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III. TRADE POLICIES AND PRACTICES BYMEASURE
(1) Overview
1. Asnoted inChapter II,thelasttwoyears havegenerally confirmed theEuropean Union 'sslow
butsteady movement towards amore liberal trade regime, under thecombined effects ofWTO
implementation intheareas oftariff reductions, andtheelimination ofquotas andVERs, including
intextiles andclothing; newmultilateral agreements (theITA,andthatontelecommunications services)
andinternal reform through theSingle Market programme. Inareas suchastelecommunications and
financial services, theSingle Market process andmultilateral liberalization have proved mutually
supporting, withsignificant market access improvements forexternal suppliers. Ontheother hand,
inthepresence ofinternational obligations thelackofimplementation ofSingle Market Directives
mayhaveadverse consequences onthird-country enterprises inareassuchasgovernment procurement.
Moves toharmonize standards andtechnical requirements intheSingle Market havebeenmirrored
attheinternational levelbytheconclusion ofmutual recognition agreements withtheEU'smaintrading
partners. While fearsthatliberalization would result insubstantial growth intheuseoftraderemedies
havenotbeenrealized, therehasbeensome increase inthenumber ofanti-dumping measures inforce
since thelastTPR, although thenumber ofinitiations hasapparently diminished.
2. Asborder protection hasbeengradually reduced, internal obstacles totrade, more efficient
resource allocation andgreater competitiveness havebecome more apparent. Government assistance
toEUeconomies hasremained sizeable; theopening ofpublic procurement markets hashadlimited
effect onexternal suppliers (asagainst "foreign" firms withsubsidiaries incorporated intheEU); and
despite gradual liberalization, thesurvival ofmonopoly orduopoly structures incertain service markets
havepreserved highcosts foruserindustries andconsumers (Chapter IV(1)). Many ofthese issues
are,however being addressed through anactive competition policy (Section (4)(i)).
3. Pressure forfurther economic andtrade reform islikely tobesustained withtheintroduction
ofthesingle currency. Bymaking pricedifferences among Member States more apparent, thisshould
increase Single Market transparency, andmight helptoremove remaining intra-EU trade barriers
(Chapter I(2)(iii)). Budgetary limits intheEMU context mayalsoconstrain stateaid.Theprospects
offurtherEUenlargementmayincreasepressureonthe"unreformed"agriculturalmarket.Furthermore,
international negotiations ornewagreements insectors suchasfinancial services maycreate increasing
external pressure forfurther liberalization andderegulation.
(2) Measures Directly Affecting Imports
(i) Tariffs andother trade-related charges
(a) Average tariffs
4. Toimplement itsUruguay Round commitments, theEUhasapplied eachyear, on1January
forindustrial products and1Julyforagricultural products, thescheduled reductions initsconventional
(i.e.applied m.f.n.) rates. In1997, theEU'ssimple average m.f.n. tariff across allproducts stood
at10.0percent(Table AIII.1).1Thesimple average rateforindustrial products (HS25-97) hasfallen
1This average reflects both tariffs expressed inadvalorem terms and-particularly inagriculture and
food-processing-theadvaloremequivalentssuppliedtotheSecretariatbytheEuropeanCommission(Footnote2).European Union WT/TPR/S/30
Page 45
from6percentin1995to4.9percentin1997. Reflecting thetariffication ofprevious variable levies
andimportrestrictionsundertheWTOAgreement,agriculturaltariffsshowconsiderablyhigheraverages;
theoverall simple average m.f.n. tariffforagricultural products (HS1-24) wasestimated at20.8percent
in1997, down from 25percentin1995.2Asaresult oftheUruguay Round, allEUagricultural
tariffs arebound, against twothirds previously. Sectoral aspects ofagricultural andindustrial tariffs
arediscussed inChapter IV(2) and(3).
5. Tariff cutsonindustrial products under theWTO Agreement arebeing applied relatively evenly
overtheapplication period, withsome exceptions. Deeper reductions areextended forsome areas
ofchemicals, textile fibres, scientific instruments, andindustrial electronics; tariff elimination has
alreadybeenachievedinsomeareasofpaperproducts,pharmaceuticals,medicalequipment,construction
equipment, agricultural equpiment, furniture, andsteel, andfurther tariffelimination istobeachieved
onproducts covered bytheITA(Chapter II).TheCommunities 'unweighted average tariffonindustrial
products, which wasscheduled todecline to3.7percentin2000 asaresult oftheUruguay Round,
willbereduced tounder 3percentasaresult oftheITA. Peaks aregradually being eroded by
successive cuts,butseveral "sensitive" products intextiles andclothing (knitted fabrics, men'sand
women 'sclothing, andfootwear), consumer electronics (TVreceivers) andmotor vehicles (passenger
cars, trucks, andpublic transportation equipment) continue tobesubject toratesequal toorabove
10percent,reflecting lesser Uruguay Round commitments. Attheendoftheimplementation period,
products inthese areas willcontinue tobenefit from higher thanaverage protection.
(b) Tariff escalation
6. TheEU'stariffstructure hastraditionally displayed significant escalation, favouring domestic
processors inareas suchasfish,foodproducts, tobacco, textiles, leather, paper, andmetals.3The
Uruguay Round results provide forthegradual reduction ofescalation byapplying proportionally higher
tariff cutstothehighest tariffs (essentially, tariffs onfullyprocessed products). By2000, escalation
bystage ofprocessing willhavedisappeared inpaper, andironandsteel, butwillremain intextiles,
clothing, leather, rubber, andagricultural andfoodproducts (Chart III.1).
2Sectoral tariff averages varywiththedefinition used. Thedefinitions usedinthisparagraph (HS1-24 for
agricultural products, 25-97 forindustrial products), while conventional, donotcorrespond precisely tothose
for"agricultural" andother products negotiated intheUruguay Round. TheWTO Agreement onAgriculture
excludes fishandfishproducts (HSchapters 3andpartof16)andincludes initscoverage items regarded as
"agricultural" from HSchapters 29,33,35,38,41,43,50,51,52and53(Annex IoftheAgreement). The
breakdown oftariffs byInternational Standard Industrial Classification categories, contained inTable AIII.1,
attempts toclarify thedistinction between theagriculture/processed food, beverage andtobacco sectors (ISIC
1and31)andother manufactures.
3Tariff escalation estimates calculated forthisreport, asforprevious TPRreports, arebased onm.f.n tariffs
andtherefore donottakeintoaccount EUpreferential agreements. Ifincorporated inthecalculations, theywould
reinforce theescalation effects asthebenefits ofthese agreements (notably GSP) concentrate more oninputs
thanonprocessed products, inparticular insensitive areas.WT/TPR/S/30
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European Union WT/TPR/S/30
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(c) EUenlargement
7. In1995, theEUintroduced anewtariff schedule (Schedule CXL replacing Schedule LXXX)
following theaccession ofAustria, Finland andSweden. Theschedule incorporates thechanges related
totheadoption oftheEUexternal tariffbytheacceding Members andcompensations granted toWTO
Members under GATT Article XXIV(6) fordeterioration inaccess conditions (fordetails see
Chapter II(3)).
(d) Information Technology Agreement4
8. ApartfromtheimplementationoftheresultsoftheUruguayRound,theITA,signedinSingapore
inDecember 1996, isthemain source ofchange intheEUtariff structure since the1995 TPR. It
covers sixmain categories ofproducts: computers (including printers, scanners, monitors, hard-disk
drives, etc.); semiconductors; semiconductor manufacturing equipment; software (e.g., CD-ROMs
anddiskettes); scientific instruments andtelecommunications equipment. TheAgreement provides
forthestaging oftariffreductions infourequal rate-reductions of25percenteachandwillaffect about
400EUtariff lines. Asaresult oftheEU-United States agreement inlate1996, EUtariffs on
semiconductors willbeeliminated more rapidly, witha50percentreduction on1July1997, anda
further 25percenton1January 1998andagain on1January 1999.5TheEUiscurrently considering
afurther acceleration oftheliberalization schedule formany ofthese products.
9. While thetariff incidence oftheITAwillbesignificant fortelecommunications equipment
(with applied tariffs averaging 7.5percentin1997 andfinalbound rates around 4percent) and
semiconductors, itsimpact oncomputers, scientific andmeasurement equipment willbemuch lower.
Final bound ratesonmany products inthese categories already carried zerorates.6Theconclusion
oftheITAwaslinked ontheEUsidetothesignature ofaMemorandum ofUnderstanding withthe
United States concerning theabolition onanm.f.n. basis ofcustoms duties oncertain spirits, liquors
andalcoholic beverages.7
10. TheITAislikely toresult inasignificant reduction andconsolidation oftariff suspensions
granted bytheCommunity toEU-based processing andmanufacturing companies.8Micro-electronics
products, andsemiconductors inparticular, havetraditionally accounted forahighshare ofthetotal
(1,300-1,400) tariff suspensions granted eachyearbytheCommunity inthefield ofindustrial,
4Formally known asthe"Ministerial Declaration onTrade inInformation Technology Products".
5About 35percentoftotalimports ofsemiconductors already enter theCommunity dutyfreeasaresult
ofthenumerous tariff suspensions granted inthisfieldandofcompensations provided under Article XXIV(6)
attheaccession ofthethree newMember States.
6TheCommission evaluates thelossofdutyrevenue directly related totheimplementation oftheITAat
approximately ECU 3billion in1997 (information provided bytheCommission inthecontext ofthisreview).
7Intheminutes oftheGeneral Affairs Council of24March 1997, theCommission andtheCouncil declared
thattheprovisions oftheMoU onspirits, liquors andother alcoholic beverages "will innowaymodify theaccess
conditions ontotheCommunity market reserved forexporters ofrumfrom ACP countries intheframework
oftheLomé Convention" (Europe, 24/25 March 1997).
8Under Article 28oftheTreaty ofRome, theCouncil maygrant tariff suspensions byaqualified majority.
Requests maybelodged by,oronbehalf of,anyEU-based processing andmanufacturing company.WT/TPR/S/30
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agricultural andfisheries sectors.9Total trade under suspension amounted toECU 12.5billion and
represented adutyrevenue lossofECU 1.2billion in1995.
(ii) Customs cooperation
11. In1996, theCouncil adopted the"Customs 2000" programme aimed atmodernizing customs
administration overtheperiod 1996-200010;theprogramme isalsointended toincrease theefficiency
ofchecks attheCommunity 'sexternal borders. Itprovides, interalia,forthedevelopment ofimproved
working methods (riskanalysis, audit techniques), agreater useofcomputerization andsimplified
procedures, thedevelopment andextension oftraining programmes, andenhanced means tofightfraud.
Externally, theEUandtheUnited States signed inMay1997, acustoms cooperation agreement, in
theframework oftheTransatlantic Dialogue, which willsimplify customs procedures andpromote
efforts tocombat commercial fraud between thetwopartners (Chapter II(5)(vi)). Asimilar agreement
withtheRepublic ofKorea entered intoforce inMay1997, andanother wasconcluded withCanada
inFebruary 1997. Anagreement establishing greater cooperation between thecustoms authorities
ofFinland, Sweden andNorway wasapproved bytheCouncil inMarch 1997. TheCouncil also
endorsed agreements between theCommunity andtheUnited States onthecontrol oftradeinchemical
precursors frequently usedintheillicit manufacture ofdrugs andpsychotropic substances.
12. TheEUisworkingcloselywithEuropeAgreementcountriesontheiraccessiontothe"Common
Transit" and"theSingle Administrative Document" Conventions. Poland, theCzech andSlovak
Republics, andHungary became contracting parties tothese conventions on1July1996. TheEU
isproviding technical assistance toTurkey, Romania, Bulgaria, Slovenia andthethree Baltic States
tofacilitate theiraccession inthenearfuture.11
(iii) Quantitative restrictions, trade controls andsurveillance measures
13. Asdescribed intheSecretariat report forthelastTrade Policy Review, under theSingle Market
process quantitative restrictions maintained byEUMember States havebeenphased outor,inafew
cases, converted intoCommunity-wide quotas. Themain cases of"communitization" were canned
sardines andtuna,bananas, the"carconsensus" withJapan (Chapter IV(3)(ii)(c)), andcertain restrictions
onconsumer products from China andsteelproducts from former Soviet Union countries.
14. These EU-wide restrictions haveeither beenabolished orare,forthemost part,scheduled
tolapsearound theturnofthecentury, either asaresult oftheWTO Agreements (automobile products
andother products notified asgrey-area measures, andtextiles andclothing), orunder bilateral
arrangements (steel products from Russia). Progress hasbeenrecorded since theprevious Review,
withtheremoval ofmost grey-area measures, except forcars, andtheintegration intoGATT 1994
ofasecond listoftextiles andclothing products. Allremaining restrictions affecting textiles andclothing
products originating inCEECs willbeabolished on1January 1998 (Chapter II).Restrictions are
9Chemical andelectronics products accounted for92percentofalltariff suspensions granted in1995.
10European Parliament andCouncil Decision No.210/97/CE of19December 1996 (OJNo.L33of
4February 1997, p.24).
