RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/214 
2 March 2009  
 
(09-1000) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
EUROPEAN COMMUNITIES 
 
  
 
This report, prepared for the ninth Trade Policy Review of the European 
Communities, has been drawn up by  the WTO Secretariat on its own 
responsibility.  The Secretariat has, as required by the Agreement establishing 
the Trade Policy Review Mechanism (A nnex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from the 
European Communities on its trade policies and practices. 
 
Any technical questions arising from th is report may be addressed to Jacques 
Degbelo (tel: 022/739 5583), Ricardo Barba (tel: 022/739 5088), Eugenia Lizano 
(tel: 022/739 6578), and Thomas Friedheim (tel: 022/739 5083). 
 
Document WT/TPR/G/214 contains the policy statement submitted by the 
European Communities. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Re view Body on the Eu ropean Communities. 
  European Communities WT/TPR/S/214 
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CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) T HE ECONOMIC ENVIRONMENT  vii 
 (2) I NSTITUTIONAL FRAMEWORK  vii 
 (3) T RADE POLICY INSTRUMENTS  viii 
 (4) S ECTORAL POLICIES  ix 
 (5) T RADE POLICY AND TRADING PARTNERS  x 
I. ECONOMIC ENVIRONMENT  1 
 (1) M AIN CHARACTERISTICS  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  3 
 (3) T RADE AND INVESTMENT  6 
(i) Trade in goods 7 
(ii) Trade in services 11 
(iii) Foreign direct investment 12 
(4) O UTLOOK  13 
II. TRADE AND INVESTMENT REGIMES 14 
(1) I NSTITUTIONAL FRAMEWORK  14 
(2) P OLICY FORMULATION AND IMPLEMENTATION  15 
(3) T RADE POLICY OBJECTIVES  17 
(4) T RADE REGULATIONS AND BUSINESS ENVIRONMENT  18 
(5) T RADE AGREEMENTS AND ARRANGEMENTS  20 
(i) Overview 20 
 (ii) WTO 21  (iii) Preferential trade agreements and arrangements 23 
 (iv) Aid for Trade (AfT) 32 
III. TRADE POLICIES AND PRACTICES BY MEASURE 34 
(1) I
NTRODUCTION  34 
(2) M EASURES DIRECTLY AFFECTING IMPORTS  35 
(i) Customs procedures 35 
(ii) Tariffs 38 
(iii) Other charges 43 (iv) Duty and tax exemptions and concessions 47 
(v) Customs valuation and rules of origin 48 
(vi) Import prohibitions, restrictions, and licensing 49 (vii) Contingency measures 51 
(viii) Technical regulations and other technical requirements 56 
(ix) Government procurement 65 
(3) M
EASURES DIRECTLY AFFECTING EXPORTS  71 
(i) Registration and documentation 71 
(ii) Export taxes, charges, and levies 71 WT/TPR/S/214 Trade Policy Review 
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    Page 
 
(iii) Export prohibitions, re strictions, and licensing 71 
(iv) Export subsidies 72 (v) Export finance, insurance and guarantees 73 
(vi) Export promotion and marketing assistance 73 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  73 
(i) Assistance and other incentives 73 
(ii) State trading and st ate-owned enterprises 77 
(iii) Competition policy and regulatory issues 79 (iv) Intellectual property rights (IPR) 85 
IV. TRADE POLICIES BY SECTOR 96 
(1) I
NTRODUCTION  96 
(2) A GRICULTURE AND RELATED ACTIVITIES  97 
(i) Main features 97 
(ii) Common agricultural policy 98 (iii) Fisheries 113 
(3) E
NERGY   117 
(4) M ANUFACTURING  121 
(i) Overview 121 
(ii) Selected industries 126 
(5) S ERVICES  132 
(i) Overview 132 
(ii) Financial services 135 (iii) Telecommunications and postal services 143 
(iv) Transport 146 
(v) Tourism 152 (vi) Professional services 153 
REFERENCES   155 
APPENDIX TABLES  159 
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CHARTS 
    P a g e  
I. ECONOMIC ENVIRONMENT  
I.1 Direction of merchandise trade, 2003-07 9 
I.2 Structure of merchandise trade, 2003-07 10 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Breakdown of applied MFN tariff rates, 2008 40 
III.2 Tariff escalation by ISIC 2-digit industry, 2008 42 
IV. TRADE POLICIES BY SECTOR   
IV.1 EC-27 production growth by manufacturing activity, 1996-2006 123 
IV.2 EC tariff by ISIC  classification, 2008 125 
TABLES 
I. ECONOMIC ENVIRONMENT  
I.1 Selected indicators, 2007 1 
I.2 Key macroeconomic indicators, 2006-07 4 
