of the meeting.  The Report by the EC was contained in document WT/TPR/G/136 and 
that of the Secretariat in document WT/TPR/S/ 136.  Copies of advance written questions, submitted 
by:  Switzerland;  Cuba;  Canada;  Indonesia;  Jap an;  the Separate Customs Territory of Taiwan, 
Penghu, Kinmen, and Matsu;  Mexico;  Colombia;  China; Peru;  Venezu ela;  Guatemala;  
New Zealand;  the United States;  Hong Kong, China;  Turkey;  Panama;  Australia;  Singapore;  Argentina;  Chile;  Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, and Panama 
(joint submission);  El Salvador;  Costa Rica;  Norway ;  Korea;  Malaysia;  Kenya;  India;  Thailand;  
and Brazil had been transmitted to the delegation of the EC.  These questions and the replies provided 
by the delegation of the EC are reproduced in WT/TPR/M/136/Add.1. 
3. The Chairperson stated that the documentati on prepared for the Review highlighted the 
critical role the EC played in the multilateral trad ing system.  Excluding intra-EC trade, the EC 
continued to be the world's leading merchandise exporter and second importer. 
4. The report by the EC also stated that the EC  remained the largest importer and exporter of 
agricultural products, and the world's largest custom er for farm products fro m developing countries.  
In this regard, Members would be interested in hearing about the reform of the Common Agricultural 
Policy, including domestic support and the decouplin g of payments from produc tion, export subsidies, 
and tariff quota administration. 
5. In addition, the EC and its member States we re leading contributors to the WTO's Global 
Trust Fund for technical cooperati on.  The EC continued to offer non-reciprocal trade preferences to 
developing countries under several schemes, incl uding GSP and the Cotonou Agreement, and to 
LDCs under the "Everything But Arms" Initiative.  However, it was being said that the current GSP 
system would soon end and a new system would be applied as from 2006.  It would be of interest to Members to know about the new reform. 
6. Moreover, as the EC had enlarged to 25 me mbers States, with ten new members since 
1 May 2004, Members would be interested in h earing how the EC would bring its common trade 
policy and measures into line with its WTO concessions and commitments. WT/TPR/M/136 
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE EUROPEAN 
COMMUNITIES 
7. The representative of th e European Communities
 (EC) said that the trade policy review – an 
obligation for any Member – was an opportunity to better understand the EC's trade policies and 
practices and their impact on the multilateral trading system.  The EC's commitments to 
multilateralism and to the WTO was increasing for two reasons.  First, the more the EC proceeded 
towards its own economic integration, the more it sa w the benefits of trade liberalization and rules 
setting, and the more it wanted to share them with its trading partners.  Second, each EC enlargement 
had strengthened its sense of responsibility vis-à-vis  the world. 
8. The representative congratulated the Secretaria t for its comprehensive and accurate Report, 
and focused his presentation on the principal themes and developments in the EC's trade policy over 
the 2002-04 period.   
(i) Further reform of EC internal market, and EC common policies 
9. The representative highlighted three important ach ievements on the reform of the EC internal 
market and common policies.  Firstly, the internal ma rket had been further consolidated in major areas 
with impact on trade and investment.  Secondly, the ongoing reform of the EC's Common 
Agricultural Policy (CAP), had paved the way to the August Framework Agreement, which resulted 
mainly from the internal integration and the su ccessive enlargements of the EC.  Three domestic 
factors had driven the reform:  the cost of the CA P, the sustainability issue, and the social equity 
issue.  This had led the EC to cap the CAP budget, to encourage extensive, rather than intensive, 
agricultural methods (through decoupling and growi ng focus on environment and quality), to drop 
export subsidies, and to open prospects for more market access, mainly for developing countries.  
Thirdly, the Lisbon Strategy, aimed at improving the long-term competitiveness of the EC economy, 
was helping it to overcome many challenges (in partic ular technical progress and trade liberalization).  
Structural reforms in the EC were flanked by a so cial policy aimed at ensuring a workforce able to 
adjust and benefit from the competitive pressures th at came with market openness, economic change, 
and globalization, including the so-called outsourcing  issue.  The EC could cope with these challenges 
through education, R&D, competition, and active social solidarity.  
(ii) EC enlargement 
10. On 1 May 2004, the EC had welcomed ten new me mber States.  This enlargement was not the 
largest in terms of population, GDP, or surface but was the most significant in  geo-political terms and 
the most challenging in economic terms;  it was the fi rst expansion to have re quired the creation of an 
EC Constitution.  The EC now offered a bigger a nd unified market, and a common set of rules for 
trade, investment, goods, services, and movement of capital.  Almost all tari ffs in the new member 
States had been reduced, and common regulatory requirements would reduce business costs, in 
particular for medium-size companies from third countries.  
(iii) Adjustment of EC trade policy to the opportunities and challenges of globalization 
11. From the EC perspective, globalization, framed by multilateral rules, was the most effective 
way to sustain and contribute to the world's gr owth and unity, and called for adequate policy 
responses in three areas.  First, for the EC, this had meant enhancing the capacity of its society to 
withstand competitive pressures from markets, while en suring a fair distribution of the gains.  The 
balance between efficiency and solidarity w as identified as a key feature of the European 
development model, and for successful liberal trade policies in Europe;  this was what the Lisbon 
Strategy was trying to achieve.    WT/TPR/M/136 
 Page 5 
 
 
12. Secondly, market access and FDI were critical f actors for developing countries to successfully 
integrate into the global economy.  If trade create d a window for development, it did not achieve it, 
and domestic policies were crucial in this respect .  Policy space was a valid concept rather than a 
"one-size-fits-all" approach but w ith two substantive qualifications.  Domestic policies should display 
enough compatibility among them to allow for some  degree of convergence towards a level playing 
field over the long term;  and all countries should contribute to trade liberalization according to their 
capacity and potential.  In that respect, special a nd differential treatment shoul d not be confused with 
a free ticket for all developing countries.  The EC would work hard, through the GSP and EBA, and its multilateral and bilateral trade policies, to in tegrate developing countries in the global economy by 
opening up its market and supporting their efforts th rough technical and financial assistance.  The EC 
supported the efforts undertaken by the Bretton Woods international fina ncial institutions to 
strengthen the adjustment capacity of the developing  countries.  The granting of EBA-type schemes, 
by other trade preferences donors, as well as the adva ncement of South-South trade, through unilateral 
concessions or regional integration schemes, were cr itical for offsetting the erosion of preferences. 
13. Thirdly, the EC took environmental objectives into account in all policy areas, including 
trade.  It had started a process of sustainable-impact assessments of its trade negotiations to look at the 
environmental, economic, developm ental, and social effects of  the multilateral and bilateral 
negotiations.  The EC attached importance to the WTO work on trade and environment since it 
wanted to ensure that its trade measures did no t damage the environment, but protect it better. 
(iv) EC contribution to the WTO and to the DDA negotiations  
14. The WTO was the most effective pillar of the international ec onomic system as far as long-
term growth was concerned, and the key tool for channelling the forces of globalization, given that 
global solutions remained the best way to address global issues.  The EC had been the principal 
architect of the DDA, and had worked to expand th e WTO membership, and to ensure coherence with 
the U.N. and the Bretton Woods organizations.  The EC had also participated actively in the Dispute 
Settlement System, and had complied with its findings.  
15. Members had worked very hard, particularly afte r Cancún, to restore confidence in the WTO, 
to strengthen the system, and to promote a more active participation of all WTO Members.  The 
successful August 2004 outcome was partly due to the EC's commitments in agriculture, industrial 
tariffs, services, the Singapore issues, and other ar eas.  Those commitments provided momentum, and 
responded directly to the interests of many developing countries.  The EC now needed to ensure that 
this momentum would continue. 
16. The EC would continue negotiating across the boa rd;  pursuing an agenda that would benefit 
its economy and the rest of the world;  finding ways to help developing countries directly;  and negotiating stronger international trade rules that protect and benefit all Members, and the global 
environment, and that equipped them to manage gl obalization.  The EC would continue to argue in 
favour of a broad trade agenda covering not onl y market access, which alone could not help 
development, but also stronger rules.  
(v) Bilateral and regional trade agenda 
17. As a complement to its efforts in the WTO, the EC had deepened its trade relations with other 
partners through preferential trade arrangements (i ncluding bi-regional and bilateral free-trade areas), 
and bilateral agreements, aimed at  facilitating cross-border trade with  its closest neighbours.  These 
agreements had not been driven only by trade objectives but by geo-political reasons (for example, 
creating zones of peace and stability), or for development reasons.    
18.
 The EC's bi-regional negotiations and agreemen ts included the African Caribbean and Pacific 
countries, Central America, and the Andean Comm unity, the eight Mediterranean countries in the WT/TPR/M/136 
Page 6  
 
Euro-Med and the Cooperation Council for the Arab  States of the Gulf, and MERCOSUR.  The EC 
wished to use the bi-regional appr oach to enable its partners to integrate in the multilateral trading 
system.  These initiatives were helping in regiona l economic stability and the creation of economies 
of scale at the regional level.  Its bilateral a nd bi-regional negotiations were built upon multilateral 
rules and market access, and could allow more rule  making and trade openness than had been so far 
possible multilaterally.  The EC valued regional integr ation and had demonstrated that this could also 
support the multilateral system.  However, the EC had ensured that bilateral negotiations did not 
divert resources or interest from the DDA and no new FTA initiatives had been launched in the last 
five years.  WT/TPR/M/136 
 Page 7 
 
 
III. STATEMENT BY THE DISCUSSANT 
19. The discussant  noted that the EC enlargement on 1 May 2004 had made it the most ambitious 
internal economic and trade liberalization projects in  modern history.  Its enlargement to 25 members 
had been an impressive achievement, and meant new challenges for the EC.  How it would deal with 
them remained in the future.  
(i) Economic environment  
20. The discussant observed the mixed economic pe rformance of EC member States.  Some 
remained amongst the most competitive in the world, and had recorded healthy growth and 
unemployment levels, whereas for other EC member  States the macroeconomic prospects were not 
good and did not appear to be set for improvement.  However, inflation seemed to be under control, 
and the euro had maintained its strength relative to th e US dollar, but whether this had been translated 
into trade effects was difficult to asses. 
21. The EC's post-enlargement economic outlook was uncertain.  All new EC members had a 
lower GDP per capita than the pre-enlargement EC  average;  many had shown high unemployment 
rates.  The enlarged EC would likely not conti nue regional development pa yments and agricultural 
subsidies on the same scale as before, but some tran sfer of wealth, from the already strained budgets 
of the centre to the poorer peripheries, appeared to be inevitable.  Whether this transfer resulted in 
another Irish miracle, and its impact on existing ec onomic pressures for the net-contributors remained 
to be seen. 
(ii) Trade policies  
22. One of the engines of EC's growth and wealth -creation was the expansion of exports and the 
opening of its internal markets, helped along by a gradual lowering of the common customs tariff.  
The objective of the EC's common commercial policy was "to contribute, in the common interest, to the harmonious development of world trade, the prog ressive abolition of restri ctions on international 
trade and the lowering of customs barriers." 
23. The EC had the most extensive web of preferential trade arrangements of any WTO Member.  
There were pre-accession agreements, two customs un ions, the European Economic Area, more than a 
dozen FTAs, trade and cooperation arrangements,  various trade and development treaties and 
conventions, unilateral preferences, and sectoral ag reements.  Only seven countries and two customs 
territories did not benefit from such arrangements.   MFN treatment resulted oddly in the highest 
tariffs and, therefore, the lowest level of market access.  Average ad valorem equivalent tariffs on 
manufactured goods tended to be low, while agri cultural goods tended to be more protected.  
However, the level of bound access and ease of access were  different.  In this respect, certain EC trade 
and domestic policy instruments may have resulted in  a lower effective level of market access than 
would appear at first glance.   
24. The EC's common customs tariff was complex and comprised ad valorem , specific, 
compound, mixed, variable, and snap-back duties, fu rther complicated by tariff-rate quotas for certain 
agricultural products.  There were value-added and excise taxes that varied from one member State to 
another.  The EC tax and tariff re gimes were complemented by impor t licences and other restrictions 
(CITES, SPS, and TBT-related measures).  Payment of all duties and meeting all of EC rules was no 
guarantee of consistent access;  many of the policy instruments had been harmonized but their 
application by member States could result in disruptions in trade, and also disputes (e.g. the LAN case).   
25. The addition of ten new members with widely  different traditions increased the existing 
complexities in two other areas.  The first area was the EC trade remedies regime, which was highly WT/TPR/M/136 
Page 8  
 
sophisticated and regularly used.  Since 1992, the ra te of initiation of anti-dumping investigations and 
duties imposed had remained steady;  there had been significant variations in countervailing duty investigations from year to year;  the number of measures in force had been increasing steadily 
(70% for anti-dumping duties, and nearly 900% for countervailing me asures).  All new members were 
required to apply these duties to imports, even thou gh the impact of these imports on them had not 
been investigated, and they could remain separat e competitive markets for some of the products at 
issue. 
26. The second complexity was standards.  Before accession, all candidates had been required to 
adopt at least 80% of the EC's technical standards.   The EC's new approach to standardization had 
tended to simplify conformity assessment procedur es;  and the EC had been negotiating sectoral 
mutual recognition agreements with some of its part ners to help improve such procedures.  While the 
enlargement would result in the application of comm on technical standards, their application had yet 
to be harmonized;  this lack of harmoniza tion could pose additional barriers to trade. 
(iii) Sectoral policies  
27. Nearly half of the EC's budget (some €43 billion) went to the CAP.  He stressed that there 
was nothing wrong with either the figure or the policy choice of spending 40% of its budget on 
agricultural subsidies.  One could no more criticize this, than question the expenditure of roughly the 
same amount on other policy choices.  The EC's e xpenditure was well within its treaty obligations 
negotiated and agreed by WTO Members (its co mmitments amounted to €67 billion).  Even if 
€43 billion was an impressive figure, expenditure on agriculture, in relative terms, had declined over 
the years, and for once recent the CAP reforms were taking into account the interests not only of the 
affected farmers, but also the consumers and taxp ayers who paid directly and indirectly for the 
programme. 
28. Some aspects of the CAP remained a problem in  real terms and with respect to specific 
commodities.  For example, the EC produced 80% of  the world's olive oil, and MFN tariffs on this 
product averaged 67%, with additiona l support provided directly to pr oducers.  The EC's export prices 
on sugar were about one fifth of domestic prices, a nd MFN tariffs were as hi gh as 114%;  oddly, sugar 
remained outside the CAP reform. 
29. In other sectors, the EC did better.  Since January 2003, the EC had had a new Common 
Fisheries Policy (CFP) that set multi-annual recovery  and management plans for certain stocks.  The 
EC was seeking to integrate environmental protectio n requirements directly into the CFP, and wished 
to implement an action plan to counter soci al, economic, and regional consequences of the 
restructuring of its fishing in dustry.  In 2003, the telecommunications market had reached a 
remarkable €251 billion.  There was now a comm on regulatory framework, though not all member 
States had implemented it fully.  WT/TPR/M/136 
 Page 9 
 