11TheSingleAdministrativeDocumentwasintroducedinPoland,theCzech andSlovakRepublics,andHungary
on1July1996 forimport, export andtransit operations. Inaddition, under thecommon transit procedure, these
countries apply andhave access tothesimplified border controls andprocedures forwhich permission ismade
intheConvention.European Union WT/TPR/S/30
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graduallybeingeasedonECSCimportsofsteelfromRussia,UkraineandKazakhstan,theonlycountries
stillcovered bybilateral quota arrangements. Details onspecific products concerned arelisted below.12
(a) Agriculture andfishery products
15. Community quotas onimports ofcanned sardines andtunawereabolished, asscheduled, on
31December 1996. Thequotas hadbeennotified totheWTO asgrey-area measures andeliminated
inconformity withtheWTO Agreement onSafeguards (section (v)(c) below).13
16. Asnoted intheSecretariat report fortheprevious Trade Policy Review, national restrictions
onimports ofbananas werereplaced on1July1993bytheCommon Market Organization forBananas
(Chapter IV(1)). Since theabolition ofborder checks within theCommunity in1993, thepossibility
ofapplying provisions ofArticle 115oftheECTreaty (under which, after authorization ofthe
Commission, Member States could restrict intra-EU tradeinthird-country products) nolonger exists.
(b) Consumer goods
17. Under theWTO Agreement onTextiles andClothing, theEUiscommitted tophasing out
allquantitative restrictions maintained under bilateral arrangements by2005. On31January 1997,
asrequired, theCommission submitted totheWTO itssecond listofproducts forintegration under
theAgreement. Ofthe23categories ofproducts integrated, 12aresubject toquotas vis-à-vis WTO
Members (Chapter IV(3)(ii)(a)). Following thatintegration, about onethirdoftheEU's1990import
volume would havebeenintegrated intotheGATT.
18. Attheendof1995, theEUandtheCEECs reviewed theEurope Agreements Protocols on
textiles andclothing. Asaresult ofthereview, thequota levels ofproducts under restraint were
increased andseveral categories oftextile products werecompletely liberalized. Allrestrictions affecting
products originating inBulgaria, theCzech andSlovak Republics, Hungary, Poland andRomania are
toberemoved by1January 1998.
19. Most agreements ontradeintextiles andclothing products between theEUandthirdcountries
notmembers oftheWTO were reviewed in1995 or1996. Negotiations resulted inquota increases
andfurther product liberalization forcountries subject toquantitative restrictions (Russia, Belarus,
Ukraine, Uzbekistan, China andVietNam).14Pending theconclusion ofanewbilateral arrangement
withtheRussian Federation (theprevious oneexpired on31December 1996), theEUestablished a
transitory autonomous regime forimports oftextiles andclothing products from thatcountry.15
According totheCommission, theonlynewquantitative restrictions introduced bytheCommunity
sincetheprevious Trade Policy Review arethose imposed on1April 1996onproducts fromtheFederal
Republic ofYugoslavia.
12This overview onlycovers restrictions other thanthose imposed onenvironmental, security andhealth
protection grounds.
13WTO documents G/SG/N/2/EEC andG/SG/N/3/EEC, 24March 1995.
14According totheCommission, increases inquotas orproduct liberalization granted bytheCommunity to
third countries depend onsimilar improvement ofmarket access inthese countries.
15Agreater degree ofliberalization hasbeen incorporated inthetransitory regime, ascompared withthe
former bilateral agreement.WT/TPR/S/30
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20. In1994 theCommunity established quotas affecting various consumer products fromChina,
including footwear, gloves, glassware, tableware ofporcelain orceramic, car-radios andthree types
oftoys. Since then,quotas havebeeneither gradually relaxed orcompletely removed. From 1January
1998, theonlyremaining quotas willbethose applying tofullyassembled toys, certain ceramic and
porcelain tableware andsome leather-upper shoes.
(c) Basemetals andmetal products
21. Attheendof1995theCommunity dismantled allremaining tariffquotas onsteelimports from
theCzech andSlovak Republics. Thetariffquota regime wasreplaced in1996byadouble-surveillance
system, which wasrenewed for1997.
22. Theonlycountries subject toquantitative restrictions insteelproducts areRussia, Ukraine
andKazakhstan. When theformer system ofautonomous Community quotas forex-Soviet Union
countries expired attheendof1994, theCommunity concluded bilateral ECSC steelagreements with
Russia andUkraine for1995 and1996, comprising quantitative limitations coupled withadouble-
checking system. Imports from allother FSUcountries were liberalized. Onthisoccasion, quotas
wereincreased by50percentrelative tothose countries 'share ofthepriorautonomous quotas. These
agreements havebeenextended until1997, pending theconclusion ofnewagreements (Table III.1).16
Newagreements withRussia andtheUkraine wereconcluded in1997, containing acommitment by
theEUtoopen itsmarket fully by2001 provided thatRussia andtheUkraine develop "normal
competitive conditions" concerning competition policy, stateaidandenvironmental protection.17
Table III.1
Quantitative restrictions onsteelimports from CISrepublics, 1993-96
(Tonnes)
EU-wide
autonomous quotasNegotiated agreements withprincipal suppliers
Russia Ukraine
1993 1994 1995 1996 1997
1sthalf1995 1996 1997
1sthalf
Flat-rolled products 218,995 225,566
Coils 140,200 144,404 152,163 604,988 115,492 35,385 40,693 26,857
Coils forre-rolling 283,800 -
Heavy plate 49,099 50,570 36,455 41,923 27,669 34,551 79,734 52,624
Other flatproducts 29,699 30,592 22,343 25,695 16,959 10,642 12,238 8,077
Long products 102,335 105,406
Beams 10,000 10,293 12,854 16,782 11,076 5,738 7,599 5,015
Wire rods 10,233 10,540 15,219 29,502 19,471 5,885 12,767 8,426
Other longproducts 82,102 84,565 63,652 84,950 56,067 48,632 58,927 38,892
Total 321,333 330,972
Source: European Commission.
16Theagreement withtheUkraine, entered intoforce on1July1997. Negotiations onthenewECSC steel
agreement withRussia were completed inApril 1997, buttheagreement isscheduled toenter intoforce on
1October 1997.
17Under theAgreement, EUquotas onRussian steelwillberaised formost products by10percentin1997
toatotalof841,224 tonnes, byafurther 5percentin1998 and2.5percenteachyearuntiltheendof2001.European Union WT/TPR/S/30
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(iv) Trade sanctions andembargoes
23. TheEUimplements anumber oftradeembargoes based onthedecisions oftheSecurity Council
oftheUnited Nations. Thecurrent status ofthese isasfollows:
- Anembargo isapplied against Iraqonthebasis ofResolutions 660,661,666,670
and687. TheUNSecurity Council recently decided toallow theexchange oflimited
amounts ofpetroleum andrelated products byIraqagainst exports toIraqofcertain
products (essentially medicines, foodstuff andsupplies forhumanitarian purposes) and
theEUhaseased itsapplication oftheembargo incompliance withthisdecision.
(Council Regulation 2465/96 of17December 1996).
- Thelimited embargoes areapplied against Libya onequipment fortheaircraft and
theoilandgasindustries (Council Regulations 3274/93 and3275/93), andagainst
UNITA inAngola onthesupply andsaleofpetroleum (Council Regulation 2967/93).
These measures haveremained unchanged since theprevious Trade Policy Review.
- Therestrictions imposed oneconomic andfinancial relations withtheFederal Republic
ofYugoslavia (Serbia andMontenegro), theUnited Nations Protected Areas inthe
Republic ofCroatia andthose areas oftheRepublic ofBosnia andHerzegovina under
thecontrol ofBosnian Serb forces were lifted byCouncil Regulation 2382/96 of
9December 1996.18
- TheEUhasalsoimposed embargoes ontheexport ofarms, munitions andmilitary
equipment toAfghanistan (1996), Burundi (1996), Liberia (1995) andRwanda (1995).
(v) Trade defence instruments
24. TheCommunity tradedefence system wasreorganized in1994when newregulations foranti-
dumping, countervailing, andsafeguards measures were introduced toincorporate theprovisions of
therelevant WTO Agreements. There havebeennosubstantial changes totheseregulations sincetheir
entry intoforce in1995.19TheTrade Barriers Regulation of1994, which establishes aninternal
procedure forcomplaints against trade measures inother countries, remains unchanged.
25. Theuseofcontingency measures hasstabilized inrecent years, inparticular between 1992
andmid-1996. Thisprocess benefited from thecombination ofnewdisciplines andtheelimination
ofcertain measures under WTO Agreements, more favourable cyclical conditions, andtheexistence
ofaneffective WTO dispute settlement process. Fears thatthegradual dismantling ofVERs would
translate intoasharp increase intheuseofanti-dumping measures havenotbeenrealized sofar.20
However, theEUremains thesecond mostimportant userofanti-dumping procedures. While there
18Council Regulation 2382/96 repealed Council Regulations 990/93 and2471/94.
19European Commission (1994), Uruguay Round Implementing Legislation, COM (94)414Final, Brussels.
20One significant evolution isthegradual abolition ofvarious cases ofexport monitoring orrestraint
arrangements, either before theentry intoforce oftheWTO Agreement onSafeguards (some consumer products
originating inJapan), orunder theAgreement (section (c)below). VERs hadbecome animportant trade policy
instrument attheendofthe1980s. After theelimination ofthemonitoring arrangement oncarexports from
Japan, allexport restraint ormonitoring arrangements involving theEUwillhave been removed.WT/TPR/S/30
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hasbeensome increase inthenumber ofmeasures inforce since thelastTPR(177measures on
30April 1997 asagainst 147measures attheendof1995), thenumber ofinitiations hasapparently
diminished (33in1995, 24in1996 and10between January andApril 1997). Other trade defence
instruments available under WTO provisions, suchassafeguards orcountervailing actions, arebeing
usedonlymarginally: countervailing duties havebeenusedinonlyafewcases andnosafeguard
proceedings havebeeninitiated inrecent years.
(a) Anti-dumping
EU'sgeneral anti-dumping regime anditsapplication
26. Twoamendments havebeenintroduced totheEUanti-dumping legislation since theprevious
Trade Policy Review in1995. Thefirstamendment, ofapurely technical nature, concerns the
incorporation inthemain textoftwominor provisions adopted intheprevious period under review
andthecorrection ofsome material andtranslation errors found intheinitial version ofthelegislation.21
These changes havebeenconsolidated inarevised version ofthelegislation, Council Regulation 384/96,
which replaces Council Regulation 3283/94.22Thesecond amendment, ofgreater substance, concerns
thekinds ofadjustments thatmaybemade fordifferences inindirect selling expenses when comparing
thenormal values andexport prices todetermine thedumping margins.23Theamendment allows for
adjustments foranydifferences inexpenses demonstrated toaffect price comparability. Itdirectly
addresses concerns raised inthecontext ofaGATT panel (unadopted) requested byJapan ontheimport
ofaudio-cassettes bytheEuropean Union.
27. Themainprovisions oftheEUanti-dumping legislation werepresented inprevious Trade Policy
Reviews.24Council Regulation 384/96 incorporates theresults oftheUruguay Round oninitiation,
investigation procedures, thecalculation ofdumping margins, andtheimposition ofprovisional or
definitive measures, andincorporates principles recommended butnotrequired bytheWTO Agreement
onlesser dutyandCommunity interest.
28. Actions based onanti-absorption andanti-circumvention procedures havebeensubject todebate
among WTO Members. The"anti-absorption clause" (Article 12oftheEURegulation) allows for
there-opening ofaninvestigation when ananti-dumping measure hasnotledtoanyor"sufficient"
changes intheselling prices orthesubsequent selling prices ofthedumped product, andcould ultimately
result inincreased duties. TheCommission concluded twosuchreviews in1995, bothconcerning
electronic weighing scales: oneledtotheimposition ofanadditional anti-dumping dutyonscales
originating inSingapore; intheother case, against Japan, noaction wastaken. Twoother recent
investigations havebeenclosed, oneconcerning imports oftelevision camera systems fromJapan and
theother relating toimports ofmicrowave ovens from theRepublic ofKorea.
21Thetwoamendments, contained inCouncil Regulations 355/95 and1251/95, define thetransitional
arrangements andtimelimits related totheentry-into-force ofthenewanti-dumping legislation.
22Council Regulation 384/96 hasbeen notified inWTO document G/APD/N/1/EEC/2, 25July1996.
23Theamendment, embodied inCouncil Regulation 223/96 of2December 1996, modifies Article 2.10of
theEUanti-dumpingRegulation.ItwasnotifiedtotheCommitteeonAnti-DumpingPracticesinWTOdocument
G/ADP/N/1/EEC/2/Suppl.1 of1April 1997.
24See, inparticular, GATT (1993) andWTO (1995).European Union WT/TPR/S/30
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29. TheCommission mayalsoopenaninvestigation ifevidence isbrought thatexisting measures
arebeing circumvented.25Anti-dumping measures maythenbeextended toimports oflikeproducts
orparts. Since theinception oftheamended Regulation, theanti-circumvention procedure (Article 13)
hasbeen used onfouroccasions. Thefirstcase, involving imports ofmicro-diskettes from
Chinese Taipei andChina, didnotleadtoanyextension oftheanti-dumping measure. Thesecond,
concerning bicycles from China, resulted intheextension ofduties toessential bicycle parts. Two
other recent cases, again concerning weighing scales from Japan andSingapore, arenowclosed.
30. Under Article 14(4)oftheRegulation, theCommunity maytemporarily suspend anti-dumping
measures, initially forninemonths, ifjustified bymarket conditions (forexample, where ashortage
ofsupplies oftheproduct intheCommunity could hurtuserindustries). Measures canbereinstated
ifcircumstances change. Arecent application ofthisprovision concerned dynamic random access
memories (DRAMs).
31. Under thelesser-duty rule,Community institutions mustapply apreliminary ordefinitive duty
onlytoalevelsufficient toremove theinjury totheCommunity industry, should thisamount belower
thanthedumping margin.
