WT/TPR/S/177 Trade Policy Review 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. The EC's trade regime has remained largely unch anged since its last TPR in 2004.  The 2006 
tariff comprises 90% ad valorem  and 10% non- ad valorem  r a t e s .   N o n - ad valorem  rates apply on 
agricultural goods (WTO definition), many of which are also subject to tariff quotas.  The average 
applied MFN tariff has increased slightly, to 6.9% from 6.5%, due to a downward trend in the import 
prices of certain agricultural products subject to non- ad valorem  tariffs, the ad valorem  equivalents 
(AVE) having increased accordingly.  Tariff rate s range from 0% to 427. 9% (an AVE), with 
agricultural products still attracting the highest rates.   The EC's wide network of preferential trade 
arrangements, together with the large number of countries eligible for unilateral preferences, has 
confined the application of its exclusively MFN tariff to nine WTO Members, which accounted for 
some 30% of its total merchandise imports in 2005. 
2. Value-added tax and excise duties apply to im ports and locally produced goods (VAT also 
applies to services) at the same rates;  these rates are set by Member States and are not harmonized within the EC.  The EC remains an important user of contingency trade remedies;  between 
January 2004 and September 2006, it initiate d three safeguard, 27 anti-dumping and two 
countervailing investigations.  Under its Cust oms 2007 programme, the EC is improving customs 
administration through the implementation of electr onic exchange systems to support the creation of a 
paperless customs environment.  Customs controls are based on risk analysis using automated data 
processing techniques. 
3. The EC maintains import licences on grounds of surveillance, quota management, and 
safeguards.  Technical regulations, standards, a nd sanitary and phytosanitary measures have been 
under continued review by the Commission;  in certa in areas, they have not been fully harmonized 
among Member States.  Products placed on the market of a Member State must comply with both national and EC legislation.  The EC provides expor t subsidies for a number of agricultural products;  
they account for some 90% of total export subsidies notified by WTO Members.   
4. New legislation on public procurement entered in to force in 2004 with a view to making the 
legal framework simpler, more flexible and adapti ng it to the electronic era.  There have been no 
major changes to the legal basis of compe tition policy in the EC, which seeks to address 
anticompetitive practices and enhance competitiveness throughout the EC.  The intellectual property 
rights regime in the EC is governed by both Comm unity-wide legislation and legislation of Member 
States.  Since its last TPR, the EC has acceded to th e Madrid Protocol;  it has also been reviewing its 
patent policy.  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Customs procedures and valuation 
5. The EC's customs procedures, in place since 1992, are governed by its Customs Code (CC) 
along with its implementing provisions.1  During the period under review, security- and safety-related 
procedures were added to the CC whilst preparations  and consultations were undertaken for a major 
overhaul of the CC.  The EC signed the International Convention on the Simplification and 
                                                      
1 Council Regulations No. 2913/92 and No. 2454/93 respectively, as amended.  For further details on 
the basis of the EC's CC, see WTO (2004). European Communities WT/TPR/S/177 
 Page 41 
 
 
Harmonization of Customs Procedures (Kyoto Conventi on), but had not ratified any of its chapters or 
annexes.2  
6. Several amendments to the CC were introduced  by Regulation No. 648/2005, most of them 
with the aim of increasing safety and security proc edures while at the same time furthering trade 
facilitation.  Implementing provisions  for this Regulation were under  discucussion as at October 2006.  
After the adoption of such provisions,  pre-arriva l and departure declarations should be lodged at 
customs offices in advance of the goods in order for its  risk to be analysed.  Risk analysis is to be 
carried out through "automated data processing techni ques".  The Regulation also introduces the legal 
concept of an authorized economic operator (AEO),  i.e. an economic operator that has:  (i) an 
appropriate compliance record with customs require ments;  (ii) a satisfactory system of managing 
commercial (and, where applicable, transport) r ecords; (iii) proven financial solvency (when 
applicable);  and (iv) appropriate security and safet y standards (when applicable).  It stipulates that 
Risk Information Forms are to be prepared and exchanged electronically amongst customs offices 
where routine control concerns exist. Also, acti on is being taken on a programme for post-clearance 
audits (i.e. examination of accounts and records), under the Customs 2007 programme.3  Council 
Decision No. 787/2004/EC provided funding for cust oms-related schemes that take into account the 
entrance of new Member States.  In 2004, the EC  signed an agreement with the United States to 
broaden and intensify cargo security on a reciprocal basis, ensuring equal treatment to both U.S. and 
EC ports and operators.4  Since its last TPR, the EC has also  signed agreements on cooperation and 
mutual administrative assistance in customs matters with the People's Republic of China, and India.5 
7. The EC Commission adopted two proposals to modernize the CC in November 2005, both of 
which were under consideration by the Council a nd the European Parliament as at October 2006.6  
The first one proposes a complete overhaul and a reformulation of the CC, albeit maintaining its current bases, to take into account, inter alia , the use of new technologies.  The proposal seeks, 
amongst other things, to:  simplify the structure of  the CC and provide more  coherent terminology 
(the number of articles would be reduced as well as  the number of main procedures), fewer provisions 
and simpler rules;  reduce the number of import and export procedures; rationalize the customs 
guarantees system; extend the use of single authorizations throughout the EC, and provide the possibility for operators to centralize clearance of goods at a single customs office.  The second 
proposal seeks the implementation of a paperless cust oms environment with interoperable, accessible, 
and interconnected automated customs systems th roughout the EC; this will comprise all the IT 
systems necessary to ensure a fully functioning co mputerized customs environment of 25 (27 as of 
January 2007) national customs administrations.
7  Other specific proposals include the centralization 
of clearance procedures, with a one-stop shop for cu stoms and other procedures to be performed at the 
EC's external border, and the implementation of a single window electronic entrance point.  
                                                      
2 World Customs Organization online informati on. Viewed at: http:// www.wcoomd.org/ie/En/ 
Conventions/conventions.html.  
3 The Customs 2007 Cooperation Programme is to support the achievement of policy objectives such as 
the functioning of the internal market, including supply chain security and trade facilitation, strengthening 
security and safety, and supporting the modernization of the customs environment. For further details on 
Customs 2007, see WTO (2004).  An assessment was ca rried out by the Commission in 2005 (EC working 
document SEC/200635).   
4 Official Journal L 304/34 of 30 September 2004. 
5 Official Journal  L 375/47, of 23 December 2004, and Official Journal  L 304/ 47 of 
30 September 2004. 
6 Proposals for a regulation laying down the Community Customs Code (COM (2005) 608 final), and 
for a decision on a paperless environment for customs and trade (COM (2005) 609 final).  Both proposals were 
adopted on 30 November 2005. 
7 EC working document TAXUD/477/2004-Rev.3.   WT/TPR/S/177 Trade Policy Review 
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8. As at February 2006, customs declarations, e ither paper-based or electronic, were lodged and 
processed on the basis of the 1992 CC.8 Although paper-based declarations are currently the rule (the 
above-mentioned proposals intend to reverse this), el ectronic declarations are already widely in use. 
Moreover, Regulation (EC) No. 648/2005 provides for th e lodging of pre-arrival information, in the 
form of a summary declaration, to any customs o ffice, in electronic form, with the exception of goods 
passing through territorial waters or airspace.  Cu stoms controls are based on risk analysis using 
automated data processing techniques and electronic exchange of risk information between customs 
offices on an EC-wide basis.9  All appeals against customs decisions have to be lodged in the Member 
State where the decision has been taken or applied for. 
9. Customs valuation procedures in the proposals under consideration would maintain the same 
basis as in the current CC.10  As at January 2006, there wa s general satisfaction amongst the 
participating countries with the efficiency of th e Customs 2007 programme.  Nevertheless, the speed 
and extension of interconnected IT customs networks  remains the principal challenge.  In particular, 
several IT systems, e.g. TARIC and NCTS, togeth er with new systems, will be brought under the 
electronicCustoms initiative, which seeks to estab lish interoperability and access to the various 
electronic customs systems throughout the EC and the transmission of data.  The use of NCTS has 
been compulsory since 1 July 2005.11  These various IT initiatives are expected to contribute to trade 
facilitation, as operators will be able to carry ou t all customs procedures from their place of business. 
The measures should reduce operating costs for trad ers and increase savings for the EC.  They are 
expected to generate €2.5 million per year in  savings and revenues when fully implemented.12   
(ii) Common Customs MFN Tariff 
10. The EC tariff nomenclature, known as the Co mbined Nomenclature, is based on the 
International Convention on the Harmonized Commodity Description and Coding System.13  The EC's 
Common Customs Tariff schedule is published annually in its Official Journal;   for 2006, it contains 
9,843 lines.  The EC applies several types of tariff;  ad valorem  rates are the most widely used (90%), 
followed by specific (6.4%), compound (2%), alternate (0.7%) and variable (0.9%).14  S o m e  
agricultural products are subject to tariff quotas (section (2)(vii) and (Chapter IV(2)(ii)(a)).  Ad 
valorem  tariffs are applied on the c.i.f. customs value. 
11. The EC has bound all its tariff lines in the WTO (Schedule CXL) (Table III.1).  The 
proportion of tariff lines with the same applie d and bound rates is 98.4%.  On three product 
categories, the autonomous (applied) tariffs presen t problems of consistency with the corresponding 
conventional (bound) tariffs (Table III.2);  a ccording to the general rules on the EC tariff15, "when 
autonomous rates of duty are lower than the conventional rates of duty, the autonomous duties, [...], are applicable". 
                                                     
 
8 For further details, see WTO (2004). 
9 Regulation (EC) No. 1889/2005 also requires that all persons carrying €10,000 or more make a 
declaration when crossing the border a nd that the information be exchanged with other Member States if there 
are indications that it is related to illegal activities as defined in Directive 91/308/EEC. 
10 For further details, see WTO (2004). 
11 For further details on the various customs-related IT schemes, see WTO (2004). 
12 EC Memo/05/453.  Viewed at: http://europa.eu .int/rapid/pressReleasesAction.do?reference=MEMO/ 
05/453&format=HTML&aged=0&language=EN&guiLanguage=fr. 
13 For a detailed description of the EC's Combined Nomenclature, see WTO (2004). 
14 For a description of the five types of rates used by the EC see WTO (2004). 
15 European Union Official Journal  L 286, 28 October 2005. European Communities WT/TPR/S/177 
 Page 43 
 
 
Table III.1 
Structure of the EC MFN tariff, 2004-06 
(Per cent) 
  2004 2006 2006 
bound rate U.R. 
1.   Bound tariff lines (% of all tariff lines) 100.0 100.0 100.0 100.0 
2.   Duty-free tariff lines (% of all tariff lines) 26.9 26.0 25.2 25.2 
3.   Non- ad valorem  tariffs (% of all tariff lines) 9.9 10.0 10.0 10.0 
4.   Tariff quotas (% of all tariff lines) 3.3 3.4 3.4 3.4 
5.   Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 2.7 2.1 2.1 2.1 
6.   Simple average tariff rate 6.5 6.9 7.0 7.0 
16.5 18.6 18.6 18.6 
4.1 4.0 4.1 4.1 
10.0 10.9 11.2 11.2 
0.2 0.3 0.3 0.3   Agricultural products (WTO definition)a 
      Non-agricultural products (WTO definition)b 
      Agriculture, hunting, forestry and fishing (ISIC 1) 
      Mining and quarrying (ISIC 2) 
      Manufacturing (ISIC 3) 6.4 6.8 6.9 6.9 
7    Domestic tariff "spikes" (% of all tariff lines)c 5.8 5.6 5.8 5.8 
8.   International tariff "peaks" (% of all tariff lines)d 8.6 9.0 9.3 9.3 
9.   Overall standard deviation of applied rates 11.5 14.0 14.0 14.0 
10. "Nuisance" applied rates (% of all tariff lines)e 6.8 9.4 9.4 9.4 
a WTO Agreement on Agriculture definitions. 
b Excluding petroleum. 
c Domestic tariff spikes are defined as those exceeding three times the overall simple average applied rate (indicator 6). 
d International tariff peaks are defined as those exceeding 15%. e Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: The 2006 bound tariff rate is the "conven tional" rate given by the EC, while the UR rate is the final bound rate extracte d from the 
 WTO database. 
Source:  WTO Secretariat calculations, based on EC Official Journal  L286;  and WTO estimates. 
Table III.2 
Items with problems of consistency betw een conventional and autonomous rates 
 "Conventional" (bound) rate "Autonomous" (applied) rate 
21069010 8.3% + 78.3 €/100 kg/net 13% + 122.3 €/100 kg/net MAX 35 €/100 kg/net 
37061099 6.5% 5 €/100 m 
37069099 5.4% 3.5 €/100 m 
Source: European Union Official Journal  L286, 28 October 2005. 
12. For analytical purposes, ad valorem  equivalents (AVEs) of non- ad valorem  tariffs have been 
calculated using average unit prices or "entry prices"  of imports, where they exist.  The computation 
of the average unit prices is based on 2005 (or 2004) data.16  The analysis covers some 9,741tariff 
lines, i.e. some 102 non- ad valorem  tariff lines, with no import or entry price, are excluded.  The tariff 
lines excluded from the analysis are for agricultural products:  83 of the lines carry data on intra-EC 
trade, with no imports from non-EC Members.  The an alysis may, to a certain extent, be biased.  For 
instance, the exclusion of some non- ad valorem  tariff lines, as well as th e use of 2005/04 data for the 
present analysis, is likely to introduce a downward bi as in the estimate;  world prices (in euros) of 
certain agricultural products might have fallen since then.17  The use of variable tariffs (with entry 
prices) is also a factor. 
13. Subject to the preceding observations, the simple average applied MFN tariff is estimated at 
6.9% in 2006 (up from 6.5% in 2004), with rates ranging from zero to 427.9% (Table III.3 and 
AIII.1).  The increase in the average rate is due to a downward trend in import prices of certain 
agricultural products subject to non- ad valorem  tariffs:  the tariffs having remained unchanged, the 
                                                      
16 In the absence of imports of certain items in  2005, 2004 data are us ed where they exist. 
17 AVEs used in the 2004 review of the EC were based on 2002 trade data;  the overall average tariff 
was 6.5%.  The use of 2004 trade data would have resulted in a higher overall 2004 average tariff of 6.8%.  WT/TPR/S/177 Trade Policy Review 
Page 44 
 
 
downward trend has meant higher AVEs (i.e. higher no minal tariff protection) for the products.  Some 
81.5% of tariff lines carry rates lower than 10% (Cha rt III.1).  The modal range (32.1% of all tariff 
lines) remains between zero (excl uded) and 5% (included), and the modal rate is still zero.  The 
relatively high coefficient of variation (2) depicts a wide dispersion within the rates, essentially in 
agriculture, mainly due to the imposition of non- ad valorem  tariffs and the large 
dispersion/fluctuation of their AVEs.   
Table III.3 
Structure of the EC MFN tariff by WTO sector, 2006  
 All products: HS 01-97 WTO Ag riculture WTO non-agriculture a 
 Number of lines % Number of lines % Number of lines % 
Total 9,843 100.0 2,059 100.0 7,784 100.0 
Ad valorem 8,854 90.0 1,107 53.8 7,747 99.5 
   Duty free 2,559 26.0 389 18.9 2,170 27.9 
   Dutable 6,295 64.0 718 34.9 5,577 71.6 
Non- ad valorem  989 10.0 952 46.2 37 0.5 
   Spécific 633 6.4 628 30.5 5 0.1 
   Mixed 73 0.7 42 2.0 31 0.4 
   Compound 197 2.0 197 9.6 0 0.0 
   Other 86 0.9 85 4.1 1 0.0 
a Includes petroleum. 
Source:  WTO Secretariat estimation, ba sed on data provided by the Eu ropean Community authorities. 
 