I.3 Growth in real GDP and expenditure components, 2003-07 5 I.4 Euro exchange rates, 2000-08 6 
I.5 Balance-of-payments, 2003-07 7 
I.6 Trade in services, 2005-07 11 
I.7 FDI inflows and outflows, 2005-07 12 
II. TRADE AND INVESTMENT REGIMES   
II.1 Distribution of EC AfT by category, 2001-06 33 
II.2 Distribution of EC AfT by recipient, 2001-06 33 
III. TRADE POLICIES AND PRACTICES BY MEASURE III.1 Structure of EC MFN tariffs, 2006 and 2008 40 
III.2 Summary analysis of EC MFN tariff, 2008 41 
III.3 National VAT rates in the EC, 2006 and 08 44 III.4 VAT exemption thresholds in the EC, 2008 45 
III.5 VAT and excise duty exemptions on imports (for personal use) from  
 non-EC countries, 2008 46 III.6 Contingency measures notified by the EC, 2005-08 52 
III.7 Notifications of technical regulations by the EC and its Member States, 2000-08 59 
III.8 (a) Emergency SPS measures 63  (b) SPS measures restricting imports 63 
III.9 Minimum public procurement thresholds, mid-2008 67 
III.10 Selected procurement indicators, 2004-06 68 III.11 Public monopolies in EC Member States, 2007 77 
III.12 (a) State aid in the EC, 2006 83 
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III.12 (b) State aid in the EC, 2007 84 
III.13 Statistics on trade marks and designs, 2000-08 86 III.14 Term of protection of copyrights and related rights, 2008 91 
IV. TRADE POLICIES BY SECTOR  
IV.1 Selected agricultural statistics, 2005 and 2007 97 
IV.2 EC crop area  98 
IV.3 Transfers associated w ith agricultural policies in the EC, 1986-88 and 2005-07 99 
IV.4 EAGF and EAFRD expenditures by EC Member State, 2007 100 IV.5 Expenditures by the EAGF, 2007 101 
IV.6 Reference prices for products subj ect to intervention measures, 2008 105 
IV.7 Selected sugar indicators, 2005-08 106 IV.8 Tariff quotas on fishery products, 2007 116 
IV.9 Production and consumption of energy, 2002-06 118 
IV.10 Electricity generation, 2002-06 119 IV.11 Main indicators of EC-27 manufacturing, 2005 122 
IV.12 Main indicators of EC-27 manufacturing by subsector, 2005 124 
IV.13 Trade in high-tech products, 2005 129 
IV.14 Selected basic metals statistics, 2005 130 
IV.15 Production of basic metals, 2006 131 IV.16 Number of banks and total assets, 2003-07 137 
IV.17 Total assets under management by insurance corporations and by  
 investment funds, 2003-07 140 IV.18 Selected telecommunica tions indicators, 2007 143 
IV.19 EC freight transport by mode, 2000-06 146 
IV.20 Tourism receipts, expenditure , and nights spent, 2000-06 152 
APPENDIX TABLES 
I. ECONOMIC ENVIRONMENT  
AI.1 Destination of exports, 2003-07 161 
AI.2 Structure of exports, 2003-07 162 
AI.3  Origin of imports, 2003-07 163 
AI.4 Structure of imports, 2003-07 164 
II. TRADE AND INVESTMENT REGIMES  
AII.1 EC notifications to the WTO, January 2007-May 2008 165 
III. TRADE POLICIES AND PRACTICES BY MEASURE  AIII.1 Applied MFN tariff averages by HS2, 2008 169 
AIII.2 Zero-rated goods and services by Member States, 2008 172 
AIII.3 Selected state-owned enterprises in the EC, October 2008 173 
AIII.4 EC membership in IPR treaties and conventions 187 
IV. TRADE POLICIES BY SECTOR  AIV.1 Applied MFN tariffs, by ISIC Rev.2 category, 2008 189 
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SUMMARY OBSERVATIONS 
 
(1) THE ECONOMIC ENVIRONMENT  
1. Real GDP growth in the European 
Communities (EC) was 3% on an annual 
average during 2006-07, but fell to an estimated 1% in 2008 partly due to the global financial crisis (and subsequently economic 
slowdown) that emerged in the second half of 
the year. While the moderation in growth was 
broad-based, performance at Member States level remained dispersed. Following an increase in government revenues and a decrease in expenditure related to, inter alia, the pension system reforms in several Member 
States, the EC fiscal deficit, as percentage of 
GDP, declined from 1.4% in 2006 to 0.9% in 2007 (its best fiscal performance in many years), but is estimated at 2% in 2008. Further efforts to address concerns about long-term 
fiscal sustainability would appear to remain 
needed, particularly in the light of the large costs of the measures envisaged to respond to the global economic downturn. 