32. Thenotion of"Community interest", which existed inprevious legislation, wasexpanded by
Council Regulation 3283/94 (nowreplaced byRegulation 384/96) totakebetter account oftheparties '
interests, andinparticular those ofuserindustries andconsumers. The"interest test"comes intoplay
atthetimeofimposition ofaprovisional measure orananti-dumping duty, oronthetermination of
aninvestigation ormeasure. Under theprovision, Community institutions havetoassess whether there
areanycompelling reasons nottoimpose ameasure when dumping isfound. Thisrequires athorough
evaluation oftheeconomic impact oftheanti-dumping measure proposed withaviewtoavoiding any
detrimental effect overall fortheCommunity. Thecomplainants, importers andtheirrepresentative
associations, representative users andconsumers organization areinvited, under Article 21,toprovide
information totheCommission, andmayrequest hearings.26
33. Ingeneral, theexpansion ofthe"Community interest" clause andthegenerally greater
transparency ofEUprocedures inrecent years haveincreasingly brought anti-dumping actions tothe
public eye.Recent highprofile cases haveshown thatthedecision toimpose provisional ordefinitive
anti-dumping measures canfoster vigorous debate.27
25Circumvention isdefined as"achange inthepattern oftrade between third countries andtheCommunity
which stems from apractice, process orwork forwhich there isinsufficient duecause oreconomic justification
other thantheimposition oftheduty, andwhere there isevidence thattheremedial effects ofthedutyarebeing
underminedintermsofthepricesandor/quantitiesofthelikeproductsandthereisevidenceofdumpinginrelation
tothenormal values previously established forthelikeorsimilar product" (Article 13,paragraph 1).Thecriteria
governing theextension ofduties aredescribed inWTO (1995) p.62.
26TheCommission refers totworecent examples ofCommunity decisions illustrative oftheapplication of
theCommunity interest andlesser-duty clauses: Commission Decision 303/96 of19February 1996 ongrain
oriented electrical sheets from Russia, andCouncil Regulation 119/97 of20January onringbinder mechanisms
from Malaysia andfrom China. Onecommentator hassuggested thattheexpansion oftheCommunity 'sinterest
testhasledtocloser scrutiny ofrequests foranti-dumping measures (Carzaniga, 1996).
27Thedecisiontoimposeprovisionalanti-dumpingdutiesintworecentcases,oneongreycottonfabricimports
from India, China, Indonesia, Pakistan, Turkey andEgypt and,theother onimports ofbagsfrom China, led
tointense discussions between theparties involved andeventually drew press attention. Intheearlier case, the
(continued...)WT/TPR/S/30
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34. Inresponse tocertain concerns about possible politicization ofEUanti-dumping procedures,
theEUTrade Commissioner hasreportedly presented totheCommission aninformation noteto"ensure
thatdecisions intheanti-dumping fieldarebased oneconomic factsalone, established bymeans of
rigorous investigations, andthatourprocedures arefairandtransparent".28TheCommission document
reportedly states thatEUprocedures areinconformity withWTO rulesandproposes changes, including
anearly-warning system intended tokeepCommissioners informed ofupcoming cases.
35. CountriesdefinedbytheEUas"non-marketeconomies"currentlyaccountfornearly40percent
ofallEUanti-dumping measures inforce (theEUlistcovers allformer Soviet Union countries, China,
North Korea, Albania andVietNam). Council Regulation 384/96 contains specific provisions for
non-market economies relating tothecalculation ofnormal values, export prices anddumping margins.29
Thetreatment ofsuchcountries 'imports ischanging asthese countries progress towards market
economiesandagreaterproportionoftheirproducersoperateundersuchprinciples.Individualtreatment
canthusbegranted tosuppliers "clearly demonstrating independence from theState", andthe
Commission iscurrently considering introducing moreflexibility inthegranting ofindividual treatment
andnewprocedures forselecting these countries.
36. TheCEECs andtheBaltic States aretreated asmarket economies. Under theEurope
Agreements, thesecountries benefit fromapreferential procedural framework inrespect ofanti-dumping
actions, consisting inparticular ofimproved information, possibilities forrequesting consultations in
thecourse ofaninvestigation, andapreference forprice undertakings toconclude aninvestigation.
37. Fisheries andagriculture aretheonlytwosectors forwhich EEAMembers havenotreplaced
anti-dumping andcountervailing rulesbycompetition rules. Following aproposal bytheCommission
toimpose aprovisional anti-dumping dutyof10.8percentandacountervailing dutyof3.6percent
onimports ofNorwegian salmon, bilateral consultations between theEUandtheGovernment ofNorway
wereheldinJune1997. According totheCommission, theseresulted inabilateral arrangement, under
which Norwegian exporters offered undertakings nottoselltheirproduct forexport totheCommunity
below acertain floorpriceandtheNorwegian Government agreed toincrease export duties onsalmon.
Residual anti-dumping andcountervailing duties are,however, tobeimposed onNorwegian exporters
notoffering undertakings.
27(...continued)
Commission tooktheunusual stepofissuing apress release toexplain itsproposal toimpose duties ofupto
36percent. Following avoteintheCouncil oneyearlater(May 1997), theCommission 'sproposal toturnthe
provisional dutyintoadefinitive dutywasnotaccepted (Financial Times of23May1997). However, anew
investigation waslaunched bytheCommission. Inthelatter case, arguments overtheexistence ofaninjury
totheEuropean bagindustry andonthehighcostofprotecting theEuropean market opposed theCommission,
thecomplainant(theEuropeanCommitteeforLeatherGoodsIndustries)andrepresentativeofusers(theEuropean
Association ofLeather Goods, Luggage andAccessories Creators andtheFederation oftheEuropean Sporting
Goods Industry) (European Report of23November and4December 1996).
28Europe Report, No.2246, 1August 1996.
29Thenormal value isdetermined onthebasis ofthedomestic prices orcosts inthird countries 'markets;
ortheprice from suchacountry toother countries; oranyother "reasonable basis" (including theprice prevailing
intheCommunity plusaprofit margin, ifnecessary). TheCommission 'susual approach istochoose ananalogue
country. Inaddition, dumping margins andduties aredetermined forthenon-market economy asawhole and
notbyproducer ontheground thatmost producers arecontrolled toacertain degree bytheState andinorder
toavoid thecircumvention ofduties.European Union WT/TPR/S/30
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Sector-specific provisions
38. Asnoted intheSecretariat report fortheprevious Trade Policy Review, theOECD Agreement
respectingNormalCompetitiveConditionsintheShipbuildingandRepairIndustrycontainsan"Injurious
Pricing Instrument" towhich theEUhassubscribed. TheEUhasenacted aRegulation implementing
theInstrument; however, thiscanonlyapply fromtheentry intoforceoftheOECD Agreement, which
itself hasbeendelayed. Thus, noaction hasyetbeentaken.30
39. Asnoted inprevious reviews, theEUdoesnotmaintain anygeneral anti-dumping legislation
intheareaofservices. Specific procedures against unfair pricing practices ininternational cargo liner
shipping exist, butthese havenotbeenusedsince theprevious review.
Recent cases
40. TheEUcontinues tobethesecond mostfrequent userofanti-dumping procedures, afterthe
United States. Thenumber ofinitiations varies between 20and40from yeartoyear. However, it
seems tohavediminished since thelastTPR. Thenumber ofmeasures inforce, which stabilized at
around 150between 1992and1995, hasincreased; inApril 1997, atotalof177measures (provisional,
definitive duties andundertakings) were inforce (Table III.2).31
Table III.2
Anti-dumping actions, 1990-97
(Number ofcases)
1990 1991 1992 1993 1994 1995 19961997
Jan-Apr.
Initiations 43 20 39 21 43 33 24 10
Measures taken 27 22 16 19 21 13 26 6
ofwhich: definitive duties 18 19 16 19 19 13 26 3
price undertakings 9 3 0 0 2 0 0 3
Findings ofnodumping 0 1 1 1 5 0 0 6
Findings ofnon-injury 13 6 4 1 1 4 0 0
Measures inforce 139 142 158 150 151 147 163 177
Source: European Commission.
41. Anexamination ofanti-dumping measures bycountries (including undertakings) show that
measures against China arethemostfrequent, with34measures inforce, anincrease sincetheprevious
review. China isfollowed bytheRussian Federation (14), Japan (13), theRepublic ofKorea (12)
andUkraine (9).TheAsian region attracted more thanhalfofallmeasures, withCentral andEastern
Europe thesecond mostheavily affected region; countries oftheformer Yugoslavia, countries ofthe
former Soviet Union, andEurope Agreement countries together account forabout onethird ofEU
measures. Turkey andEgypt aretheonlytwoMediterranean countries affected byanti-dumping
measures. InLatin America, there aremeasures against Brazil, Venezuela andMexico.
30TheOECDAgreemen twasimplementedinCommunitylawbyCouncilRegulation385/96of29January1996.
31These statistics must beinterpreted carefully. While thenumber ofmeasures increased, thetotalshare
ofimports covered byanti-dumping measures hastended todecline (0.8percentattheendof1995, 0.6percent
in1997), butthisdecrease could alsoberelated totherestrictive effects ofthemeasures.WT/TPR/S/30
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42. Ingeneral, themain evolution inrecent years isthestability orthereduction intheuseof
anti-dumping measures against market economies andtheirincreased useagainst non-market economies,
asdefined bytheEU.Thus, measures against China andtheRussian Federation havegrown between
1994 andApril 1997, from 25to34andfrom 8to14,respectively.
43. Turning toproduct breakdown, three large categories ofproducts represent twothirds ofall
measures: ironandsteelandrelated ortransformed products; textile andfootwear products; and
consumer electronics (3.5inchdiskettes, television receivers, microwave ovens). Figures reveal an
increase inthelastyearininvestigations andmeasures affecting certain textile products (unbleached
cotton fabric andpolyester yarns).
44. Since 1993, decisions toimpose definitive duties havebeentaken byasimple majority ofthe
Council. According totheCommission, thechange hasnotledtoanysignificant modification inthe
application ofCommunity policy inthisarea.
(b) Countervailing measures
45. Since theprevious review, there havebeennomajor changes toEUcountervailing legislation
(Regulation 3284/94), which waslastrevised in1994toincorporate thechanges required bytheWTO
Agreement onSubsidies andCountervailing Measures.32Traditionally, theEUhasnotbeenafrequent
userofcountervailing actions. Nomeasures haveyetbeentaken under Regulation 3284/94. The
countervailing proceeding onimports offarmed Atlantic salmon fromNorway initiated, on1August
1996, wasconcluded byaspecial bilateral arrangement (seeanti-dumping section above). Theonly
measures inplace attheendof1996 concerned ball-bearings imported fromThailand, introduced in
1990intheformofanundertaking andmodified in1993bytheaddition ofaresidual duty, andpolyester
yarns andfibres fromTurkey, intheformofanundertaking accepted in1991. Boththese measures
were imposed under previous legislation (Regulation 2423/88) andwere reviewed under
Regulation3284/94in1996.InthecaseofTurkeyanexpiryreviewwasinitiatedwhiletheThaimeasure
wassubject toaninterim review. Decisions areexpected inthecourse of1997.
(c) Safeguards under WTO provisions
46. TheEUsafeguard legislation wasalsosubject toacomprehensive review in1994toincorporate
thechangesrequiredbytheWTOAgreementonSafeguards.CouncilRegulation3285/94wasintroduced
onthisoccasion andhasbeenamended onlyoncesince. Council Regulation 139/96 introduced a
simplified anduniform Community surveillance document, which aligns thecontent andlayout ofthe
surveillance document tothecommon import licence forms.33
32Since theprevious review, onlyoneminor amendment hasbeenmade, establishing thedateatwhich some
provisions ofRegulation 3284/94 would enter intoforce. Themain provisions ofRegulation 3284/94 havebeen
described inprevious Secretariat reports, inparticular thenew, detailed provisions governing thedefinition and
thecalculationofasubsidy,itscountervailabilityandtheproceduresforinitiation,investigationandtheimposition
ofmeasures. TheRegulation contains, inparticular, provisions concerning sampling andcircumvention that
have nocounterpart intheWTO Agreement onSubsidies andCountervailing Measures.
33Asdescribed intheSecretariat report fortheprevious Trade Policy Review, Council Regulation 3285/94
introduced newprovisions related totheestablishment ofaquota anditsallocation between supplier countries;
amore precise definition of"threat ofserious injury", "serious injury" and"Community producers"; better
protection oftherights oftheinterested parties totheproceedings toreply toother parties 'arguments; afour-year
(continued...)European Union WT/TPR/S/30
Page 57
47. TheCommunity hasnottaken anysafeguard measures under Council Regulation 3285/94.
Theonlymeasures inplace arepre-existing GATT Article XIXmeasures which havebeenmaintained
under theWTO Agreement onSafeguards. Inaccordance withArticle 10oftheAgreement, theyare
tobeeliminated nolaterthan31December 1999. They concern minimum prices onimports ofdried
grapes andsome types ofpreserved cherries, andrestrictions byGermany oncoalimports.34
48. There aretwoother possibilities ofsafeguards offered byWTO Agreements. Article 5.1of
theWTOAgreementonAgriculturepermitstheintroductionofsupplementarytariffsonspecificproducts
identified intheWTO schedules, incases ofrising imports (volume based-actions) orsubstantial
reductions inworld prices (price-based special safeguard). According totheEU'smost recent
notification, thevolume-based action hasnotbeeninvoked during the1995/96 marketing year.35In
addition, Article 6oftheWTO Agreement onTextiles andClothing allows transitional safeguards
tobeintroduced forproducts notyetintegrated intothedisciplines oftheAgreement intheevent of
increased imports, provided thatsuchincrease causes orthreatens tocause serious damage todomestic
producers. Nosuchsafeguard hasbeenusedbytheEUsince theentry intoforce oftheAgreement.