(1.9)(0.5)(26.0)(55.5)
(11.6)
(2.6)(0.9)
010002000300040005000
0% 0-10% 10-20% 20-30% 30-40% 40-50% >500102030405060708090100
The figures in brackets correspond to the percentage of total lines. They do not add to 100% since AVEs are not 
estimated for 102 lines.
WTO Secretariat calculations, based on EC Official Journal  L286, 28 October 2005.Chart III.1
Breakdown of applied MFN tariffs, 2006
Number of tariff lines
Note:
Sourc e:Percentage
Number of lines
Cumulative percentage (right-hand scale)
 
 
 
 European Communities WT/TPR/S/177 
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14. Agricultural products (WTO definition) are the most tariff-protected, with an average MFN 
tariff of 18.6% (more than twice the overall aver age MFN tariff).  The average non-agricultural MFN 
tariff (excluding petroleum) is 4.0%.  Agricultura l products are also the most tariff-protected under 
the ISIC (Revision 2) definition, with an averag e rate of 10.9%, followed by manufactured products 
(with an average tariff of 6.8%), and mining and qu arrying (0.3%) (Table III.1).  Some 5.4% of all 
agricultural tariff lines are subject to rates higher than 50% (Chart III.2). 
 
26.0
24.493.9
34.655.5
57.3
6.136.811.6
11.5
16.22.6
2.5
4.30.9
0.9
0.80.5
0.5
1.21.9
1.7
5.4
0102030405060708090100
All products
Manufacturing
Mining
Agriculture
0 0-10 10-20 20-30 30-40 40-50 >50Chart III.2
MFN tariff distribution by ISIC sectora, 2006
Number of lines
a
Source:Labels are share of the total number of tariff lines, by sector.  They do not add to 100% since AVEs are not 
estimated for 102 lines.
WTO Secretariat calculations, based on EC Official Journal  L286, 28 October 2005. 
 
15. Product-wise, the zero rate still applies to, inter alia , bamboo, rattan, cotton linters, 
pharmaceutical products, pulp of wood, ore, slag a nd ash, printed books and newspapers, tin products, 
works of art, and civil aviation aircraft.  Produc ts with relatively high tariff protection are almost 
exclusively agricultural or processed food, including cer tain edible flours and meals of meat or meat 
offal (427.9%);  certain Agaricus mushrooms (300.8%);  certain frozen meat of bovine animals 
(276.9%);  certain pineapple juices (209.8%);  frozen  edible offal of bovine animals (188.2%);  live 
Gallus domesticus  fowl (167.2%);  and isoglucose (163.8%). 
16. On aggregate, because of the relatively high protection of agricultural goods, the EC tariff 
schedule continues to show mixed escalation, with  average rates of 8.9% for the first stage of 
processing, 5.0% on semi-processed goods and 7. 5% on fully processed goods.  At a more 
disaggregate (ISIC (Revision 2) two-digit) level,  the tariff structure has also remained broadly 
unchanged since the last review of the EC, with mixed escalation in wood products;  paper; food, 
beverages and tobacco;  chemicals and plastics;  and positive escalation in basic metal industries;  textiles and apparel;  non-metallic minerals;  an d fabricated metal (including machinery and 
equipment) industries (Table III.3 and Chart III.4). WT/TPR/S/177 Trade Policy Review 
Page 46 
 
 
Table III.4 
Summary analysis of EC applied MFN tariffs, 2006  
  Applied 2006 rates  
 
Analysis No. of linesa No. of lines 
used Simple avg. 
tariff (%) Tariff range 
(%) Std-dev (%) CV  Imports 2005
(US$ million)
Total 9,843 9,741 6.9 0-427.9 14.0 2.0 1,461,431 
By WTO definitionb               
Agriculture 2,059 1,957 18.6 0-427.9 27.1 1.5 78,001 
Live animals and products thereof 331 295 27.3 0-427.9 39.9 1.5 5,843 
Dairy products 155 123 42.4 1.6-134.4 28.8 0.7 693 
Coffee and  tea, cocoa, sugar, etc. 300 294 18.8 0-163.8 19.7 1.0 14,722 
Cut flowers and plants 62 62 4.3 0-19.2 4.4 1.0 2,276 
Fruit and vegetables 437 437 16.2 0-300.8 22.1 1.4 19,933 
Grains 55 55 55.2 0-116.6 33.4 0.6 2,521 
Oil seeds, fats, oils and their products 164 162 7.4 0-137.2 16.3 2.2 15,527 
Beverages and spirits 272 253 15.2 0-209.8 22.7 1.5 6,496 
Tobacco 30 30 19.7 5.2-74.9 20.8 1.1 2,321 
Other agricultural products 253 246 6.1 0-122 14.7 2.4 7,667 
Non-agriculture (excl. petroleum) 7,743 7,743 4.0 0-35.6 4.1 1.0 1,077,002 
Fish and fishery products 381 381 10.5 0-26 6.6 0.6 17,679 
Mineral products, precious stones and 
precious metals 513 513 2.4 0-13.8 2.9 1.2 111,991 
Metals 1,024 1,024 1.8 0-10 2.3 1.3 100,101 
Chemicals and photographic supplies 1,389 1,389 4.4 0-35.6 2.8 0.6 124,184 
Leather, rubber, footwear and travel goods 283 283 4.8 0-17 4.7 1.0 32,838 
Wood, pulp, paper and furniture 444 444 1.2 0-10 2.3 2.0 44,139 
Textiles and clothing 1,269 1,269 8.0 0-12 3.2 0.4 98,806 
Transport equipment 262 262 4.8 0-22 5.1 1.1 108,099 
Non-electric machinery 952 952 1.7 0-9.7 1.4 0.8 177,787 
Electric machinery 544 544 2.8 0-14 3.4 1.2 163,529 
Non agricultural articles n.e.s. 682 682 2.4 0-14 1.9 0.8 97,850 
By ISIC sectorc        
Agriculture, hunting, forestry and fishing 598 594 10.9 0-167.2 20.4 1.9 43,049 
Mining 131 131 0.3 0-8.6 1.3 5.0 270,425 
Manufacturing 9,113 9,015 6.8 0-427.9 13.5 2.0 1,086,408 
By stage of processing        
Raw materials 1,202 1,197 8.9 0-167.2 18.6 2.1 371,061 
Semi-processed products 2,917 2,911 5.0 0-207.2 8.2 1.6 175,750 
Fully-processed products 5,724 5,633 7.5 0-427.9 15.0 2.0 856,345 
a Tariff rates are based on a lower frequency (number of lines) since lines with no ad valorem  equivalents are  excluded.  
b Some 41 tariff lines are excluded from both WTO agriculture and non-agriculture definitions (essentially petroleum products).  
c International Standard Industrial Classification (Rev.2).  Electricity, gas and water are excluded (1 tariff line). 
Note: CV = coefficient of variation.  
Source : WTO Secretariat estimates, based on EC Official Journal  L286; imports data provided by the EC. 
 
 
 European Communities WT/TPR/S/177 
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0,05,010,015,020,025,0Chart III.3
Tariff escalation by ISIC 2-digit industry, 2006
Per cent
Sourc e:    WTO Secretariat calculations, based on EC Official Journal  L286, 28 October 2005; and WTO estimates.All products
Food, beverages
and tobacco
Textiles,
apparel
Wood products
Paper, printing
Chemicals ,
plastics
Non-metalli c
minera l
products
Basic meta l
products
Fabricated meta l
products
Other manufac -
turingNOT APPLICABLEAgricuture
MiningRaw materials Semi-processed Fully processed
NOT APPLICABLE
 
 
(iii) Other duties and taxes 
(a) Value-Added Tax  
17. During the period under review there has been no fundamental change to the main VAT 
legislation at the EC level (The Sixth Directive).18  The VAT base is largely harmonized across the 
EC, but rates, derogations, and procedures differ acro ss Member States.  In practice, the contribution 
of VAT to the Member States' fiscal accounts varies:   in 2003, it ranged from 6.1% of GDP (Italy) to 
9.7% of GDP (Denmark).19  I n  t h e  l o n g  r u n ,  t h e  E C  a i m s  to establish a single harmonized VAT 
system, with the tax levied at the final place of consumption of goods and services, and a single set of procedures based on electronic returns.
20   
18. The Sixth Directive allows Member States certain derogations in the implementation of VAT 
at national level (Article 27).  This gives rise to variations in the way VAT functions across the EC 
(Table III.5).  As at 31 December 2005, the following de rogations were in force:  Austria (3), Belgium 
(12), Cyprus (1), Denmark (7), Finland (1), Fr ance (11), Germany (18), Greece (7), Ireland (10), 
Italy (10), Luxembourg (7), Netherlands (16), Portugal (1), Spain (2), Sweden (1), and United Kingdom (13).
21   
                                                      
18 Sixth Council Directive 77/388/EEC of 17 May 1977, as last amended by Council Directive 
2006/18/EC of 14 February 2006. 
19 DG Taxation and Customs Union (2005). 
 20 DG Taxation and Customs Union (2006b). 
 21 DG Taxation and Customs Union (2006a). WT/TPR/S/177 Trade Policy Review 
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Table III.5 
National VAT rates in the EC 
a Will be raised to 19% as of January 2007. 
n.a. Not applicable. 
Note: Further reductions are applied in some regions  of Austria, Greece, France, Italy and Portugal.  
Source : European Commission (2006), VAT rates applied in the Member States of the European Community .  Viewed at: 
http://europa.eu.int/comm/taxati on_customs/customs/index_en.htm. 
19. Another salient feature of the EC's VAT regi me is its exemptions schemes (Table III.6).22  
The four main schemes are for:  (i) intra-EC acquisitions by taxable persons;  (ii) intra-EC distance 
sales (generally small non-businesses);  (iii) small businesses operating within the Member State 
where they are located;  and (iv) small quan tities of particular goods imported for personal 
consumption (section (b) below).23  These exemptions are generally applied as long as the transaction 
value is below the thresholds defined by each Member State subject to certain limits set out in EC legislation. Other more general VAT exemptions  provided for by the Sixth Directive concern 
activities of public interest or where the applicati on of VAT is difficult (e.g. postal services, hospital 
and medical care, financial services, insurance and reinsurance transactions), specific imports (e.g. 
goods that should enjoy VAT exemption in the exporting country, gas, and electricity), and goods in transit (e.g. goods placed in warehouses).  Special rules apply to  transactions involving motor 
vehicles less than six months old and with less th an 6,000 km, where VAT is paid in the owner's 
Member State of residence. 
                                                     
 
22 Sixth Council Directive 77/388/EEC of 17 May 1977, as last amended by Council Directive 
2006/18/EC of 14 February 2006, Articles 13-16, and Council Directive 69/169/EEC of 28 May 1969, Articles 2 
and 7.  
23 DG Taxation and Customs Union (2006c). Country Legal base (as amended)  Rates  
  Super Reduced Reduced Standard Parking 
Austria  Turnover Tax of 1994 - 10.0 20.0 12.0 
Belgium  VAT Law  of 3 July 1969 - 6.0 21.0 12.0 
Cyprus  VAT Law of 7 July 2000 L.95(I)/2000  - 5.0/8.0 15.0 n.a.
Czech Republic  VAT Act of 2004 - 5.0 19.0 n.a.
Denmark  Danish VAT Act of 18 May 1994  - - 25.0 n.a.
Estonia   VAT Law  of 25 August 1993 - 5.0 18.0 n.a.
Finland VAT Act of 30 December 1993 - 8.0/17.0 22.0 n.a.
France  Law 78/1239 of 29 December 1978  2.1 5.5 19.6 n.a.
Germany  The VAT Act of 21 February 2005 - 7.0 16.0a n.a.
Greece  Law 1642 of 21 August 1986 
1986 codified by Law 2859/2000 of 
7 November 2000 4.5 9.0 19.0 n.a.
Hungary  Act  IXXIV on  VAT of  1992  - 5.0 20.0 n.a.
Ireland  VAT Act of 1972  4.4 13.5 21.0 13.5 
Italy  PD 633 of 26 October 1972  4.0 10.0 20.0 n.a.
Latvia  VAT Law of 26 October 1995  - 5.0 18.0 n.a.
Lithuania  VAT Law of 5 March 2002 No IX-751   - 5.0/9.0 18.0 n.a.
Luxemburg Basic VAT Law of 5 August 1969  3.0 6.0 15.0 12.0 
Malta  VAT  ACT XXIII of 1998  - 5.0 18.0 n.a.
Netherlands  VAT of 28 June 1968  - 6.0 19.0 n.a.
Poland  VAT Act of 11 March 2004  3.0 7.0 22.0 n.a.
Portugal  DL 394B/84 of 26 December 1984  - 5.0/12.0 21.0 n.a.
Slovenia  VAT Act  No. 89/98 of 23 December 1998 - 8.5 20.0 n.a.
Slovakia  VAT Act  No. 175/1998 of 1 January 
1998 -- 19.0 n.a.
Spain  Law 37 of 29 December 1992  4.0 7.0 16.0 n.a.
Sweden VAT (SFS 1994: 200) of 1 July 1994 - 6.0/12.0 25.0 n.a.
United Kingdom VAT Act of  1994 - 5.0 17.5 n.a.European Communities WT/TPR/S/177 
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Table III.6 
VAT exemption thresholds in the EC 
a Second subparagraph of Article 28(a)(i ) of Directive 77/388/EEC, as amended. 
b Article 28b, (2) of Directive 77/388/EE, as amended. c Article 24(2) of Directive 77/388/EEC, as amended.  This scheme  is reserved for taxable persons established within the territ ory 
of the country. 
d The first figure refers to intra-EC imports;  the sec ond refers to imports from third countries into the EC. 
.. Not available. 
Note: For Malta, € 37,000 when the economic activity consists principally in the suppl y of goods. € 24,300 when the economic ac tivity 
consists principally in the supply of services with a low valu e added (high inputs), and € 14, 600 in other cases, namely servic e 
providers with a high va lue added (low inputs). 
Source : DG Taxation and Customs Union (2006).  VAT in the European Community . Viewed at: 
http://europa.eu.int/comm/taxation_customs/taxation/ vat/traders/vat_community/index_en.htm and Council 
Directive 69/169/EEC of 28 May 1969, Articles 1 and 2. 
20. During the period under review, the Council ame nded the Sixth Directive, granting Member 
States the right to apply reduced VAT rates un til 31 December 2010 to specific labour-intensive 
activities, i.e. small service repair of bicycle, s hoes and leather goods, renovati on and repair of private 
dwellings, window cleaning in private househol ds, and domestic care service and hairdressing.24  In 
February 2006, a proposal was also presented to the Commission to bring the regime up to date and 
raise the maximum quantities and values under which imports for personal consumption are eligible 
for exemption of VAT.25  The proposal also seeks to abolis h quantitative limits for perfume, coffee 
and tea, and impose a quantitative limit on imported beer, whether from EC Member States or not. 
21. In 2005, the Commission published a report on the results of consultations concerning the 
implementation of a one-stop scheme for persons lia ble for VAT in more than one Member State26, an 
initial step in the simplification of the VAT system throughout the EC.  A number of issues raised in 
                                                      
24 Council Directive 2006/18/EC of 14 February 2006. 
25 Council Directive Proposal COM(2006), 76 final, 2006/0021 (CNS). 
26 EC working document TAXUD/D/1D (2005). Country  Thresholds (euros)  
 Acquisitions by 
taxable personsa Distance sellinga Small enterprisesa Small quantitiesd 
Austria  11,000 100,000 22,000 600/175 
Belgium  11,200 35,000 5,580 600/175 
Cyprus  10,000 35,000 15,600 600/175 
Czech Republic  10, 018 35,034 30,731 600/175 
Denmark  10,722 37,528 6,667 600/175 
Germany  12,500 100,000 17,500 600/175 
Estonia  10,226 35,151 16,000 600/175 
Greece  10,000 35,000 9,000/4,000 600/175 
Spain  10,000 35,000 .. 600/175 
France  10,000 100,000 76,300/27,000 600/175 
Ireland  41,000 35,000 51,000/25,500 600/175 
Italy  8,263 27,889 .. 600/175 
Latvia  10,778 36,952 17,200 600/175 
Lithuania  10,138 36,207 29,000 600/175 
Luxemburg 10,000 100,000 100,000 600/175 
Hungary  10,000 35,000 15,860 600/175 
Malta  10,000 35,000 37,000/24,300/
14,600 600/175 
Netherlands  10,000 100,000 .. 600/175 
Poland  10,000 35,000 10,000 600/175 
Portugal  10,000 35,000 9,976/12,470 600/175 
Slovenia  10,000 35,000 25,000 600/175 
Slovakia  10,345 36,946 36,946 600/175 
Finland 10,000 35,000 8,500 600/175 
Sweden 10,071 35,809 .. 600/175 
United Kingdom 87,145 105,089 87,145 600/175 WT/TPR/S/177 Trade Policy Review 
Page 50 
 
 
the consultations were reflected in the subsequent legislative proposal, including a more extensive use 
of the system (business-to-business (B2B) as well as business-to-consumer (B2C));  and provisions 
for repayments have been made more business-frie ndly.  A regulation was also enacted to clarify 
provisions of the Sixth Directive and to ensu re greater consistency in its interpretation.27   
(b) Excise duties 
22. During the period under review, there was no majo r change to the excise duty system in the 
EC, which concerns alcoholic beverages, tobacco products, and energy products.28  The base for 
excise duties has been harmonized throughout the EC, but the rates differ among Member States;  
while EC legislation establishes their minimum, they are set at national level.  EC legislation on 
excise taxes does not discriminate between EC and non-EC products.   
23. There are no limits on what private persons can ta ke with them when they travel between EC 
countries, as long as the products are for personal use and not for resale.  Excise duties and VAT are 
included in the product price in the Member State of purchase, and no further payment is due in any 
other Member State.29  Each country can set guide levels for personal use, tobacco and alcohol.30  
Travellers who carry a larger quantity of these goods  may be asked to prove they are intended for 
personal use. In May 2004, existing Member States were given the temporary option to set limits for 
exemptions from excise duties on goods travellers could bring from new Member States.  Limits on tobacco products were imposed by Austria, Belgiu m, Denmark, Finland, France, Germany, Ireland, 
Italy (only with respect to Slovenia), Sweden, and the United Kingdom.
  