2. As of January 2009, sixteen EC 
Member States have the euro as their currency. 
Romania has set a target euro adoption date for 
2014. Denmark and the United Kingdom have opted to retain their national currencies, while Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and 
Sweden do not have target dates for euro 
adoption.  Influenced by increasing energy and other commodity prices, EC inflation rose from 2.3% in 2006 and 2.4% in 2007 to an estimated 3.7% in 2008. The key interest rate 
in the euro area increased from its historically 
low level of 2% during 2004 and most of 2005 to over 4% in July 2008. Nonetheless, by early 2009, it was back to 2% mainly because of the financial crisis.   
3. The services sector is the backbone of 
the EC economy, with a share of about 70% in 
both gross value added (GVA) and employment. Manufacturing contributes around one-quarter to GVA, but its share has been decreasing over the last few years 
reflecting geographical shifts in international processing activities. As a result, the EC is 
implementing, since October 2005, a new industrial policy to become more competitive. The participation of agriculture (including 
livestock, hunting, forestry and fishing) in the 
EC's GVA is relatively low (around 2%), but remains significant for many new Members States such as Bulgaria and Romania.  
4. The EC accounts for some 17% of 
world merchandise trade. Its trade account has 
been in persistent but sustainable deficit, amounting to €141.8 billion in 2006 and €153.4 billion in 2007. As a percentage of GVA, the EC had external current account deficits of 0.8% in 2006, 0.7% in 2007, and 
1% (estimation) in 2008. The EC remains the 
world's largest trader in services, as well as the largest recipient and supplier of foreign direct investment (FDI), accounting for some 40% of global inward stock and over 50% of global 
outward stock.  It is also a net investor in the 
rest of the world. 
(2) I
NSTITUTIONAL FRAMEWORK  
5. Since its last TPR in February 2007, 
the EC has made no major changes to its institutional framework.  The Treaty of 
Lisbon, which will alter the structure of EC 
institutions, was signed by EC heads of state or government in December 2007, but its ratification has not been completed. Bulgaria and Romania joined the EC in January 2007, 
while accession negotiations with Croatia and 
Turkey are ongoing.   
6. Under the Treaty of Nice of 2001, the 
EC's trade policy aims to contribute to, inter 
alia, the progressive dismantling of restrictions 
on international trade and the lowering of 
customs barriers.  These objectives are pursued by the EC at the multilateral, bilateral, and unilateral levels. At the multilateral level, the EC has stressed the importance of the Doha Development Agenda (DDA) as the best 
approach to prevent trade protectionism in the 
current economic downturn. The EC remains one of the most active Members in WTO dispute settlement.   During the period under review, the EC initiated six new disputes, and WT/TPR/S/214 Trade Policy Review 
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was a respondent in six cases and a third party 
in thirteen disputes. The EC is also a major sponsor of trade-related technical assistance within its Aid for Trade framework.  
7.   The EC has continued to build upon 
its extensive network of preferential trade agreements (PTAs), as part of a broader policy of promoting multilateralism. These PTAs have so far resulted in free trade in non-
agricultural goods, and limited liberalization of 
trade in agricultural products;  in some cases, these agreements also cover trade in services. A significant number of its negotiations are with, or encourage the creation of, regional groupings.  Negotiations with regional bodies 
include the Andean Community, ASEAN, 
Central America, the Gulf States, MERCOSUR, the Mediterranean countries, and Economic Partnershi p Agreements (EPAs) 
with the African, Caribbean and Pacific (ACP) 
regions. Negotiations on an EPA with the 
Caribbean region have been concluded; trade relations with countries in the other ACP regions are governed by interim agreements. Furthermore, the EC has launched bilateral negotiations on PTAs with India, the Republic 
of Korea and Ukraine. 