49. TheWTO Agreement onSafeguards alsoprovides fortheelimination ofgrey-area measures
(Article 11.1(b)) suchasvoluntary export restraints andorderly marketing arrangements, according
tofixed timetables andwithin fouryears fromtheentry intoforce oftheAgreement. TheEUnotified
thefollowing listofmeasures tobeeliminated:36
- restrictions onimports ofcoal,rabbit meat, swine andmeatofswine, andlivebovine
animals intoSpain;
- restrictions maintained byAustria onimports oflignite;
- limits ondeliveries ofpotatoes totheCanary Islands;
- andCommunity-wide restrictions onpreserved sardines andtuna.
50. Since theprevious review, theEUhaseliminated therestrictions affecting preserved sardines,
tunaandlignite (on31December 1996). Asnotified totheWTO, therestrictions oncoalimports
33(...continued)
limit ontheduration ofasafeguard measure withapossible extension offouryears after anewinvestigation;
progressive liberalization ofmeasures applying formore thanoneyear; theinstitution ofamid-term review
foranymeasurewithadurationofmorethanthreeyears;andaminimumtwo-yearmoratoriumonthere-imposition
ofameasure. Insome areas, EUlegislation contains more stringent provisions thantheWTO Agreement, such
astherequirement of"greatly increased" imports toinitiate asafeguard proceeding, andinrespect ofinvestigation
deadlines.
34ThesemeasureshavebeennotifiedunderArticle12.7oftheWTOAgreemen tonSafeguards(WTOdocument
G/SG/N/2/EEC, Annex 2,24March 1995). TheCommission hadindicated thattheymight remain inforce
until 31December 1999.
35WTO document G/AG/N/EEC/6, 25March 1997.
36WTO document G/SG/N/2/EEC, Annex 1,24March 1995.WT/TPR/S/30
Page 58Trade Policy Review
willbeeliminated by31December 1997 andthose maintained onpotatoes by1November 1998.
According totheCommission, therearenogrey-area measures other thanthose notified totheWTO.37
51. TheEU-Japan car"consensus" issubject tospecial treatment under theWTO Agreement on
Safeguards, andisscheduled toexpire on31December 1999. Itsrecent operation isdescribed in
Chapter IV(3)(ii)(c).
(vi) Other trade measures
(a) TheTrade Barriers Regulation
52. TheTrade Barriers Regulation (Council Regulation 3286/94) isunchanged since theprevious
review. Itlaysdown theprocedures under which EUenterprises, industries orMember States
complaining about obstacles totrademayrequest theCommunity todefend itsrights under international
trade rules.38Asaresult, aninvestigation canonlybeinitiated when international trade rulesprohibit
the"aggrieved practice" orprovide arightofaction against suchpractice. Theprocedure, detailed
intheSecretariat report fortheprevious review, mayuponaproposal fromtheCommission leadthe
Council totaketrademeasures against thecountry concerned, byaqualified majority. Measures may
include theintroduction ofquantitative restrictions, suspension orwithdrawal ofconcessions, increase
incustoms duties onanyother measure modifying oraffecting tradewiththatcountry. InWTO cases,
measures canbetaken onlyifadecision istaken infavour oftheEUandiftheyaredulyauthorized
bytheDSB.
53. Initsrecent Communication ontheEU'snewMarket Access Strategy, theCommission states
that"although theNewTrade Barriers Regulation allows fortheuseofretaliation (inconformity with
international rules) asasanction forthirdcountries 'tradebarriers, itspurpose istoensure theremoval
ofthose barriers; thus,theRegulation isgeared toanegotiated settlement when thisappears capable
ofyielding asatisfactory result".39
54. Nodefinitive measure hasyetbeentaken under thenewTrade Barriers Regulation butithas
provided thebasis foreight proceedings sofar.Thefirstcase, initiated under theprevious New
Commercial Policy Instrument of1984, concerning piracy ofEUsound recordings inThailand, was
suspended attheendof199540;thesecond proceeding, initiated inNovember 1996, relates tothe
changes made bytheUnited States intheirrulesoforigin fortextile andapparel products. Inthecontext
37TheRepublic ofKorea notified totheWTO voluntary export restraint arrangements concerning microwave
ovens andcolour picture tubes (European Union) andstainless steelflatware (Germany andtheUnited Kingdom)
which aretobeeliminated ineither December 1997 or1998. WTO document G/SG/N/5/KOR, 15August 1995
andWTO (1996).
38ComplainantsmayrefertoobstaclestotradehavingeffectwithintheCommunity("causingmaterialinjury")
orinthird-country markets ("having adverse trade effects"). Asnoted intheSecretariat report fortheprevious
review, thenotion ofobstacles totrade covers "any trade practices adopted ormaintained byathird country
inrespect ofwhich international trade rules establish aright ofaction".
39European Commission (1996g).
40According totheCommission, theCommunity suspended theproceeding, ontheonehand, in"recognition
oftheefforts made byThailand toeliminate thisphenomenon andof,ontheother hand, thepersistence ofhigh
levels ofpiracy ofsound recordings inthatcountry" (statement made inthecontext ofthisreport).European Union WT/TPR/S/30
Page 59
ofthisprocedure, theCommission initiated consultations intheWTO. Asolution wasfound bythe
twoparties inAugust 1997. Theother proceedings havebeeninitiated more recently andarestillunder
investigation bytheCommission.41
(b) The"Market Access Strategy"
55. In1996, theEUintroduced aMarket Access Strategy aimed atachieving better access to
third-country markets through amore focused, systematic andcoordinated useofavailable trade
instruments.42According totheCommission, thestrategy would notinanywaycreate newtrade
instruments orjeopardize EUobligations under theWTO. Instead, theEUwould work atopening
markets andensuring better observance oftraderulesunder existing bilateral andmultilateral channels,
including therecourse tobilateral andmultilateral consultations, negotiations, anddispute settlement
procedures. AnAction Group onMarket Access wascreated within theCommission toimprove
information andcoordination intheuseoftradeinstruments forwhich responsibility isdivided between
different Directorates-General.
56. Todate, themain concrete stephasbeenthecreation ofaninteractive database compiling
information fromEUMember States, industries andinternational sources onexisting "obstacles" outside
theEU,bycountry andsector.43Over 700"obstacles" havesofarbeenidentified andregistered in
thedatabase. TheCommission intends toprepare market access reports identifying priority countries
andlisting theirtrade barriers andisconsidering producing ayearly report ontrade barriers inthe
EU'smain trading partners 'markets, similar toitsannual report onU.S.barriers.44
(c) Other regulations
57. Following theenactment ofthe1996 Cuban Liberty andDemocratic Solidarity Actandthe
IranandLibya Sanctions ActbytheUnited States Congress, theCouncil adopted Regulation 2271/96
of22November 1996 "protecting against theeffects oftheextra-territorial application oflegislation
adopted byathirdcountry, andactions based thereon orresulting therefrom".
58. TheRegulation isadirectly applicable legal instrument, which aims, according tothe
Commission, to"protect theeconomic andfinancial interests oftheEuropean Union against negative
effects ofextraterritorial legislation ofcertain thirdcountries".45Itsapplicability ispresently restricted
tothetwoabove-mentioned U.S. Acts. Under theRegulation, nonatural orlegal person, directly
orthrough asubsidiary, shallcomply withthesaidlegislation, unless anauthorization hasbeenobtained
fromtheEuropean Commission. Judgements ofU.S.courts, tribunals oradministrative authorities,
41These proceedings concern theUnited States (Anti-Dumping Actof1916); Argentina (exports ofhides
andskins andimports offinished leather); Brazil (exports ofCognac); Japan (imports offinished works);
United States (licensing ofmusical works); andBrazil (restrictions onimport licensing ofsteel products).
42European Commission (1996g).
43TheCommission 'sdatabase isaccessible ontheInternet at:http://mkaccdb.eu.int. Information isdrawn
from WTO Trade Policy Reviews, among other sources.
44Press Release from theEuropean Commission, 15February 1996. Forseveral years theEUhasbeen
publishing anannual report on"United States Barriers toTrade andInvestment".
45Commission 'sstatement made inthecontext ofthisreview.WT/TPR/S/30
Page 60Trade Policy Review
based onthose acts,shallnotbegiven effect within theEU.Compensation foranydamages (including
legalcosts) caused bytheapplication oftheActsmaybeobtained fromthepersons orentities causing
thedamages, possibly intheform ofseizure andsaleoftheirassets. "Effective, proportional and
dissuasive" sanctions incases ofviolation oftheRegulation aretobetaken bytheMember States.
Pertinent legislation tothateffect hasbeenadopted bytheUnited Kingdom andGermany, andisunder
wayintheother Member States.
59. Inparallel, theEUlaunched adispute settlement procedure intheWTO. Formal bilateral
consultationswiththeUnitedStateswererequestedbytheEUon3May1996andapanelwasestablished
bytheDSBatitsmeetingon20November1996.TheprocedurewaseventuallysuspendedinApril1997
aftertheCommission andUnited States 'authorities reached aprovisional understanding.46
(vii) Local-content requirements
60. The1989 Television Without Frontiers Directive (Council Directive 89/552) wasreviewed
in1996, andamended byDirective 97/38 of30June1997. Thereview hasconfirmed theexisting
broadcasting quota system. Theinitial requirement forMember States toensure "where practicable
andbyappropriate means" thatbroadcasters reserve forEuropean works amajority oftheirtransmission
times, excluding timeappointed tonews, sports events, advertising, games, teletext andteleshopping
services remains inforce. Proposals forstricter requirements forthebroadcasting ofEuropean
programmes andfortheinclusion ofnewaudiovisual services (pay-per-view services, etc.)inthescope
ofapplication oftheDirective havenotfound amajority intheEuropean Parliament.
61. TheCommission hasstated, asnoted inprevious reviews, thatthere arenolocal-content
requirements inother EUmarkets forgoods andservices, noriseligibility under Community
programmes, including research programmes, orcommercial policy instruments, subject tonationality
criteria, withtheexception ofprogrammes covered bym.f.n. exemptions such astheMedia II
programme (Chapter IV(4)).
(viii) Rules oforigin
62. TheCommunity 'snon-preferential rules oforigin haveremained unchanged since theTrade
Policy Review of1991. However, theEUisworking, likeotherWTO Members, towards international
harmonization under theWTO Agreement onRules ofOrigin.
63. Recent changes inthepreferential rules oforigin arerelated totheharmonization ofrules of
origin among European countries andthecreation ofapreferential territory fororigin between the
EEA(including theEU),EFTA andCEEC countries (inall28countries, i.e.the15EUMember States
and13associated countries).47Thereform, which entered intoforce on1January 1997, consists in
thealignment oftherulesoforigin contained intheEurope Agreements withthoseapplied inpreferential
trade between theEUandEFTA countries, andthelinkage ofallcountries (CEEC, EFTA andthe
EEA) through asystem ofdiagonal cumulation. Asaresult, economic operators willbeabletouse
originating material fromanycountry within thezonetoproduce anoriginating product. Forexample,
amanufacturer intheCommunity willbeabletosource allmaterial fromaCEEC andexport thefinished
46Thecompromise follows, inparticular, theUSPresident 'sdecision tosuspend theapplication ofTitle III
oftheCuban Liberty andDemocratic Solidarity Act.
47ThecountriescoveredbythenewrulesareBulgaria,theCzech Republic,Estonia,Hungary,Iceland,Latvia,
Lithuania, Norway, Poland, Romania, theSlovak Republic, Slovenia andSwitzerland.European Union WT/TPR/S/30
Page 61
product throughout theEU/EFTA/CEEC zonewhile keeping preferential origin. Similarly, aproducer
inHungary willbeabletouseNorwegian material tomake anoriginating product forexport tothe
Community.
64. Thenewsystem islikely toencourage thefurther development ofoutward-processing and
assembly operations within theenlarged region, inparticular inthetextiles andclothing andthe
automobile industries where these arealready conducted onalarge scale. Itisanewsteptowards
economic integration within theEuropean continent, inparticular vis-à-vis theCEECs. Intextiles
andclothing, theharmonization oftherulesoforigin coincides withtheabolition bytheEUofduties
(on1January 1997) andthedismantling ofquantitative restrictions (on1January 1998) onproducts
originating intheCEECs.
65. Other preferential agreements provides alsoforthecumulation oforigin, butgenerally ona
bilateral basis.48
66. ChartIII.2providesanoverviewofcumulationrulesbetweentheEUanditspreferentialpartners.
48TheEuro-Mediterranean Agreements provide, ingeneral, forbilateral cumulation between theEUand
thebeneficiary country, butefforts arecurrently being made toestablish asystem ofdiagonal cumulation through
thezone. TheGSPScheme provides forbilateral cumulation oforigin except forcountries members ofaregional
groupwhichcanapplydiagonalcumulationwithinthegroup(ASEAN,CentralAmericaCommonMarket,Andean
Community). While theLomé Convention provides onlyforbilateral cumulation oforigin between theEUand
ACP countries, diagonal cumulation applies ineach ofthetwozones.WT/TPR/S/30
Page 62Trade Policy Review
67. On1January 1997, theEUintroduced newlegislation allowing importers andexporters to
request information fromnational administrations concerning theorigin ofaparticular product (Council
Regulation 82/97). TheCommission isworking withtheMember States ontheestablishment ofa
computerized monitoring system toensure thattheinterpretation oftherules oforigin isthesame
throughout theEU.