24. Travellers entering the EC from a non-EC country may import goods in their personal 
luggage free of customs duties, VAT, and excise dut ies within specified  limits (Table III.7).   
Table III.7 
Thresholds for excise duty exemptions on imports (for personal use) from non-EC countries, 2005 
Tobacco products 200 cigarettes or  
100 cigarillos or  
50 cigars or  
250 grams of tobacco  
Alcoholic drinks 1 litre of spirits over 22 % volume or  
2 litres of fortified wine  or sparkling wine  
2 litres of still wine  
Perfume 50 grams 
Eau de toilette 250 ml  
Other goods Up to a value of €175a b c 
a Within that limit, Finland applies a limit of 16 litres of beer per person. 
b Member States may reduce this limit to €90 for travellers under 15 years. 
c The value of personal effects imported temporarily or re-im ported following their temporary export is not be taken into 
consideration for determining this amount.  
Note: In this context, imports are regarded as having no commerc ial character if they take place occasionally and consist of go ods for 
the personal or family use of the travellers, or of goods intended as presents.  The limits laid down in the table above also a pply 
for travellers coming from:  the Canary Islands, the Channel Is lands, Gibraltar or other territories where VAT and EC excise 
provisions do not apply.  
Source:  Directive 69/169/EEC and Article 46 of Regulation 918/83.  
                                                      
27 Council Regulation No. 1777/2005 of 17 October 2005. 
28 See WTO (2004), for further details on the EC's excise duty legislation. 
29 Council Directive No. 92/12/EEC of 25 February 1992, Articles 8 and 9. 
30 Council Directive No. 92/12/EEC of 25 February 19 92, Article 9.  The guide levels may not be lower 
than: 800 cigarettes, 400 cigarillos, 200 cigars, 1 kg of smoking tobacco, 10 litres of spirit drinks, 20 litres of 
intermediate products, 90 litres of wines (including a maximum of 60 litres of sparkling wines), and 100 litres of beer. European Communities WT/TPR/S/177 
 Page 51 
 
 
25. In February 2006, a proposal was adopted to  revise international travel allowances.31  T h e  
proposal includes an increase to €220 (€500 for air travellers) for goods brought into the EC, other 
than those specified in the regulations;  the a bolition of limits on perfume, coffee, and tea;  the 
introduction of limits on the importation of beer;  an d a prerogative to Member States to reduce limits 
on tobacco products in order to support health polic ies.  During the period under review, additional 
regulations were enacted to clarify rules and procedures for cooperation among Member States to 
ensure compliance with excise duties legislation.32   
(iv) Duty and tax exemptions and concessions 
26. During the period under review, there were no changes to the EC legislation on duty and tax 
exemptions and concessions33;  and no changes are envisioned under the proposed CC.  In addition to 
VAT and excise duty exemptions (section (iii) above ), the CC still provides for customs duty relief on 
account of special circumstances34;  on re-imported Community goods;  on products fished from the 
sea by Member State vessels;  and on goods re-e xported after inward processing under the drawback 
procedure, or because they are defective, or do not comply with the terms of the contract.35  
Furthermore, customs duties are suspended under various customs approved treatments, including:  
external transit;  customs warehousing;  inward processing;  temporary importation;  and free zones 
and free warehouse. 
27. The EC is a signatory to the Convention on Temporary Admission and thus applies the VAT 
exemptions contained in the Convention.36 
(v) Rules of origin 
28. EC rules of origin have not changed since its  last TPR, nor have the procedures used to 
establish the origin of imports.  Non-preferential rules of origin are contained in the CC and its 
implementing regulations, and preferential rules of  origin in the implementing provision of the CC 
(for autonomous/non-reciprocal preferences) and th e various trade agreements and arrangements 
concluded by the EC.  The provision on cumulation c ontinues to be applied under its three schemes:  
bilateral, diagonal, and full.37 
29. Consultations have been carried out with the private sector and customs offices on the 
changes to be implemented on preferential rules of origin, with a view to promoting their simplification.  A Communication on the future of  preferential rules of origin (COM(2005) 100) was 
                                                     
 
31 EC Press release IP/06/238 of 27 February 2006;  and European Communities (2006).  
32 Council Regulation No. 2073/2004 of 16 November 2004 and Council Directive No. 2004/106/EEC 
of 16 November 2004. 
33 For further details on VAT exemptions, see WTO (2004).   
34 Regulation No. 918/83 lists the goods that qualify for duty relief on account of special circumstances.  
These include personal property by private individuals;  goods of negligible value imported by private 
individuals;  articles imported for carrying out activities in the public interest;  equipment belonging to a firm 
moving to the Community;  selected products obtained by Community farmers;  and tourist information 
material. 
35 CC Articles 124 to 128, and Articles 184 to 188. 
36 For further details on the Convention on Temporary Admission, see WTO (2004), Chapter III, 
footnote 41.   
37 For further details on the EC's rules of origin, s ee WTO (2004).  The legal basis for non-preferential 
rules of origin are contained in Articles 22-27 of th e CC, and Articles 35-65 and Annexes 9-11 of the IPC 
(Commission Regulation No. 2454/93).  In the case of pr eferential rules of origin, the legal basis comprises 
Article 27 of the CC, Articles 66-123 of the IPC and the preferential agreem ents and arrangements signed by the 
EC.   WT/TPR/S/177 Trade Policy Review 
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adopted as a follow-up to the Green Paper put forw ard in December 2003.  Three broad changes are 
contemplated in the Communication:  (i) the replacement of all existing rules (many of which are specific to products and countries), by one, across- the-board rule based on value-added in the 
beneficiary country (i.e. a threshold of value-added, to be determined, would define origin) subject to 
an ongoing evaluation of its suitability; (ii) certifi cations of origin would be replaced by a statement 
on origin given directly by the exporter, with  the appropriate country authorities retaining 
responsibility for carrying out registration and certifica tion of origin controls; and (iii) enforcement of 
rules of origin would fall under the responsibility of the competent authorities in the beneficiary country. 
(vi) Tariff preferences 
30. The CC provides for the possibility of granti ng preferential tariffs unilaterally, or on a 
reciprocal basis, through trade agreements (Chapter II(5)(iii)).
38  The preferences consist of duty-free 
access for almost all non-agricultural products, and relatively low tariffs (compared with the MFN 
levels), generally under quotas (i.e. tari ff quotas), on selected agricultural goods.39   
(vii) Import prohibitions, restrictions, and licensing 
31. The EC implements trade and economic sancti ons in accordance with resolutions of the 
United Nations Security Council (UNSC).  For instance,  the EC prohibited direct or indirect imports 
of rough diamonds, as well as round logs and timber products, from Li beria (whether of Liberian 
origin or not).40  Furthermore, the EC has prohibited the importation of rough diamonds from 
Côte d'Ivoire, whether of Côte d'Ivoire origin or  not.  The EC has also implemented some other 
restrictions.41   
32. The EC also restricts trade under treaties and international conventions to which it is a 
signatory.  Since its last TPR, the EC has signe d two treaties that may impose restrictive trade 
measures.42  These were:  the WHO Convention on Tobacco control, and the Convention on the 
Conservation of Highly Migratory Fish Stocks  in the Western and Central Pacific Ocean.43  The EC 
implemented recommendations by the International Commission for the Conservation of the Atlantic 
Tunas (ICCAT) to impose trade sanctions upon Bolivi a, Cambodia, Equatorial Guinea, Georgia, and 
Sierra Leone, and to lift sanctions earlier imposed  upon Belize, Honduras, and Saint Vincent and the 
Grenadines.44 Following a recommendation by ICCAT, the EC lifted trade sanctions on Cambodia, 
                                                      
38 CC Article 20. 
39 See WTO (2004), for further details and an anal ysis of the EC's preferential trade regime. 
40 Council Common Position 2006/31/CFSP of 23 January 2006.  Council Regulation (EC) No. 
234/2004 of 10 February 2004 concerning certain restrictive measures in respect of Liberia and repealing 
Regulation (EC) No. 1030/2003  OJ L 40, 12.2.2004.   
41 Council Regulation (EC) No. 314/2004 of 19 February 2004 concerning certain restrictive measures 
in respect of Zimbabwe  OJ L 55, 24.2.2004;  Regulation (EC) No. 1210/2003 of 7 July 2003 concerning the 
importation of cultural goods from Iraq;  Council Regulation (EC) No. 1236/2005 of 27 June 2005 concerning 
trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading 
treatment or punishment  OJ L 200, 30.7.2005; Council Regulation (EC) No. 1859/2005 of 14 November 2005 
imposing certain restrictive measures in respect of Uzbekistan OJ L 299, 16.11.2005; Council Regulation (EC) No. 817/2006 of 29 May 2006 renewing the restrictive measures in respect of Burma/Myanmar and repealing 
Regulation (EC) No. 798/2004  OJ L 148, 2.6.2006. 
42 For a summary of the treaties and conventions in  force at the time of the last Review, see WTO 
(2004). 
43 Council Decision 2004/513/EC of 2 June 2004, and Council Decision No. 2005/75/EC of 
26 April 2004. 
44 Council Regulations (EC) No. 826/2004, No. 827/2004, and NP 828/2004 of 26 April 2004. European Communities WT/TPR/S/177 
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Equatorial Guinea, and Sierra Leone.45  The EC has also transposed into Community law conservation 
measures adopted by the Convention on the Conser vation of Antarctic Mari ne Living Resources, 
which included some trade-related elements.46 The EC continues to carry out import surveillance, 
controls, and prohibitions on, inter alia , technical, sanitary, phytosanitary, and environmental 
grounds. The EC is member of the Kimberley Process; Council Regulation (EC) No. 2368/2002 
implemented the Kimberley Process certification scheme. 
33. During the period under review the EC made tw o notifications concerning import licensing 
procedures.47  The EC import licensing system is in place to manage imports of specific products 
subject to quantitative restrictions, safeguard measur es or import surveillance.  In addition, certain 
steel and agricultural products are subject to Community surveillance for statistical purposes, 
according to the Commission.  As regards non- WTO Members, the EC maintains quantitative 
restrictions on certain steel imports from Russia, Ukraine, and Kazakhstan.  Import licences are free.   
34. The EC currently maintains 98 tariff quotas, of which 91 are on agricultural products.48  
These quotas are administered through import licen ces, and include beef, sheep, goats, chicken, 
turkey, milk products, eggs, potatoes, fruit and vegetables, wheat, barley, rice, maize, starch, 
mushrooms, sausages, sugar, and grape juice (Chapter IV(2)(ii)). 
35. Following the phase-out of the WTO Agreement on Textiles and Clothing on 
31 December 2004, the EC maintains no quotas or  double-checking on textiles and clothing imports 
with WTO Members. However, for ten textile and clothing products originating in China, specific 
agreed levels have been set until the end of 2007 .  These ten products, i.e. cotton fabrics, T-shirts, 
pullovers, men's trousers, blouses, bed linen, dresses, brassieres, table and kitchen linen, and flax or 
ramie yarn, were subject to the most significant surge of imports into the EC in the first semester of 
2005 or were considered sensitive by EC producers.  The import quota regime is administered through 
a double-surveillance licence system, both in China (at the export point) and in the EC (at the import 
point).  The MoU was incorporated into the EC's textile import regime.49  Trade in the products not 
covered by the MoU is to remain unaffected and thus quota free. 
36. During the period under review, the EC extende d the bilateral agreement with Belarus on 
trade restrictions on textile and clothing products, including on eco nomic outward processing traffic.  
The bilateral textile agreement w ith Ukraine was also extended, but double-checking requirements 
were ended;  double-checking requirements were  also ended for Viet Nam and the Russian 
Federation.  A bilateral textile ag reement with Serbia suspended all quantitative restrictions.  On an 
autonomous basis, the EC continues to apply quan titative restrictions on imports of textile and 
clothing products from the Democratic People's Republic of Korea, Montenegro, and Kosovo.50  In 
the light of global liberalization of trade in te xtile and clothing produc ts, bilateral and other 
arrangements with Azerbaijan, Bosnia and He rzegovina, Kazakhstan, Laos, Tajikistan, and 
Turkmenistan and Uzbekistan were no longer extended.   
                                                      
45 Council Regulation (EC) No. 919/2005 of 13 June 2005. 
46 Council Regulation (EC) No. 601/2004 of 22 March 2004. 
47 WTO documents G/LIC/N/3/EEC/7, G/LIC/N/ 3/EEC/7/Add.1, G/LIC/N/3/EEC/7/Corr.1, 
G/LIC/N/3/EEC/8, G/LIC/N/3/EEC/8/A dd.1 and G/LIC/N/3/EEC/8/Corr.1. 
48 Commission Regulation No. 1719/2005 of 27 October 2005. 
49 Council Regulations No. 1084/2005 and 1478/2005 of 8 July and 12 September of 2005 respectively. 
50 For further details concerning bilateral agreements that imposed import restrictions, see WTO 
(2004). WT/TPR/S/177 Trade Policy Review 
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(viii) Contingency trade remedies 
37. During the period under review there were no major changes to the basic safeguard 
regulations applied by the EC on imports from WTO and non-WTO Members.51  No major changes 
were made to its basic anti-dumping (AD) legislation52;  and legislation on countervailing (CV) 
measures is unchanged.53  Under EC regulations, imports s hould not be subject to more than 
necessary trade remedies.  If the Council establishes th at the combination of either anti-dumping or 
countervailing, and safeguard measures could lead to  effects greater than "d esirable" under the EC's 
trade defence policy, then the anti-dumping or coun tervailing measures may be amended, suspended, 
or repealed (partially/totally);  nonetheless, othe r measures may be imposed if the Council deems it 
necessary.54 
(a) Safeguards 
38. The phase-out period of the WTO Agreem ent on Textiles and Clothing ended on 
31 December 2004, thus terminating the quota schem e and safeguard mechanism under this regime.  
The adjustment to the EC's textile safeg uard regulations was undertaken in 2003.55  
39. According to official EC data, during the period 1 January 2004 to 30 September 2006, the 
EC initiated three safeguard investigations (on certain textile products, frozen strawberries, and 
farmed salmon), initiated one review of a safeguard  measure (citrus fruits), imposed two definitive 
safeguard measures (on citrus fruits and farmed  salmon), and revoked one measure (on farmed 
salmon).56  As at September 2006, there were safegua rd measures on citrus fruits, and surveillance 
measures on footwear and steel products. The safeguard  investigation on strawberries was terminated 
without the imposition of measures.  During the pe riod under review, the EC made six safeguard 
notifications and six supplementary or corrigendum notifications to the WTO Committee on Safeguards
57;  they related to farmed salmon, prepared or preserved citrus fruits and strawberries.  In 
these three cases, the notifications referred only to th e initiation of inv estigations, and to the results of 
the mid-term review in the case of preserved citrus  fruits.  The EC notified that it did not apply the 
temporary tariff quotas (the safeguard measure)  on imports of farmed salmon from developing 
countries as their individual and collective imports were negligible.   
                                                      