 
IV. STATEMENTS BY THE MEMBERS 
30. The representative of Switzerland  said that his country and the EC belonged to the same 
economic area and shared several similar viewpoint s.  Furthermore, their WTO relations had been 
complemented and enriched by many preferential ag reements.  In 2002, 90% of  Swiss exports  went to 
the EC and 80% of Swiss imports were from the EC. 
31. On the main DDA elements, Switzerland and the EC shared views on:  non-trade concerns in 
agriculture;  extension of the protection of geographi cal indications;  priority to the negotiations on 
services and industrial products, and trade facilitation;   integration of developing countries into the 
multilateral trading system;  and trade policies that protected the environment.  However, Switzerland 
was concerned about measures on certain steel products that had not yet been eliminated and served 
as an additional non-tariff barrier.  In the services area, Switzerland had been negatively affected by 
the enlargement, and had requested to be in cluded in the GATS compensation negotiations.  
Nevertheless, Swiss-EC trade re lations had traditionally been ve ry good without major bilateral 
problems.   
32. The representative of Cuba  said that her country benefited from the EC's GSP.  Cuba wished 
to know whether the GSP would be the only mechanism maintained by the EC to grant preferential 
access to its market, and whether it considered the GSP specific incentives convergent with the 
treatment that should be granted to all developi ng countries under the GSP.  Cuba also asked for 
clarification on the REACH initiative and whether its risk assessment procedure would have a 
negative impact for countries that had to apply it.   Cuba considered that its economy would be 
negatively affected because it would not have the fi nancial or technical res ources required within the 
set deadlines.  
33. The representative of Canada  said that his country and the EC had a longstanding economic 
relationship and shared similar trade policy objectives.   The EC faced huge challenges with regard to 
its enlargement process, the development of its intern al market, and the creation of a monetary union.  
Canada commended the Commission's goal of crea ting the world's most "competitive and dynamic 
knowledge-based economy".  Canada had noted that each step in European integration had 
historically been a source of rejuvenation in th e Community, and had contributed positively to the 
global economic environment, including for Canadian  companies.  However, Canada would remain 
engaged, particularly in the agricultural sector, to en sure that an enlarged EC would not, on balance, 
divert third-country trade.  Since 1994, Canadi an agricultural exports to the EC had remained 
stagnant, despite the addition of new members.  Ca nada was also concerned about the present delay in 
the GATT Article XXVIII negotiations due to missi ng data and information;  it urged the EC to 
provide this material as quickly as possible.  Canada attached great importance to common and 
consistent customs procedures in the EC, and was c oncerned that practices were not consistent from 
one member to another.   
34. Canada welcomed EC leadership in bringing WTO Members together on a July Package that 
addressed crucial areas in the negotiations, especia lly agriculture.  The EC reform on domestic 
support measures, under the CAP, was critical in re ducing sectoral distortions of global impact.  
Canada called on the EC to ensure that the refo rm was carried out to promote the development of 
agricultural trading opportunities for competitive supp liers world-wide.  Canada was a major exporter 
of agricultural products derived through modern bi o-technologies.  It remained concerned about 
regulations that impeded trade for these products (fo r example, the EC's moratorium on the approval 
process for agricultural biotech products);  since 2002, little progress in this area had been observed.   
On GMOs, the EC labelling and traceability meas ures were creating uncertainty for Canadian 
exporters.  Canada was concerned about how th e traceability and detection requirements would be 
implemented given the lack of internationally-accepted testing and sampling methodologies to validate the presence of GMOs.  On intellectual property, unlike the EC, Canada opposed multilateral WT/TPR/M/136 
Page 10  
 
rules that would extend protection of geographical indications to food products.  An extension would 
be inappropriately expensive and would likely increase gl obal frictions in the trade of food products.    
35. The role of regulatory issues had grown in importance, including in the EC;  its prominence 
and commitment to safety, environment, and health could have a profound impa ct outside its borders.  
Canada was following closely the development of re gulations on chemicals (in particular the REACH 
initiative).  Canada shared the goals of protecting human health and the environment.  Canada asked 
that attention on the REACH development be focussed on streamlining the compliance burden to 
facilitate the commercialization of substances.  It  would be important to deliver a cost-effective 
system, consistent with international obliga tions, while safeguarding regulatory benefits.  
36. Canada appreciated the EC's impor tant and constructive role in the multilateral trading system 
and hoped that it would continue its  various reform initiatives and the development of more market-
oriented policies.  
37. The representative of Malaysia
 on behalf of Brunei Darussalam, Cambodia, Indonesia, 
Myanmar, the Philippines, and Thailand , stressed that, since 2002, significant developments had taken 
place in the EC (creation of the euro area, and en largement).  They welcomed these developments and 
hoped that the enlargement would have a positive economic impact for the EC members and its 
trading partners.  In 2003, alt hough there had been positive economic  developments (i nflation reduced 
to 2%, and two consecutive years of high current  account surplus), economic growth had remained 
weak (0.8%), public sector deficits had risen to 2. 6% of GDP, and unemployment to 8.1%.  Structural 
rigidities, declines in investment and flagging privat e consumption needed attention in order to foster 
stronger EC growth. 
38. The EC's basic trade regime ha d remained largely unchanged since 2002.  Its average applied 
MFN tariff exhibited wide dispersion with rates ranging from 0% to 209.9%.  Non- ad valorem  duties 
were used frequently.  The tariff structure for agri cultural products was complex, and tariffs remained 
high.  Export subsidies for most agricultural products were still high.  Despite a slight decline in most 
production-distorting expenditures in 2002, EC ru ral development support was higher in 2004 than 
2003.  Malaysia, Brunei Darussalam, Cambodia, Indonesia, Myanmar, the Philippines, and Thailand 
were concerned that this shifting of support could not result in reducing trade-distorting support. 
39. Textiles and clothing were important for ASEA N.  Malaysia, Brunei Darussalam, Cambodia, 
Indonesia, Myanmar, the Philippines, and Thailand were concerned about the back-loading of the 
quotas' phase-out, the non-availability of carry-forwar d for 2004, and the extension of quota to the 
new members only eight months before the ATC expi red.  They welcomed the EC's intention to 
integrate all remaining products by the end of the ATC.  
40. The EC's trade polices had tried to take the development concerns of developing countries 
into account, through preference schemes (GSP, Everything But Arms initiative, and Cotonou 
Agreement).  However, they carried non-trade -related conditionalities that imposed burdens of 
compliance.  If the new GSP scheme was implemente d, it was questionable whether the criteria to 
qualify for preferences would be objective and non- discriminatory.  Malaysia, Brunei Darussalam, 
Cambodia, Indonesia, Myanmar, the Philippines, a nd Thailand were concerned that this new GSP 
scheme would generate levels of  concessions that undermined the non-discriminatory principle. 
41. The EC remained a leading user of continge ncy trade remedies.  The implementation of 
common customs procedures by individual members was a challenge and was expected to be exacerbated with the recent expansion to EC-25.  Malaysia, Brunei Darussalam, Cambodia, Indonesia, 
Myanmar, the Philippines, and Thailand hoped that its 2007 customs programme could address it 
quickly and adequately.  The EC had developed directives on product regulation and standards.  Every 
country had the right to protect health, safety, a nd the environment, but standards should not impose 
onerous compliance conditions on trading partners, especially developing ones, and hinder trade.   WT/TPR/M/136 
 Page 11 
 
 
They urged the EC to ensure that its REACH re gulation did not disguise burdensome obligations and 
costs to the detriment of small and medium-sized enterprises. 
42. Services played an important role in the EC's real GDP and employment.  Malaysia, Brunei 
Darussalam, Cambodia, Indonesia, Myanmar, the Philippines, and Thailand welcomed the EC's 
proposal to set out a framework for creating an inte rnal market for services by 2010, and hoped that 
the EC did not create a market exclusive to itself.  They looked forward to a revised offer from the EC 
in the ongoing services negotiations to addr ess the needs of developing countries.  
43. The EC was committed to the multilateral trading system, being a key player in the launch of 
the DDA and a major participant in the ongoing nego tiations.  However, due to the complexity of  its 
internal process, the EC should further strengthen th e transparency of its trade policies, through prior 
information and bilateral consultations, to allow sufficient time for developing countries to make 
adjustments accordingly.  The EC and its member s contributed to the WTO Doha Global Trust Fund 
for technical cooperation. 
44. The EC-ASEAN relations needed to be re vitalized, and ASEAN welcomed the Trans-
Regional EC-ASEAN Trade Initiative.  The EC's efforts to promote trade with ASEAN were 
encouraged, as the region had many wide-rangi ng opportunities for trade and investment. 
45. The representative of Japan  highlighted the EC's growing role in world trade and the world 
economy.  The EC was playing a more responsib le role for maintaining and strengthening the 
multilateral economic system.  Japanese investment in  the EC (about €10 billio n in 2004) showed the 
strong interest of the Japanese private sector.  Japan  appreciated the EC's contributions to the success 
of the multilateral trading negotiations and hoped that  it would continue to make the system more 
transparent and accountable.  Japan expected the enlargement process to  be kept open and transparent, 
and recognized its influence on the world.  It hoped that the EC-25 would contribute to a stable and healthy world economy, and pay attention to the inte rest of non-EC countries.  Japan also hoped that 
the EC would continue to be engaged in the GATT Article XXIV:6 and GATS Article XXI 
negotiations. 
46. The acceptance of the EC Constitution by EC l eaders was important;  and Japan hoped that 
through it the EC would contribute even more to the stability and sound development of world trade 
and world economy.  The euro had been smoothly circulated, and had provided a stable business 
environment for all countries.  Japan hoped that the EC would endeavour to realize a more attractive business environment, including through tax harmonizati on.  Japan and the EC had continued to try to 
enhance the business environment through measu res such as the Japan-EC Regulatory Reform 
Dialogue.  Japan believed that these dialogues, in a ddition to this TPR, would improve their business 
environment by enhancing competitiveness and achievi ng the targets of the Lisbon Strategy.  Progress 
in the Lisbon Strategy was of interest to many countries, though there were some implementation difficulties.  EC cooperation with non-EC enterpri ses in business and R&D areas would contribute to 
achieve its targets.  Japan hoped that opportuniti es for non-EC enterprises would be enhanced through 
their cooperation and partnership in  the implementation of the strategy.  Japan hoped that the EC and 
its members would actively enhance the business environment and promote investment through the Cooperation Framework for Promotion of Japan -EC Two-Way Investment.  New measures to 
promote FDI in Japan had been implemented;  Japan  hoped that European investors, traditionally very 
active, would make full use of them. 
47. Japan welcomed the General Council's July decisi on.  Japan wished to achieve ambitious and 
well-balanced final results, throug h cooperation with the EC and other Members sharing its position.  
Japan appreciated the EC's commitment to abolish export subsidies for agriculture;  modalities had to 
be discussed on market access for ag riculture.  Japan hoped that the EC would contribute actively to 
making a new adequate trade rule by reflecting non-tr ade concerns in the agricultural negotiations.  It WT/TPR/M/136 
Page 12  
 
also hoped that the EC and its members would con tinue to strengthen the multilateral trading system, 
and further liberalize their trade po licies based on the WTO Agreements. 
48. The representative of the Separate Customs Te rritory of Taiwan, Penghu, Kinmen, and Matsu
 
(Chinese Taipei) said that, since 2003, bilateral trade w ith the EC – its fourth largest trading partner – 
had grown significantly, after a two-year decline, and hoped that an enlarged common market would 
further strengthen their trade relations.  The EC's experiences in integrating new countries at different 
stages of economic development would be extremely useful for the WTO.  Chinese Taipei welcomed the EC's "go-slow" approach to initiating new FTA negotiations since 1999, focusing instead on 
multilateral (rather than bilateral or regional) negotiations, which c ould bring more economic benefits, 
and it encouraged other Members to follow it.  Chin ese Taipei recognized the EC's contributions to 
the DDA, and its commitment to the multilateral trading system.   
49. It was concerned about the REAC H initiative, and asked the EC, before it implemented it, to 
ensure that it did not impose any undue or unfair burden.  Concerns were also raised about the 
automatic application of the EC-15 trade remedy measures by the new members;  Chinese Taipei was 
still waiting for the EC's suggestion on how to al leviate these concerns.  Trade remedy measures 
should be applied very cautiously, and in a WTO-c onsistent manner.  Chinese Taipei would continue 
to work with EC to find a solution. 
50. The representative of Mexico
 said that the EC was Mexico's second market and supplier, and 
the source of a third of its FDI inflows;  their FTA  had given additional impetus to their relations.  
Although bilateral trade had not been dynamic in 2004,  Mexico hoped it would increase, in particular 
with the ten new EC members.  The EC was one of the main actors in world trade, and its leadership 
in the current negotiations made this Review partic ularly important to identify possible delays or 
problems to be solved.  In Mexico's view, any me asure applied by the EC had a higher impact than 
that of any other WTO Member.   
51. Mexico was concerned about certain EC measu res, such as the REACH initiative, and the 
technical rules on the denomination of wines and de rived products.  Both measures showed that non-
tariff requirements could generate problems to market  access, in particular for developing countries.  
WTO provisions on special and differential treatment  and technical assistance should be observed to 
allow developing countries to fully benefit from th em.  The representative reiterated that Mexico saw 
the trading system as a mechanism of access for a ll countries, in particular the developing ones.  
52. The representative of the United States  highlighted her country's bilateral trade relationship 
with the EC.  They had used the WTO rules to wo rk through their disputes, and had always worked 
hard to maintain constructive dialogue.  The re presentative saluted the commitment and vision of 
Pascal Lamy, and recalled that, in 1949, Paul Hoffm an, U.S. Marshall Plan Administrator, called for 
"the formation of a single large market within which quantitative restrictions on the movement of 
goods, monetary barriers to the flow of payments an d, eventually, all tariffs would be permanently 
swept away."  The United States had supported EC enlargement but remained concerned about the 
EC's response on WTO issues related to its enlargem ent, and in particular the need for adequate 
compensation in the areas of tariffs and services.  The United States asked for clarification on:  the status of the new members' enforcement of intell ectual property rights, adoption of EC regulations 
and standards, customs administrations, and agreements with third countries. 
53. The role of non-tariff barriers and regulatory i ssues in EC trade policy was important to the 
United States.  The principal challenges for the U. S.-EC trade relationship would lie in confronting 
the trade implications of regulatory measures adopted by the EC.  The United States believed that the 
Report by the Secretariat did not comment extensively enough on whether non-EC parties had a meaningful opportunity to influence the outcome of  regulatory decisions.  The EC needed to increase 
transparency and access to its increasingly co mplex regulatory and trade policy process.  WT/TPR/M/136 
 Page 13 
 