68. Pursuant toArticle 5.1andparagraph 4ofAnnex IIoftheAgreement, theEUhasnotified
totheWTO Committee onRules ofOrigin itslegislation covering non-preferential andpreferential
rulesoforigin (Council Regulations 2913/92, 2454/93 andsubsequent amendments) .49Thenotification
contains alistofthenumerous bilateral agreements containing specific provisions onrulesoforigin.50
(ix) Recent developments inother import-related areas
(a) Government procurement
69. TheEUparticipates intheWTO Government Procurement Agreement (GPA), which took
effect on1January 1996. Table III.3summarizes itsmain commitments. TheEU-United States
Agreement of1994, which extends national treatment toabout US$100 billion ofpublic procurement
annually ineachmarket, isincorporated andimplemented under theGPA.51Theschedules ofAustria,
Finland andSweden wereincorporated intheEUschedule ontheiraccession totheCommunity. Related
changes totheEU-United States Agreement havebeennotified totheCommittee onGovernment
Procurement.52
70. TheGPAbecame partoftheEUregime onitsentry intoforce. Inaddition, theEUundertook
toaligncertain EUdirectives (theservices, supplies, public works, andutilities Directives) totheGPA
toensure coherence, simplify implementation (e.g., avoiding discrepancies between thresholds), and
prevent "reverse discrimination" against Community firms, wherever theGPAprovides greater rights
tothird-country firms.53
49WTO document G/RO/N/1/Add.1, 22June 1995.
50Specific rules oforigin arecontained intheagreements withAlgeria, Andorra, Bulgaria, Cyprus, Egypt,
Estonia, Hungary, Faroe Islands, Iceland, Israel, Jordan, Lebanon, Malta, Morocco, Norway, ACP Countries,
Poland, Slovak Republic, Czech Republic, Romania, Slovenia, Switzerland, Syria andTunisia.
51Themain features ofthebilateral agreement weredescribed intheSecretariat report fortheprevious review.
Theagreement provides fornational treatment bycentral government entities above certain thresholds. Atthe
sub-central level, theagreement entitles European companies totender forthesupply ofgoods, services and
construction in37ofthe50States oftheU.S. and7major cities, while U.S. firms aregiven access toall
procurement forgoods butnotforservices byEUsub-central governments. Telecommunications intheEU,
andpublic transport intheUnited States, were excluded from theagreement. With respect toutilities, U.S.
suppliers benefit from national treatment intheelectricity andportsectors butnotintheother excluded sectors
(water, airports, urban transport). Sanctions taken bytheUnited States against theEUin1993 have remained
inplace andwereextended toAustria, Finland andSweden ontheiraccession totheCommunity. These sanctions
donotapply toGermany, Spain, Greece andPortugal. The1993 EUsanctions against theUnited States also
remain inplace.
52WTO document GPA/W/32, 17December 1996.
53Forexample, theobligation toinform eliminated candidates ortenderers ofthereasons fortheirrejection
andeliminated tenderers ofthecharacteristics andadvantages ofthetender selected (Article 18.2(c)oftheGPA)
hasbeen limited tothesectors covered bytheGPA.European Union WT/TPR/S/30
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Table III.3
Summary oftheEU'smain commitments under theGovernment Procurement Agreement
Goods Services (exc. construction) Construction
Central
governmentsThreshold: SDR 130,000
M.f.n. treatment
Specific exemptions for
telecommunications equipment
(Germany) andforparticular
products (airtraffic control
equipment from theUnited States;
some electronic equipment, office
machines from Canada) andfrom
other countries (Rep. Korea, Israel).Threshold: SDR 130,000
Reciprocal access
Specific exemptions inthefieldof
telecommunications (voice
telephony, telex, radiotelephony
paging andsatellite services);
financial services (securities or
other financial instruments, and
central bank services).Threshold: SDR 5million
M.f.n. treatment
Sub-central
governmentsThreshold: SDR 200,000
M.f.n. treatment, except for
suppliers from Canada.Threshold: SDR 200,000
Reciprocal access, except for
service providers from Canada.
Specific exemptions apply tosome
telecommunications andfinancial
services (seeabove).Threshold: SDR 5million
Reciprocal access, except for
suppliers from Canada and
United States
Other
entities
(utilities)Threshold: SDR 400,000
M.f.n. treatment forprocurement of
electricity projects andmaritime,
inland port, andother terminal
facilities, water andurban facilities.
Country-specific exemptions:
Water (Canada, United States)
Electricity (Canada, Japan)
Airports (Canada, Rep.Korea,
United States)
Ports (Canada)
Urban transport (Canada, Israel,
Japan, Rep.Korea, United States)Threshold: SDR 400,000
Reciprocity forprocurement of
electricity projects andmaritime,
inland ports, andother terminal
facilities.
Some country-specific exemptions
byservice:
Water (Canada, United States)
Electricity (Canada, Japan)
Airports (Canada, Rep.Korea,
United States)
Ports (Canada)
Urban transport (Canada, Israel,
Japan, Rep.Korea, United States)Threshold: SDR 5million
M.f.n. treatment forprocurement
ofelectricity projects and
maritime, inland portandother
terminal facilities, water and
urban facilities.
Country-specific exemptions:
Water (Canada, United States)
Electricity (Canada, Japan)
Airports (Canada, Rep.Korea,
United States)
Ports (Canada)
Urban transport (Canada, Israel,
Japan, Rep.Korea, United States)
Source: WTO Secretariat.
71. TheSingle Market legislative framework inthefieldofpublic procurement isnowinplace
but,according totheCommission, EUDirectives havenotyetbeenfullybeentransposed intonational
lawandtheireconomic impact has,todate,beenrelatively minor.54Forexample, onlythreeMember
States havefullyincorporated allEUDirectives intonational lawandtheimplementation oftheservices
Directive (92/50) wasdescribed bytheCommission as"alarming", withlittleprospect thattheMember
States concerned would adopt relevant legislation inthenearfuture.55Problems often encountered
54EuropeanCommission(1997f).TherearetwosetsofEUDirectives,onefixingthegeneralrulesforsupplies,
works andservices (Directives 93/36, 93/37 and92/50), andonefixing particular rules forsupplies, works and
servicesbyutilitiesinthewater,energy,transportandtelecommunicationssectors,theso-called"excludedsectors"
(Directive 93/38 amending by90/531). They arecomplemented bytworemedies Directives (Directive 89/665
amended by92/50, andDirective 92/13) requiring administrative orlegal remedies toputinplace forcases
ofnon-compliancewithprocurementrules.AcomprehensivedescriptionoftheEUandMemberStatesgovernment
procurement procedures inservices isprovided inWTO document S/WPRG/W/11/Add.10, 2December 1996
(ResponseoftheCommunityanditsMemberStatestotheQuestionnaireonGovernmentProcurementofServices).
55Five Member States (Belgium, Germany, Greece, France andAustria) have failed tonotify national
implementing measures forDirective 92/50 (European Commission, 1996h).WT/TPR/S/30
Page 64Trade Policy Review
arelinked totheincorrect interpretation ofEUDirectives andthehandling ofprocedures concerning
advertising, deadlines, selection andaward criteria. While compliance withtheadvertising and
transparency requirement ofEUDirectives hasrecently improved, only15percentofthe110,000
purchasing entities subject tolegislation (inparticular localauthorities) haveyetpublished tender notices
forcontract intheOfficial Journal.56Asummary oftheimplementation ofEUDirectives isprovided
inTable III.4.
72. PotentialbenefitsfromopenprocurementintheEUwouldbeconsiderableintermsofefficiency,
competition, rational useofpublic finances anddeficit reduction. Total procurement ofworks, supplies
andservices were estimated in1994 atabout 12percentofGDP (ECU 720billion). Theshare of
(intra- andextra-EU) imports inpublic contracts inMember States hasrisenbutremains verymodest:
theshares increased from1.4percentin1987to3percentin1995fordirect cross-frontier business,
andfrom4percentin1987to7percentin1995 forpurchases made bymeans ofimporters orlocal
subsidies.57
73. TheCommission haslaunched 39infringement proceedings forfailure byMember States to
transpose EUDirectives correctly oratall.Individuals mayinvoke EUDirectives before theEUCourt
ofJustice ifMember States areinbreach oftheirobligations vis-à-vis Community law. However,
inconsistencies between EUandnational procedures maypossibly haveinternational repercussions.
Forexample, somenon-EU firms bidding forcontracts ofheavy electrical equipment recently expressed
concerns about thedifficulty ofbenefiting inGermany from theremedy provisions contained inthe
relevant EUDirective, although abletoseekredress under German domestic law. Separately, the
Commission senta"reasoned opinion" totheGerman Government seeking amodification ofdomestic
remedy legislation toalign itwithEUprovisions. Asaresult, anewtexthasbeenprepared bythe
German Government andistobesubmitted toParliament.
(b) Standards andother technical requirements
74. Thelarge-scale effort launched in1983bytheCommunity toremove standards-related barriers
tointernal trade accelerated markedly under theSingle Market. Themutual recognition principle
applicable inintra-Community tradehasbeenreinforced byharmonizing divergent national standards
through European standards. European standardization bodies, including theEuropean Committee
forStandardization, theEuropean Committee forElectrotechnical Standardization andtheEuropean
Telecommunications Standards Institute developed more than1,000 standards in1996(about 850for
theEuropean Committee forStandardization alone). Bothindustry andstandardization bodies are
increasingly focused onparticipating in,andcontributing to,theprocess ofEuropean andinternational
standardization.
56Substantial increases inthenumber ofpublications oftender notices forcontracts have, however, been
recorded inrecent years (from 12,000 in1987 to90,000 in1995). According theCommission, thelowlevel
ofpublication isnotnecessarily linked toavoluntary lackoftransparency ofthecontracting entities butcanbe
linked tothethresholds setoutintheDirectives.
57European Commission (1997e).European Union WT/TPR/S/30
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Table III.4
Status ofimplementation ofthepublic procurement directives, June 1996
DirectivesNational implementing measures:
Derogation
granted to
Member
StatesNot
communicated
oronlypartly
communicatedCommunicated
andchecked:
infringement
proceedings for
non-compliance
under wayCommunicated
89/440/EEC
Works (18.7.89)
Inforce since 19.9.90
GR,E,P:1.3.92
AI,FI,SE:1.1.94
replaced by93/37/EECBelgium
Italy
PortugalDenmark, Germany, Greece, Spain,
France, Ireland, Luxembourg,
Netherlands, United Kingdom,
Austria, Finland, Sweden
88/295/EEC
Supplies (2.3.88)
Inforce since 1.1.89
GR,F,P:1.3.92
AI,FI,SE:1.1.94Portugal Belgium, Denmark Germany,
Greece, Spain, France Ireland, Italy,
Luxembourg, Netherlands,
United Kingdom, Austria, Finland,
Sweden
89/665/EEC
Remedies (21.12.89)
Inforce since 21.12.91
AI,FI,SE:1.1.94Germany
Greece
Spain
PortugalBelgium, Denmark, France, Ireland,
Italy, Luxembourg, Netherlands,
United Kingdom, Austria, Finland,
Sweden
90/531/EEC
Utilities (17.9.90)
Inforce since 1.1.93
E:1.1.96
GR,P:1.1.98
AI,FI,SE:1.1.94Spain Germany
United KingdomBelgium, Denmark, France, Ireland,
Italy, Luxembourg, Netherlands,
Austria, Finland, SwedenGreece
Portugal
92/13/EEC
Remedies forUtilities (25.2.92)
Inforce since: 1.1.93
AI,FI,SE:1.7.94
F:30.6.95
GR,P:30.6.97Spain
AustriaGermany
Freance
Irland
Italy
United KingdomBelgium, Denmark, Luxembourg,
Netherlands, Finland, Sweden,Greece
Portugal
92/50/EEC
Services (18.6.92)
Inforce since 1.7.93
AI,FI,SE:1.7.94Belgium
Germany
Greece
France
AustriaDenmark, Spain, Ireland, Italy,
Luxembourg, Netherlands, Portugal,
United Kingdom, Finland, Sweden
93/36/EEC
Supplies (11.6.93)
Inforce since 11.6.94
AI,FI,SE:1.7.94Belgium
Germany
France
Italy
AustriaPortugal Denmark, Greece, Spain, Ireland,
Luxembourg, Netherlands,
United Kingdom, Finland, Sweden
93/38/EEC
Utilities (14.6.93)
Inforce since 1.7.94
AI,FI,SE:1.7.94
F:1.1.97
GR,P:1.1.98Germany
France
United Kingdom
AustriaBelgium, Denmark, Ireland, Italy,
Luxembourg, Netherlands, Finland,
SwedenGreece
Spain
Portugal
Notes: GR=Greece; E=Spain; P=Portugal; AI=Austria; FI=Finland; SE=Sweden; F=France.
Source: WTO Secretariat onthebasis oftheCommission 'sGreen Paper onGovernment Procurement intheEuropean Union.WT/TPR/S/30
Page 66Trade Policy Review
75. Since theprevious review in1995, theEUhasopened negotiations formutual recognition
agreements (MRAs) forconformity assessment ofregulated products withseveral trading partners.