51 Council Regulation (EC) No. 2200/2004 of 13  December 2004 amended Council Regulation (EC) 
No. 3285/94 by excluding textiles imports from the scope of the regulation, unless they are subject to Council Regulation (EC) No. 517/94, and in general, products from countries listed in Council Regulation No. 519/94.  
Council Regulation (EC) No. 519/94 of 7 March 1994, as last amended by Council Regulation (EC) 
No. 427/2003 of 3 March 2003;  Council Regulation (EC) No. 517/94 of 7 March 1994, as last amended by Commission Regulation (EC) No. 931/2005 of 6 June 2005 and Council Regulation (EC) No. 3030/93 of 
12 October 1993, as last amended by Commission Regulation (EC) No. 1478/2005 of 12 September 2005.  See 
WTO (2004), for further details. 
52 Council Regulation (EC) No. 384/96 of 22 Decembe r 1995, as last amended by Council Regulation 
(EC) No. 2117/2005 of 21 December 2005.  For further details concerning the main AD legislative framework, 
see WTO (2004). 
53 Council Regulation (EC) No. 2026/97 of 6 October 1997, as last amended by Council Regulation 
(EC) Nº 461/2004 of 8 March 2004. 
54 Council Regulation (EC) No. 452/2003 of 6 March 2003. 
55 For further details concerning the legal basis of the adjustment, see WTO (2004). 
56 DG Trade online information.  Viewed at:  http ://europa.eu.int/comm/trade/issues/respectrules/anti_ 
dumping/index_en.htm. 
57 WTO documents G/SG/N/7/EEC/3; G/SG/N/8/EEC/3  and Suppl.1;  G/SG/N/10/EEC/3 and Suppl.1; 
G/SG/N/11/EEC/3 and Suppl.1 and Suppl.2; G/SG/N/6/EEC/4 and Corr.1, G/SG/N/13/EEC/1; and G/SG/N/6/EEC/2/Suppl.1. European Communities WT/TPR/S/177 
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40. The EC also notified the Committee on Safeguard s that, since 1 May 2004, EC legislation on 
safeguards is applicable throughout the new Member  States and that all existing previous national 
legislation lapsed on that date.58  Accordingly, all safeguard measures maintained by new EC Member 
States lapsed, including special safeguard measures (SSGs) on agricultural products.59 
(b) Anti-dumping (AD) measures 
41. The EC's AD legislation was amended in 2004.60  The amendment imposed mandatory time 
limits for completion of review investigations (a ta rget duration of twelve months, with a mandatory 
maximum of 15 months);  amended the decision-ma king procedures for the adoption of definitive AD 
measures (a Commission proposal shall be adopted unl ess the Council decides by a simple majority to 
reject the proposal;  this implies that abstentions  count as positive votes);  clarified what constitutes 
anti-circumvention practices, and who has the right to request the initiation of an investigation on 
circumventing practices;  and clarified the rules on the possibility for exporters to be exempted from extended duties when circumvention takes place outside the EC.
61  In general, any resolution 
concerning the application of AD measures may be cha llenged in the European Court of First Instance 
and in the DSB in the case of WTO Members.62 
42. According to EC data, from 1 January 2004 to 30 September 2006, 77 AD investigations were 
initiated and 39 definitive AD measures imposed.63  Furthermore, the EC imposed provisional 
measures in 26 cases and terminated 18 cases without  imposition of measures. The definitive AD 
measures applied were mostly ad valorem  duties on specific textiles, chem icals, electronics, processed 
woods, bicycles, bricks, steel produc ts, hand pallet trucks and their essen tial parts, trout, salmon, lever 
arch mechanisms, refrigerators, chamois leather, a nd plastic sacks and bags.  During the same period, 
the EC made three AD notifications and three ad dendums or supplementary notifications to the 
WTO.64   
43. Most AD rates applied were ad valorem, at between zero and 82%.  During the period, 40 AD 
measures expired after the five-year imposition period,  22 were repealed after their review, and 16 
lapsed with the accession of the new EC Member States.  As at 30 September 2006, 135 definitive 
measures were in place, of which 39 on imports from China, ten from Russia, and nine each from 
India and Thailand.  The EC also applies AD measu res against certain leather shoes from China and 
VietNam (excluding high-tech sport shoes)65;  the AD rates are set at 16.5% and 10.0% respectively 
(7 October 2006). 
44. The number of AD notifications by the EC to the WTO has decreased si gnificantly since the 
late 1990s;  notifications of other contingency measures have decreased slightly (Table III.8).  In 
                                                      
58 WTO document G/SN/N/1/EEC/1/Suppl.2 of 1 November 2004. 
59 Four new EC Member States were imposing special safeguard measures on agricultural products:  
the Czech Republic (one), Hungary (two), the Slovak Republic (two) and Poland (three). WTO documents:  
G/AG/N/CZE/54 of 26 May 2004, G/AG/N/HUN/36 of 5 May 2004, G/AG/N/HUN/39 of 8 February 2005, 
G/AG/N/POL/61 of 17 February 2004, G/AG/N/POL/64 of 20 September 2004, G/AG/N/POL/65 of 
31 January 2006, and G/AG/N/SVK/46 of 20 May 2005. 
60 Council Regulation No. 461/2004 of 8 March 2004. 
61 For further details on EC anti-dumping procedures, see WTO (2004). 
62 DG Trade online information.  Viewed at: http ://europa.eu.int/comm/trade/issues/respectrules/ 
anti_dumping/index_en.htm. 
63 DG Trade (2005) and (2006a). Cases concerning several countries are counted as separate 
investigations/proceedings per country involved. 
64 WTO documents G/ADP/N/119/EEC and Add.1; G/ADP/N/126/EEC; G/ADP/N/132/EEC; 
G/ADP/N/1/EEC/2/Suppl.6 and Suppl.7. 
65 Council Regulation No. 1472/2006 of 5 October 2006. WT/TPR/S/177 Trade Policy Review 
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particular, during 2000-04, the average number of initiations of AD investigations per year was 
significantly less (at 23), than during 1995-99, as was the average number of definitive measures (at 18).
66 
Table III.8 
Contingency measures notified by the EC   
a To 30 September 2006. 
Source : WTO Committees on Anti-Dumping Practices, Subsid ies and Countervailing Measures, and Safeguards. 
(c) Countervailing (CV) measures 
45. Countervailing investigations proce dures are similar to those for AD.67  After accession on 
1 May 2004, the new EC Member States' CV measures were replaced by the EC's.  According to 
official data, from 1 January 2004 to 30 Sept ember 2006, the EC initiated two new countervailing 
investigations (on plastic sacks and bags imports from Malaysia and Thailand), and imposed two 
definitive CV measures (on cotton-type bed linens and graphite electrode systems imports from India), both ad valorem  duties.
68 The investigation on plastic sack s and bags from Malaysia and 
Thailand was terminated without imposition of definitive measures. 
46. The EC made five notifications during th e period, including one addendum and one 
corrigendum, to the WTO Committee on Subsidies and Countervailing Measures.69  As at 
September 2006, a total of twelve CV measures were in force, eight on imports from India.  Most of 
the measures were ad valorem, at rates ranging from 0% to 32%, a nd were on chemicals, textiles, 
some electric systems, some steel products, and anti biotics.  Nine CV measures were terminated, all 
due to automatic expiry after the  five-year imposition period.  
47. In October 2004, the EC requested consultati ons concerning alleged U.S. subsidies to its 
national air-transport industries.  The EC considered this type of aid incompatible with the provisions 
of the SCM Agreement, and with Article III:4 of the GATT 1994.  As at mid-2006, the complaint was 
under review by the Dispute Settlement Body. 
                                                      
66 After accession to the EC on 1 May 2005, the ten new Member States' own AD measures lapsed and 
were replaced by existing EC measures. 
67 For further details on the EC's basic legislation on countervailing measures, see WTO (2004). 
68 DG Trade (2005) and (2006a). 
69 WTO documents: G/SCM/N/113/EEC and Add.1; G/SCM/N/122/EEC; G/SCM/N/130/EEC/Corr.1.  Average 
1995-99 2000 2001 2002 2003 2004 2005 2006a 
Anti-Dumping         
   Initiation of investigations 37 31 27 20 7 29 24 24 
   Definitive measures 21 40 12 25 3 9 19 11 
Countervailing         
   Initiation of investigations 6 0 6 3 1 0 2 0 
   Definitive measures 1 11 0 3 2 2 0 0 
Safeguards         
   Initiation of investigations 0 0 0 1 2 1 2 0 
   Definitive measures 0 0 0 1 0 1 1 0 European Communities WT/TPR/S/177 
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(ix) Technical barriers to trade (TBT) 
48. Full harmonization of Standards and technical re gulations in the EC has not been achieved.70  
Products placed on the market of a Member State must comply, where necessary, with relevant 
national and Community-wide legislation; complia nce is established by means of conformity 
assessment procedures.  Product regulations at the Community level are of two main types:  those 
laying down detailed specific technical requirement s (old-approach directives), and those limited to 
the setting up of essential  requirements (new-approach directives) defined to meet health, safety, and 
environmental objectives.  Under the new-approach  directives, the use of "specific standards" 
(harmonized standards) confers presumption of conformity to these essential requirements. The new-
approach directives cover a wider range of products than the old-approach directives.71 
49. Under the new-approach directives, the manufacturer placing a product on the Community 
market assumes responsibility for compliance with Community legislation.  The manufacturer must 
affix the "CE" marking on the product to indicate c onformity with the applicable EC requirements, 
without which the product cannot be placed on the Community market.  The steps a manufacturer must take in order to affix the "CE" marking depends upon the sector.  Conformity assessment of 
industrial products is carried out by bodies d esignated by Member States in accordance with the 
Community procedure for the notification of bodies.  However, for many products, the EC accepts the 
supplier's declaration of conformity of the product to the relevant legislation without any mandatory 
third party intervention.  The harmonized standard s, which confer presumption of conformity, are 
developed by European standardization bodies, i.e. the European Telecommunications Standards 
Institute (ETSI), the European Committee for Electrotechnical Standardization (CENELEC), and the 
European Committee for Standardization (CEN).
72  These bodies have adopted the WTO Code of 
Good Practice for the preparation, adoption and application of standards.   
50. In non-harmonized areas, Member States may legi slate to provide increased transparency, and 
to prevent unjustified restrictions to trade;  th ey are required to notify the European standards 
organizations of draft standards and the Europe an Commission of draft technical regulations.  
Furthermore, the EC applies the principle of mutual  recognition in the internal market.  Hence, goods 
lawfully produced in one cannot be banned from sale on the territory of another, even if produced to 
meet technical or quality specifications different from those applied to locally produced goods, except 
in cases of overriding general interest (such as health , consumer, or environment protection), of which 
the Commission must be notified. 
51. During the period under review, consultations we re undertaken to revise the new approach.  
In particular, the standardization of existing informal requirements in the information and 
communication technology industry is a main issue. During the consultation process, recommendations were put forward:  to continue  making extensive use of EC TBT (harmonized 
regulations);  to improve efficiency, coherence and visibility of European standards, and their 
regulatory framework, including the establishment of institutional mechanisms to finance the 
standardization process;  and to continue to transp ose international standards into the EC framework.  
An Action Plan for European Standardizati on was developed by the Commission in 2005 to 
                                                     
 
70 See WTO (2004).  
71 See WTO (2004). 
72 The CEN and the CENELEC develop European standards in a consensual process with national 
committees (representing the EC Member States, Iceland,  Norway, and Switzerland).  About 85% of the work 
of the European standardization bodies is market-driven, with only 15% consisting of standards mandated by the 
Commission.  A CEN standard is estimated to take an average of eight years for final clearance;  a CENELEC 
standard takes three to four years and an ETSI standard  over two years.  There are plans to reduce these lead 
times. WT/TPR/S/177 Trade Policy Review 
Page 58 
 
 
implement the recommendations.73  The Commission also presented a proposal to regulate financing 
of EC standardization, based on different types of  grants to the European standardization bodies.74 
52. Under the WTO TBT Agreement, EC Member States made 54 notifications in 2004, 68 in 
2005 and 62 in 2006 (up to October 2006) whilst the EC  made 29, 24 and 35 notifications respectively 
(Table III.9).  New regulations were adopted by the EC on civil aviation security, biometric products, 
laboratory blood tests, bananas, and poultry.  All EC  Member States have a national enquiry point for 
TBT requirements on non-harmonized areas.75 
Table III.9 
WTO notifications of technical regulatio ns by the EC and Member States, 1995-06 
n.a. Not applicable. 
a Up to October 2006. 
Source : WTO Secretariat. 
53. The EC has signed no new mutual recognition ag reements (MRAs) since its last TPR.  
However, amendments are being introduced to so me existing MRAs. In other cases, the removal of 
the requirement for third party certification requirement s in the regulations applied by the Parties, for 
example in electro-magnetic compatibility, has re moved the need for an MRA. Once adopted, the 
amendment to MRA with Switzerland will eliminate the need for formal decisions by the EC and 
Switzerland to recognize, change the scope of, or  withdraw recognition of conformity assessment 
bodies in cases where both parties agree.76  Moreover, Protocols to the Europe Agreements on 
                                                      
73 European Commission (2005a). 
74 COM(2005) 377 final. 
75 WTO document G/TBT/ENQ/27 of 17 February 2006. 
76 For details on existing MRAs and their sectoral coverage, see DG Trade Newsletter No. 1, "Mutual 
Recognition Agreements", February 2006.  1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006a 
Austria  0 0 2 1 2 0 0 0 0 0 0 0 
Belgium  17 13 48 49 23 19 26 11 1 0 0 2 
Cyprus  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 0 
Czech Republic  n.a. n.a. n.a. n.a.  n.a. n.a. n.a. n.a. n.a. 8 16 5 
Denmark  28 15 23 40 27 25 7 6 16 2 2 5 
Estonia n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 1 
Finland 4 7 5 5 3 5 3 5 0 2 0 4 
France  1 2 15 20 21 7 9 7 14 5 15 6 
Germany  2 3 3 3 3 0 0 0 0 2 0 0 
Greece  0 0 0 0 0 0 0 0 0 0 0 0 
Hungary  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 1 2 
Ireland  0 0 1 0 0 0 0 0 0 0 0 0 
Italy  0 0 0 0 0 0 0 1 2 3 1 0 
Latvia  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 0 
Lithuania  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1 1 1 
Luxemburg 0 0 1 2 1 0 0 0 0 0 0 0 
Malta  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 0 
Netherlands  33 0 287 91 48 46 40 15 4 7 1 5 
Poland  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 1 
Portugal  0 0 0 0 0 0 0 0 0 0 0 0 
Slovenia  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15 9 12 
Slovakia  n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1 3 0 
Spain  4 7 5 9 9 6 9 12 5 1 0 3 
Sweden 5 30 22 18 9 15 8 17 9 7 19 13 
United Kingdom 0 0 5 2 5 9 1 4 4 0 0 2 
EC 31 46 20 36 34 16 7 17 21 29 24 35 
Total 123 123 437 276 185 148 110 95 76 83 92 97 European Communities WT/TPR/S/177 
 Page 59 
 