 
54. The representative referred to the U.S. advan ce questions on technical barriers to trade, 
sanitary and phytosanitary measures, and the implem entation of the REACH, that the United States 
believed in its present form would be unworkable, and may not achie ve the EC's own goals.  The 
United States would welcome details about the RE ACH, and why the EC believed it would streamline 
and simplify its regulatory system for chemicals.  The United States called for clarification on rules 
related to wine labelling, and on whether U.S. wine s sold in the EC would be prohibited from using 
descriptive and marketing terms. 
55. The EC and the United States shared an inte rest in the services sector, in innovative 
technologies, and in the protection of intellectual property rights.  The representative referred to the 
U.S. advance questions on the protection of geograp hical indications in the EC for non-EC nationals, 
agricultural products, as well as wine and spirits.  An European Council regulation appeared to 
require, as a condition for protecting the geographical indications of another WTO Member, that this 
Member offered equivalent protec tion to EC products.  The United St ates wished to learn how the EC 
squared that requirement with the national treat ment obligation under TRIPS.  The United States 
remained discouraged that the EC appeared de termined to implement a mandatory labelling and 
traceability scheme for biotechnology products. 
56. The Report by the Secretariat mentioned very little about the level and nature of state aid and 
subsidies to European industries by EC members.   The United States had followed the evolution of 
the CAP, which was critical to the success of the D DA.   The representative, referring to the U.S. 
questions, asked how the CAP reform would be impl emented and would operate at a practical level. 
57. The EC continued to expand its large network of preferential trade arrangements with third 
countries.  The United States hoped that they would be, on balance, trade creating, and asked the EC 
to provide updated information on them.   
58. The representative of Colombia  said that the EC was Colombia's third destination for its 
exports (mainly coal, coffee, banana, and nickel ).  In 2003, Colombia had imported goods worth 
US$2 million from the EC (mainly chemical products), and the EC had accounted for 25% of 
Colombia's FDI inflows.   
59. Colombia recognized the EC's commitment to  the multilateral trading system, its active 
involvement in the DDA, including in the negotiations  that led to the July Package.  Colombia hoped 
that the EC would strengthen this commitment, through the negotiations leading to the Hong Kong, 
China Ministerial Conference.  Colombia benefited from the EC's GSP, in particular the regime on 
drugs had helped Colombia in its fight ag ainst production and ex port of illegal drugs. 
60. The representative wished the EC  success in its enlargement pro cess.  Colombia wished to 
extend the deadline for negotiations on GATT Artic les XXIV and XXVIII to achieve adequate access 
conditions for its products.  In the services ar ea, Colombia had followed the post-enlargement 
procedure on the consolidation of specific commitmen ts.  Colombia wished to negotiate with the EC 
on the banana tariff regime;  the EC had to ma intain the MFN treatment for banana exporting 
countries.  Bananas were not only an export product but a symbol of peace in one of the most 
violence-vulnerable areas in Colombia, which produ ced only bananas.  Colombia recognized the EC's 
progress in the services, agriculture, and fishery sector s.  However, some sectors were still protected 
and subsidized, such as coffee.   
61. The representative of China  stressed the EC's importance and influence on the world economy 
and trade.  China hoped that, after enlargement,  the EC's economic competitiveness would be further 
enhanced, and its trade regime more liberalized.  Since 2002, trade relations between China and the 
EC had developed further.  The EC was China's la rgest trading partner and fourth largest source of 
FDI.  There was huge potential for further developmen t, and the exchange of views within bilateral 
and multilateral frameworks was of great importance.   WT/TPR/M/136 
Page 14  
 
62. The EC maintained huge subsidies and high tari ffs on agricultural products, despite measures 
to reform its CAP;  China encour aged the EC to take more concrete actions to promote and accelerate 
the liberalization of world agricultural trade.  The EC was a major player in the application of trade 
remedy measures, including anti-dumping;  from 1991 to 2003, China had been one of EC's main targets of anti-dumping measures with negative impact on their bilateral trade.  China firmly believed 
that the 2003 EC assessment report failed to reflect  the real situation of a Chinese market-oriented 
economic regime;  China was concerned about this i ssue and looked forward to its early resolution.  
The EC's TBT and SPS measures (for instance, the food safety legislation, and the REACH) were 
increasing unnecessary trade constraints.  China thought that the WTO was not the proper organization to deal with social policies since ther e were other fora to address these issues.  China 
also believed that social policies and policies rela ted to environment should not be taken into account 
in trade- and development-related assistance, and trade preference programmes to developing countries.  
63. As a major economic and trade power, the EC had obligations and responsibilities for the 
healthy development of the world economy and trade,  and for the functioning of the multilateral trade 
system.  China appreciated its leadi ng role in the July Package.  It hoped that the EC would continue 
to be committed in further improving its trade regi me and practices;  demonstrate more courage and 
foresight in the DDA negotiations, particularly in trad e in agriculture;  and make greater contributions 
towards the reinforcement and improvement of the multilateral trading system. 
64. The representative of Peru
 congratulated the EC for its enlargement, as well as for its reforms 
since 2002.  The EC was committed to trade liberaliza tion, one of the aims of its trade policy, and 
played an outstanding role in the WTO.  Peru recogni zed the EC's efforts to fu rther reform its CAP.  
However, it was still concerned about the CAP exceptions, tariff escalation for processed goods, and 
export subsidies.  Peru congratula ted the EC for its new common fisheries policy, aimed at controlling 
over-fishing and safeguarding populat ions;  it also encouraged th e EC to further strengthen its 
commitment to develop specific disciplines in fisheri es subsidies.  Peru hoped to receive EC's replies 
on the effects of the implementation of fisheries re forms on the subsidies granted by its members, and 
the levels of over-fishing. 
65. The EC was Peru's second market for exports.  Peru's exports had been facing obstacles due 
to the implementation of stringent TBT and SPS measu res;  a number of conditions were not clearly 
laid out in the EC directives.  The ban on fish meal for ruminants, imposed without any scientific 
base, had been enforced for the past  three years.  Given that all criteria imposed by the EC had been 
fulfilled, Peru urged the EC to lift th e ban, which had hampered its exports. 
66. The representative asked the EC to explain how the new GSP scheme would fulfil the 
principle of sharing responsibility in the fight agai nst drugs;  the new scheme had to take into account 
the principles of non-reciprocity and non-conditio nality.  The Andean Community and the EC had 
scheduled talks, and Peru wished to know what pos sible free-trade chapters could be included.  The 
representative also asked what m easures had been foreseen to impl ement the Madrid Agreement on 
trade marks.  Peru hoped that the EC's efforts for gr eater trade liberalization could not be hampered by 
a few tariff and non-tariff measures. 
67. The representative of Venezuela  recognized the EC's efforts to  maintain a stable economic 
regime despite a slow down in grow th in 2003.  Bilateral relations with the EC had been progressing 
slowly.  In 2003, Venezuelan exports amounted to more than US$3 million (mainly petroleum 
products, aluminium, iron, methanol, rum, tobacco , gold, and chemical products);  imports were 
steady (mainly liquors, chemicals, processed meats, construction materials, and dairy products).  Venezuela welcomed EC enlargement, but was concerned about the implementation of sanitary 
measures, which could become trade restrictive a nd contrary to the DDA objectives.  At the regional 
level, Venezuela hoped that the EC would conclude  its negotiations with the Andean Community.   WT/TPR/M/136 
 Page 15 
 
 
68. The representative of New Zealand  said that her country welcomed EC enlargement, which 
had already contributed to increased trade flows, and rapid economic growth .   New Zealand looked 
forward to successfully completing its Article XXIV :6 trade compensation negotiations with the EC.  
The EC's key role in the WTO was crucial to the July Package.  As  the EC was the world's leading 
merchandise exporter and trader in services, and the second largest importer, its trade regime was of 
vital interest to all WTO Members.  The EC was New Zealand's second largest trading partner.   
69. The EC market was important for New Zeala nd's trade in agricultural goods.  New Zealand 
commended the EC's efforts to reform its CAP, and welcomed the decision of a number of EC members to fully decouple support payments from pr oduction.  The CAP reform would enable the EC 
to achieve outcomes across all three pillars of th e WTO agriculture negotiations.  But, reform in 
remaining EC agriculture sectors (for example, da iry) would still be needed to eliminate export 
subsidies.  The level of financial support for agri culture remained high.  New Zealand expected the 
EC to find it necessary to take further steps to ach ieve economic competitiveness, social cohesion, and 
environmental sustainability, while remaining with in budget limits.  Further reforms would be of 
benefit to its members, and to WTO Members, particularly developing countries. 
70. New Zealand supported the EC's proposed suga r reform, noting that developing countries 
would benefit from the removal of support, and re duction of market access barriers.  Preference 
receivers had legitimate concerns, and New Zealand ur ged the EC to shift some of its current sugar 
support into structural adjustment aid to help them  move towards a more liberal trading environment. 
The EC should pay fuller attention to the impact on third countries trade when making regulatory decisions.  New Zealand welcomed the entry into fo rce of its Veterinary Agreement with the EC, and 
observed that it had reduced compliance costs to ex porters, and made trading conditions more certain 
in sanitary and phytosanitary requirements.  New Zealand also welcomed the EC's progress, since 2002, in reforming its fisheries sector.  This had important implications for an enhanced multilateral 
trade regime in fish products, as well as improved sustainability of fish stocks.   
71. New Zealand and the EC shared similar objectives for the WTO negotiations on trade in 
services.  Services had lagged behind other sectors in creating a single market, and accounted for only 
20% of EC-15 cross-border trade, due mainly to di fferences in regulation across member States, and 
red tape for companies operating outside their home  countries. The EC's objectives would be further 
facilitated by the reduction of these barriers between its members. 
72. The representative of Hong Kong, China
 said that the EC was his country's third largest 
trading partner, supplier, and market.  The EC w as a key contributor to the successful launch of the 
new Round, the revival of the DDA negotiations afte r Cancun, and the July Package.  Hong Kong, 
China congratulated the EC on the recent enlargem ent, stating that this presented new trading 
opportunities for the EC and its members, but express ed concerns about its effects on trade with non-
members. 
73. Hong Kong, China commended the EC's low level of  tariffs for non-agricultural products.  It 
hoped that high tariffs on agricultural product woul d be reduced soon.  The EC's preferential 
arrangements now covered some two th irds of its trade.  The WTO MFN regime applied to only nine 
Members, representing only a third of the EC's tr ade;  this seemed ironic given the core and non-
discriminatory nature of the MFN principle.  The liberalization of quantitative restrictions, required 
under the ATC, had been back-loaded to the end of the ten-year transition period.  Hong Kong, China 
was disappointed that liberalization of textiles a nd clothing trade had been neither progressive nor 
commercially meaningful.  This back-loading would make the adjustment process more difficult for all.   
74. Hong Kong, China was concerned about the EC's extension of its textile quotas to its new 
members, remarking that it was inconsistent with any ATC provisions, and a previous DSB ruling;  
the EC had left these restrictions in defiance of  the Textile Monitoring Board's findings.  While the WT/TPR/M/136 
Page 16  
 