Anoverview ofthecountries andproducts concerned isprovided inTable AIII.2.58
76. InJune1997, theEUandtheUnited States initialled anMRA covering sixcategories ofproducts
(Chapter II(5)(vi)). Theagreement covers pharmaceuticals; telecommunications equipment, including
cellular telephones, computer modems, andoffice telephone switches; electronic equipment withmotors
orcomputer chips, ranging fromaircraft components totelevision sets; certain electrical equipment
requiring safety certification, suchashairdryers andtoasters; medical devices, including home
pregnancy tests, X-ray machines, etc.; andrecreational craft. TheU.S.Department ofCommerce
estimatesthattheeliminationofcertificationandinspectionsproceduresontheseproductscouldrepresent
annual savings ofuptoUS$172 million forbothUSandEUcompanies. Non-U.S. andEU-originating
products would remain subject tomultiple testing andcertification. Similar multisectoral agreements
havealsobeeninitialled withAustralia, NewZealand andCanada. These agreements involve seven,
sixandseven industrial sectors, respectively, accounting forapproximately US$10 billion oftrade
between theEUandthese three countries.
77. Health, safety andenvironmental concerns haveincreasingly influenced theelaboration and
implementation ofEUregulatory policies. Asmany as133environmental Directives wereapplicable
attheendof1995onthemanagement orprotection ofair,chemicals, water, noise, waste andnature.
Directives onthetransport ofdangerous goods byroad(Council Directive 94/55), packaging and
packaging waste (Council Directive 94/62) andhazardous waste (Council Directive 94/31) entered
intoforce intheperiod under review. NewDirectives havebeenadopted bytheCouncil concerning
emissions bylightvehicles (Council Directive 96/69); thetreatment ofdecontaminated equipment
containing PCB(Council Directive 96/59); theextension oftheexport banfromOECD tonon-OECD
countries onwaste destined forrecovery andrecycling, inconformity withDecisions taken bytheparties
totheBasel Convention (Council Regulation 120/97); theprotection ofspecies ofwildfauna andflora;
andtrade inendangered species (Council Regulation 338/97).
78. TheEUhaspursued thedevelopment ofitsEco-Label Award Scheme through thedefinition
of12product groups. Eco-label criteria fordouble-ended lightbulbs (1995), bed-linen (1996), tee-shirts
(1996), copying paper (1996) andrefrigerators (1996) havebeenadopted since theprevious Trade
Policy Review in1995, adding tothealready extensive listofproducts suchaswashing machines,
dishwashers, toilet paper, kitchen rolls, soilimprovers, laundry detergents, single-ended lightbulbs
andpaints andvarnishes. Todate,51applications havebeenreceived foratotalof166eco-labelled
products. Eco-labels have been awarded to20manufacturers innineEUMember States forsix
categories ofproducts (toilet paper, kitchen rolls, indoor paints andvarnishes, bed-linen andtee-shirts,
washing machines, andlaundry detergents). Ayearago,fewer than40products were eco-labelled
withapplications made inthreecountries. Onepossible explanation fortheslowstart(orlackofinterest
inthescheme bymanufacturers) mayliewiththeco-existence oftheEUscheme andthewell-established
national eco-labelling schemes, suchasthe"white swan" inScandinavian countries, the"blue angel"
inGermany, andothers intheNetherlands, France, Spain, Austria andSweden.
58According totheCommission, MRAs areintended toenable alltesting andcertification steps tobecarried
outlocally, thereby generating significant savings interms ofexpenses, time andpredictability inobtaining
approvals (European Commission, 1996i).European Union WT/TPR/S/30
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79. Inresponse toconcerns expressed bysome trading partners about insufficient consultation and
transparency intheadoption ofeco-label criteria (copying paper), theEUhasprovided information
andclarification onitsscheme through consultations atbilateral level(United States, Canada andBrazil)
andintheWTO.59Attheendof1996, theCommission adopted adraftproposal torevise theEU
scheme. Onefeature oftheproposal istheestablishment ofanewindependent body (theEuropean
Eco-Label Organization) thatwould beresponsible forthetechnical development oftheeco-label
ecological criteria. According totheCommission, special attention willbegiven toimproving
transparency ofthescheme inorder toensure consistency withinternational standards andtofacilitate
access andparticipation ofthird-country manufacturers.
80. Aveterinary agreement establishing mechanisms fortherecognition ofequivalence ofhealth
andhygiene measures covering liveanimals andanimal products wassigned between theEUand
NewZealand inDecember 1996.60Thisagreement wasthefirstinaseries ofpacts being negotiated
bytheCommission withcertain EUtrading partners (theUnited States, Canada, Australia, Argentina,
theCzech Republic, Chile andUruguay). AnAgreement wasconcluded withtheUnited States in
May1997 atatechnical level, covering redmeat, dairy andfishproducts. Eggproducts aresubject
tospecific interim conditions. Theagreement hasyettobeadopted bytheCouncil. Noagreement
hasyetbeenreached onpoultry (September 1997).
81. TheEUapproach concerning theuseofhormones inmeatandmilkproduction hasremained
unchanged since theprevious Trade Policy Review. InJanuary 1996, theUnited States requested
consultations intheWTO onEUmeasures affecting imports ofmeatandmeatproducts. NewZealand,
Australia andCanada joined theUnited States intherequest. Apanel wasestablished inMay1996
andanother casewasopened separately byCanada, forwhich apanel wasestablished inOctober 1996;
thetwoPanel Reports werecirculated toWTO Members inAugust 1997. Inbothcases, thePanels
found theEUbanonimports ofmeatandmeatproducts fromcattle treated withsixspecific hormones
forgrowth promotion purposes tobeinconsistent withseveral articles oftheSPSAgreement. The
EUhasappealed against thedecision.
(c) Countertrade
82. Asnoted intheprevious reviews, there arenocommon policies noranyharmonization or
coordination procedures attheEUlevelintheareaofcountertrade. National Governments generally
tendtolimittheirinvolvement insuchdeals tomilitary offsets.
59Thecriteria forthecopying paper eco-label eventually drew theattention ofcertain trading partners as
itextends totheproduction process, andnotjusttheproduct (Financial Times of6November 1996). The
Commission provided acomprehensive description oftheEUscheme inWTO documents WT/CTE/W/23 and
G/TBT/W/23 of19March 1996. Inthese documents theCommission emphasizes thevoluntary character of
thescheme andexplains thatbothEUandnon-EU producers benefit from equal access toconsultation groups
andinformation available intheprocess ofdefining products andcriteria forthescheme.
60Theagreement isbased ontheprinciple ofregionalization: ifanepidemic appears inoneareaofthecountry,
abuffer zone would beestablished forthatparticular region, andexports would beallowed tocontinue from
other areas.WT/TPR/S/30
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(3) Measures Directly Affecting Exports
(i) Export promotion, financing andinsurance
83. AccordingtotheCommission,mostexportpromotionactivitiesattheEUlevelhavebeenphased
out,withtheexception oftheJapan export promotion programme (Chapter II(5)(viii)). Thecampaign
"Gateway toJapan" hasatotalbudget ofECU 12million fortheperiod 1997-2000. Asindicated
inprevious reviews, export promotion activities areconcentrated inindividual Member States, but
nodetailed information wasmade available onrecent developments atthatlevel. However, there are
indications thatexport promotion activities intheMember States havebeenaffected bybudgetary
consolidation and,insome cases, redeployed towards fast-growing export markets, inparticular in
Asia.61
84. Budgetary constraints, combined withinternational disciplines, arealsolimiting government
contributions tonational export finance andinsurance schemes.62AdraftDirective proposed bythe
Commission totheCouncil andestablishing EUrulesformedium- andlong-term export credit insurance
iscurrently under discussion intheCouncil 'sPolicy Coordination Group responsible forexport credits.
85. Intheframework oftheWTO Agreement onAgriculture, reductions inagricultural export
subsidies invalue (36percent) andvolume (21percent) willbemade by1July2001. The
implementation ofEU'scommitments waseased byrelatively favourable trends inworld prices for
products suchasgrain (Chapter IV(1)(i)).
(ii) Export controls andrestrictions
86. TheCommunity regime governing thecontrol ofexports ofdual-use (military andcivilian)
goods andtechnologies islaiddown inCouncil Decision 94/942/CFSP andCouncil Regulation 3381/94
of19December 1994, andentered intoforce on1July1995. Thelistofgoods isregularly updated
(twice in1995 and1996) andwaslastamended inJune1997 (Decision 97/419/CFSP) .
87. Inthespring of1996, following medical surveys establishing possible linksbetween BSEin
cattle andCreutzfeldt-Jacob disease inhumans, theCouncil declared acomplete banonexports of
livecattle, semen, embryos, andmeatofcattle slaughtered intheUnited Kingdom, aswellasderivative
products (Chapter IV(2)).
(4) Measures Affecting Production andTrade
88. TheCommission isinvested bytheEUTreaty withimportant powers inthefieldofcompetition
policy andStateaid.Monitoring inbothfields iscomplementary, aimed atpreventing distortions to
competition intheSingle Market, ensuring fairaccess ofallfirms toEUmarkets, andimproving the
overall competitive performance oftheEUeconomy. Withtheabolition ofnational barriers, monitoring
61SomeMemberStatesbenefitfromlargeexportpromotioninfrastructuresthroughtrademissionsandchambers
ofcommerce. Forexample, theFrench Trade Ministry employs about 2,000 civilservants initsworldwide
network oftrade representations. Inaddition toStates 'representations, large regions ofsome federal States
arealsoinvolved inexport promotion, andincertain countries, have their ownrepresentations.
62Most EUMember States maintain export financing andcredit guarantee systems. Oneimportant source
ofexport finance istheattribution oflong-term concessional loans tothird countries. InFrance forexample,
budgetary outlays allocated forthefinancing ofsuch programmes have been halved since theearly 1990s.European Union WT/TPR/S/30
Page 69
activities haveproved increasingly intensive and,insome cases, sensitive. Thetotalnumber ofcases
registered bytheCommission inrelation toanti-trust, mergers andStateaidroseby36percentfrom
1,081 in1994to1,472 in1995.63Since theprevious review, some Community procedures havebeen
revised toadapt toincreasingly complex business practices andStateaidpackages andtoimprove both
theirtransparency andeffectiveness.
(i) Competition policy
89. TheEU'sgeneral competition rules (embodied inTreaty Articles 85to90)haveremained
unchanged since the1995 TPR. TheCommission 'sDirectorate General IVisresponsible forthe
implementation(enquiries,controlsandprosecution),review,anddevelopmentofCommunitylegislation
inthefieldofcompetition policy. Final decisions aretaken bytheCollege ofCommissioners.
90. WhiletheCommunitycontinuestoprogresstowardstheliberalizationofcertainsectorspreviously
subject tomonopoly orexclusive rights (telecommunications, energy, postal services ortransport),
some EUMember States havestressed thattheopening upofthesemarkets should becompatible with
theperformance bypublic services oftasks ofgeneral interest (such astheprovisions ofauniversal
service atanaffordable price), justifying certain limitations tothescope ofcompetition policy.64At
theEuropean Council ofAmsterdam, aspecial reference wasintroduced inthenewTreaty forservices
ofgeneral economic interest.
91. Thelasttwoyearshaveseenarapidincreaseinthenumberofcompetitionpolicycases,reflecting
theriseofcross-border mergers andacquisitions. Thenumber ofdecisions taken bytheCommission
inthisfieldhasgrown rapidly, from 125in1996 tosome 160expected in1997. Areview ofthe
Merger Regulation (Council Regulation 4064/89) launched in1995 ledtheCommission topropose:
(a)alowering ofthecompany turnover thresholds triggering itsintervention andcontrol, fromECU
5to3billionforaggregateworldwideturnoverandfromECU250to150millionforEuropeanturnover.
Between ECU2billion andECU150million, theCommission proposed tohaveexclusive competence
forallconcentrations which would benotifiable toatleastthree national merger control authorities;
(b)theestablishment ofasingle notification requirement attheEUlevel formergers above certain
thresholds (toavoid multiple filings ofconcentrations when several Member States areinvolved); (c)to
place full-function jointventures under theMerger Regulation instead oftheAnti-trust Regulation;
and(d)toadopt newtechnical criteria forthecalculation ofturnover inthebanking sector. TheCouncil
hasalready accepted theextension oftheCommission 'scompetence byadding newthreshold criteria
which combine world (ECU 2billion), EUandnational turnover.
92. Areview ofEUpolicy regarding vertical restraint arrangements isalsounder waywiththe
recent publication ofnewproposals bytheCommission (Box III.1).65In1996, block exemptions
63Inthefields ofanti-trust andState aid,alarge partofthisincrease isduetotheaccession ofthree new
Member States totheCommunity on1January 1995.
64Such concerns arealready addressed bythecurrent legislative framework (Article 90(2)oftheTreaty).
Where certain restrictions ofcompetition prove essential inmaintaining auniversal service, theCommission
recognizes thelegitimacy ofthese restrictions under Community law(European Commission, 1995b).
65InitsGreenPaperonverticalrestraints,theCommissionpresentedfourpolicyoptionsforblockexemptions:
(a)thestatus quo(i.e.maintenance ofthecurrent system); (b)thewidening ofblock exemptions toincrease
flexibility (forexample, more flexibility would apply tothespecial arrangements forbeerandpetrol); (c)the
(continued...)WT/TPR/S/30
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coveringexclusivepurchasinganddistributionforbeer,petrolandcosmetics,andforcars,wereextended
until1999(Chapter IV(3)(ii)(c)). Suchblock exemptions -which remain oneofthemajor exceptions
totheSingle Market -havefrequently beencriticized, ontheonehandforbeing extensively regulatory
andontheotherforperpetuatingmonopolisticstructuresandbarrierstomarketentry.66TheCommission
hasstated thatitspriority istotakeresolute action against business practices thatprevent parallel imports
andprevent consumers from taking advantage ofprice differences between Member States.