 
Conformity Assessment and Acceptance of Industr ial Products (PECA) have been agreed with 
Romania and Bulgaria.77  Technical meetings were held within the framework of agreements on 
conformity assessment and acceptance of industrial pr oducts (ACAAs) with Algeria, Egypt, Israel, 
Jordan, Lebanon, Morocco, the Palestinian Authority, Syria, Tunisia, and Ukraine.  The ACAAs will 
be bilateral between the EC and the partner co untry, and will be limited to specific industrial 
subsectors as appropriate for each partner country;  subsectors under discussion include electrical equipment, machinery, gas appliances, pressure eq uipment, construction products, medical devices, 
measuring instruments, toys, and pharmaceuticals. Preparatory work for the ACAAs is in the early 
stage of development. The EC considers ACAAs/PECAs an important pre-accession tool for 
candidate and potential candidate countries.
78   
(x) Sanitary and phytosani tary (SPS) measures 
54. EC legislation on SPS issues is implemented by Member States in coordination with the 
Commission.  The common SPS regime aims to pr ovide EC exporters with technical support in SPS-
related issues in third countries;  provide technical  assistance to developing countries in institutional 
capacity-building on SPS matters;  comply with WTO rules and rulings;  and maintain EC SPS 
legislation in line with international guidelines.  The EC and its Member States participate in most 
committees and task forces in the Codex Alimen tarius Commission and other international 
organizations in the SPS field (World Organisation for Animal Health, International Plant Protection 
Convention).  An EC-wide Community Animal H ealth Policy was envisaged for 2007;  as at 
October  2006 a review of the policy was still in progress. 
55. During the period under review there was only one minor change to the main legislation on 
food safety.79  An amendment was passed to enlarge the Scie ntific Panel of the European Food Safety 
Authority (EFSA) so as to include experts in va rious areas of plant health, e.g. entomology, 
mycology, virology and bacteriology.80  The EFSA remains the princi pal institution in charge of 
scientific analysis on all SPS matters at EC level.  It focuses on risk assessment, whilst the Commission and Member States ar e responsible for risk management and the operation of food 
control systems.  Risk assessment is carried out by one of the eight scientific panels on:  (i) food 
additives, flavouring, processing aids, and materials in  contact with food;  (ii) additives and products 
or substances used in animal feed;  (iii) plant hea lth, plant protection products and their residues;  (iv) 
genetically modified organism;  (v) dietetic products, nutrition and allergies;  (vi) biological hazards;  
(vii) contaminants in the food chain;  and (viii) animal health and welfare.  
56. Several regulations were enacted to implem ent SPS legislation.  An extension of the 
transitional period to allow for the implementation of collection systems for animal by-products was 
granted to Cyprus until 1 January 2007;  in the me antime, on-site burning of animal by-products is 
permitted.
81  Another transitional measure was enacted to  allow Member States to collect, transport, 
treat, use and dispose of some foodstuffs as long as these do not come into contact with any animal 
by-product;  the measure is to be in pl ace from 1 January 2006 to 31 July 2007.82  The use of organic 
                                                      
77 All relevant conformity assessment procedures and requirements concerning Turkey are contained in 
the Agreement Establishing the Definitive Phase of the Customs Union. 
78 For further details on the EC's TBT regime, see WTO (2004). 
79 The main legislation on food safety is Commission Regulation No. 178/2002 of 28 January 2002.  
For further details, see WTO (2004). 
80 Commission Regulation No. 575/2006 of 7 April 2006. 
81 Commission Decision 2005/62/EC of 27 January 2005. 
82 Commission Regulation No. 197/2006 of 3 February 2006. WT/TPR/S/177 Trade Policy Review 
Page 60 
 
 
fertilizer and soil improvers (other than manure) was regulated to, inter alia , eliminate the possible 
use of animal tissues that might contain transmissible spongiform encephalopathy agents.83  
57. In order to help its exporters, the EC establis hed data base on "trade-d istorting" SPS measures 
in third countries.84  These trade-distorting SPS measures relate to, inter alia , bovine spongiform 
encephalopathy, highly pathogenic avian influen za, certification, foot-and-mouth disease, food 
additives, classical swine fever, and listing of establis hments.  Under Article 7 of the Annex B to the 
WTO SPS Agreement, the EC and its Member States (EC-25) made 107 notifications in 2004, 44 in 
2005 and eleven in 2006 (up to October 2006).  Of these, eight (including addendums) were 
emergency SPS measures (Table III.10). 
Table III.10 
EC's emergency SPS measures 
G/SPS/N/EEC/234 Temporary suspension of imports from Thailand of fresh meat of poultry, ratites, farmed and 
wild feathered game, poultry meat products and me at preparations consisting or containing meat 
of the above mentioned species, of raw material  for pet food production obtained from poultry 
and of eggs for human consumption. 
 29 January 2004 
G/SPS/N/EEC/235 
 Temporary suspension of imports from Cambodia, Indonesia, Japan, Laos, Pakistan, China 
(including Hong Kong), Korea, Thai land, and VietNam of fresh meat  of poultry, ratites, farmed 
and wild feathered game, poultry meat products a nd meat preparations consisting or containing 
meat of the above mentioned species, of ra w material for pet food production obtained from 
poultry and of eggs for human consumption. 
 9 February 2004 
G/SPS/N/EEC/238 Temporary suspension of imports from th e United States of live birds other than poultry 
including those accompanied by their owner, live poultry, ratites, farmed and wild feathered 
game birds and hatching eggs of these species a nd of fresh meat of poultry, ratites, wild and 
farmed feathered game, meat preparations a nd meat products consis ting of, or containing 
meat of those species and of eggs for human consumption in response to an avian influenza 
outbreak in the United States (HS: 0105, 010631 to 010690, 0207, 0407, 0408, 1601, 160220 
to 160239). 
 26 February 2004 
G/SPS/N/EEC/240 Temporary suspension of imports  of live birds other than poultry including those accompanied 
by their owner, live poultry, ratite s, farmed and wild feathered ga me birds and hatching eggs of 
these species and of fresh meat of poultry, ra tites, wild an d farmed feathered game, meat 
preparations and meat products consisting of, or containing meat of those species and of eggs 
for human consumption in response to an avia n influenza outbreak in Canada (HS:  0105, 
010631 to 010690, 0207, 0407, 0408, 1601, 160220 to 160239). 
 24 March 2004 
G/SPS/N/EEC/242 Suspension of imports of jelly mini-cups containing additives E 400, E 401, E 402, E 403, E 
404, E 405, E 406, E 407, E 407a , E 410, E 412, E 413, E 414, E 415, E 417 and/or E 418 (ICS:  
67.220).  These additives present choking hazards. 
 7 April 2004 
G/SPS/N/EEC/255 Suspension of imports of  chemically defined flavouring substances for use in foodstuffs 
(ICS 67.220.20).  These substances do not meet EC technical requirements. 
 16 February 2005 
G/SPS/N/EEC/257 Suspension of  imports of fruits of Capsicum spp.  dried and crushed (CN 090420-90), curry 
powders (CN 091050), curcuma (CN 091030) ICS:   67.220.10 (spices and condiments) and 
palm oil (CN 15111090).  These substances have been found to be carcinogens. 
 30 March 2005 
G/SPS/N/EEC/277 Suspension of imports of chemically defi ned flavouring substances for use in foodstuffs (ICS 
67.220.20, spices and condiments) and foodstuffs  containing them.  These substances do not 
meet EC technical requirements. 13 December 2005 
Source : WTO documents. 
                                                      
83 Commission Regulation No. 181/2006 of 1 February 2006 and 780/2004 of 26 April 2004. 
84 The database is available at: http://mkaccdb.cec.eu .int/sps/index.html.  See WTO (2004), for further 
details on the SPS requirements and procedures for animal products exports. European Communities WT/TPR/S/177 
 Page 61 
 
 
58. Council Directive 2002/99/EC of 16 December 2002 deals with, inter alia , the prevention of 
the spread of transmissible diseases to animals, and veterinarian certification of animal products 
intended for human consumption.  Several regula tions established procedures for the implementation 
of the principal legislation on health concerni ng animal by-products not intended for human 
consumption. Several annexes were amended85, i.e. Annex II, on hygiene requirements for the 
collection and transport of animal by-products ; V, on the general hygiene requirements for the 
processing of animal by-products; VI on specific re quirements for some animal by-products and for 
biogas and composting plants; VIII, on the requireme nts to place pet food, dog chews and technical 
products on the EC market;  and XI, the list of c ountries from which animal by-products, not intended 
for human consumption, may be imported.  In particular, imports of blood products from ungulates 
and other types (except from equidae) from Japan are now allowed as are imports of animal by-
products for pharmaceutical use from Japa n, the Philippines and Chinese Taipei. 
59. The prohibition on certain s ubstances having hormonal action for growth promotion has 
remained into force.86  An amendment was introduced to the legislation on plastic materials and 
articles intended to come into contact with food.87  Certain monomers were added to the Community 
list of permitted substances, as were some a dditives to the list monitored by EFSA after new 
information on their safety was made available.  Also, the specific migration limit was reduced for 
PVC gaskets containing epoxidised soybean oil (ESBO) , which are used to seal glass jars containing 
baby-food.   
60. The restriction on the importation of Brazilian nuts in shells from Brazil has remained in 
place.88  The Commission extended controls on Sudan dyes (Sudan I, II, III, and IV) to include 
imports of curcuma and virgin palm oil, as well as chilli, chilli products, and curries that may 
contained such dyes.89  These dyes are not found naturally in food and have been classified as 
carcinogens by the International Agency for Research on Cancer.90  As a consequence, EFSA and 
Member States have carried out systematic toxicological reviews on dyes since mid 2005.91  Council 
Directive 2005/94/EC sets out preventive and contro l measures relating to the surveillance, early 
detection, and control of avian influenza.  
(xi) Government procurement 
61. Total public procurement within the EC-25 in  2004 represented 16% of its GDP.  The EC 
public procurement regime aims to increase compe tition and transparency, and to create opportunities, 
better quality, and valued services.92  During the period under review three new pieces of legislation 
were enacted which, as at mid 2006, provided the legal basis for public procurement procedures 
within the EC.  Directive No. 2004/18/EC of 31 Ma rch 2004 consolidated, under one directive, the 
previous provisions on public work contracts, public  supply contracts, and public services contracts.  
Directive N° 2004/17/EC of 31 March 2004 establishe d public procurement procedures for specific 
sectors, i.e. water, energy, transport, and post services.   These directives repealed existing legislation.  
                                                      
85 Commission Regulations:  No. 92/2005 of 19 January 2005, 93/2005 of 19 January 2005, 416/2005 
of 11 March 2005, 2067/2005 of 16 December 2005 and 208/ 2006 of 7 February 2006. 
86 See WTO (2004), for a description of EC legislation on the ban of the use of hormones for growth 
promotion purposes. 
87 Commission Directive 2005/79/EC of 18 November 2005. 
88 For a description of these restrictions, see WTO (2004). 
89 DG Health and Consumer Protection, Press release IP/05/385 of 4 April 2005. 
90 Commission document MEX/04/0121, on Midday Express , 21 January 2004. 
91 Commission briefing MEMO/05/154, 11 May 2005. 
92 SIMAP online information. Viewed at: http://simap.eu.int/A/2330efb7-0aab-b34c-
04c0377ccce3f48d_en.html. WT/TPR/S/177 Trade Policy Review 
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Commission Decision No. 2005/15/EC set the rules for the applicability of Article 30 of Directive 
No 2004/17/EC. The main objectives of the new dir ectives were to simplify the legal framework, to 
make it more flexible, and to adapt it to the electronic era. 
62. The new directives introduced the following princi pal changes:  (i) framework agreements (an 
agreement between one or more contracting entities and one or more suppliers, the purpose of which 
is to establish the terms governing contracts to be awarded during a given period of time); (ii) rules 
for selective tendering with negotiations;  (iii) rules for a dynamic purchasing system based on open tendering (a wholly electronic system for commonly used goods/services);  (iv) the possibility to 
reserve contracts to sheltered workshops and busin esses where 50% or more of the labour force are 
disabled persons;  (v) the possibility to have recourse  to central purchasing bodies;  (vi) clarifications 
on the use of social and environmental issues;  (v ii) mandatory exclusion of candidates under certain 
circumstances;  and (viii) the use of electronic auc tions.  The procedures stipulated in the Directives 
are applied when the value of the purchase is at  or above specified thresholds (Table III.11).  
Otherwise, the procedures followed are based on na tional law and principles stipulated in the EC 
Treaty such as non-discrimination, equal treatme nt, transparency, mutual recognition, and 
proportionality. 
Table III.11 
Minimum thresholds, mid 2006a 
(euros) 
n.a. Not applicable. 
a Threshold amounts do not include VAT. 
b Utilities include water, energy, transport,  postal and telecommunications services. 
c Contracts that are subsidized more than 50% by the contrac ting authorities involve either civ il engineering to build hospital s, 
 facilities intended for sports, recreation a nd leisure, school and university buildings, and buildings used for administrative  
 purposes or the services connected to the aforementioned types of projects.  
d Specific sectors refer to telecommunications (CPC Reference No. 752) and research and development. 
Source : Commission Regulation (EC) No. 2083/2005 of 19 D ecember 2005, amending Directives 2004/17/EC and 
 2004/18/EC. 
63. Under the new Directive 2004/18, open and restricted procedures may be used at the 
authorities' discretion, whereas the Directive provide s for an exhaustive list of the cases justifying the 
use of the negotiated procedure with a prior public  notice (for instance, in exceptional cases, when the 
nature of the purchase does not permit prior overall pr icing) and without public notice (such as when, 
for technical or artistic reasons, the contract may be awarded only to a particular operator). 
Competitive dialogue is to be used when the contr act is particularly complex and cannot be awarded 
under the open or selective procedure.  A contract is  deemed to be "particularly complex" where the 
procuring entitites cannot objectively define the tech nical means capable of satisfying their needs or 
are not objectively able to specify the legal and financial make-up of the project.  Contracts for  Supplies Services Works 
Public contracts, other than for utilities    
EC GPA contracting authorities  137,000 137,000 5,278,000 
Other public sector contracting authorities 211,000 211,000 5,278,000 
Contracts subsidized more than 50% by the contracting authorityc n.a. 211,000 5,278,000 
Service designs contests:    
Central government authorities n.a.  137,000 n.a.  
Other authorities n.a.  211,000 n.a.  
Specific sectorsd n.a.  211,000 n.a.  
Utilitiesb    
All Sectors, except service design contests  422,000 422,000 5,278,000 
Service designs contests n.a. 422,000 n.a. European Communities WT/TPR/S/177 
 Page 63 
 
 
utilities may be awarded under open, restricted, or negotiated procedures. Gi ven that, in the utilities 
Directive, procuring entities may choose between open, restricted or negotiated procedure at their own 
discretion, it was not deemed necessary to in troduce more flexibility (and thus a competitive 
dialogue). 
64. The new directives provide for non-discriminato ry treatment to suppliers across the EC and 
that procuring entities act in a transparent manner.   However, to guarantee employment opportunities 
for handicapped workers, Member States may reserve  certain contracts to businesses in which the 
majority of employees are handicapped. Public procurement contracts must be awarded either on the basis of the lowest price or the economically most  advantageous tender.  Procuring entitites shall 
inform candidates and tenderers as soon as possible of  decisions relating to the award of a contract, 
and, upon request, shall provide the reasons for thei r decisions (rejection of tenders, non-admittance to 
a dynamic system or rejection of a framework agreem ent);  this information must be provided within 
15 days from receipt of the written request. 
65. For utility markets, i.e. water, energy (including  exploration), transport, and postal services, 
which can be verified to be competitive (with ope n entry), procurement contracts may be exempted 
from the procedure set out in Directive 2004/17.
93 Exposure to competition is assessed on the basis of 
objective criteria, taking account of the specifi c characteristics of the sector concerned.94 Furthermore, 
the new Directives provide for the exclusion of sever al types of contract from their scope for various 
reasons, such as defence, security, provision or ex ploitation of public telecommunication networks, 
provision of utilities by joint-ventures formed by procuring entities but not entirely subsidized by 
them, the acquisition or rental of land or other immovable property, arbitration and conciliation, 
employment, research and development where results accrue exclusively to the procuring entity, and 
services supplied under exclusive rights.95   
66. Specific measures to enhance competition in pr ocurement were also introduced, e.g. online 
auction bidding (e-auctions).  This type of auction can be used at the authorities' discretion if all 
aspects of the contract can be fully specified.  Al so, a completely electronic system of purchases of 
"commonly used" goods and services, called Dynamic Purchasing System, may be set up following 
open procedure rules.  These measures are expected to increase the level of competition and 
efficiency in public procurement across the EC.   
67. During the period under review, there were no changes to the provisions on procedures to 
appeal a purchasing authority's decision and damage award payments.96  The EC is a signatory to the 
WTO Government Procurement Agreement (GPA):   all EC Members States provide national 
treatment for goods or suppliers from the GPA signatory countries. During the period under review, the EC made one notification to the Committee on Government Procuremen t concerning its new 
thresholds.
97  In the framework of the ongoing review of  the WTO GPA, the EC plays an active role;  
it has tabled several submissions on the text to  the GPA Committee, as well as an initial offer.  
68. According to Eurostat data , procurement advertised in the Official Journal , represented 
between 2.5% and 3.6% of GDP between 2001 and 2004 (Table III.12), 16.1% of total procurement in 
the EC-25 (€ 287.7 billion approximately).  
                                                      