EC had been one of the leading users of anti-dumpi ng measures, investigations initiated and definitive 
measures imposed by the EC had decreased in 2003.  The EC's administration of anti-dumping measures contrasted with that for competition policy,  where consumer interest reigned.  Hong Kong, 
China's was also concerned about the automatic ex tension of anti-dumping measures to the EC's new 
members.  It believed such extension to be totall y unjustified under the WTO anti-dumping rules.     
75. On TBT, some 21% of products had remain ed unharmonized in 2001;  Hong Kong, China 
hoped this would be completed speedily.  The EC  maintained some SPS regulations on animal 
feeding stuff, animal health conditions, and plant health, which were more stringent than the ISO 
norms;  Hong Kong, China urged the EC to relax th ese to the ISO level.  The representative said that 
public purchasers in the EC were unaware of the full extent of the EC's rules, which could explain the 
low level of cross-border procurement;  Hong Kong,  China urged the EC to better promulgate its 
rules.   
76. Services was of particular interest to Hong Kong, China.  It wished to put on record that with 
regard to the enlargement, the withdrawn and the new notifications sought to initiate the Article XXI 
process in respect of the consolidated list of sp ecific commitments only, and that the EC had not 
initiated any procedure to modify its list of MFN exemptions. 
77. The representative of Turkey
 noted the EC's efforts, since 2002, to further consolidate and 
reform its internal market, as part of the Li sbon Strategy, intended to improve the long-term 
competitiveness of its economy.  The enlargement had been another important development.  Further 
integration, and a larger and unified market woul d benefit the EC and the WTO Members.  At the 
multilateral level, the EC had been the main actor of the DDA, and played a leadership role in its 
ongoing implementation.  The EC gave MFN treatme nt to all WTO Members, complied with its 
obligations, and contributed to the transparency of its trade regime. The EC was a leading contributor 
to the Global Trust Fund for technical cooperati on, and it had improved the coherence between the 
WTO, the U.N., and the Bretton Woods institutions.  
78. Turkey appreciated the EC's efforts to give preferential treatment to developing countries and 
LDCs.  The EC had reviewed its GSP regime and would introduce a new and pro-development 
scheme, together with simple rules of origin, unde r the Everything-But-Arms initiative, for tariff- and 
quota-free access to almost all imports from LDCs .  The EC also offered non-reciprocal trade 
preferences within the Cotonou Agreement. Turk ey appreciated the EC's decision not to start 
negotiations for new preferential trade agreements but to focus more on the multilateral negotiations. 
79. EC-Turkey relations went back to 1963 when Turkey had signed an association agreement 
with the EC with a perspective on membership.  In 1995, a customs union had been created, and in 
1999 the European Council decided Turkey's status  as an accession candidate.  In 2004, it had been 
reaffirmed that if Turkey fulfilled the Copenhagen political criteria, the European Union would open 
accession negotiations with Turkey.  Turkey's trade with the EC had increased, especially after the 
customs union, from US$ 47.7 billion in 2002 to an estimated US$50.3 billion in 2004 .  In 2004, the 
EC-15 was expected to account for 55% of Turkey 's exports, and 48% of its imports.  Turkey had 
increased its exports of automotive, spare parts,  electronic, and iron and steel products, and had 
improved competitiveness in these products.  Turkey mainly imported investment goods, and inputs 
from the EC.  In 2003, the EC had ranked first in the FDI flows to Turkey.  Turkey had a special 
relationship with the EC, and was determined to co mplete the integration process to full membership. 
80. The representative of Australia  said that his country looked forward to working with the new 
Commission in Brussels.  Referring to the TPR cycle, he concluded that a two-year cycle for the EC 
was appropriate.  He highlighted the many EC deve lopments since 2002:  enlargement;  CAP reform;  
agreement to eliminate agricultura l export restitutions;  various DS U challenges initiated against the 
EC;  customs regulations;  introduction of a new GSP;  and advancement of a new concept of 
community preferences.  WT/TPR/M/136 
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81. The EC's trade policy was evolving faster th an Members were addressing issues in the WTO, 
and, in some important respects, in a different di rection to the one pursued in the WTO (for example, 
the EC was using trade policy to achieve non-trad e objectives).  The representative recalled that 
Members did not agree to the EC's proposal to include trade and labour, and the precautionary principle in the Doha Declaration.  After Canc ún, Members agreed to drop from the negotiating 
agenda investment and government procurement.  It appeared that the WTO decisions had neither 
deterred nor discouraged the EC from pursuing th ese issues outside the WTO.  The representative 
invited the discussant to reflect on the apparent disconnect between the EC's support for multilateralism, the DDA, and the WTO and its pursu it, outside the WTO, of outcomes that appeared 
to go in an opposite direction (for example, in as king developing countries to provide reciprocal 
preferences, in tying preferences to non-trade conditio ns, in maintaining opaque barriers to imports, in 
failing to provide third countries with adequate opportunity to comment on domestic regulations, and 
in seeking to undermine the science-based appr oach to risk assessment and precaution).   
82. For more than a decade, the EC-15 had been Aust ralia's largest trading partner, and was also 
its largest source of FDI.  Therefore, Australia had a great deal at stake in the development of the EC's 
economic and trade policies.  The representative re ferred to Australia's adva nce questions and looked 
forward to receiving replies from the EC.  
83. The representative focused on the EC's commitmen t in the July Package to negotiate an 
agreement that eliminated export subsidies.  The July Package had restored confidence in the DDA 
negotiations, and Australia welcomed the importanc e the EC placed on multilateral institutions and 
solutions, and on ambitious results in the agri cultural, NAMA, and services negotiations.  The CAP 
reforms were aimed at introducing greater market orientation into EC farm production.  Australia 
hoped this would better equip the EC to deliver on  the substantial cuts in domestic support, as 
required by the Doha mandate.  Agricultural market  access into the EC and other markets remained 
important to Australian exporters, who were adversely affected by  the EC's export subsidies and 
market access barriers.  Australia expected the EC to play a key role in delivering real market access 
opportunities to Members through the Doha Round.  As the largest single economic grouping in the 
world, the EC was a big importer.  But, the EC 's net imports of agricultural products from non-EC 
members had fallen quite substantially (from over €5 billion in 1995 down to less than €500 million 
in 2003).  If the size of the EC population and the f act that the EC simply did not produce all its food 
needs were taken into account, then the issue of improved market access would be the test for the 
success of the Doha Round   In this context, Aust ralia remained concerned about the EC's continued 
widespread use of non- ad valorem  tariffs, estimated to apply to over 46% of agricultural product 
lines, compared with only 0.5% of non-agri cultural tariff lines.  He stated that non- ad valorem  duties 
hid the incidence of border protection.  Austra lia welcomed the EC's commitment in the NAMA 
negotiations to move away from non- ad valorem  tariffs, and bind them in ad valorem terms, and 
looked for a similar ambition in the agriculture negotiations. 
84. Australia noted that the EC would trade off market access openings in the Doha Round with 
those negotiated in bilateral and regional trading arra ngements.  Australia was interested to learn more 
about how the EC intended to treat preferential mark et access deals in compar ison with market access 
improvements it had undertaken to provide in the Doha Round.  Australia was engaged in the GATT 
Article XXIV:6 negotiations.  While Australia welcomed EC enlargement, there had been a negative 
impact on Australia's trade.  His country was keen to agree compensation, and needed important trade 
and statistical information from the EC to move this process forward.   
85. Australia recognized that within the EC's regul atory environment there were legitimate public 
policy concerns, for example, regarding food safety and environmental protection, but  this needed to take place within the WTO rule-based  framework.  Australia welcomed the EC's efforts in legislative 
process, including simplifying and improving the re gulatory environment, but the EC's regulatory 
systems, intended to harmonize policy throughout its members, affected third-country trading 
partners;  an example was the REACH.  While Au stralia welcomed its objectives to protect human WT/TPR/M/136 
Page 18  
 
health, safety, and the environment, it was concer ned about its far-reaching effect, complexity, and 
economic impact on international markets.  Australia  was also confused and concerned about the EC's 
approach to trade and environment issues.  The relationship between these two bodies of international 
law was working well, and Australia saw no need to  take action to disturb it.  Australia looked 
forward to close cooperation and work with the EC to move the Doha process forward, while 
addressing the important changes in the EC's trade policy. 
86. The representative of Panama
 said that the EC was one of the first agricultural markets for its 
imports and exports.  Panama wish ed to know which parts of the CAP would be applied to fulfil the 
EC's DDA commitments to open its agricultural ma rket.  Agricultural products from agricultural-
exporting countries had gained competitiveness vis-à-vis  the European market, and were vital to 
reduce poverty in these countries.  Panama hoped that  the EC, through this review, would strengthen 
its trade policy to fulfil the WTO rules and disciplines. 
87. The representative of Singapore  congratulated the EC on its enlargement, which it hoped 
would benefit all WTO Members.  Singapore commended  the EC's continued leadership in the WTO, 
including in the launch of the DDA and the achievem ent of the July Package.  The EC had tabled 
concrete and comprehensive propo sals, and had participated activel y in various negotiating groups to 
move the DDA process forward;  after Cancun, it ha d acted to revive the DDA.  The EC's offer to 
eliminate export subsidies on all agricultural produc ts was an important catalyst to achieve the July 
Package.  Singapore had worked closely with  the EC in the DDA negotiations.  Singapore 
acknowledged the EC's contribution in technical assi stance and capacity building, and encouraged it 
to continue its efforts to enable developing c ountries to participate meaningfully in the DDA 
negotiations and in the multilateral trading sy stem.  Regarding services, Singapore echoed the 
comments made by Malaysia on the creation of an EC internal market, and looked forward to the EC 
tabling a revised offer.  Singapore hoped that the EC  would continue to show leadership in the WTO. 
88. Singapore was concerned about the REACH draft re gulation;  it urged the EC to ensure that 
this was not unduly burdensome and did not unnecessarily  hinder trade.  Singapore also had concerns 
about other non-tariff measures, such as the uniform implementation of the EC common customs 
procedures, and the frequent use of contingency trade remedies.   
89. Singapore commended and welcomed the EC's engage ment in other fora to develop a closer 
economic partnership with Asia.  
90. The representative of Argentina  said that the EC was Argentina's major export destination and 
primary investor.  Argentina had historic links and an important cooperation re lationship with the EC.  
It hoped that the enlargement would reinforce their bilateral trade. 
91. The representative referred to the EC's stable average applied MFN tariff rate.  However, the 
tariff structure  was still complicated, especially fo r agricultural products, which were subject to the 
highest tariffs.  The multilateral negotiations offered the EC the opportunity to correct the situation.  
Although customs procedures were ha rmonized amongst the EC members, there was disparity in their 
application.  The EC had taken measures to improve these by approving the 2007 programme on 
customs;  Argentina asked for details on its degree of application. 
92. The representative referred to paragraph 144 of th e Report by the Secretariat.  Argentina did 
not agree with either the presentation of the EC's list of 41 products, in the context of geographical 
indications, nor did it wish TRIPs protection to be extended to other products, and even less in the 
framework of agriculture negotiations.  Argentin a did not understand what the EC was trying to 
achieve, and hoped that it was not the use of univers al names and generic terms.  The representative 
asked the EC to clarify the protection system for similar geographical denominations of third 
countries (for example, La Rioja referred to on footnote 218 of the Report by the Secretariat).  WT/TPR/M/136 
 Page 19 
 
 
93. The representative of Chile  highlighted that, since 2002, the EC had gone through important 
developments:  process of enlargement;  creation of an European Constitution;  launch of an important 
but insufficient CAP reform;  efforts to further st rengthen the single market;  continued commitment 
to the multilateral trading system;  and a strong lead ership in the DDA, which was instrumental in the 
achievement of the July Package, and would be  important as Members moved towards the sixth 
Ministerial Conference.  Chile and the EC shared similar views on many DDA issues, such as 
NAMA, services, and trade facilitation.  The EC an d Chile shared a commitment to open trade, as a 
powerful tool towards sustainable development, pove rty reduction, and social justice;  they also 
shared common cultural and social values.  Their re lations had been further strengthened through their 
bilateral association agreement.  In 2003, the EC  was Chile's first export destination, second import 
supplier, and second foreign investor.  Total b ilateral trade had reached US$8 billion and was 
expected to increase in 2004.  Ch ile wished to further expand thei r agreement coverage to include 
products (especially, agricultural) excluded from full liberalization.  
94. In 2004, Chile had signed a Horizontal Agreement on Air Transport with the EC, that 
acknowledged the concept of European airline.  The next step would be to negotiate an open skies 
agreement to allow European and Chilean airlines to offer their services without capacity or route 
limitations.   
95. Chile welcomed the EC's Common Fisheries Policy reforms, aimed at sustainable exploitation 
of fisheries resources, and facilitating the ongoing negotiations on fisheries subsidies.  Chile had 
important and well-known differences with the EC in agriculture;  however, it welcomed the CAP 
reforms, which went in the right direction but were not the end of the road.  Chile also disagreed with 
the EC on geographical indications.  The EC had a ttempted to link mandates that were independent 
from each other, and to incorporate, in the negotiatio ns, issues that did not have a mandate.  Chile also 
was concerned about the EC's existing restrictions  on Chile's fishmeal exports with no scientific 
ground, and about the negative implications of RE ACH.  Chile hoped its arguments and suggestions 
on both issues would be taken into account.     
96. The representative of Costa Rica  welcomed the EC's enlargem ent, and hoped it would benefit 
the ten new members without affecting trade with third countries.  Costa Rica was interested in 
starting negotiations on compensation for the modifica tion introduced in the Schedules of the new EC 
members.   
97. In the agriculture sector, EC inputs subsidies,  outputs payments, and price support measures 
accounted for 69% of the assistance to producers.  Costa Rica wished to know what measures the EC 
was considering to avoid the distortion of pr oduction and trade by the accumulation to a single 
product of payments from programmes attributed to the amber, blue, and green boxes.  Costa Rica 
expressed serious reservations on the EC's decision to  adopt a tariff-only system on bananas, because 
it seemed that the EC could increase its tariff, which would negatively affect Costa Rica's banana trade.  Costa Rica also wondered how, with a singl e tariff instrument, the EC would maintain access 
for bananas for countries that did not enjoy a prefer ential regime, such as Cost a Rica.  Costa Rica also 
wished to know how the EC would bring its bana na regime reforms into harmony with the DDA 
mandate for market access in th e agriculture sector, the mandate on tropical products, and with Costa 
Rica's ambition to get better market access for ba nanas.  Costa Rica would not accept the DDA ending 
with worse or equal market acces s conditions than those at the beginning of the Round;  however, the 
tariff-only regime of the EC appeared to go in that direction.   
98. The EC had tried to integrate developing count ries into the international markets, through 
reciprocal and non-reciprocal preferential agreements.  Even though the EC had stated that it would not initiate further bilateral trade negotiations, Co sta Rica was concerned on how the EC's bilateral 
relations could affect the DDA.  The EC was se eking to maintain the preferences it had granted 
unilaterally unchanged in the DDA;  this went against the WTO basic principle of opening trade WT/TPR/M/136 
Page 20  
 
relations under the MFN regime.  Costa Rica was deep ly concerned with this situation, and asked the 
EC how it intended to address this situation.  
99. The representative of Ecuador
 said that her country and the EC were key partners mainly on 
technical cooperation, FDI, and trade.  The EC's leadership in the DDA had to be strengthened and 
maintained;  and Ecuador hoped that agricultural subsidies would be reviewed within the July 
Package.  The harmonization of the new EC members' commitments in good and services gave 
countries that had suffered from the enlargement the right to compensation.  Maintaining the legal 
certainty of the WTO Agreements was vital for de veloping countries to maintain their commitments 
to the multilateral trading system, and for the DDA to further liberalize markets.  
100. Ecuador, as EC's main supplier of bananas, ha d a tremendous interest in the new EC import 
regime, and hoped it would guarantee full market a ccess.  Ecuador wished to know how access for 
bananas would be maintained for countries that di d not enjoy any preference, like Ecuador.  Ecuador 
was also concerned about the establishment of high  sanitary standards.  The representative stressed 
the inconsistencies of the EC's new GSP scheme fo r the 2006-08 period with the WTO rules.  Ecuador 
wished to know how the preferential agreem ents would be integrated in the DDA.   
101. With regard to structural funds, she asked who received and benefited from these, what had 
been their allocation over the past five years.  She also asked which industries had benefited from 
these programmes, and the allocations over the past fi ve years.  She asked the EC to clarify which 
categories of maritime conferences benefited from such initiatives.  The repr esentative asked how the 
reciprocity rule in the banking sector c ould be harmonized with MFN treatment.   
102. The representative of Guatemala  said that the EC was Guatemala's third trading partner, and a 
market for future growth.  In 2003, the government s' of Central American countries and the EC had 
expressed their intention to further advance their political dialogue, and to achieve a cooperation and 
free-trade agreement.  The relations between Cent ral America and the EC were framed by the 1984 
San José Dialogue process, which, throu gh cooperation programmes, had strengthened 
Central America's regional integration process, and granted it preferential access through the GSP-
drug scheme.  Exports from Central America to th e EC had increased with the introduction of this 
scheme.  Guatemala wished to achieve greater  access to the EC's markets within the DDA 
negotiations.  Guatemala recognized the importan ce of preferences to stimulate development;  
however, preferential arrangements were selective, did not apply to all products of a given country, 
and were also linked to other non-tr ade-related considerations.  Guat emala hoped to further deepen its 
relations with the EC to benefit their mutual trade flow.   
103. Guatemala appreciated the EC's efforts to help de veloping countries to obtain greater benefits 
in their trade in goods and services.  An EC co mmitment, under the Annex A negotiations, would be 
crucial to develop modalities for fair trade in agricultu re;  this should include series of specific 
commitments (gradual elimination of subsidies for exports and internal support measures, and tariff 
reductions) to guarantee access to the EC market.  Guatemala welcomed the EC's reform on sugar, 
which should be engaged within th e framework of its trade liberalization commitments.  Thus, the 
internal policies that distort trade should be eliminated;  the reform should guarantee supply 
possibilities for new members in a broader market. 
104. Guatemala congratulated the EC for its enlargement.  It hoped that the GATT 
Articles XXIV.6 and XVIII negotiations would be tran sparent and favourable to Central America.  
The representative stressed that the negotiations fo r the establishment of a single tariff for banana 
should guarantee access to the EC's market.  He reca lled that the needs and interests of developing 
countries were at the heart of the DDA.  Guat emala hoped that the services negotiations would 
strengthen its participation in the world market, and promote its economic growth.  Guatemala also 
hoped that the EC would reflect Guatemala's request in its revised offer to be presented in 2005.  
Guatemala welcomed the EC's commitment to fulfil the quota elimination under the Textile  WT/TPR/M/136 
 Page 21 
 