BoxIII.1: Block exemption regulations under ECcompetition law
Thegeneral competition rules applicable tovertical restraints arecontained inRome Treaty Article 85.
TheArticle forbids agreements which mayaffect trade andrestrict ordistort competition (Article 85(1)).
Such agreements arenullandvoid under EUcompetition law(Article 85(2)) unless exempted under
Article 85(3). Tobeexempted, anagreement should noteliminate competition andshould produce net
economic benefits fortheCommunity (i.e. thereduction incompetition must beoutweighed byother
economic gains).
TheCommission isresponsible forthegranting ofexemptions, under theconditions specified byeach
regulation. Given thenumber ofindividual demands (more than30,000 notifications intheearly 1960s),
theapproach of"block exemptions" forcertain sectors and/or categories ofarrangements wastaken.
Block exemptions regulations define certain categories ofagreements complying withArticle 85(3) and
specify alistofconditions tobefulfilled tobenefit from theexemption (types ofrestrictive clauses that
areexempted, clauses thatshould notbeincluded).
Over time, three main types ofdistribution systems have been covered byblock exemptions: exclusive
distribution, exclusive purchasing (including special provisions forbeer andfuels) andfranchising. A
fourth type, selective distribution, maybesubject toexemptions butdecisions aretaken onanindividual
basis, notunder block exemptions. Sector-specific regulations provide fortheapplication ofcompetition
rules, subject tocertain block exemptions forspecified forms oftechnical cooperation orarrangement
(liner conferences inmaritime transport, jointcapacity planning orairport slotallocation inairtransport).
According totheCommission, while theblock exemptions provide legal certainty forfirms bysetting out
thetypes ofdistribution arrangements automatically exempted under Article 85(3), theydonotpermit any
form ofabsolute territorial protection. Impediments toparallel trade areconsidered toinfringe
competition rules andarenormally punished byfines.
Source: WTO Secretariat onthebasis ofEuropean Commission (1997g).
93. Theglobalization oftheworld economy poses newchallenges forcompetition authorities.
Therapid development ofcross-border mergers, acquisitions andstrategic alliances hasraised theneed
toaddress private anti-competitive practices attheinternational level, butatthesame time, tolimit
thecosts ofcompliance withdifferent national legislations forfirms operating worldwide. Problems
ofnational competence bothwithin theCommunity (asintheBritish Airways-American Airlines case)
65(...continued)
granting ofexemptions onlytocompanies withminority market shares (under 40percent) toprevent vertical
restraint, when coupled withstrong market power, from being anti-competitive; and(d)tomake exemptions
automatic onlyforthesmaller companies (with market share under 20percent) (European Commission, 1997g).
66SeeGATT (1991); andEuropean Report, 8January 1997.European Union WT/TPR/S/30
Page 71
orbetween theEUandother countries (theBoeing-Airbus case), reflect thevariety ofinterests involved
inlarge international operations.67
94. TheEUhastherefore beenseeking todevelop international co-operation. Bilateral negotiations
opened in1996withtheUnited States tocomplement anddeepen the1991Agreement onCooperation
inCompetition Policy.68Afirstpreliminary agreement strengthening theapplication ofthe"positive
comity" principle intheenforcement oftheircompetition lawswasfound inearly 1997; however,
theagreement willnotapply tomergers. TheEUhasargued onmany occasions infavour ofthe
development ofacompetition policy framework atthemultilateral level, which could reduce theuse
oftrade policy instruments. Building onitsexperience atthenational andregional levels, theEU
expressed strong support attheWTO Ministerial Conference inSingapore fortheestablishment of
awork programme aimed atclarifying theconnections between trade andcompetition policy
(Chapter II(6)(i)). TheEuropean Union andMember States, likeother WTO Members, havemade
substantial proposals forthework oftheWorking Group ontheInteraction between Trade and
Competition Policy.
(ii) Competition, deregulation andprivatization
95. Since the1995 Trade Policy Review, theopening ofservices sectors tocompetition, already
welladvanced inairtransport, telecommunications, andfinancial services, hasbeengradually extended
toelectricity, gasandpostal services, albeit insome caseswithlongphase-in periods (Chapter IV(4)(i)).
Theliberalization oftraditionally monopolized markets hasbeen accompanied byamovement of
privatization ofpublic utilities. Thelargest operations tookplace inGermany, France, theUnited
Kingdom andItaly, concerning telecommunications monopolies, inpreparation forfullliberalization
ofEUandworld markets in1998. Anewprivatization programme hasbeenadopted inSpain with
alarge spectrum ofpublic enterprises tobesoldin1997 and1998 suchasRepsol (oil), Eudesa
(electricity)andTelefonica(telecommunications).Themainflotationssince1995wereDeutscheTelecom
(Germany); ElfAcquitaine, Renault, Usinor-Sacilor, Bull,Pechiney, AGF(France); British Gasand
British Rail(United Kingdom); andStetandAutostrade (Italy).
67IntheBT-MCI case, theCommission changed itsmethodology fordetermining whether thecompanies
fellunderEUcontrol.Inthepast,onlythosetelecommunicationrevenuesbilledintheEUweretakenintoaccount,
sothatmostforeigntelecommunicationscarrierswereexemptfromEUmergerrules.InthecontextoftheBT-MCI
decision, however, theCommission decided toapply awider criterion, under which alltelephone callsoriginating
intheEUwould count asEUrevenue. IntheBoeing-McDonnell Douglas case, theCommission finally endorsed
themergerafterBoeingaccep tedcertainconditions(suchasnotconcludingpre-suppliercontractswithcommer cial
airlines ornotenforcing existing exclusivity provisions insupply contracts withother airlines, etc.).
68The1991 bilateral agreement provides for:(a)thenotification ofcases by(andto)eachcountry forcases
ofcommon interest, andexchanges ofinformation; (b)co-ordination andco-operation inenforcement actions;
(c)a"traditional comity" providing fortheconsideration oftheother country 'sinterest when onecountry enforces
itscompetition rules; and(d)a"positive comity" providing forthepossibility toinvite theother country totake
action onitsterritory against practices thataffect it.WT/TPR/S/30
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(iii) Subsidies (State aid)
(a) General framework
96. TheCommission reviews andmonitors StateaidintheCommunity onthebasisofArticle 92
oftheTreaty ofRome. Agriculture (Article 42),transport (Article 77)andcoalandsteel(Article
95oftheECSC Treaty) aresubject tospecific provisions.69Inapplication ofArticle 92,secondary
legislationorguidelinesspecifytheconditionsforgrantingaidinvarioussectors(shipbuilding,man-made
fibres, motor vehicles, andmore recently certain services) andforcertain categories (regional aid,
andaidtoresearch anddevelopment). Overall, thesystem ischaracterized byacertain degree of
complexity anddifferentiation among economic activities, which itself reflects thelarge number and
widevariety ofaidprogrammes available intheCommunity. Inadatabase recently created forits
corporate customers (Eurexpert), theBanque Nationale deParis hasenumerated more than7,000 aid
programmes accessible toEUenterprises (1,400 inFrance and800inGermany).70
97. Thelatest available Community statistics show anincrease inStateaidgranted in1992-94 over
1990-92 (ECU 97billion asagainst 94billion), interrupting thegradual downward trend observed in
thepast(Chart III.3).71While partly reflecting thecostofGerman reunification anddifficult economic
conditions, theCommission considered thisincrease asa"stepinthewrong direction" anda"tendency
disturbing theproper working oftheSingle Market".72Aidtoindustry continued toaccount fornearly
halfoftotalassistance (ayearly average ofECU 43billion in1992-94) andtended tobeconcentrated
inthelarger Member States (Germany, France andItaly). Stateaidperworker wasrelatively intense
inGermany, Italy, Ireland, Belgium andFrance. TheUnited Kingdom ranked lowest withlessthan
ECU 300perworker andperyearandonly3percentoftotalaiddistributed toindustry inthe
Community.
98. Theincrease inStateaidhasbeenaccompanied byarapid riseinthenumber ofnotifications
totheCommission andanincreasing complexity ofcases. In1995, theCommission services handled
1,279 cases; upto2,000 cases were pending atanyonetime.73Special taskforces orexternal
consultants were needed insome high-profile cases tohandle sophisticated aidorrescue packages.
Thus, onesignificant development inrecent years hasbeenanincrease inaidgranted toindividual
firms, falling outside schemes promoting horizontal, sectoral orregional objectives. Itfollows that
alimited number ofindividual cases areresponsible foradisproportionate partoftotalaidgranted.
69Article 92setstheprinciple ofageneral banonaidintheCommunity (Article 92(1))butprovides for
possible exemptions. Article 92(2)details thecategories ofaidbenefiting from automatic exemption (aidlinked
tonatural disasters, social aid,andaidforcertain regions inGermany after thereunification ofthecountry)
while Article 92(3)setsalistofconditional exemptions (regional aid,aidtopoorareas, aidforEuropean projects,
aidtoculture) andallows forother forms ofaidshould theCouncil decide. Inaddition tosuch exemptions,
Article 90(2)oftheTreaty provides forexemptions forsubsidies granted topublic enterprises operating services
of"general economic interest".
70LeMonde of26April 1997.
71European Commission (1997h).
72Europe, 23January 1997.
73Preliminary datafor1996, which donotcover agriculture, fisheries, transport andcoal, show 553new
aidnotifications plus91cases ofaidnotnotified.European Union WT/TPR/S/30
Page 73
Theshare ofsuch"adhoc"aidintotalaidtoEuropean industry increased from 7percentin1990
to36percentin1994. Itconsists inthemain ofaidgranted fortherescue andrestructuring of
companies, together withaidgranted bytheTrenhandanstalt WTO (1995).
WT/TPR/S/30
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99. Anotherdevelopmenthasbeenthegrowthofaidgrantedbylocalauthoritieswhicharecompeting
toattract enterprises (giving risetodoubts about thenetbenefits ofsuchprogrammes). Resource
constraints intheCommission andfailure oflocalauthorities tonotify havelimited Community control
inthisarea.74Aidmeasures often combine taxincentives, investment grants, interest relief measures,
loanguarantees andvarious other facilities fortheestablishment andfinancing ofjobcreation. Arecent
survey bytheFrench Court ofAuditors onaidprovided byFrench localauthorities indicates thatsuch
aidinFrance alone mayhaveamounted toabout F15billion in1993.75
100. AttheEuropean Council inDublin (December 1996) theIrishPresidency presented proposals
aimed atimproving thetransparency ofStateaidreviews, suchasthecreation ofnational openregisters
onaid,orthepublication ofasimple, aidrule-book, andallowing theCommunity tofocus better on
themaincases. TheCommission isconsidering making aproposal foraregulation allowing ittoexempt
certainaidfromnotificationobligations,soastofreeresourcesfortheexaminationofthemoreimportant
cases. Atthesame time, itvowed totakeatougher stance onState aid,inparticular aidgranted to
individual firms ordirectly targeted atindividual sectors; thenumber ofnegative decisions taken by
theCommission hadalready increased from 9in1995 to23during 1996.
101. Since 1995 theCommunity anditsMember States have provided totheWTO detailed
notifications oftheirsubsidies programmes under Article XVI.1 ofGATT 1994andArticle 25ofthe
WTO Agreement onSubsidies andCountervailing Measures. TheEU'smost recent notification, a
670-page document updating thenotification submitted in1996, describes more than500Community,
national, regional andlocalsupport schemes. Details areprovided ontheobjectives, duration, form
ofaid,budgetary costandother relevant information foreach individual scheme described.76
Notifications, however, varyinvolume anddetail among Member States, andtherefore cannot befully
usedforcomparison norforestimation oftotalaid.77According totheCommission, theCommunity
isactively pursuing greater transparency inmatters ofState aidattheworld levelandhasprovided
lengthy written responses toquestions posed byother WTO Members regarding itsnotifications.78
(b) Industry-specific rules
102. Sector-specific rulesandguidelines applying tosteel, coal,synthetic fibres, shipbuilding, motor
vehicles andtransport areunder constant examination, andseveral haveundergone changes since the
previous Trade Policy Review. Thus, theCouncil hasadopted newrulesonStateaidtothesteelindustry
toreplace theFifthSteelAidCode, which expired attheendof1996. ThenewCode willapply until
74Allsubsidies programmes exceeding ECU 100,000 must benotified totheCommission. Many local
programmes arenotnotified either because ofinsufficient awareness ofnotification obligations oruncertainty
about thelegal status ofsuchprogrammes ("indirect aid"isrecognized andpermitted insome Member States
while itisneither recognized notpermitted under EUlaw)(Cour desComptes ,1996).
75Cour desComptes ,1996.
76WTO document G/SCM/N/16/EEC, 2April 1997.
77Elements forsuchcomparisons canalready beshown from theCommission 'sannual survey onState Aid,
referred toabove.
78Statement made inthecontext ofthisreview. With regard totransparency, theCommission emphasizes
thatitistheonlytrading group having acentral aidcontrol authority, andthatitregularly publishes detailed
information onState aid.European Union WT/TPR/S/30
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expiry oftheECSC Treaty in2002, afterwhich thesteelindustry willbesubject tothegeneral rules
governing State aidintheCommunity. Animportant feature ofthenewCode isthepossibility of
granting aid,under certain conditions, forthepartial closure ofanundertaking which ispartofalarger
group, while under theprevious Code aidcould onlybegranted fortotalclosure. Unlike theprevious
Code, however, theCommission maynowrequest thesuspension ofthedisbursement ofanyfinancial
means untilapproval isgiven bytheCommission. Under thenewcode, regional aidwould belimited
toGreece (until theendofyear2000) andwithin atotalvalue ofECU 50million.