93 Directive 2004/17/EC, Article 30. 
94 Commission Decision 2005/15/EC. 
95 Directive 2004/17/EC, Articles 18-22, and Directive 2004/18/EC, Articles 10-16, 57 and 68. 
96 Council Directives 92/13/EEC and 89/665/EEC of 25 February 1992 and 21 December 1989 
respectively.  For further details, see WTO (2004). 
 97 WTO Document GPA/W/295/Add.5, 30 January 2006.  WT/TPR/S/177 Trade Policy Review 
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Table III.12 
Open procurement indicators, 2002-2004 
 Value of procurement published in the OJ as a 
percentage of gross domestic product  Value of procurement published in the OJ as a 
percentage of total public procurement  
 2002 2003 2004 2002 2003 2004 
Belgium 2.40 2.65 2.54 15.49 16.84 16.10 
Czech Republic n/a n/a 0.37 n/a n/a 1.43 
Denmark 2.74 2.36 2.73 15.07 12.82 16.61 
Germany 1.28 1.84 1.17 7.34 10.61 7.49 
Estonia n/a n/a 2.86 n/a n/a 21.65 
Greece 5.76 4.97 4. 13 39.79 35.25 36.43 
Spain 3.04 3.59 2.99 22.83 26.71 21.61 
France 3.16 3.80 2.78 20.49 23.76 16.15 
Ireland 2.39 2.40 3.34 18.54 19.00 27.77 
Italy 2.25 2.74 2.36 19.55 22.40 16.25 
Cyprus n/a n/a 1.28 n/a n/a 10.39 
Latvia n/a n/a 1.77 n/a n/a 10.80 
Lithuania n/a n/a 2.28 n/a n/a 18.95 
Luxembourg 2.02 2.23 3.33 13.04 14.22 18.51 
Hungary n/a n/a 1.29 n/a n/a 6.50 
Malta  n/a n/a 0.32 n/a n/a 1.64 
Netherlands 1.90 1.80 1.76 8.55 7.94 7.47 
Austria 2.50 2.65 3.27 15.70 16.49 19.74 
Poland n/a n/a 2.58 n/a n/a 16.18 
Portugal 2.59 2.47 2.52 19.85 18.66 16.69 
Slovenia n/a n/a 1.66 n/a n/a 9.19 
Slovakia  n/a n/a 2.79 n/a n/a 11.12 
Finland 2.28 2.58 2.95 14.03 15.15 17.38 
Sweden 3.92 3.70 3.40 20.10 19.10 18.89 
United Kingdom 3.89 7.44 4.70 22.61 40.52 25.29 
Total 2.64 3.58 2.68 16.59 21.88 16.11 
Source : Eurostat (2006). Public procuremen t advertised in the Official Journal .  Viewed at:  epp.eurostat.cec.eu.int. 
69. During 2004-05, the Commission handled 49 cases of infringement of the public procurement 
regime at EC level, up from 39 cases in 2002-03.98    
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration and documentation 
70. During the period under review, registration procedures and documentation for exports from 
the EC changed in accordance with its stricter secu rity-related policy.  All exports, except those put 
under the outward processing or transit procedures, must undergo specified procedures.99  E C  
Regulation No. 648/2005 of 13 April 2005 establishe d, amongst other things, that exporters are 
required to submit pre-departure information to Cust oms offices for risk analysis.  This information 
may be submitted electronically or at the border offi ce.  Export procedures are to be facilitated for 
reliable traders, i.e. authorized economic Op erators (AEO) (for further details on AEA see 
section (2)(i) above).  The proposed Customs Code streamlines export procedures, including security-
related declarations.  Moreover, the EC's e-Cu stoms initiative to implement a paperless customs 
                                                      
98 SIMAP onlinle information.  Viewed at: http://europa.eu.int/comm/internal_market/public 
procurement/infringements_en.htm. 
99 CC Article 161.  For further details on expor t registration and documents, see WTO (2004). European Communities WT/TPR/S/177 
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environment, includes the Automated Export Syst em project to implement inter-operability, and 
electronic exchange of export-related informati on between Member States (see also section (2)(i)).100 
71. Agreements with the United States estab lished further documentation procedures for EC 
exports to the United States in particular, under th e Container Security Initiative.  Also, the World 
Customs Organization established a new general frame work for security-related customs procedures 
in 2005.101 The elements set out in that framework have  been incorporated in the CC and should be 
fully implemented between 2007 and 2009.  
(ii) Export taxes, charges and levies 
72. The EC does not apply taxes, charges or levies on exports (mid 2006). 
(iii) Export prohibitions, restrictions, and licensing  
73. During the period under review, there was no ch ange to the EC's export regime, including 
export restrictions, except for the entry into fo rce of a new regulation controlling the import and 
export of certain equipment that could be used fo r capital punishment, torture or other cruel, inhuman 
or degrading treatment or punishment.102  Under existing regulations, exports are not subject to any 
quantitative restrictions.  However, Member Stat es may impose export restrictions, including export 
authorizations, on a temporary basis.  Exports restrictions may not be imposed on agricultural 
products covered by common organizations of market s or processed agricultural products covered by 
regulations within the framework of Article 308 of  the EC Treaty.  Exports restrictions may be 
imposed by the Council, upon recommendation by  the Commission based upon a request from a 
Member State. General rules for export of cultu ral goods from the Community are laid down in 
Council Regulation No. 3911/92.  
74. The EC continued to impose prohibitions on ar ms exports within the scope of the Common 
Foreign and Security Policy (CFSP), which supplemen t the arms export licensing schemes applied by 
its Member States.  Since its last TPR, the EC has adopted and amended several arms embargoes to implement UN Security Council Resolutions con cerning e.g. Democratic Republic of Congo, 
Côte-d'Ivoire, Lebanon, and Sudan.
103 The embargoes cover the sale of arms, ammunition, military 
vehicles and equipment, paramilitary equipment, a nd spare parts. In the framework of the CFSP, 
restrictions can also be imposed on  exports of goods other than arms and related materiel, in particular 
internal repression equipment.  The UN arms emba rgoes are supplemented by other similar measures 
applied by the EC as regards Burma-Myanmar, Uzbe kistan, and Zimbabwe.  On the other hand, the 
EC lifted its arms embargoes against Libya in  October 2004 and Bosnia and Herzegovina in 
January 2006. The EC also starte d consultations on the possibility of lifting its arms embargo against 
China.   
                                                      
100 EC (2004).   
101 WCO (2005). 
102 Council Regulation (EC) No. 1236/2005. For further description of the main EC legislation on 
export restrictions, see WTO (2004). 
103 The following EC documents establish the arms sale prohibitions (as at October 2006): Common 
Position (CP) 1998/409/CFSP, CP 2002/402/CFSP; CP 2002/ 960/CFSP, CP 2003/495/CFSP, 
CP 2004/161/CFSP CP 2005/440/CF SP, CP 2005/411/CFSP CP 2005 /792/CFSP, CP  2006/30/CFSP, 
CP 2006/31/CFSP, CP 2006/318/CFSP, CP 2006/625/CFSP.  The following Re gulations ban exports of internal 
repression equipment: Regulation (EC) No. 314/2004, Regulation (EC) No. 174/2005, Regulation (EC) No. 817/2006, Regulation (EC) No. 1859/2005.   WT/TPR/S/177 Trade Policy Review 
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75. There was no major change to the legislati on governing dual-use items and technology during 
the period under review.104  The Commission adopted a regulation to update Annexes I and IV of 
Regulation (EC) No. 1334/2000 (list of exports, a nd intra-EC transfers, of dual-use items and 
technology) to accommodate international treaties signed by Member States.105  
76. As at April 2006, the EC maintained expor t licences under the common market organization 
as well as under tariff-quota commitments with trad ing partners. An overvie w of products requiring 
export licences is provided in the EC's online customs tariff database (Taric).106  
(iv) Export subsidies 
77. The EC provides export subsidies based on the provisions laid down in the individual 
common market organization for the product in questi on.  For milk and milk products, for example, 
these are laid down in Council Regulation (EC) No . 1255/1999 of 17 May 1999.  Export refunds are 
granted through the management committee for the product concerned. 
78. During the period under review, the following produc ts received export subsidies:  wheat and 
wheat flour, coarse grains, rice, sugar, butter and butter oil, skim milk powder, cheese, other milk 
products, beef meat, pig meat, poultry meat, eggs , wine, fruits and vegetables (fresh), fruit and 
vegetables (processed), alcohol, and "incorporated pr oducts" (Chapter IV (2)(ii)).  With the exception 
of those for coarse grains and sugar, they are mo stly direct export subsidies.  In value, export 
subsidies notified by the EC represent approximate ly 90% of all the WTO Members' notified export 
subsidies.  The Commission indicates that the overall level of export subsidies granted by the EC is 
likely to fall, due to market reforms and the declin ing number of products eligible for such subsidies. 
79. According to the Commission, the EC conti nues to base its position on the 2004 Framework 
Agreement and the Ministerial Decl aration adopted in Hong-Kong, Ch ina, in December 2005, which 
stipulates that WTO Members agree to ensure the pa rallel elimination of all forms of export subsidies 
and disciplines on all export measures with equivalent effect by the end of 2013. 
(v) Export assistance 
80. During the period under review, there were no ch anges to EC rules on assistance in the form 
of publicly provided export credits, insurance or guarantees.107  All export assistance is provided at the 
Member State level, and is based on texts and prin ciples elaborated mainly within the framework of 
the OECD.  The EC has been a party to the OECD  arrangement on guidelines for officially supported 
export credits since 1978.  The EC undertook consultations with Brazil (along with other OECD members) with a view to establishing an understanding on export credit for civil aircraft. 
                                                     
 
104 For further description of the legislation on dual-use goods and technologies, see WTO (2004). 
105 The new list of items under control since 11 Apr il 2006 can be found in the Council Regulation 
No. (EC) 394/2006 published in Official Journal  L 74, dated 13 March 2006.  An updated list of national 
measures implemented in conformity with EC Regulation 1334/2000 has been published in the Official Journal  
C 270, dated 29 October 2005. 
106 Taric online information.  Viewed at: http://ec.europa.eu/taxation_customs/common/databases/ 
taric/index_en.htm. 
107 See WTO (2004), for a description of EC rules on export assistance. European Communities WT/TPR/S/177 
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(vi) State-trading enterprises  
81. During the period under review, the EC notified the WTO that no state-trading enterprises in 
the meaning of GATT Article XVII existed in the EC.108 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) State-owned enterprises 
82. State-owned enterprises (SOEs) abound throughout the EC and participate in various 
activities (Table AIII.2).  Many of these SOEs are activ ely engaged in trade, including in energy and 
utilities.  In general, their portfolios of operations  vary along with the degree of public ownership and 
the level of the public institutions that own them, i.e. states, municipalities, other SOEs,  EC rules 
regarding companies do not make any distinction ba sed on ownership structure.  As established by 
Article 86 of the EC Treaty, the competition ru les and the prohibition of discrimination on the 
grounds of nationality apply full y to state-owned enterprises.  
83. No EC regulations provide guidelines for activiti es carried out by EC SOEs, apart from those 
normally established for any business.  There are no legal community restrictions on SOEs' activities, 
apart from those common to all firms.   
84. According to an OECD study, the privatization of EC SOEs produced mixed results as most 
have not achieved the level of competitiveness initially envisioned.109  Some of the issues mentioned 
were:  government influence on the internal decisions  of the partly privatized SOEs, and in some 
cases, internal decisions remaini ng highly sensitive to political pr essures;  the business culture of 
many SOEs remaining civil-service oriented;  a lack of a clear distinction between the roles of the 
State as regulator and as owner of a competing business;  and the loss of government guarantees in 
favour of SOEs – this loss has made private investme nt in those companies more risky, thus raising 
the cost of capital.  These factors have contributed  to the under-performance of many partly privatized 
SOEs, in terms of profit margins, returns on equi ty and on investment, compared with competing 
private enterprises.  
(ii) Competition policy and regulatory issues  
85. During the period under review, there were no majo r changes to the legal basis with regard to 
the main areas of competition policy in the EC, i. e. anti-trust issues, mergers, monopolies and state 
aide.  The fundamental principles in competition law ar e stipulated in Articles 4, 16, 36, 73, and 81-89 
of the EU Treaty.  Pursuant to Article 4 of th e Treaty, EC Member States are required to adopt 
economic policies "in accordance with the principle of an open market economy with free 
competition".  In general, competition policy in the EC seeks to enforce regulations on 
anticompetitive practices, enhance competitiveness throughout the EC, and address anticompetitive problems in liberalized sectors.  In particular, enforcement is focused on eliminating cartels and 
abuses of dominant position.  Efforts are being made  to enforce regulations on mergers that have 
cross-border implications, and to rectify decisions that lead to incompatible state-aid as well as its 
reimbursement. 
                                                     
 
108 G/STR/N/8/EEC; G/STR/N/9/ EEC; G/STR/N/10/EEC; G/STR/N/11 /EEC, of 11 October 2006. 
109 OECD (2005b).  A survey conducted by the OECD on mostly EC SOEs concluded that governance 
within the SOEs was not entirely transp arent.  The questionnaire upon which this survey was based was sent to 
countries in the European Economic Area and Canada (OECD, 2005d). WT/TPR/S/177 Trade Policy Review 
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(a) Anti-trust 
86. EC basic anti-trust legislation remains unchanged.110  The Treaty prohibits anti-competitive 
agreements between undertakings that ma y affect trade between Member States111, except for those 
exempted as being beneficial on balance to economic efficiency and consumer interest.112  T h e  
exemption applies automatically to any agreement sa tisfying the relevant criteria;  therefore, the 
Commission no longer grants individual exemption decisions.  The Commission can also grant block 
exemptions, based on Article 81(3) of the Treaty.  
87. The Commission has revised its rules on access to files by parties involved in anti-trust cases 
(and mergers).113  The revision clarifies both the extent and ex ercise of the right to access such files.  
In 2005, the Commission began a review of Article  82 of the EC Treaty (abuse of dominant position 
in the market) and its exclusionary effects, i. e. anti-competitive behaviour that tends to drive 
competitors out of the market.  To this end, it published a discussion paper on  exclusionary abuses in 
December 2005.114  The paper deals with the general framework for analysis of exclusionary abuses, 
and proposes an approach for five main categories of abuse, i.e. predation, single branding, rebates, 
tying and bundling, and refusal to supply; it proposes to move to an economic-effects-based approach.  
The review process expected to conclude with  the issuing of guidelines in 2007 or 2008. 
88. The Commission has initiated an in-depth inquiry , expected to conclude early 2007, into the 
electricity and gas markets due to possible restrictions or distortions to competition.115  S e v e r a l  
outstanding issues were found, including high levels of  market concentration, vertical foreclosure, 
lack of market integration at EC level, lack of  transparency, and non-competitive prices (e.g. price 
distortions though regulated tariffs set at rela tively low levels).  Initiatives are currently under 
consideration to address these concerns (October 2006) through, inter alia , competition advocacy 
(need for further regulation, including structural adjustments) and enforcement of EC competition law 
both at the EC and national levels.116  The Commission also initiated a review to examine the level of 
competition in retail banking (includi ng its payment networks) and in insurance services;  the enquiry 
conclusions were expected by end 2006.117   
89. The enforcement of anti-trust regulations is carried out by the Competition DG in 
coordination with national authorities.  In fact, Article 15 of Council Regul ation N° 1/2003 requires 
national competition authorities to transmit inform ation and submit copies of judgements to the 
                                                      