 
Agreement by January 2005.  Guatemala urged the EC to take into account the difficulties faced by 
developing countries in this liberalization process.   Guatemala benefited from the EC preference 
system for textiles and clothing;  however, it could not reap real benefits for many of the products 
included, due to the EC's trade concentration w ith its neighbouring countries and complex rules of 
origin criteria.  Guatemala considered that rul es of origin should be simplified and not become 
technical barriers to trade. 
105. Guatemala thanked the EC for its contribution to the WTO technical cooperation plan, and for 
its bilateral programmes.  The representative co ngratulated the EC for its commitment towards 
development, and encouraged it to abide by it strictly within the DDA. 
106. The representative of Honduras  emphasized the importance of the TPR process and the 
interest of his country in understanding the EC's trade practices and policies.  Honduras welcomed the 
EC's enlargement;  however, Honduras had not been  granted preferential access on certain products 
(e.g. bananas and textiles).  The representative pointed out that any enlargement should not restrict 
market access. Honduras hoped that the EC enlargem ent would consolidate its trade relations, and 
would offer better trade opportunities for Honduras.  
107. The EC still maintained high levels of tariffs and subsidies for agriculture.  The CAP reform, 
although a step in the right direction, was insufficien t to fulfil the EC's promise within the multilateral 
trading system.  Honduras applauded the EC's inten tion to promote the integration of developing 
countries into the multilateral trading system, and its commitment to reduce poverty.  In this regard, 
Honduras shared the view that better market acces s for products in which developing countries were 
competitive and efficient should not be denied. 
108. The representative highlighted the important st eps in the EC-Central America relations 
through the 2003 agreement on political dialogue  and cooperation, whic h had launched the 2004 
negotiations for an FTA.  The EC expected Cent ral America to create a single market;  Honduras, 
Guatemala, El Salvador, and Nicaragua had alread y taken steps to establish a customs union:  they 
had adopted measures to facilitate free moveme nt of persons, goods and services, and a common 
external tariff that applied to 94% of their tariff lines.  The future associa tion agreement between the 
EC and Central America should not be subject to the conclusion of the DDA.   
109. Honduras hoped the new EC GSP scheme would improve market access opportunities for 
Central America, and that the GSP-drug scheme w ould be maintained.  However, it was concerned 
that the EC's GSP scheme could be subject to more stringent conditions, including non-trade concerns.  Honduras asked the EC not to impose new and difficult restrictions to trade on 
Central America. 
110. Honduras congratulated the EC for its achieveme nts since 2002.  It hoped that, in the DDA, 
the EC would show a constructive spirit to achieve  greater liberalization of trade in agricultural 
products of interest to Honduras.  
111. The representative of El Salvador
 said that the EC was one of his country's main markets, and 
an important source of FDI.  El Salvador benefited from the EC's G SP-Plus drug scheme.  El Salvador 
was concerned that non-trade conditions had been  established for eligibility for the new GSP-Plus 
regime.  After a decade of armed conflict, El Salvador had reached peace through very delicate balances that could be jeopardized by imposing a series of conditions for access to preferential 
treatment.   
112. El Salvador welcomed the EC's  developments since 2002:  the enlargement;  the Constitution;  
the reforms to reinforce the single market, and the EC 's internal policies.  However, El Salvador was 
concerned about how some modifications had been and would be applied in agriculture, technical 
barriers to trade, and sanitary and phytosanitary measur es, in that they would be more stringent than WT/TPR/M/136 
Page 22  
 
those agreed in international organizations (e.g. high standards imposed on the import of green coffee 
beans and roasted coffee, and the REACH rules).  El Salvador hoped that they  were consistent with 
the DDA objectives.  The representative referred to co mments made by an EC official on  the "urgent 
need to reduce and rationalize European legislation on technical norms and sanitary and phytosanitary 
rules" to facilitate trade and avoid unnecessary complications faced by European and foreign 
operators.   
113. Negotiations had been launched to extend the EC -Central America partnership.  El Salvador 
had worked hard for this initiative, and welcomed a ll efforts to strengthen their relations with a view 
to liberalizing trade.   El Salvador hoped to c ontinue working with the EC to conclude the DDA 
successfully. 
114. The representative of Norway
 congratulated the EC for its enlargement.  The EC was 
Norway's dominant trading partner.  Norway partic ipated in the EC's internal market through the 
European Economic Area (EEA).  Thus, it was important for Norway that EC succeeded in 
implementing the Lisbon Strategy.   
115. Norway agreed with the EC's view that trad e policy promoted sustainable development, and 
that improving market access for developing coun tries should be complemented by trade-related 
technical assistance and capacity-building measures to overcome supply-side constraints.  Norway recognized that further improvements were needed between trade policy and other policy areas;  the 
DDA had an important role to play.  Norway comme nded the EC's leadership in the launch of the 
DDA and for its commitment to a successful conc lusion to the negotiations.  Referring to 
paragraph 56 of Report by the EC, the representative said that Norway fully concurred with the EC's 
assessment of the WTO's crucial role.  However, Norway was concerned that the EC remained a 
leading user of contingency trade measures.  Although much of Norway's trade with the EC was covered by the EEA Agreement, an important part of it remained covered by the WTO Agreements.  
Norway was working actively to strengthen the WT O rules and disciplines (in particular in anti-
dumping), and welcomed the EC's ambition for the development of the multilateral trading system. 
116. In the agricultural negotiations, Norway shared th e EC's view that movement was needed, in a 
balanced manner, on all three pillars.  Norway belie ved that parallel treatment of all forms of export 
subsidies was important.  It also shared the EC's view that both defensive and offensive interests of 
Members had to be reflected in the market access to be established.  Norway and the EC were cooperating to ensure that the non-trade concerns in agriculture were taken into account.  Norway also 
appreciated their close contacts in the negotiating group on non-agricultural market access, and shared 
views on an ambitious outcome in the NAMA, and that services should not lag behind.  Norway 
agreed that the special needs and interests of developing countries should be at the heart of the 
negotiations, that environmental c oncerns should be taken into acc ount, and that the DDA outcomes 
should contribute to sustainable development. 
117. The representative commended the Secretariat for introducing economic analysis into the 
TPR, and said that assessing the economic effects of the various trade instruments was valuable to 
those giving advice on the best possible trade policy to  be pursued;  such an approach seemed to be 
well inside the TPR exercise and should be encouraged. 
118. The representative of the Republic of Korea
 said that his country appreciated the EC's 
leadership role in supporting and strengthening the multilateral trading system, and advancing the 
DDA negotiations, in which Korea and the EC shared  views on several issues.  Since 2002, their 
bilateral economic and trade relationship had been ve ry positive.  The EC was Korea's fourth largest 
trading partner;  Korea was the EC's eleventh la rgest trading partner and the fourth largest among 
non-European countries.  In 2003, the EC had been the largest investor in Korea.    WT/TPR/M/136 
 Page 23 
 
 
119. Korea congratulated the EC on its enlargement,  which could promote economic prosperity for 
EC and WTO Members.  Korea hoped that the enlarged  EC would continue to play a leading role in 
developing the multilateral trading system.  The repr esentative referred to the unfinished procedures 
relating to renegotiations of tariff concessions unde r GATT Article XXIV:6.  The EC was consulting 
with Members on changes of some tariff concessions  as a result of its enlargement.  Korea looked 
forward to working closely with the EC, and w as awaiting basic statistical information for the 
negotiations.   
120. The EC had frequently used contingency tr ade measures and, while its anti-dumping 
measures had declined since 2000, Korea remained one of its most frequent targets.  Korea hoped that 
the EC would be more cautious about the initia tion of anti-dumping measures that could cause 
irreparable damage to the exporters concerned.   It was also concerned about the growing number of 
EC regulations on environmental protection, and th at the REACH system could be implemented in a 
way that imposed a heavy burden on exporters to the EC. 
121. The representative of Kenya  welcomed the EC's enlargement, which had created more 
opportunities among its members and for its trading part ners.  The enlarged EC was expected to be a 
major engine for world economic growth.  Kenya was concerned that, between 2001 and 2003, the 
EC's GDP had declined, and unemployment had incr eased.  Economic recovery had started in 2003, 
but more needed to be done to ensure growth.  The EC was Kenya's main trading partner outside the 
African continent, and accounted for about 30% of  Kenya's exports.  Therefore, the EC's trade 
policies and practices had a significant impact on Kenya's export performance, and on its overall 
development strategies and poverty reduction efforts.  
122. The EC's agriculture sector en joyed limited liberalization with high domestic support, export 
subsidies, tariffs, and a complex tariff structure.  This had hindered its exposure to competition, and 
constrained Kenya's efforts to export its agricultura l products to the EC.  The current negotiations on 
agriculture offered the EC an opportunity to address these issues for a world market-oriented 
agricultural trading system.  Kenya looked forward to accelerated reform efforts under the CAP.  The 
impact of limited liberalization in agriculture wa s further compounded by SPS standards that were 
more stringent and restrictive than the intern ational standards for exports, particularly from 
developing countries.  Kenya urged the EC to ensure  that adequate time, an d the requisite technical 
assistance and capacity building support were provi ded, as required under the SPS Agreement. 
123. Kenya commended the EC's extension of non-reciprocal tariff preference arrangements to 
developing countries under the Cotonou Agreement a nd GSP;  however, their benefits had been 
limited by more restrictive rules of origin, particul arly on products with higher preferential margins 
and of export interest to Kenya.  Kenya urged the EC to adopt less restrictive rules of origin, and ensure business-friendly administrative procedures.  
124. Kenya commended the EC's contribution to th e WTO trade-related technical assistance and 
capacity building programmes for developing countries,  and its leadership in the implementation and 
revival of the DDA.  Kenya was negotiating an in ter-regional Economic Part nership Agreement with 
the EC, under the Cotonou Agreement, to further deepen the integration between ACP countries and 
the EC.  Kenya hoped that work would be comple ted within the provided time frame.  Kenya also 
appreciated the EC's development assistance progra mme;  Kenya would ensure that this assistance 
contributed effectively to its development efforts.   
125. The representative of India
 congratulated the EC for its enlargement, noting that it presented 
new opportunities and challenges.  India hoped that the EC would strive to contain any negative trade 
effects of this enlargement on non-preferential thir d parties.  The EC's commitment to an open, 
liberal, and transparent trade regime was vital for the multilateral trading system.  The EC was India's 
largest trading partner.  The representative noted the EC's constructive c ontribution to the ongoing 
WTO negotiations.  India complimented the EC's acceptance to eliminate all export subsidies in WT/TPR/M/136 
Page 24  
 
agriculture.  India also noted the EC's efforts toward s closer integration of developing countries in the 
multilateral trading system.  It hoped that the EC w ould further strengthen its efforts to realize the 
developmental promise of the DDA.   
126. Preferential trade arrangements, with divergen t trade liberalization agendas and rules, had 
complicated the EC's trade regime.  India was concer ned about the EC's recourse to trade policy as an 
instrument to achieve non-trade objectives.  India hoped the EC's GSP schemes for the 2006-08 
period would be made WTO compliant.  The represen tative referred to India's written questions and 
looked forward to the EC's responses.  The EC's st ringent sanitary and technical standards represented 
a challenge for its trading partners, and were even more difficult when individual EC members 
deviated from common EC norms (for example, widely different standards represented a problem for 
seafood exporters).  India urged the EC to look into  these concerns, with regard to the needs and 
constraints of developing countries, as envisaged  in the SPS Agreement.  The EC's use of trade 
remedy measures had especially impacted upon India's exports of textiles and clothing;  9.8% of all 
anti-dumping measures, and 19% of all CVD measur es had been enforced only on textiles products.  
India had highly-competitive and skilled manpower;  the difficult and slow procedures for visas and 
work permits to the EC markets, combined with th e requirement of social security contributions, had 
blunted this Indian comparative advantage.  India requested the EC to address these issues 
expeditiously. 
127. High tariff protection and domestic support, couple d with limited liberalization of trade in 
agriculture under the EC's preferential arrangement s, had insulated the EC's agricultural production 
from competition, and generated surpluses.  This policy had adversely affected exports from other 
countries, especially from developing countries.  Although the CAP reforms were welcome, total 
support to producers had increased from 34% in 2001 to  36% in 2002.  India hoped that the EC would 
assume leadership in realizing the Doha mandate on agriculture. 
128. The representative underlined that its trade and economic relations with the EC were 
important.  They were pursuing these relations through bilateral fora.  India and the EC also remained 
closely engaged at the WTO in pursuit of a succe ssful outcome of the ongoing Doha negotiations. 
129. The representative of Brazil
 highlighted the importance of trade to the EC, and the 
significance of the EC's market for the world.  The EC was one of Brazil's largest trading partners; 
bilateral trade amounted to over US$30 billion.  It was also one of the two most important foreign 
investors in Brazil.  MERCOSUR and the EC were negotiating to give further impetus to their trade 
relations.  Brazil appreciated the EC's commitmen t to strengthening the multilateral trading system 
and its engagement in addressing some of the DDA's most difficult issues.  Brazil expected that the 
July Package would be translated into concrete  gains for developed and developing countries.  
130. While the EC's market was relatively open  for non-agricultural products, it remained 
protected for agricultural products, with a complex ta riff structure.  The average MFN tariff rate had 
remained stable in 2004, while non- ad valorem tariffs applied to 46% of agricultural tariff lines, and 
could reach ad valorem equivalents of up to 209.9%.  Brazil en couraged further simplification of the 
EC's tariff structure, and liberalization of the ag riculture sector to improve the efficiency of the 
European economy, and benefit its consumers.  The EC also provided a large amount of export subsidies and trade-distorting domestic subsidies for several commodities (including sugar, a product 
of special interest to Brazil);  Brazil and other in terested parties had submitted the sugar issue to the 
WTO dispute settlement mechanism.  Brazil expect ed that the announced reform of the EC sugar 
regime would eliminate these subsidies as soon as possible and allow competitive producers to fully 
benefit from their comparative advantages.  Brazil's expressed concerns about the EC's new 2006 GSP scheme, and its possible consequences to the multilateral trading system.  WT/TPR/M/136 
 Page 25 
 