8. The EC grants at least MFN treatment 
to all WTO Members and unilateral preferences through its Generalized System of Preference (GSP), whic h consists of three 
arrangements.  First, all eligible countries 
benefit from the "general arrangement". Second, a "special incentive arrangement for sustainable development and good governance" (GSP+) provides additional 
benefits to countries implementing 
international standards in sustainable development and good governance. Third, under the Everything But Arms (EBA) initiative, LDCs benefit from duty-free and quota-free access to the EC market;  for rice 
and sugar, tariff-free and quota-free access 
will be introduced in 2009. 
9.  As a result of preferential agreements 
and the GSP scheme, the EC's MFN tariff is applied to only nine WTO Members 
(Australia; Canada; Separate Customs Territory of Taiwan, Penghu, Kinmen and 
Matsu; Hong Kong, China; Japan; Republic of Korea; New Zealand; Singapore; and the United States). These nine WTO Members 
accounted for 27.5% of the EC's total 
merchandise imports in 2007, compared to about 30% in 2005. 
(3) T
RADE POLICY INSTRUMENTS  
10.  The EC's trade regime has remained 
largely unchanged since its last TPR. Certain 
areas, such as customs procedures, internal taxation, incentives, and technical barriers to trade are yet to be fully harmonized. The structure of the EC's common MFN tariff, broadly unchanged over the last few years, 
remains complex.  It comprises ad valorem  
and non ad valorem  rates. The non-ad valorem  
duties (10.1% of all tariff lines) are specific (6.5%), compound (2.9%), and mixed or variable per entry price range (0.8%).  Non-ad 
valorem  rates apply mainly to agricultural 
goods (WTO definition), many of which are also subject to tariff quotas.  The average applied MFN tariff rate has decreased slightly, to 6.7% from 6.9% (in 2006), with rates ranging from zero to 604.3% (an ad valorem  
equivalent (AVE) on isoglucose 
(HS 1702.40.10));  agricultural products still attract the highest rates.   
11. The actual level of tariff protection for 
agricultural products is likely higher than the 
level estimated by the AVEs due to various 
simplifications (e.g. exclusion of non- ad 
valorem  tariff lines with no import data and of 
non-ad valorem  components of certain lines 
from the calculations). In consequence, the 
estimated level of overall tariff protection is 
also likely underrated. The EC's wide network of preferential trade arrangements, together with its system of unilateral preferences, adds to the complexity of its tariff regime. Value-added tax and excise duties apply to imports 
and locally produced goods (VAT also applies 
to services) at the same rates; these rates are set by Member States and are not yet harmonized within the EC. European Communities WT/TPR/S/214 
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12. Imports prohibiti ons and surveillance 
are maintained on, inter alia , security, 
technical, sanitary, phytosanitary and environmental grounds and under treaties and 
international conventions.  Import licences are 
required where products are subject to quantitative restrictions, tariff quotas, safeguard measures or for import monitoring and surveillance purposes. Some non-
agricultural products, including some textile 
products, have been subject to quantitative restrictions by the EC during the period under review.  No changes were made to the EC legislation on trade remedies.  The EC remains an important user of contingency trade 
remedies;  however, the number of 
contingency measures notified by the EC to the WTO has decreased since 2005.  Harmonization of technical requirements (including technical regul ations, standards, and 
sanitary and phytosanitary measures) among 
EC Member States is still ongoing. 
13. There have been no major changes to 
EC's regimes on export prohibitions, restrictions, or licensing since its previous TPR.  An export authorization or licence is 
required to export cultural goods and certain 
agricultural products, and for the control of exports of dual-use items and technology. The EC still subsidizes exports of a number of agricultural products. Assistance and subsidies 
programmes (at Community level and by 
Member States) notified to the WTO can be grouped in four major categories: the Structural Actions;  the Common Agriculture Policy (CAP);  Industrial Programmes;  and 
other programmes including assistance to 
SMEs, to joint-ventures, and to fisheries and aquaculture. 
14. EC's legislation on  public procurement 
remains broadly unchanged; it was enacted in 2004, with a view to making the legal 
framework simpler, more flexible and adapting 
it to the electronic era.  The competition regime in the EC remains also largely unchanged;  enforcement focuses on eliminating cartels and abuses of dominant 
position.  The intellectual property regime 
continues to be governed by both Community-wide legislation and legislation of Member 
States.  On intellectual property protection, a new legal framework for patent protection is expected to simplify the process of seeking 
protection.  Trade mark and plant varieties 
regulations have been amended, while the legislation related to the terms of protection of copyrights and related rights, and rental and lending rights has been consolidated in one 
piece of legislation. New regulations to protect 
geographical indications for wines and spirits were enacted. 