110 Anti-trust legislation is governed by the EC Treaty and Council Regulation No. 1/2003 of 
16 December 2002, as amended by Council Re gulation No. 411/2004 of 26 February 2004. 
111 No definition of these undertakin gs is provided by the Treaty;  however, the term is understood to 
encompass a wide range of legal forms, including companies, partnerships, cooperatives, nationalized industries, and other kinds of public corporations, and individuals engaged in the production and distribution of goods and 
services. 
112 Article 81(1) of the Treaty prohibits agreements tha t: (i) directly or indirectly fix purchase or selling 
prices or any other trading conditions;  (ii) limit or control production, markets, technical developments, or 
investment;  (iii) share markets or sources of supply;  (i v) apply dissimilar conditions to equivalent transactions 
with other trading partners;  and (v) make the conclusion of contracts subj ect to the acceptance by other parties, 
for further obligations unrelated to the subject of the contract.  Article 82 prohibits, as incompatible with the 
common market, the abuse of a dominant position, without exception. 
113 Commission Notice 2005/C 325/07 of 22 December 2005. 
114 DG Competition (2005). Further information on the Article 82 review is available on: DG 
Competition online information.  Viewed at:  http:// ec.europa.eu/comm/competiti on/antitrust/others/article_82_ 
review.html. 
115 DG Competition (2006a). 
116 DG Competition (2006c).   
117 DG Competition, Press release IP/05/719 of 13 June 2005. European Communities WT/TPR/S/177 
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Commission;  the information is available online.   Moreover, the network of competition authorities 
liaises on anti-trust surveillance with the Competition DG. 
90. Since October 2005, new rules have been applied to the motor vehicle industry, as location 
clauses, contained in vertical agreements between  manufacturers and car dealers, no longer benefit 
from the block exemption under Regulation 1400/2002.   The clauses, which had limited dealers from 
opening outlets, even within the EC, were intende d to provide an adjustment period after the new 
rules came into force in 2002.118  In a separate case, a €49.5 million fine was imposed on Peugeot for 
obstructing exports of new cars from the Netherla nds to other EC Member States during 1997-03.119   
91. A Regulation on a new block exemption for air transport was adopted by the Commission on 
2 October 2006.120  The regulation phases out previous exemptions for consultations on slot 
allocations and on passenger tariffs for intra-EC f lights with a sunset period until 31 December 2006.  
Consultations on passenger tariffs for flights betw een the EC and third countries benefit from an 
exemption subject to a reporting requirement.  In maritime transport, the block exemption allowing 
liner shipping companies to enter into consortiu m agreements covering the regular and scheduled 
transport of cargo, chiefly by container, to or fro m one or more EC ports has been prolonged until 
25 April 2010.121  This exemption covers joint services of lin er shipping consortia with a market share 
below 35%.  Exempted activities include:  fixing timetable or ports of call, the exchange, sale or cross-chartering of space or slots, pooling vessels,  use of joint operation officers, provision of 
containers, use of computerized data, temporar y capacity adjustments, use of port terminals, 
participation in cargo, revenue or  net revenue pools, and joint mark eting and related activities. The 
block exemption for liner shipping conferences has been repealed on routes to and from the EC.  By 
October 2008, after a two-year transitional peri od, liner shipping conferences will have to be 
abolished on these routes.  The scope of the comp etition enforcement rules, Regulation 1/2003, has 
been extended to tramp shipping.
122  
92. As part of the Lisbon Agenda, the review of  institutional constraints (within the EC) has 
continued on professional services, i.e. lawyers, notaries, architects, engineers, pharmacists, and 
accountants.  The review found that national regu lations and/or conventions were allowing some 
forms of anti-competitive practice in the exercise of  these professions, i.e. price fixing, restrictive 
advertising regulations, high entr y requirements, and reserved rights and regulations constraining 
governing business structure and multi-disciplinary pr actices.  Moreover, the review found progress in 
some EC Member States towards eliminating disp roportionate restrictions to competition, although 
much work needs to be done to reduce the eff ects of anti-competitive practices in the Community.123 
93. Open consultations were launched on a polic y document aimed at identifying the main 
obstacles to a more efficient system of damages clai ms by individuals or companies that suffer losses 
due to infringement of EC anti-trust laws.124 The policy document also set out different options and 
possible actions to improve such damages actions, which had been found to in "total 
underdevelopment";  obstacles such as access to ev idence and quantification of damages had been 
                                                      
118 DG Competition, Press release IP/05/1208 of 30 September 2005. 
119 DG Competition, Press release IP/05/1227 of 5 October 2005. 
120 Regulation 1459/2006, OJ L272 of 3.10.2006 p.3. 
121 Commission Regulation No. 611/2005 of 20 April 2005;  Press release IP/05/477 of 25 April 2005. 
122 IP/06/1249 of 25/9/2006. 
123 COM (2005) 405 final. 
124 DG Competition, Press release IP/05/1634 of  20 December 2005 and COM(2005) 672 final. WT/TPR/S/177 Trade Policy Review 
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highlighted.125  The consultations were completed in sp ring 2006, and the results were published on 
the Commission's website. 126 
94. The total number of anti-trust cases decreas ed from 262 in 2003 to 158 in 2004 and 105 in 
2005.127  The number of cases initiated by the Commission decreased from 97 in 2003 to 58 in 2004 
and 39 in 2005; and the number of cases clos ed increased from 319 in 2003 to 391 in 2004, to 
decrease to 244 in 2005.  Five decisions were taken by the Commission against unlawful horizontal 
agreements in 2005, with €683 million imposed in fines.   
(b) Mergers 
95. The EC's regulation on merger control seeks to  avoid a situation in which competition is 
significantly impeded, in particular by the creation or strengthening of a dominant position, as a result 
of mergers and acquisitions.128  Under the Merger Regulation, the Commission assesses proposed 
concentrations on the basis of whether a dominant pos ition is created or strengthe ned.  In general, the 
Commission only examines mergers with a Communit y dimension, i.e. mergers that would create 
business with a worldwide turnover of €5 billion and a Community-wide turnover of €250 million.  
Such mergers must be notified to the Commission be fore they are put into effect.  Most cases are 
approved within the initial scrutiny period of 25 days. 
96. The guidelines established by the EC for horizonta l mergers did not change during the period 
under review.129  The specifications for the determination of the relevant market for purposes of 
merger regulations also remained unchanged.  Specific guidelines on vertical mergers are under 
consideration.   During the period under review, the Commi ssion published three notices to clarify and 
specify issues related to EC merger regulations.130  These dealt with the rationale for referral of some 
merger deals for Commission scrutiny, and the cl auses related and necessary to concentration in 
merger deals, particularly on intellectual property  rights, as well as simplified procedures in cases not 
suspected of competition concerns. 
97. The number of mergers notified to the Commission increased from 212 in 2003 to 249 in 
2004 and 313 in 2005.131  The Commission took 246 final decisions in 2004 and 308 in 2005;  of 
these, 7 cases in 2004 and 5 in 2005 required in-depth  investigations.  Ten tr ansactions were approved 
in 2004 and six in 2005, with only one block in 2004. 
                                                      
125 COM(2005) 672 final. 
126 European Commission online information.  Viewed at: http://ec.europa.eu/comm/competition/ 
antitrust/others/actions_for_damages/gp_contributions.html. 
127 Competition DG (2006b).   
128 The main regulation governing merger control in the EC is Council Regulation No. 4064/89, 
21 December 1989.  It was revised by Council Regula tion No. 139/2004 of 20 Janu ary 2004, implemented by 
Commission Regulation No. 802/2004 of 7 April 2004.  For further details, see WTO (2004). 
129 For a description of the horizontal guidelines, see WTO (2004).  The guidelines were published in 
Official Journal, OJ C 31/5 of 5 February 2004. 
130 Commission Notices 2005/C 56/02, 2005/C 56/03 and 2005/C 56/04, all of 5 March 2005. 
131 DG Competition online information. View ed at: http://europa.eu.int/comm/competition/ 
mergers/cases/. European Communities WT/TPR/S/177 
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(c) State aid 
98. In 2006, the EC adopted new guidelines on regional aid provided by its Member States 
(national regional aid).132  The new 2007-13 guidelines cover aid such  as direct investment grants and 
tax reduction for companies.  State aid under th ese new guidelines covers four areas:  geographic 
areas with below the EC average GDP per capita (27.7% of the EC population)133, "statistical-effect" 
regions (3.6% of total EC population), economic  development and low population density areas 
(4.0%), and other areas to which additional discre tionary funding is allocated under Article 87(3)(c) 
of the EC Treaty (6.7% of the EC population).  Th e guidelines include a safety provision to ensure 
that no EC Member State loses more than 50% of its previous entitlement.  State aid to areas with 
below the EC average GDP per capita varies between  regions where average GDP per capita is less 
than 75% of the EC average, and regions where it is less than 45% of the EC average. In general, EC 
policy aims to assist Member States in better ta rgeting state aid so that it is conducive to the 
objectives of the Lisbon Agenda.  
99. New guidelines were also adopted to provide help to companies in financial difficulty.134  The 
new guidelines clarify how state aid supports a r escue and restructuring operation in favour of 
individual firms.  In particular, the guidelines estab lish new minimum thresholds of financial burden 
the companies themselves must b ear:  50% for large companies, 40% for medium-size undertakings 
and 25% for small enterprises.  The guidelines establis h an across-the-board ten year limit for such 
aid.  Moreover, the Commission enacted two other regulations.135  The first establishes transparency 
requirements concerning the financial relations  between Member States and public business, and 
specifies the public undertakings required to mainta in separate accounts from those of the State.  The 
second regulation sets procedures for granting state ai d in the form of public service compensation for 
businesses providing services of general economic interest.   
100. Block exemption regulations currently appl y to state aid to small and medium-size 
enterprises, for training and for employment.136  In mid 2006, the Commission was considering an 
extension of notification exemption to 2013 for de minimis  state aid totalling €150,000.  This aid 
would apply to all sectors, except road transport,  primary agricultural production and fisheries. 
101. In 2005, the latest year for which data are available, there were around 764 registered cases 
relating to state aid;  84 of these were initiated by the Commission.  There were 21 cases found to be incompatible with the internal market prin ciples.  In 2004, around €62 billion were granted 
throughout the EC in state aid (excluding aid to  railways), representing about 0.6% of EC GDP.
137  In 
2004, state aid (excluding aid to railways) varied widely between Member St ates, from 0.4% of GDP 
or less in Belgium, the Czech Republic, Estonia, Greece, Latvia, Luxemburg, the Netherlands and the 
United Kingdom, to 1.5% or more in Cyprus, Malta, Poland, and Finland (Table III.13).  In terms of 
state aid granted (excluding aid to agriculture, fisheri es, and transport), Estonia, Lithuania, and Latvia 
accounted for the lowest levels (0.09%, 0.13% a nd 0.16% of GDP respectively), and Malta, Cyprus, 
                                                      
132 The guidelines cover regional aid for investment, operations (in exceptional circumstances) and 
creation of new small enterprises (Commission Notice 2006/C 54/08, published in the Official Journal , OJ 
C 54/13 of 4 March 2006).  For further details on the previous guidelines, see WTO (2004). 
133 Statistical-effect regions are those with less th an 75% of the EC-15 average GDP per capita but 
more than 75% of the EC-25 GDP per capita.   
134 Commission Notice 2004/ C 244/02, Published in the Official Journal , OJ C 244/2 of 
1 October 2004. 
135 Commission Directive No. 2005/81/EC of 28 November 2005 and Commission 
Decision 2005/842/EC of 28 November 2005. 
136 See WTO (2004), for further details on block exemptions. 
137 COM (2005) 624 final of 9 December 2005,  State Aid Scoreboard  – Autumn 2005 update . WT/TPR/S/177 Trade Policy Review 
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and Poland for the highest (2.71%. 1.06% and 1.01 %).  Germany granted the highest amount of aid 
(€17 billion), followed by France (€9 billion) and Ital y (€7 billion).  Sector-wise, around 65% of state 
aid was channelled to manufacturing activities a nd various service subsectors, some 24% to 
agriculture and fisheries, 9% to coal, and 2% to tr ansport (Table III.13).  There are wide differences in 
sectoral allocation of state-aid across Member States.  For example, in Estonia and Lithuania 24% and 
16% of their state-aid was granted to manufacturi ng (respectively), and 76% and 81% to agriculture; 
in Italy and the United Kingdom sectoral allocation was almost exactly the opposite. 
Table III.13 
State aid in the EC, 2004 
Country Total aid as % of national 
GDP % of total aid by sectora Total aid  
 Excluding 
railways Excluding 
agriculture, 
fisheries and 
transport M S A F C T OM (€ million)  
Austria  0.61 0.22 32 4 63 0 0 0 0 1.427 
Belgium  0.34 0.24 65 4 26 0 0 2 2 972 
Cyprus  1.48 1.06 35 24 29 0 0 0 12 184 
Czech Rep.  0.41 0.19 37 5 47 6 4 0 0 352 
Denmark  0.71 0.52 71 2 20 1 0 6 0 1.375 
Estonia  0.39 0.09 24 0 76 0 0 0 0 35 
Finland 1.66 0.38 22 1 74 0 0 3 0 2.483 
France  0.54 0.39 54 7 26 1 10 2 0 8.915 
Germany  0.78 0.69 66 4 12 0 18 0 0 17.236 
Greece  0.29 0.20 66 3 28 2 0 0 1 473 
Hungary  1.26 0.87 63 1 31 0 5 0 0 1.015 
Ireland  0.65 0.27 33 8 58 0 0 0 0 951 
Italy  0.52 0.40 72 5 16 2 0 6 0 7.037 
Latvia  0.39 0.16 25 15 60 0 0 0 0 44 
Lithuania  0.68 0.13 16 0 81 1 0 0 3 122 
Luxemburg 0.31 0.17 48 8 45 0 0 0 0 78 
Malta  3.10 2.71 87 0 13 0 0 0 0 134 
Netherlands  0.39 0.18 47 0 45 0 0 8 0 1.813 
Poland  1.47 1.01 51 0 31 0 17 0 1 2.873 
Portugal  1.09 0.83 13 61 24 1 0 0 2 1.475 
Slovenia  0.96 0.53 46 1 45 0 6 0 2 250 
Slovakia  0.64 0.63 98 0 2 0 0 0 0 212 
Sweden 0.99 0.80 75 4 12 0 0 7 2 2.745 
United Kingdom 0.32 0.25 71 0 18 2 1 2 6 5.442 
           