 
131. Brazil encouraged the EC to continue with st ructural reforms, including the harmonization of 
trade-related procedures at the EC-25 level, to promote world trade and to improve its resource 
allocation.   
132. The representative of Benin  highlighted the EC's major changes since 2002 (the CAP reform, 
the enlargement, and the adoption of the July Pack age) and the repercussions they could have on the 
EC's economic and trade relations with WTO Memb ers, particularly ACP countries.  The EC had 
privileged relations with the ACP countries, through the Cotonou Agreement.  Benin hoped that these 
relations would be improved and strengthened through preferentia l arrangements (e.g. the GSP and 
EBA).  
133. Benin was following the CAP reform with great in terest due to the importance of farm trade 
between the EC and developing countries.  African e xports to the EC were es timated at 85% of their 
export earnings.  Thus, Benin hoped that the CAP reform would take into account African countries 
preoccupations, particularly regarding internal s upport measures and subsidies. Regarding cotton, 
Benin asked the EC to go beyond its proposal of d ecoupling 65% of its internal support measures, and 
to improve the participation of African cott on-producer countries in multilateral trade.   
134. The representative of Jamaica  said that the EC was a major trading partner for Jamaica due to 
historical ties, and relations within the Coton ou Agreement.  The EC accounted for a significant 
proportion of Jamaican exports and imports, and w as a major partner in investment, and in the 
provision of technical assistance.  Jamaica we lcomed the facilities provided within the Cotonou 
Agreement (such as, the European Development Fund).   It had benefited from trade-related technical 
assistance to participate in the ongoing Economic  Partnership Agreement negotiations between 
Cari-Forum countries and the EC.  
135. The EC's internal policy framework and its  relationship with developing countries was 
dynamic.  Preferential arrangements were vital for small economies, and Jamaica was concerned 
about some of the CAP reform measures on key commod ities.  Jamaica expected the EC to take into 
account the interests of its CARICOM and ACP partne rs.  Jamaica recognized the EC's important role 
in the DDA.  The representative re ferred to EC's views that in non-agricultural market access an 
increase in tariff bindings would be an appropria te commitment for LDCs and weak and vulnerable 
economies.  Jamaica appreciated the EC's support of the DDA Global Trust Fund.   
136. The representative of Sri Lanka  congratulated the EC on its enlargement.  The EC was 
Sri Lanka's largest trading partner and second most  important market;  Sri Lanka was a very small 
trading partner for the EC. 
137. The EC's MFN regime applied currently to only nine industrialized WTO Members;  all other 
countries traded with the EC under preferential arra ngements.  Sri Lanka's exports to the EC were 
covered by the GSP, but its utilization was restricted by stringent rules of origin.  Thus, Sri Lanka paid high MFN duties for most of its exports. In the EC, the MFN tariff was the highest tariff, hence granting the lowest level of access.  Five Sout h Asian countries had duty-free access to the EC's 
market, which left two countries at a lower level of preferential market access.  Even out of these two 
countries, Sri Lanka faced a much higher average ta riff, and was at the very bottom of the EC's 
market access pyramid. 
138. Most of the GSP benefits were used by a fe w developing countries with a high level of 
industrialization;  one reason was that the EC's preferential rules of origin favoured more industrialized developing countries.  As a result, most of the weak and vulnerable GSP beneficiaries 
did not receive an adequate level of preferential access.  Therefore, Sri Lanka disagreed with the 
observation in the Report of the Secretariat that "t he EC's preferential trade agreements had so far 
resulted in free trade with the concerned partners in industrial goods".  In 2004, the EC had extended a 
higher level of preferential access for Sri Lanka un der the GSP special incentive arrangement for the WT/TPR/M/136 
Page 26  
 
protection of labour rights;  this would increase prefer ential margins, but not the level of utilization.  
Sri Lanka welcomed the EC's proposed GSP, partic ularly the GSP Plus for vulnerable countries with 
special development needs.  This would provide a wider coverage and deeper tariff cuts for Sri 
Lankan exporters, and provided them with a level playing field in the EC market.  However, without 
changes in the preferential rules of  origin, the utilization rate would remain limited.  One immediate 
step the EC could take was to expand the cove rage area for regional cumulation to SAARC and 
ASEAN.   
139. The representative of Romania
 congratulated the EC for its positive role in the WTO, and for 
observing its obligations within the multilateral trading system.  The EC was Romania's most 
important trading partner.  Bilate ral relations with the EC starte d with the 1993 FTA, continued with 
the Association Agreement, and Ro mania's accession negotiations were close to finish.  Since 2002, 
the EC had represented over 65% of Romania's fore ign trade;  changes had occurred not only in 
foreign trade volume but also in production, services, e ducation, and in the culture of doing business.  
The Europe Agreement encouraged Romania to  assume important commitments in the Uruguay 
Round, and to participate positiv ely in the negotiating process. 
140. The EC's trade policy was a solid basis for Ro mania's own trade policy to learn more and 
better understand the multilateral trading system.  Th e EC and Romania sought to develop trade on a 
sustainable basis to improve economic growth, qua lity of life, and social welfare.  Romania 
encouraged the EC to further contribute to the WTO negotiations.  Romania recalled the EC's 
willingness to engage in bilateral consultations on trade defence measures, and this would help 
Romania's trade policy.  Romania believed that furthe r developments in the EC's trade policy, to fully 
observe its WTO commitments, would ensure a frie ndly trading and investment environment within 
the EC. 
141. The representative of Pakistan  said that the EC accounted for almost 25% of his country's 
international trade and provided Pakistan with signi ficant financial and technical assistance.  In 2002, 
the EC had included Pakistan in its special G SP scheme for illegal drug trade.  However, the 
representative noted that the EC initiated back -to-back anti-dumping duties on Pakistan's most 
competitive export of bed linen;  this was contrary to the Doha Ministerial Decision.  Neither the 
investigation, nor the way the European Commi ssion coerced its members to vote for this levy 
seemed to be transparent. This measure had now been extended to the new EC members without any 
justification.  Pakistan's basmati rice had been suddenly excluded from tariff preference without any 
valid reason, affecting its rice trade;  although th is facility had now been restored. However, such 
unpredictable measures created problems for poor farmers.  Pakistan hoped the new GSP scheme 
would be more stable, and low-income countries would not be subject to repeated trade remedy 
measures. 
142. Pakistan endorsed Australia's views that the EC brought in non-trade measures for granting 
trade concessions through the backdoor.  Pakistan  urged the EC to adhere to its international 
commitments.  The EC's subsidy regime, under its  CAP, prevented many developing countries from 
selling their products (e.g. sugar, and dairy products) in internati onal markets, and thus prevented 
poverty reduction. 
143. Pakistan appreciated the EC's efforts and lead ership to move the DDA forward, and hoped it 
would make its tariff simpler, more transparent with  fewer peaks and less escalation.  Pakistan urged 
the EC to be more transparent in applying trade remedy measures against low-income developing 
countries. 
144. The representative of Croatia  said that the EC was Croatia's most important trading partner.  
Thus, EC trade policy measures and disturbances on the European market had an impact on the Croatian economy.  The EC's role in WTO was vi tal due to its significance in world trade and 
economy.  The EC's commitment to the multilateral tr ading system had been underlined by its active  WT/TPR/M/136 
 Page 27 
 
 
participation in the WTO work, and its strong suppor t and leadership for the new Round.  Croatia and 
the EC shared identical or similar position in ma ny DDA areas.  Croatia also supported the EC's 
regional integration as complementary to the WTO.  
145. Contractual relations between the EC and Cr oatia started with the 2001 Stabilization and 
Association Agreement;  its trade and trade-related provisions had entered into force in 2002 through 
an Interim Agreement.  In 2004, Croatia had been granted official status of candidate country for 
membership;  accession negotiations had been announced  for 2005.  Acceding to the EC was Croatia's 
strategic goal. 
146. The representative of Bulgaria  appreciated the EC's efforts to further liberalize its trade 
regime, cope with an unprecedented enlargemen t, become the most competitive and dynamic 
knowledge-based economy in the world, develop its in stitutions and its external trade relations, and 
continue playing a key role in the multilateral trading system.  
147. Since the previous review, the EC had continue d its strong support to the multilateral trading 
system as a main engine of globalization and liberalization of world trade.  The EC had helped to overcome the critical deadlock in the WTO negotia tions and reach the July Package.  Multilateral 
efforts had proceeded in parallel with important in stitutional and economic reform.  Recent internal 
market developments included further reform of  the common market to achieve higher economic 
growth and meet the challenges of enlargement.  The accession of 10 new member states had been a 
major achievement in global and regional aspects, an d benefited the new member states and all global 
market participants.  The CAP re form in 2003 had been aimed at, inter alia , establishing a more stable 
policy framework and increasing market orientation through simpler and less trade-distorting support 
measures.  The euro had become the second most widely used currency worldwide.  The European 
Constitution and the initiatives to implement the Lis bon strategy in social policy and environment 
were also important political and social reforms.  
148. The EC continued to be a very important Bulgar ian political and trading partner.  A strategic 
foreign policy goal to accede to the EC had been  set more than 10 years ago with the Europe 
Agreement.  Application for membership had been  filed in 1995.  After successful conclusion of 
accession negotiations in 2004, Bulgaria expected  to sign the Accession Treaty in 2005 for accession 
to the EC in early 2007. 
149. Developing trade and economic ties with the EC was a major Bulgarian priority.  The 
European Agreement had been developed to further strengthen and deepen bilateral relations and to 
pave the way for a smooth accession.  As a result of mutual trade liberalization, the EC had become 
Bulgaria's biggest and most important trading pa rtner.  Over the 1997-03 period, trade with EC 
member states had grown by 13% (around 53% of Bu lgarian total trade).  Exports and imports had 
incrased steadily.  Leading trading partners were Ge rmany, Italy, Greece, and France.  Currently, the 
EC was a major source of foreign direct investment in Bulgaria.  
150. The implementation of the Association Agre ement, the harmonization of the Bulgarian 
legislation with the acquis communautaire , and the EC's pre-accession assistance had helped speed up 
economic reforms in Bulgaria, and had contributed to the successful transition to market economy and 
the development of trade relations with countries fro m the region.  The EC's efforts towards deeper 
and more meaningful integration among European countries were in line with the objectives of the 
multilateral trading system.  RTAs complemented the multilateral process of liberalization and globalization. 
151. Bulgaria commended the EC's contribution to  attain higher standards of sustainable 
development in its member states and in developing and least developed countries.  Efforts to assist and better integrate the latter had been underpinne d by an active and streamlined trade policy, 
providing broad market opportunities for pr oducts originating in these countries. WT/TPR/M/136 
Page 28  
 
V. REPLIES BY THE REPRESENTATIVE OF THE EUROPEAN COMMUNITIES AND 
ADDITIONAL COMMENTS 
152. The representative of the European Communities
 (EC) thanked Members for their huge 
interest, apparent in around 700 questions.  The EC  had provided written answers to all those that 
arrived in time;  answers would be provi ded for the others as soon as possible.   
(i) Economic environment 
 