(4) S
ECTORAL POLICIES  
15. Services remain the priority as regards 
the creation of a genuine internal market by 
the end of 2009, through the removal of 
remaining regulatory and administrative hurdles between Member States. Since its last Review, the EC adopted the 2007 telecoms reform package, and the postal directive aimed 
at completing the internal market for postal 
services by 2010-12. Moreover, the EC is implementing the financial services strategy 2006-10 and the action plan for transport 2002-10. Nevertheless, many other services activities are not subject to a comprehensive 
internal market policy; these include tourism, 
distribution, construction, engineering and consultancy, certification and testing services, and employment agencies. Certain services, such as telecoms are regulated at the EC level, 
while others (e.g. education, health) are mainly 
the responsibility of individual Member States. 
16. As a result of the 2003 reforms of the 
CAP, centred on the move towards the Single Payment Scheme, the share of support under 
this Scheme increased from 1% (€1.4 billion) 
of the total producer support estimate in 2004 to 33% (€32.4 billion) in 2007.  At the same time, product-specific support linked to production and/or prices, still exists, albeit at reduced levels.  Since the last TPR of the EC, 
reforms of its CAP have continued to enhance 
the market-orientation and competitiveness of the sugar, fruit and vegetables, and wine subsectors. The domestic support regimes for bananas and cotton have also been further 
reformed. In 2006, the total amount spent on WT/TPR/S/214 Trade Policy Review 
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the CAP represented 46% of Community 
expenditure. Using ISIC, the simple average MFN tariff on agriculture, hunting, forestry and fishing is 9.3% (down from 10.9% in 
2006). However, all produc ts with tariff rates 
above 100% remain agricultural (WTO definition). In addition, agricultural products remain protected by a complex tariff structure, tariff quotas and SPS measures, and still 
receive export subsidies.  On fishery products, 
some of the tariff quotas are subject to a reference price mechanism whereby the benefit of the in-quota tariff is not granted if the import price is lower than the reference price. 
17. The manufacturing sector (ISIC 
definition) is still a major beneficiary of state aid. As a result of declining productivity growth, a new industrial policy has been implemented since 2005. Together with 
measures at Member State level, the policy is 
aimed at fostering the competitiveness of the sector. MFN tariffs on manufactured imports average 6.7% (6.8% in 2006). Overall, in industries requiring agricultural inputs that are also produced by the EC, the tariff shows 
mixed escalation; because of the lack of 
competitiveness partly resulting from high tariff protection of the industries processing these inputs, exports of their products require subsidies. In industries requiring inputs 
(certain agricultural and mineral products in 
particular) that are not produced by the EC, the tariff shows positive escalation, i.e. high effective rates of protection. 
18. The EC is the world's largest energy 
importer and the second largest consumer. 
Faced with unprecedented energy challenges, the EC is implementing its action plan on energy efficiency so as to save 20% of its energy consumption by 2020 through changes in consumer behaviour and energy efficient 
technologies. It has also set a target of 20% increase in the use of renewable energy and 
20% cut in greenhouse gas emissions by 2020. Some of the recent energy policy developments include the adoption of a third 
package of legislative proposals aimed at 
solving the structural shortcomings in the energy market, notably the lack of competition. Imports of electricity are duty free. 
(5) T
RADE POLICY AND TRADING 
PARTNERS  
19. Support for the multilateral trading 
system is at the core of the EC trade policy. The EC is a major driving force behind the DDA negotiations, having made numerous 
proposals in a wide range of areas. Together 
with some of its Member States, the EC also contributes to the DDA Global Trust Fund and financed or co-financed specific activities 
under the DDA . It co-funded the WTO Public 
Forum 2007. Nonetheless, the EC has 
continued to build upon its wide network of 
PTAs with both developed and developing countries. It is important for the EC to consider the discriminatory elements of its existing and new PTAs, and the potentially 
greater advantages of market opening on an 
MFN basis. 
20. As the EC is the world's leading 
exporter and the second-largest importer of goods, the EC is expected to continue contributing to making trade play a key role in 
curbing the current global economic 
slowdown. To this end, the EC's steps towards the full establishment of its internal market could be enhanced, and its trade regime for agricultural products further liberalized 
through the simplification of its tariff structure 
and the reduction of its high tariff rates on and incentives to the products. Such reforms would also contribute to the improvement of the EC's resource allocation.