EC-25 0.60 0.44 59 5 23 1 9 2 1 61.617 
EC-15 0.57 0.43 59 5 22 1 9 2 1 56.410 
10 new M.S. 1.09 0.70 53 2 33 0 11 0 1 5.207 
a M:  manufacturing;   S:  services (including tourism, finan ce, media and cultural services); A:   agriculture;  F:  fisheries;   C: coal; 
T:  transport, excluding railways;  and OM:  other non-manufacturing. 
Note: Due to rounding of figures, the percentages of total aid by sector do not generally add up to 100. 
Source : COM (2005) 624 final,  State Aid Scoreboard ;  and calculations by the WTO Secretariat. 
102. In 2004, around half of EC Member States awarded more than 90% of their state aid for 
non-sector specific objectives.  Excluding allocations to agriculture, fisheries and transport, around 
76% of EC state aid (€34.6 billion) was aimed at horizontal objectives (an increase of 7% over the 
2000-02 period).  The four main objectives were envir onment and energy savings (25% of total aid), 
regional economic development (18%), research and development (12%) and medium and small 
enterprises (12%).  During 2002-04, grants were the main instrument of state aid to the manufacturing 
and services sectors (47.9% of total state aid), foll owed by tax exemptions (32.4%);  guarantees 
accounted for 10.3%, soft loans repr esented 5%, tax deferrals 3.1%, a nd equity participation 1.3%.  European Communities WT/TPR/S/177 
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More than 800 measures were covered by block exemp tions relating to state aid to medium and small 
enterprises, employment, and training.   
103. Transitional periods for new Member States are still in place.138  During 2002-04, Bulgaria 
and Romania, both set to accede to the EC in January 2007, awarded annual state aid of around 
€65 million (0.36% of GDP), and around €9 81 million (1.35% of GDP) respectively.139   Moreover, 
an extension was granted until 31 March 2005 for the pr ovision of temporary state aid of up to 6% of 
the contract value for the construction of liquefied  natural gas ship-carriers on the grounds of alleged 
unfair competition from Korean shipyards.140 
(iii) Intellectual property rights 
104. There was no major change to EC intellectual property legislation during the period under 
review.141  The intellectual property rights (IPR) regime in the EC is governed by both Community-
wide legislation and legislation in the Member Stat es,  Member States' legi slation takes into account 
Community legislation, and commitments under in ternational agreements, including the European 
Patent Convention. World Intellectual Property Or ganization (WIPO) conventions and treaties, and 
the WTO TRIPS Agreement.  Intellectual property legislation is considered fundamental to the 
achievement of the Lisbon objectives.  
(a) Industrial property 
Trade marks and industrial designs 
105. The accession of the EC to the Madrid Protocol  took effect on 1 October 2004.  Trade mark 
owners from Member countries of the Madrid Prot ocol are able to designate the EC in their 
application for international trade mark registrati on. If not refused by the Office for Harmonization in 
the Internal Market (OHIM), protection is effectiv e in all 25 EC Member States as if it had been 
applied for or registered directly with OHIM.  The owners may also use a trade mark application filed 
or registered at OHIM as the basis for an inte rnational application under the Madrid Protocol.142  The 
Commission also enacted a Regulation to amend rules for the implementation of existing EC trade-mark legislation.
143  This amendment introduced procedural changes and addressed, inter alia ,  
the division of applications and of registrations  of trade marks, the revocation of decisions, the 
improvement and clarification of the opposition procedure, and the specific nature and means of the 
electronic submission procedure. 
106. The Commission put forward a proposal to amend Council Regulations Nos. 6/2002 and 
40/94 to give effect to the EC's accession to th e Geneva Act of the Hague Agreement concerning the 
international registration of industrial designs.144  The Commission presented another proposal to 
amend Directive 98/71/EC on legal protection of designs.145  This proposal prohibits legal protection 
of designs for component parts of a complex product used  to restore an original appearance.  In effect, 
it is intended to harmonize the internal market th rough full liberalization of the market for spare 
                                                      
138 For further details on the transitional arrangements see WTO (2004). 
139 COM (2006) 130 final of 27 March 2006,  State Aid Scorecard - Spring 2006 update . 
140 Council regulation No. 502/2004 of 11 March 2004, amending Council Regulation No. 1177/2002 
of 27 June 2002. 
141 See WTO (2004), for further details on EC legislation on IPRs.   
142 For further details on the EC's accession to the Madrid Protocol, see WTO (2004). 
143 Commission Regulation No. 1041/2005 of 29 June 2005. 
144 COM (2005) 689 final of 22 December 2005. 
145 COM (2004) 582 final of 19 September 2004. WT/TPR/S/177 Trade Policy Review 
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parts.146  The European Economic and Social Comm ittee (EESC) published an opinion reinforcing the 
aforementioned view and stated that to do otherwise would lead to a de facto  product monopoly on 
the secondary market.147  The EESC also stated that the proposal for legislation would benefit from a 
clearer demonstration of its compatibility with the WTO TRIPS Agreement.   
107. Application fees payable to the Office for the Ha rmonization in the Internal Market (OHIM) 
for trade mark protection have been lowered148;  the fee for Community tr ade mark (CTM) protection 
was lowered from €970 to €900, whilst the CTM registration fee was reduced from €1,100 to €850.  The CTM renewal fee was reduced from €2,500 to €1, 500;  a special discount of €150 may be granted 
if the process is done electronically.  These reductions were possible as the OHIM increased 
productivity and efficiency by streamlining pr ocedures, reducing bureaucracy, implementing an 
austere financial management plan, cooperating with  Member States' intellectual property authorities, 
and introducing new information technology.
149 
108. During 2002-05, total trade mark applications registered with the OHIM increased at an 
annual average rate of 9%, with designs incr easing significantly after 2003 (Table III.14).   
Table III.14 
Statistics on trade marks and designs, 2000-06 
.. Not available. 
a Up to 31 March 2006. 
Source : Office for Harmonization of the Internal Market online information. Viewed at http://oami.eu.int/en/office/stats. 
 htm. 
Patents 
109. Procedures for filing patents can  be carried out at the national and international levels.150  
Within the Community, 7.2% of patents filed were estimated to be worth more than €10 million, and 
16.8% a value higher than €3 million.  About 68% of  the patents yield less than €1 million, and 8% 
less than €30,000.151  The Commission launched a review of its  patent policy, as part of a general 
effort to harmonize the internal market, by focusi ng on three main issues:  possible introduction of a 
Community patent, improvements to the current syst em, and the determination of possible areas for 
harmonization.152  Further to a comprehensive consultati on exercise launched on 16 January 2006, a 
public hearing on the contemplated reforms was held on 12 July 2006.   More than 2,500 submissions 
were received;   the results  of both the consultation and the hearing will be reflected in an action plan 
likely to be adopted by the end of 2006. 
                                                      
146 COM (2004) 582 final, pp. 10. 
147 Official Journal 2005/ C 286/03 of 17 November 2005. 
148 Commission Regulation Nº 1687/2005 of 14 October 2005. 
149 Commission, Press Release IP/05/1289 of 17 October 2005. 
150 See WTO (2004), for a description of  the procedures at these levels. 
151 DG Internal Market (2005). 
152 Commission, Press Release IP/06/38 of 16 January 2006.  2000 2001 2002 2003 2004 2005 2006a 
T r a d e  m a r k s         
   Applications 57,377 48,903 45,218 57,666 58,862 58,666 16,706 
   Registered trade marks 34,752 38,528 35,883 34,302 34,432 59,725 17,997 
   Opposition to trade marks 11,500 12,879 9,802 9, 939 10,721 17,311 3,462 
   Cancelled and surrendered 53 93 104 145 142 150 84 
D e s i g n s         
   Single applications .. .. .. 4,998 6,884 8,382 1,573 
   Multiple applications .. .. .. 5,470 7,187 8,425 1,632 European Communities WT/TPR/S/177 
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110. The proposal for a single EC patent was orig inally presented in 2000 and a common political 
approach was reached in 2003.153  Disagreement over translation requirements and jurisdictional 
issues has so far prevented final agreement on th e introduction of the EC patent. Another pending 
issue was the reform of the European Patent Conventi on, to which the EC is not party, while all of its 
Member States are.  Some of these Member States have been engaged in the establishment of a 
European Patent Litigation Agreemen t (EPLA);  three issues need to be addressed before they become 
party to such an Agreement:  the text of the Agr eement would have to be brought into line with EC 
legislation, the relationship with the EC Court of Justice would have to be clarified, and a mandate 
would have to be granted by the Council to the Commission to take part in the ongoing negotiations 
(with a possible view of EC accession to the EPLA).154  EC legislation covers some of the areas under 
consideration in the ongoing EPLA negotiations, e. g. Council Regulation No. 44/2001 on recognition 
and enforcement of judgements, and Directive No. 2004/48/EC on enforcement of intellectual 
property rights through civil procedures. 
111. In 2005, a proposal for legislation concerni ng the patentability of computer-implemented 
inventions failed.155  The proposal aimed to harmonize the pr ovisions of national patent law dealing 
with inventions that rely on computers for their performance.  
112. Regulation No. 816/2006 on compulsory licensing of patents relating to the manufacture of 
pharmaceutical products for export to countries with public health problems was adopted on 
27 May 2006. With this Regulation, the EC has created a legal basis for the granting of compulsory licences for export purposes, as foreseen by the WTO General Council Decisions of 30 August 2003 
and 6 December 2005.
156  
113. According to information compiled by the Trilate ral website of the European Patent Office 
(EPO). the Japanese Patent Office, and the Unite d States Patent and Trade Mark Office, the 
proportion of patents by bloc of origin remain ed stable during 2003-04 (Table III.15);  the EPO 
received 116,791 patent applications  in 2003 and 123,706 in 2004.  First-time applicants to the EPO 
originating in European Patent Convention Member States (as opposed to applic ants that first applied 
for patent protection at national level) represented around 24% of all direct patent applications to 
EPO.  A large share of the applications related to electricity- and physics- based technologies (around 
39% of all patent applications).   
Table III.15 
Patent applications at the European Pa tent Office by bloc of origin, 1998-04 
(Per cent) 
Year EPO States Japan United States Others 
1998 50 17 29 4 
1999 50 16 28 5 
2000 49 17 28 5 
2001 49 18 28 6 
2002 50 15 28 6 
2003 50 16 27 7 
2004 50 17 26 8 
Source : The Trilateral Offices online information.  View ed at: www.trilateral.net. 
                                                      
153 See WTO (2004), for further details. 
154 European Commission (2006f). 
155 Common Position (EC) No. 20/2005 of 7 March 2005. 
156 European Commission, Press Release IP/06/550 of 28 April 2006. WT/TPR/S/177 Trade Policy Review 
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114. The Community Plant Variety Office received 2,517 applications in 2003, 2,656 in 2004 and 
2,733 in 2005, as well as 1,701, 1,867 and 2,178 titles resp ectively;  most of th e applications and titles 
corresponded to ornamental varie ties (around 65% of all appli cations and 63% of all titles).157   
115. In 2005, the Commission adopted a report on pa tents related to gene sequence and on the 
patentability of inventions concerning stem cells.158  The Commission has not taken a position on 
Member States' interpretations on the preferable ty pe of protection for gene sequence, nor has it taken 
a definitive position on the patentability of embryoni c pluripotent stem cells (those capable of 
becoming other cells, excluding human beings);  the report concludes that (as at 2005), further 
harmonization in this area could not be provided.  On the other hand, totipotent stem cells (those 
capable of evolving into a human being), are excluded from any consideration on moral grounds. 
(b) Geographical indications 
116. Council Regulation No. 510/2006 of 20 March 2006 repealed Council Regulation N° 2081/92 
on the protection of geographical indications and desi gnations of origin for agricultural products and 
foodstuffs, as a consequence of a Panel Report by the Dispute Settlement Body (DSB) on the 
protection of trade marks and geographical indicators by the EC.159  The new legislation, i.e. Council 
Regulation No. 510/2006, addressed the following issues:   (i) clarification and simplification of the 
registration procedure  (ii) a better definition of responsibilities between Member States and the 
Commission;  (iii) the need to clarify that the provisions under Council Regulation No. 2081/92 on 
equivalence and reciprocity did not apply to GIs corresponding to geographical areas located in other 
WTO Members;  (iv) opening registration directly to producer groups in third countries and not 
through their national administration; and (v) cl arifying the procedures concerning amendments to 
specifications, objections, or cancellation in the event of failure to respect specifications.160 
117. The EC maintains a shortlist of regional quality products .  However, the list has not been 
updated since 2004;  and thus, does not yet contai n geographical indications from the new Member 
States. 
(c) Copyright and related rights 
118. In 2005, the Commission made a recommendati on on collective cross-border management of 
copyright and related rights for legitimate online music services.161  The recommendation brought 
forward two options that could foster EC-wide licensing of digital music and an invitation to 
strengthen national legislation for the manageme nt of legitimate online services, as well as the 
relationship between collective rights managers, on  the one hand, and right holders or commercial 
users, on the other hand.  It also provided gene ral guidelines for dispute settlement, accountability, 
and distribution of royalties. 
                                                      
157 CPVO online information.  View ed at:  http://www.cpvo.eu.int/. 
158 Commission Press release IP/05/960 of 18 July 2005. 
159 See WTO (2004), for a detailed description of the EC legislation on the protection of geographical 
designation of origin and indications.  The DSB report on the EC's protection of trade marks and geographical indications followed complaints lodged by the United States and Australia (WT/DS174 and WT/DS290).  The 
DSB report was adopted on 20 April 2005. 
160 COM(2005) 698 final/2.  Brussels. 
161 Commission Recommendation 2005/737/EC of 18 May 2005. European Communities WT/TPR/S/177 
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(d) Enforcement 
119. Commission Regulation No. 1891/2004 of 21  October 2004 lays down provisions to 
implement Council Regulation No. 1383/2003, which c oncerns IPR enforcement at the EC's external 
borders.  It established, amongst ot her things, definitions of who may represent holders of a right, as 
well as proof of ownership of an IPR;  it also set  time limits and procedures for the exchange of 
information between Member States and the Commission.162  On 26 April 2006, the Commission  
adopted a proposal for a directive of the European  Parliament and the Council on criminal measures 
aimed at ensuring IPR enforcement.  The proposed measures are aimed at establishing more effective 
alignment of criminal law, and improving Euro pean cooperation.  The Council and European 
Parliament have started the discussion of such a proposal.163 
120. According to data from the Commission, tr ade in counterfeited and pirated goods has 
increased significantly since 2003.164  The number of articles seized in 2004 totalled 103.5 million, an 
increase of 12% with respect to 2003 and almost 1,000%  with respect to 1998.  At 22,311, the number 
of procedures in 2004 were more than double those of 2003.  In 2004, most intercepted goods were of 
mass-production type, e.g. 41.6 million cigarettes,  18.5 million audio CDs, games, software, DVDs, 
etc., and 18.1 million toys and game s.  In 2004, most IPR infringements concerned trade marks (74% 
of all cases) and copyrights and related rights (14%);  a large share of the articles seized came from the People's Republic of China (54% of all artic les).  The total value of the seized goods was 
estimated at over a €1 billion. 
121. Directive 2004/48/EC on IPR enforcement was adopted on 29 April 2004;  it had to be 
transposed by Member States by 29 April 2006.  The directive, based on "good practice" found in 
Member States laws, brought national legislation on san ctions and remedies closer into line across the 
EC.  Member States were also required to appoi nt national correspondents to  cooperate with other 
Member States and the Commission.  Enforcement in the new Member States also produced significant results.  For example, during the firs t quarter of 2004, approximately 300,000 face and 
body lotions were seized in Hungary, 10,000 car pa rts in Malta, 400,000 batteries in Lithuania, and 
Estonia intercepted eleven shipping vessels full of c ounterfeit clothes.  According to official data, in 
2004, most of the counterfeited and pirated articles in the new Member States were seized in Hungary, Slovenia, and the Czech Republic. 
122. The significant increase in counterfeited and pirated articles confiscated at the EC borders 
since 2003 prompted the Commission to adopt a short-term plan.
165  This includes:  the creation of a 
business-Customs working group to consider possi ble further EC counterfeiting regulations;  the 
creation of a task force of Member State experts to improve anti-counterfeiting controls;  the creation 
of a new electronic system of secure real-time data transmission;  the promotion of further memoranda of understandings with tr ade representatives (e.g. airlines)  in order to improve exchange 
of information;  and the promotion of an amendm ent to the WTO TRIPS Agreement with a view to 
motivating exporting countries to apply anti-counterfeiting measures.    
123. In November 2004, the Commission adopted a stra tegy to improve IPR enforcement in third 
countries.
166  The strategy proposed the identification of priority countries and the implementation of 
measures such as technical assistance, awareness rais ing, and political dialogue.  The EC is also 
                                                      
162 This is Council Regulation 1383/2003 concerning customs action against goods suspected of 
infringing certain intellectual property rights and the measures to be taken against goods found to have infringed 
such rights (OJ L 328 , 30/10/2004 pp. 0016 – 0049). 
163 COM(2006) 168 final of 26.04.2006. 
164 Taxation and Customs Union online information.  Viewed at http://europa.eu.int/comm/taxation_ 
customs/customs/customs_controls/counterfeit_piracy/index_en.htm. 
165 Commission Press release IP/05/1247 and MEMO/05/364 both of 11 October 2005. 
166 Commission Press release IP/04/1352 of 10 November 2004. WT/TPR/S/177 Trade Policy Review 
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reviewing the IPR chapter of its bilateral agre ements to address enforcement concerns, and has 
appointed IPR experts in the EC delegations in va rious third countries.  In 2005, it launched a survey 
covering IPR enforcement in some 40 countries;  the results of the survey were announced in 
October 2006.167 
                                                      
167 The survey was viewed at:  http://ec.europa.e u/trade/issues/sectoral/intell_property/survey2006_ 
en.htm.