153. The EC was the largest world trading bloc and as such, had to contribute to world growth 
through its own expansion, and by helping its vast  market open.  The EC's performance as a trade and 
investment partner was satisfactory since it combined sustained growth of imports and exports with a 
robust trade balance over the medium-term, while it  was a main source of savings and FDI for the 
world.  Thus, the EC contributed to the stability and the growth of the world economy. However, the 
long-term EC-25 growth performance was critical for sustaining high living standards, and for 
absorbing more imports from the world.  The EC had been tackling this issue, through a 
comprehensive and ambitious reform agenda to ad dress structural weaknesses at EC and national 
levels, and macroeconomic constraints. 
154. These ongoing efforts were aimed at increasing efficiency through:  becoming more 
competitive;  creating more unified and open good s and factors markets;  ensuring distributional 
equity through appropriate flanking policies at  national and EC leve ls;  and improving the 
environment, in particular with regard to the greenhouse effect, the bio-diversity, and the quality of 
landscapes.  This strategy of the sustainability tr iangle (i.e. economic growth, social progress, and 
environmental protection) guided the EC domestic reform agenda:  the Lisbon Strategy;  the CAP 
reform (for sugar, olive oil, cotton, and tobacco);  and the adjustment of the Stability and Growth Pact 
to make it more effective.  This agenda was daun ting because the EC's ambitions were high, and it did 
not mean to trade off more growth for increasing in equalities or for putting environment at risk.  The 
reforms were drastic, painful, a nd politically costly.  They were still under way to respond to the long-
term needs of an ageing European society and em erging economies world-wide.   The representative 
insisted on the dynamics and on the balance of the EC domestic agenda because this showed how the 
EC approached the challenges of globalization. 
155. The representative of Australia  underlined that the 700 questions probably reflected both a 
huge interest and a great deal of concern about some aspects of the EC's trade policy.  
156. The representative of the EC  agreed, and said that interest often went along with criticism.  
The EC was ready to respond.  
(ii) Trade policies 
157. The EC favoured multilateral trade and investment  liberalization as the most effective way to 
ensure a more equitable and sustainable international division of labour.  But, it also gave priority to 
rules settings to secure more effective market acce ss and a level playing field, and to ensure that 
markets globalization delivered sustainable devel opment.   The EC believed in the mutually 
reinforcing process of trade liberalization, and pr ogress on labour rights and environmental protection.  
To what extent this parallelism could be sought and achieved within the same multilateral setting was 
a matter to be addressed in a pragmatic way by draw ing on the full potential and the specificity of all 
multilateral institutions concerned. 
158. The integration of developing countries and transition economies in the world economy was 
at the core of EC external economic strategy.  Th is concern dominated the EC approach to the DDA, 
and explained its bilateral a nd regional trade agreements.  WT/TPR/M/136 
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159. Trade incentives and aid were the EC's most e ffective foreign policy weapons, and went hand 
in hand in its dealing with its ne ighbours and with developing countries at large.  Opening up the EC's 
market through GSP and EBA, concluding FTAs to  encourage South-South trade through regional 
integration, and enhancing deep integration thro ugh regulatory convergence and investment with its 
eastern and southern neighbours were part of its st rategy to promote growth through exports and FDI, 
and to translate it into sustainable development through appropriate domestic policies, beyond what 
multilateral trading could deliver.  However, WTO compatibility of its RTAs remained its overarching concern. 
160. The EC was also championing the cause of envi ronment, mindful of its importance for the 
most vulnerable countries.  Its legislation was aimed at ensuring the prosperity of a 450 million 
population living on a rather small and densely popula ted continent.  But the environment was also a 
global public good and fell within the preview of th e global community. Despite the differences in the 
degree of responsibility in the global environmental challenge and in the capacity to cope with it, 
environment found its place in the trade negotiation as part and parcel of production and trade.  The 
same held true for sanitary, phyto sanitary, and health concerns, whic h had to be reconciled with free 
trade thanks to appropriate multilateral standards,  not preventing countries with higher standards from 
ensuring a better degree of protection of human and animal health. 
(a) Customs Union and import regime 161. The Customs Union was the EC's nucleus;  it was a constant challenge to ensure the uniform 
application of all customs rules, and create a le vel playing field.  The Common Customs Tariff (CCT) 
and the Customs Code made up the major instrume ntal legislation, along with regulatory and 
supervisory structures, such as committees dealing with specific aspects of the CCT or the Customs 
Code, budgetary controls, and more .  Institutional and administrative measures had also been put in 
place and applied to limit or eliminate divergen t practices;  here, the Commission's role was 
important, and it was constantly refining operational tools and procedures to help meeting this 
challenge.  The EC welcomed that negotiations on trade facilitation would start as they would benefit 
trade inside and outside the EC.  
162. The EC had, in general, rather low tariffs fo r all goods, but the average level of agricultural 
tariffs was higher.  However, the schedules of a number of WTO Members showed that this was not unique, and reflected the sensitivity of the agriculture  sector.  However, the EC was highly interested 
in further liberalization of trade in goods, and lo oked forward to continuing the negotiations within 
the DDA. 
(b) Enlargement 
163. Many had welcomed the EC's recent enlarg ement, which implied an important trade 
liberalization for goods and services.  In a limited numbe r of cases, tariffs were lower in some of the 
new members than in the EC-15.  Negotiations ha d been engaged and were expected to conclude 
rapidly.  However, the volume of trade involved w as rather marginal in comparison with the EC-25 
trade, which was the basis for a possible compensation. 
164. The representative addressed the question of text iles and garments.  As the EC was based on a 
customs union, the temporary extension of the quota regime was necessary to ensure the maintenance 
and unhampered functioning of the expanded internal EC market.  To preserve trade, the EC-15 
quotas had been increased on the basis of past tr ade with the accession countries, without exceptions 
for any product category.  Tariffs in the textile and garment sectors were lower in the new member 
states.  The representative did not comment in detail on backloading because there had been an 
extensive exchange on this subject at the General Council in 2003, and on the same day this TPR had 
started, the Council for Trade in Goods  met to discuss the textiles issue.  WT/TPR/M/136 
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165. Among the other positive effects of the enlargemen t was the extension of the GSP by the new 
members, which offered additional market access to developing countries and transition economies. 
166. The extension of the EC's trade defence measure s was a consequence of  the functioning of a 
customs union.  It was important to put things into perspective:  the total industrial activity in the new 
members was less than 10% of that of the EC-15.  In most cases, calculations for dumping or injury 
determinations made for the EC-15 would be also representative for the enlarged EC.  A task force 
had been created to help exporters.  Over the last ten months, the EC had addr essed this issue with all 
major exporting countries and econom ic operators to identify produc ts for which the automatic 
application of EC-15 trade defence measures,  upon enlargement, could cause unduly high economic 
hardship because of either a risk of shortage of s upplies (due to very high volumes of imports into the 
acceding countries), or quantitative elements in the measures.  
(c) Contingency remedy measures 167. Some delegations had remarked that the EC  was a leading user of contingency trade 
measures.  The Report by the Secretariat simply c ounted the number of actions .  All delegations had 
emphasized that the EC was one of, if not their most important market.  This reflected the EC's 
economic size in global trade, and the openness of its market.  He said that the EC was, in fact, quite a 
moderate user of contingency re medy measures;  most WTO Members that used them had a higher 
rate of measures compared to the level of their impo rts.  It remained important to ensure that these 
measures were taken and im plemented in full conformity with the WTO rules, and in this respect the 
EC's trade record was not too bad.  Since the crea tion of the WTO, the EC had been involved in 2 AD 
and 1 CVD cases.  
(d) GSP reform  
168. The EC was working on a new GSP regime b ased on simpler and broa der product coverage, 
and sustainability.  The EC had taken this approach  in conformity with its sustainability triangle 
strategy.  Additional efforts on sustainable devel opment resulted in additional GSP treatment.  This 
approach was coherent because it was also applied domestically, and it offe red additional support for 
developing countries.   
(e) Preferential rules of origin 169. The harmonization of non-preferential rules of origin had been much more difficult and time 
consuming than anticipated, as was also the case w ith preferential origin rules applied in the GSP 
context.  The EC was now in the process of looking at these rules to make them more palatable for 
developing countries, and easier to meet. G ood and intensified cooperation with customs 
administrations of developing countries was a key issue in this endeavour. 
170. The representative hoped that his introductory  remarks had helped Members to better 
understand the coherence between EC  domestic and international policies.  He did not see the EC 
approach as the ultimate or, even less, the single be nchmark for tackling world growth and sustainable 
development, but as an experimental contribution in a process of global learning.   
171. The discussant
 said that there was complete consensus on the fact that the EC was big.  He 
highlighted that a small change in the EC's trad e policies could have a disproportionately larger 
impact on others.  Members had requested the EC to  take care in considering changes to its trade 
policies;  changes should provide a transparent process through which its trading partners could 
provide input to discussions before their impl ementation.  Some Members had focused on the 
responsibility and duty of care that size gave to the EC;  many Members recognized the EC's efforts to 
fulfil that responsibility.  WT/TPR/M/136 
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172. A second consensus was that the EC was getting even bigger, and many exhorted it to take 
great care in dealing with the implications of en largement on its trading pa rtners.  Enlargement had 
been welcomed as an opportunity, but potential problems had also been seen.  Diversity and 
multiplicity in regulations and pr actices should give way slowly to harmonized approaches, which 
would be welcomed.  Certain new EC members coul d be subject to new restrictions following their 
accession;  this required attention and settlement.  There was a fear that building a sound internal 
market in a newly enlarged economic space could lessen opportunities (particularly in services) for 
trading partners outside Europe.  Members were co ncerned about the proposed changes to the EC's 
GSP and technical barriers to trade (in particular the REACH regulations on chemicals).  Regarding 
the GSP, some Members were concerned that this w ould not solve complexity;  some said that this 
would provide opportunities for protectionism;  and some thought that this simply would not work.  
Trying to import human rights, environment, and soci al policies into trade policy would result in little 
progress, and it would be more sensible to allow the respective international organizations to focus on 
their own areas of responsibility. 
173. The WTO Agreement exhorted that the world' s resources should be used "in accordance with 
the objective of sustainable development, seeking bo th to protect and preserve the environment, and 
to enhance the means for doing so".  All WTO Member s agreed that the reference to the environment 
encompassed not just the physical environment, but also the human environment, which had found concrete expression in the provisions of the SPS a nd TBT Agreements.  Many members had asked the 
EC to pay close attention to those concerns and questions in proceeding with its regulatory 
programmes (such as REACH), and in fashioni ng the next generation of GSP criteria. 
174. The representative of Australia
 agreed that the EC was a large market for all Members.  
However, against the background of the comment that the EC was championing the interests and 
competitiveness of developing countries, he noted that  one of the main Doha negotiations themes was 
that the greatest dividend, for most developing co untries, was liberalized access and reduced support 
for agricultural products.  For many Members, the real test of the succes s of the Doha Round in 
agriculture would be improving market access.  The EC had argued in the negotiations that market 
access could be solved by the reapplication of th e Uruguay Round tariff formula, which had worked 
in the past.  Statistics provided in response to ques tion No. 11, on the evolution of imports and exports 
from and to the EC since the Uruguay Round had shown that, as a result of the Uruguay Round or 
taking its results into account, the EC's exports of agriculture products had gone up faster than its 
imports;  net imports had fallen from €5 billion in 1995 to half a billion in 2003.  The last sentence of 
the answer mentioned the increase in per capita impo rts, but the question concerned the increase in 
per capita net imports, and that would have show n a reduction.  The representative wondered if the 
EC wished to speculate on the likely evolution of  its imports of agricultural products against its 
exports, if the Uruguay Round formula was adopted on ce again;  he wondered whether there would be 
a negligible increase in imports but a large increase in exports. 
175. The representative of the United States  noted that six months after the regulations on 
traceability and labelling had taken legal effect, the EC itself might not have a clear sense of how 
these complex regulations were being implemented in  practice.  The United States looked forward to 
engaging closely with the EC to clarify the status  of implementation of these regulations and their 
implications. 
176. The representative of Mexico  urged the EC to apply the le ssons that would be drawn from 
this Review.  The representative pointed out the effect of non-trade barriers on market access.  
Mexico might have very low tariffs on all items and sectors, but if the system was not transparent and 
just, in terms of SPS and NTBs, market access w ould not be guaranteed.  Increasingly non-trade 
barriers and sanitary measures were a true nightmare  for Mexico.  The EC was urged to maintain its 
efforts to fulfil as strictly as possible th e principles of the TBT and SPS Agreements. WT/TPR/M/136 
Page 32  
 
177. The representative of China
 believed EC enlargement was positive.  China appreciated EC's 
interest in developing countries (through the Ev erything but Arms, and the GSP treatment), and its 
positions in the negotiations for improving their cond itions.  China hoped that the EC would continue 
to do so, and improve in some aspect s.  For instance, rules of origin could be improved to help more 
developing countries (particularly LDCs) make use of  their preferences.  And, in standards China 
hoped that the EC would take measures to give developing countries (in particular LDCs) more 
opportunities to enter its market. 
178. The representative of The Philippines  asked the EC:  about the policy trend on MFN 
treatment, and how it would reconc ile this with the MFN obligations under the multilateral trading 
system;  how the EC proposed to reconcile the general view that Members should shift to an ad 
valorem  system, and shift non- ad valorem  tariffs to an ad valorem  equivalent;  whether it would seek 
to simplify its complex regulations, or whether th ere was a trend towards a reward-based market 
access system, and if how the EC intended to reco ncile it with the DDA objective of increased market 
access for developing countries to support their de velopment.  The Philippines welcomed the EC's 
commitment to sustainable development of its new members, as well as to increase development 
within its internal market.  The representative ask ed how the EC proposed to increase market access 
for developing countries to assist the multilateral trading system attain its goal under the DDA.  
179. The representative of Australia  asked the EC to clarify whethe r there was official support of 
export credits at the member state level.  On security deposit for im ports, Australia had asked the EC 
how it justified its imposition of a new security deposit on imports afte r a certain fill level of the quota 
had been reached;  the representative asked the EC to explain on how this was consistent with GATT 
1994 Article II.  Referring to EC's answers on non- ad valorem  duties, the representative asked why 
the EC was not changing those into ad valorem  equivalents, if it was so confident that prices of 
agricultural products and inflation would increase, and that the protective incidence of these non- ad 
valorem  rates would decrease.  Regarding new regulations on rice, the representative was 
disappointed that the answer was to look back to the EC Council Decision.  On geographical 
indications (GI), the representative said that the EC  supported GIs, and offered subsidies to their 
owners to promote them;  but it appeared that no money had been spent.  The representative wondered 
when was the last time that anyone had heard of a government offering money that was not taken up. 
180. The representative of Japan  thanked the EC for its answers.  Japan had always thought that 
the EC enlargement would contribute to the multilatera l system and not harm WTO Members.  In this 
regard, Japan understood that bilateral agreements with the new EC members that complied with EC 
obligations should not be renounced or amended.  Jap an hoped that the ongoing tripartite negotiations 
of bilateral agreements between Japan, the EC, and its new members would conclude positively, and 
the EC compensation list would be submitted to Japan promptly. 
181. The representative of Thailand  said that his country's questions had arrived late.  Therefore, 
Thailand appreciated that the EC w ould provide written responses later. 
182. The representative of the EC  responded that the EC's re gulation on traceability worked.  
Regarding the TBT and SPS.  He mentioned that EC  regulations were available in all three WTO 
languages.  The SPS and TBT Committees did an exce llent job in discussing notification, and the EC 
provided substantial trade-related technical assistance and capacity building to developing countries.  
The EC shared China's view that level of deve lopment was a key element in the way the EC was 
handling its trade with third countries;  to implement its new GSP, the EC also took reality into 
account, i.e. developing countries were different fro m one to another.  The representative said that 
most EC tariffs were ad valorem ;  MFN trade remained important in terms of volume because its 
largest partners were subject to that tariff;   EC exemptions to MFN were WTO compatible.  The 
RTAs had tightened trade liberalization worldw ide.  The representative wondered how the world 
would be if there would not be regional integration.  Regional in tegration among developing countries 
would strengthen their competitiveness, and increas e their power in the multilateral negotiations.   WT/TPR/M/136 
 Page 33 
 
 
RTAs could rebalance the whole multilateral trading system, and improve the international division of 
labour.  
183. In response to Australia, the representative said that net import figures depended on the 
starting point.  The EC had simply moved from huge  volume into high quality (more processed goods 
with higher value), and EC export subsidies ha d dropped.  The representative said there were 
promotion campaigns financed by the EC for products  of appellation of origin.  He said that export 
credit was provided by the member states and was not under EC competence.  On the issue of converting specific duties into ad valorem  duties for agriculture, there would be an opportunity to 
clear up differences in the next special session within the Doha negotiations. 
184. In answering Japan, the representative said th at the EC did not think the change of 
competences from the new member states to the EC would cause any harm for the Japanese economy;  
thus, the question of compensation mi ght not be relevant in that context.  The security deposits issue 
was too technical, and answer would be provided in  writing.  The representative could not inform 
Japan about the duty on rice as negotiations with Japan were under way. 
185. The representative of Australia
 commented that it could be true that the EC's exports of 
agricultural products had gone up much faster than  its imports due to high processed goods.  He 
pointed out that this was what a ll developing countries and others co mpetitive suppliers of agricultural 
products wanted to do, i.e. turning their agricultu ral-based commodities into high processed products.  
But, the level of tariff escalation in developed coun try markets was so high that it made it impossible 
for many commodity suppliers to convert some of their agricultural products into processed products.  
That was why a tariff formula in the Doha negotia tions was needed to effectively tackle tariff 
escalation.  The representative appreciated the EC's  answer to provide figures on its members export 
credit programmes, since it was useful to know what the EC did at the community level, but the EC 
was also responsible for what its members did at their own level. 
(iii) Sectoral policies  
(a) CAP reform, and agricultural liberalization 186. The representative recalled the three driving forces of the CAP reform:  the cost, the 
sustainability issue, and social equity.  At the end of the reform process, the bulk of EC support would 
have moved away from product support to direct producer support.  Most of support would be 
decoupled payments, linked to respect for the environment, food safety, animal welfare, and quality standards. To ensure that land was looked after pr operly, farmers would have  to keep their land in 
good agricultural and environmental condition, and comply with cross-compliance requirements.  
Rural development would be strengthened.  The pr oduct coverage of the CA P reform would include 
all sectors of EC agriculture;  the cotton, olive oi l, and tobacco sectors were already part of the 
reformed CAP;  the sugar sector had been tabled for reform. 
187. The CAP process was significant.  The most ev ident point of criticism related to domestic 
support was the alleged cost of the CAP.  The cost of the CAP, with respect to the overall cost of 
public expenditure in the EC, represented less than 1% for 7% of population.  The share of CAP in the 
EC's GDP was small and declining, while membersh ip had increased.  The real issue was not how 
much was spent on the CAP, but where this money went and how it was spent:  less export subsidies, less market support, and more direct aid to produ cers and rural development. This path of policy 
reform would clearly be less trade-distorting. 
(b)  Geographical indications 
188. The representative was aware of the emotion that  the geographical indica tions question stirred 
in the WTO.  Europe was known for the diversity of its agriculture, and food and drink products, WT/TPR/M/136 
Page 34  
 
which were a major part of its cultural identity.  This had led to national rules on geographical 
indications to protect consumers, prev ent deceptive practices, and promote quality. 
189. The overall EC strategy was to promote regiona l and local products with defined origins and 
characteristics, ensure accurate information, and gu arantee the quality of food products for consumers.  
This was important when the CAP reform was cu tting subsidies and promoting an agriculture of 
quality rather than quantity. 
190. For wine and spirits, an EC-wide regime had been applying for a long time.  For other 
agricultural products and foodstuffs, a 1992 EC regula tion had created a framework for its member to 
register their geographical indications, and protect  them within the single market.  Labelling of 
specific origins and processing methods facilitated exporting and marketing of food products, and 
generated profits.  This was a mark eting strategy that could give great market access opportunities, in 
particular for developing countries.  Therefore, to provide sufficient protection for such products, the 
EC had promoted, in the DDA, an extension of th e (already) higher protection level for wines and 
spirits to other products, and the creation of a system  of world-wide registration, first for wines and 
spirits, and later for other products. 
191. The use of generics/semi-generics required caref ul consideration within any negotiation, but 
the EC remained confident that significant progress could be made here. 
(c) REACH 192. Many delegations had asked for greater transp arency in the REACH proposal on chemicals, 
and in ensuring that the regulation did not become  overly excessive.  The EC had launched this 
proposal in order to strike the right balance between innovation,  efficiency, and economics, and meet 
objectives related to the human health and the environm ent protection;  this reflected the sustainability 
triangle mentioned earlier. 
193. The EC had sought to involve Members, interested  industry participants, and the civil society.  
Extensive informal consultations had been carried out, and a formal process had been initiated in the 
TBT Committee.  The EC had extended comment deadlines, listened, responded to general and 
specific concerns, and adapted its proposals in li ne with its WTO commitments;  it believed that 
consultations were important to de velop legislation.  The representativ e agreed that transparency was 
necessary when making such arrangements.  The EC would continue consulta tions with interested 
parties, aiming at adopting a RE ACH initiative in 2006.  All REACH provisions applied equally to 
EC and non-EC producers.  Achieving the balan ce between innovation and the protection of human 
health and the environment in the least trade-rest rictive manner had been central to the approach. 
194. The discussant
 recalled that Members frequently rai sed the acronyms of EC, DDA, and CAP.  
He said that the EC's policy objective of protectin g the livelihood of its wo rkers in the agricultural 
field should be beyond reproach.  But, domestic po licy objectives, however legitimate, could result in 
adverse international economic consequences.  Do mestic policies should not become insurmountable 
obstacles to the objectives of the current negotiations.   
195. The representative of Costa Rica  asked for clarification on Article XXVIII procedures that the 
EC had initiated to unbind its market access commitm ents on bananas.  The tariff of €75/tonne was 
already a very high barrier.  The EC banana prod uction represented a bit more than 1% of the world 
production.  In 2001, EC producers had received over €200 million in subsidies.  Costa Rica's 
question was how to make the July Package commitments (e.g. market access, and fullest 
liberalization for tropical products) compatible with  the EC procedures under Article XXVIII.  Costa 
Rica expected full compliance of these fundamental  commitments, which motivated banana-producer 
countries to participate actively in the Round.  On the procedures of Article XXVIII, the EC had 
answered that it was examining claims received, a nd intended to negotiate a mutually satisfactory  WT/TPR/M/136 
 Page 35 
 
 
agreement.  On how to make Article XXVIII compa tible with its commitments, the EC had said that 
Article XXVIII procedures were correct for the modification of schedules, and were available to any WTO Member at any time.  Nevertheless, Costa Rica's fundamental question was how the EC saw 
this relationship of Article XXVIII with its comm itments under the Round.  Special and differential 
treatment was very important to obtain higher levels of market access for developing countries.  If this 
expectation was denied, through the use of Artic le XXVIII, the Round might have no sense for some 
developing countries.  
196. The representative of Australia
 commented that whilst moving agricultural support from one 
box to another could be progressively less trade distorting, billions of dollars were spent in the agriculture sectors of the major developed countries, with impact on trade.  Therefore, implying that 
green box or decoupled payments had no impact on international trade was stretching reality.  
197. Australia had no fundamental difficulty with EC's  approach in terms of protecting intellectual 
property rights, but it was concerned about how thei r regulations were applied to third countries.  
When the TRIPs Agreement was adopted, all Members ag reed to the principle of territoriality.  But, 
the EC was seeking to export its particular highly regulatory, very burdensome, and bureaucratic 
approach to the protection of geographical indi cations (GIs).  GIs had become a contentious 
discussion topic in WTO.  More work was needed on whether there was any benefit to be gained from 
GIs.  
198. Within the WTO, the EC sought to increase the protection for all products to the level of 
protection now accorded to wines and spirits under th e TRIPS.  The EC also wanted to create this 
very bureaucratic multilateral register for all GIs to be  put on, and to claw back a number of terms.  
What it amounted to was a fundamental rewrite of the TRIPS Agreement;  there was no mandate in 
the Doha negotiations to do this , though there w as a mandate to negotiate on a multilateral register of 
GIs in the area of wines and spirits. Rewriting the TRIPS Agreement was not wise, particularly after having made a decision on the Singapore issues.  The representative asked why new issues should be brought in.  There was already the EC GSP pref erence agenda, which was now tied to human and 
labour rights, and the environment.  The representa tive was worried that the whole process was trying 
to bring back into the Doha nego tiations issues that had not been agreed.  Australia was concerned 
that the EC wanted to pursue this issue in all fora.   
199. A couple of countries had challenged the EC in a di spute examined by a panel that, even in its 
own policy, it had discriminated against third countries, and that it was in breach of observing the TRIPS provisions relating to GIs and trade marks.  Australia was worried about this GIs agenda 
because of very strong discussions within the EC me mber states concerning particular names and 
terms.  If this process was replicated intern ationally, the smaller oppone nt would not win the 
argument. 
200. The representative of Chile
 did not disagree with the EC's objectives on GIs (i.e. promoting 
culture heritage to avoid deceptive practices and to pr otect the consumer), but it did not want to foot 
its bill.  The EC had referred to the question of a multilateral registry, but had failed to mention the 
issue of claw back, where it wanted to go way beyo nd the TRIPS Agreement.  The EC recognized that 
every Member should also have the right to produc e a small list.  However, the sum of these would 
give a very big list of renegotiation.  Members had been unable to undertake a serious economic and 
legal analysis of the GIs issues;  and before la unching any negotiation, the question of enforcement 
costs needed to be addressed.  If there was a multilateral registry of the type exposed by the EC, the 
kind of conflict and litigation the EC was currently  facing would occur at the multilateral scale.   
201. The representative of the United States  said that his country was encouraged by the EC's 
indication that responses on TBT comments would be forthcoming, and that the TBT Committee 
would continue to be used for discussions on REAC H.  The United States maintained concerns on the 
workability of REACH;  it urged the EC to take in to account that the REACH was the subject of very WT/TPR/M/136 
Page 36  
 
widespread concerns among trading partners.  On  wine labelling, the United States understood that 
the EC could not have had sufficient time to answ er to its several questions, but it would look for 
fuller responses.  The United States was disappointed th at the EC had responded quite indirectly to its 
questions on trade in nuclear materials. 
202. The representative of Mexico
 said that his country considered the REACH as a critical issue 
for all Members.  The EC had shown, in this TPR, that it could reply to questions, and there would be 
further questions in the next TBT meeting.  C oncerns remained because no information had been 
provided regarding alternatives considered in th e context of the REACH decision;  therefore, 
discussions should be extended.  It was also not kno wn how the special needs of developing countries 
were to be taken into account;  this was a provision  in Article 12 of the TBT Agreement that had not 
been reflected in the EC's answers.  Mexico believed that the EC had an excellent opportunity to 
prove that the provisions of special and differe ntial treatment did not require any changes. 
203. The representative of Cuba  thanked the EC for its answers.  She said that Cuba had raised 
questions on the REACH programme whose answer s were not fully satisfactory.  WTO Members 
were concerned about the REACH proposal, and Cuba  was pleased that discussions would be pursued 
in the TBT Committee.  Cuba's questions were re lated to the level of involvement of the REACH 
system, its impact on developing countries, the marg in of flexibility planned by the EC for developing 
countries to implement the system properly,  and the compensation for damages from its 
implementation.  Cuba had pointed out the effects for the European products made from imports from 
developing countries, and was worried about how the REACH would be formalized.  Cuba was not convinced the regulations were in line with the TBT Agreement. 
204. The representative of Japan
 said that his country understood the purpose of the REACH 
regulation since Japan had also experienced the pr oblem of environmental pollution in the 1960s and 
1970s.  However, the REACH regulation should not constitute overregulation for a number of 
Japanese enterprises operating within the EU.  Japan would like to contribute to the improvement of 
the regulation through bilatera l consultations with the EC. 
 
   WT/TPR/M/136 
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
205. This seventh Trade Policy Review of the Eur opean Communities (EC) has been conducted in 
a friendly and comprehensive manner, and our dialogue  has been very constructive.  We have greatly 
benefited from the engagement of the EC delegati on, led by Mr. Pierre Defraigne, Deputy Director 
General DG Trade, the very insightful comments by our discussant, Ambassador Don Stephenson, 
and the active involvement of a large number of Members. 
206. Members commended the EC on its continued effort s towards a liberal trade regime and on its 
monetary discipline.  These efforts have contributed  to a further decline in its already low inflation 
and to external current account surplus in the last few years.  Members welcomed the ongoing 
recovery of the EC's economy following a slowdown since 2001; they hoped that the recovery would 
be sustained, given the positive impact this might ha ve on unemployment and fiscal deficits within the 
EC, and on the global economy in general.  Member s welcomed the EC's strong commitment to, and 
active participation in, the multilateral trading system, including its strong leadership in striking a deal 
on the July Package.  They expressed appreciation fo r its substantial contribu tion to the WTO's Global 
Trust Fund for technical cooperation, and for its n on-reciprocal preferences to developing countries 
under its GSP scheme and Cotonou Agreement, a nd to LDCs under the Everything But Arms 
initiative. Nevertheless, several members expressed  concerns on its planned reforms of the GSP 
scheme and hoped that it would be objective and c onsistent with the WTO rules and principles.  
Members also noted that the EC's MFN trade regime  applied to only nine WTO Members because of 
its active involvement in various preferential trade arrangements.   
207. Members commended the EC on its liberal trad e regime for non-agricultural products. Some 
Members shared the EC's non-trade justifica tion for its Common Agricultural Policy (CAP). 
However, other Members noted th at, despite the ongoing reform of the CAP, mainly through the 
decoupling of payments from production, agriculture re mains protected by high tariff rates, a complex 
tariff structure, and by high levels of domestic  support and export subsidies. Arguing that such 
protection undermines economic efficiency and pena lised both EC tax payers and consumers, they 
urged the EC to further liberalize its CAP.  Severa l members also asked the EC  to provide information 
on its specific agricultural policy, including th e reforms of sugar and banana regimes.  
208. Members noted the new opportunities provided by the enlargement of the EC.  Concerns were 
expressed about the EC's consistency with and co mmitments to the WTO rules and disciplines as a 
result of its enlargement to 25 members, in partic ular the need to provide adequate information and 
compensation to Members.  Various Members rai sed concerns about the continued active use of 
contingency trade remedies by the EC, and expressed fears that this might increase with the 
elimination of textiles and clothing quotas at the end of  this year.  Concerns were also expressed about 
the lack of harmonization within the EC in areas such  as internal tax rates, and certain services.  The 
EC's technical barriers to trade and SPS measures,  including the new REACH system for chemicals, 
were deemed stringent and burdensome.  Members sought further clarification on the EC's common 
fisheries policy; the scheme for the GMOs and bi otechnology products; customs procedures; rules of 
origin;  tariff quota administration;  government procurement;  state aid and subsidies programmes;  
protection of intellectual property rights, includi ng geographical indications; business regulation and 
competition policy;  and on specific activities, including energy, steel, financial services, telecommunications, and transport. 
209. Members appreciated the responses provided by the EC delegation, an d looked forward to 
receiving written answers on any outstanding questions. 
210. In closing, I would like to thank the EC de legation on its oral and written responses provided 
during the meeting.  This Review has offered the opportunity for a much better and updated 
understanding of the EC's policies and practices, an d for a collective appreciation of the challenges it 
faces and its efforts to address them in a WTO consistent way.  The wide interest shown by Members, WT/TPR/M/136 
Page 38  
 
with many advance written questions, interventions, and high attendance, reflects the vital importance 
of the EC to the multilateral trading system.  It appears that the main ar eas where many Members 
would like to have the EC's positive and expediti ous response are the WTO issues related to its 
enlargement and the implementation of its agricultura l and technical regulations reforms.  This would 
strengthen both its support for the multilateral system  and its widely recognized actions in favour of 
developing countries, mainly those with a key interest in agriculture.  
211. The Chair
 stated that the Annual Report (WT/TPRW/32) had been circulated and proposed its 
adoption.  The report was adopted.   
212. The representatives of Australia  and Chile  agreed that there was considerable room for 
improvement in the way the TPR meetings were handled.  Members should not only think seriously 
about the review cycle, but also on whether the format adopted was ensuring the most open discussion 
and analysis of each others policies.   
213. The Chair  noted that this was part of the appraisal  process, and asked the Secretariat to take 
the floor.  
214. The Director of the Trade Policies Review Division  (C. Boonekamp) noted that an Appraisal 
of the Operation of the TPRM should be undertaken in preparation for the Hong Kong, China 
Ministerial.  An informal note to start this pr ocess was being prepared.  The discussions in the TPRB 
for the Appraisal would be a good opportunity to consider the whole review process, including the meetings and content of the Secretariat report.  On e procedural change was already in the making, at 
the forthcoming TPRB meeting (in December) on the Ov erview of Developments in the International 
Trading Environment, two discussants  would be invited to consider the Director-General's report for 
that meeting;  it was hoped that this would help the TPRB to hold an active debate, centred on the 
economics of the issues.  
215. The representative of Australia
 asked the Ambassador for the European Commission to 
reflect the outcome of this trade policy review in his press statement.  
 
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