103. There havebeennochanges tothenewState aidrules forECSC coalproducts, which were
described indetail intheSecretariat report fortheprevious review. They willapply untiltheexpiry
oftheECSC Treaty on2002.
104. TheSeventh Directive onaidtoshipbuilding wasextended until31December 1997byCouncil
Regulation 1904/96, pending fullratification byOECD Members ofthenewAgreement Respecting
Normal Competitive Conditions intheCommercial Shipbuilding andRepair Industry. TheDirective,
which hasbeeninforce since January 1991, allows atpresent amaximum levelofproduction aidof
9percentforships forwhich contract value isabove ECU 10million and4.5percentunder thislimit
(forsmall ships andconversions). Specific aidforresearch anddevelopment andforclosures and
investment isauthorized under certain conditions. Thederogation applying toshipyards intheformer
GDR wasphased outattheendof1995.
105. AnewCode governing State aidtothesynthetic fibres industry entered intoforce on
1April1996.While,undertheoldCode,authorizationofinvestmentaidwascontingentonasignificant
reduction incapacity, thenewCode adopts amore flexible approach bytaking greater account ofthe
marketsituation,theproductsconcerned,andprovidesformoregeneroussupporttosmallandinnovative
companies. However, forlarger firms investment aidmayonlybeauthorized atupto50percent
oftheapplicable aidceiling. Thenewrules aredescribed further inChapter IV(3)(ii)(a).
106. There havebeennomajor changes totheCommunity framework governing aidtothemotor
vehicle industry sincetheprevious review.79There arenotification requirements foranyaidexceeding
ECU 17million andyearly reporting requirements fortotalaid.Forcases involving regional aid,
theCommission hasdeveloped acost-benefit analysis method toassess thejustification ofparticular
projects ineligible areas.80Aidprovided forrestructuring inthissector, asinothers, iscontingent
oncapacity reductions. Aconflict arose recently between theCommission andtheGerman State of
Saxony overaidusedtoincrease theproduction capacities oftheVolkswagen company. Following
anegative decision fromtheCommission andanorder torepay partofthesubsidy, theStateofSaxony
decided in1996 tobring thecasetotheEuropean Court ofJustice.
107. Certainservicessectors,inparticularthosewhereStateinvolvementandsupporthastraditionally
beenhigh, aresubject tospecific guidelines. TheCommission putinplace asetofrulesforairtransport
services in1994, following thereport ofagroup of"wise men" in1992 andtheinjection oflarge
79Slightly updated inJanuary 1996, theFramework onState AidintheMotor Vehicle Industry isvalid until
end-1997.
80Most aidreceived bycarcompanies intheCommunity isregional aidoncarinvestment. Initscost-benefit
analysis, theCommission weighs thebenefit oftheaidfortheregion against thepossible negative effect onthe
industry asawhole. TheCommission hasplanned areview ofthemotor-vehicle framework andrequested an
independent study onitseffectiveness.WT/TPR/S/30
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subsidies insome mainEuropean carriers intheperiod 1991-94.81Under thenewguidelines in1996,
theCommission cleared aPtas87billion rescue planforIberia, butrejected aproposed Lit1,500 billion
capital injection intoAlitalia. Commission guidelines fortheexamination ofStateaidtoCommunity
shipping lineshaverecently beenadopted.82
108. Until December 1995, aidprogrammes forresearch anddevelopment were assessed bythe
Commission onacase-by-case basis. However, themultiplication ofthese programmes andgrowing
expenditure inMember States haveledtheCommunity toadopt aCommunity framework onState
aidforresearch anddevelopment, fixing ceilings of75percentonState aidforindustrial research
and50percentfor"precompetitive development" irrespective ofthesector concerned.83The
Commission laterincreased thepercentage applying toagriculture to100percent,oncertain conditions,
inlinewiththerules thatapplied previously inthissector.
(c) EUschemes
109. Thetwolargest sources ofsubsidy expenditure attheCommunity level aretheCommon
Agricultural Policy andtheStructural Funds, which accounted in1995 for50.4percentand
31.7percentoffinancial commitments intheEUbudget, respectively, asagainst 49.3and30.5percent
in1994. Theother major areas ofspending areCommunity aidtothecoalindustry (7.5percentof
totalEUbudget expenditures), andresearch anddevelopment (3.8percent).
Structural policies
110. TheCommunitystructuralpoliciesareaimedatreducingeconomicandsocialdisparitiesbetween
thevarious regions oftheEU,inparticular byproviding financial support todevelopment projects
intheleast-favoured areas. Thelarge majority offunding isallocated toinfrastructure projects or
toindividuals directly and,according totheCommission, doesnotnecessarily benefit commercial
enterprises.84Structural actions mustconform totheprovisions ofRome Treaty Article 92onState
aid.
111. Structural actions arefinanced bythreeStructural Funds (theEuropean Regional Development
Fund (ERDF), European Social Fund (ESF) andEuropean Agricultural Guidance andGuarantee,
Guidance Section (EAGGF)) andtheCohesion Fund. Abudget ofECU 157billion hasbeenallocated
81Large State subsidies were granted from 1991 to1994 toSabena, AirFrance, Olympic Airways, TAP,
AirLingus andLufthansa.
82TheCommunity framework onState aidtothetransport sector hascome under criticism intherecent years.
Inview oftheincreasing level ofmarket deregulation (inparticular, inairtransport), market participants have
voiced concerns about thepotentially negative effects ofState aidforthegrowing number ofcompetitors. In
spiteofthe"one time, lasttime" principle, theycriticize thepersistence ofState aidawarded tovarious airlines
(Iberia, AerLingus, AirFrance, Olympic, Alitalia). In1995-96, more than100cases ofState aidwereexamined
bytheCommission inthetransport sector. Some 70complaints ofthird parties being unable togainaccess to
theCommission during theprocedures arepending inECJ(European Report, 1February 1997).
83TheCommission states thatthese aretheoretical maxima; inpractice levels of50and25percentare
generally applied.
84Statement made inthecontext theEUsubsidies notification (WTO document G/SCM/N/16/EEC,
2April 1997).European Union WT/TPR/S/30
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tothethree structural funds fortheperiod 1994-99.85They areaimed atfulfilling specific objectives,
namelydevelopingandfavouringstructuraladjustmentinbackwardregions(61percentofexpenditures),
industrialrestructuringincertainregions(10percent),combattinglong-termunemployment(8percent),
facilitating theadaptation andreconversion ofworkers (1.5percent), speeding upstructural adjustment
inagriculture andfisheries (4.5percent), helping thediversification ofruralareas (4.5percent), and
supporting regions withlowpopulation density inNordic countries (0.5percent). Allprojects funded
bytheCommunity under theStructural Funds areco-financed bytheMember States.
112. TheCohesion Fund contributes essentially tothefinancing ofenvironmental andtransport
infrastructure projects inMember States whose GDPislessthan90percentoftheEUaverage (Greece,
Ireland, Portugal andSpain). Ithasatotalbudget ofECU 14.5billion fortheperiod 1994-99. In
itsfirstCohesion Report, theCommission provides anassessment oftheimpact ofregional aidon
income distribution inEurope. According tothereport, there hasbeenanarrowing oftheincome
gapbetween therichest andpoorest Member States intheEuropean Union. Greece, Spain, Portugal,
andIreland haveraised theircapita income from66percentoftheEUaverage in1983to76percent
in1995. Atthesame time, thereport points outgrowing disparities between regions inindividual
Member States. Further details areprovided inBoxIII.2.
Community programmes forresearch anddevelopment
113. Research anddevelopment activities areoneofthepriorities ofCommunity action, drawing
upto60percentoftheresources available forEUinternal policies other thanCAP andstructural
spending. AtotalofECU 9.4billion hasbeengranted forthefinancing oftheCommunity 'sFourth
FrameworkProgrammeinthefieldofResearchandTechnologicalDevelopmentfortheperiod1994-98.86
Priority areas include information andindustrial technologies, lifesciences, environment, energy and
transport. Theobjective oftheEUpolicy inthisareaistohelpmaintain alevelofresearch comparable
toitsmaintrading partners. According totheCommission 'sfigures, EUspending onR&D accounted
for2percentofitsGDP in1995, while theUnited States spent 2.5percentandJapan 3percent.
114. InterestforEU-financedprojectsisgrowingwithintheCommunity.In1996,6,395newprojects
wereapprovedundertheFourthFramework,involving25,278participantsandsharingtotalEUfinancing
ofalmostECU3billion.IndustriesaretakinganincreasingparticipationinEUprojectswith44percent
ofallfinancing in1995 asagainst 38percentin1994. Theaverage profile ofaproject withshared
costswould entail anEUcontribution ofabout ECU0.7million, andtheinvolvement ofthreeMember
States andfourorfiveparticipants.
115. TheCommission iscurrently considering future priorities fortheFifthFramework Programme,
covering theperiod 1999-2002. Inarecent Communication, itoutlined sixpriorities covering three
sector-specific areas (living resources, information society, andenvironment) andthreemulti-sectoral
fields (international cooperation, human training, innovation ofSMEs).
85TheStructural Funds include alsoasmaller programme, theFinancial Instrument forFisheries Guidance
(FIFG), which assists therestructuring ofthefisheries sector. Structural Funds have been thefastest-growing
Community programmes inrecent years, from abudget ofECU 18billion in1992 toaplanned budget ofECU
31billion in1999 (at1992 prices).
86That envelope canbeexpanded bytheCouncil andtheParliament toECU 11.6billion, andarequest for
afinancial supplement wassubmitted bytheCommission totheCouncil attheendof1996.WT/TPR/S/30
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BoxIII.2: Main findings oftheCommission 'sCohesion Report
Thereport contains extensive economic indicators andstatistics onincome distribution, growth rates and
employment intheEuropean Union. Figures show, forexample, thatin1995 thepercapita income in
Belgium, Denmark, Luxembourg andAustria, thefourrichest Member States, was10percentormore
above theEUaverage, followed byasecond group ofcountries comprising Germany, France, Italy and
theNetherlands, alsoabove theEUaverage. Income percapita inathird group ofcountries, theUnited
Kingdom, Sweden andFinland wasaround orslightly under theEUaverage.
Thefour cohesion countries, Greece, Ireland, Portugal andSpain, while remaining below theEU
average, have improved their relative situation over thelastdecade. Thegapbetween them andother
Member States hasbeen cutbyafifth since 1983 andtheir average percapita income reached
three-quarters oftheEUaverage in1995, compared withtwothirds in1983. However, thefigures show
wide differences between these four countries. With annual GDP growth rates regularly above
5percent, Ireland 'spercapita income hasexperienced thefastest increase, from 64percentoftheEU's
average in1993 to89.9 percentin1996. Percapita income inSpain andPortugal hasalsogrown
significantly, from 70.5 to76.2 percentandfrom 55.1 to68.4 percent, respectively. Greece hadthe
slowest income growth over theperiod, with again ofonly 2.4percentage points, from 61.9 to
64.3 percentoftheEUaverage.
Thereport stresses alsothatunequal economic development between regions hasdeepened income
disparities within individual countries. Several examples taken from Germany, theUnited Kingdom and
Portugal show awidening ofincome gaps between therichest andpoorest regions.
Theunemployment situation alsovaries widely within theCommunity, withrates ranging from 2.6and
4.1percentinLuxembourg andAustria to23percentinSpain. Thereport states thatin1995, the
EU's25regions most affected byunemployment hadanaverage rateof22.4 percent, more thanfour
times theaverage ofthe25least-affected regions where theratewas5.4percent.
TheCommission estimates thatEUstructural aidfortheperiod 1989-93 ledtoanadditional growth of
0.5percentperyearinthefourcohesion countries, taking their average GDP growth ratefrom 1.7to
2.2percent. Some 500,000 jobswere created (orpreserved).
Source: WTO Secretariat based onCommission publications.
(iv) Intellectual property protection
(a) Recent developments
116. Recent legislative changes attheEUlevelinclude thecreation ofasupplementary protection
certificate forplantprotection products (Council Regulation 1619/96 of23July1996) and,inthefield
ofcopyrights, theadoption ofanewDirective onthelegalprotection ofdatabases (Council Directive
96/9of27March 1996). Several Commission proposals arepending before theCouncil ortheEuropean
Parliament: twoconcern trademarks (allowing theCommunity eventually tojointheMadrid Protocol
andtoestablish alinkbetween theCommunity trade mark system andthatoftheWIPO), andone
concerns thelegalprotection ofdesign (Chapter IV(3)(ii)(c)).87Inthefieldoftrademarks, oneimportant
development hasbeenthestartofoperations on1April 1996 oftheOffice forHarmonization inthe
87TheCommission'stwoproposalsincludeadraftRegulationconfirmingtheaccessionoftheEUtotheProtocol
RelatingtotheMadridAgreemen tconcerningtheInternationalRegistrationofMarks;andaproposedmodification
toCouncil Regulation 40/94 onCommunity trade marks.European Union WT/TPR/S/30
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Internal Market, located inAlicante, Spain, which administers theCommunity trade mark system.
Todate, ithasreceived more than45,000 applications.
117. IntellectualpropertyrightsarealsoanimportantareaintheimplementationoftheSingleMarket.
Theharmonization ofMember States 'legislation hasbeenundertaken forcertain intellectual property
rights, including mainly, semiconductor layouts, computer software, rental andlending rights,
communication bysatellite andcable re-transmissions, terms ofprotection, databases andtrademarks.
Patents havenotbeenharmonized byEUlawsbutthrough accession byallEUMember States tothe
European Patent Convention (1973).88Controversy overcertain aspects oftheproposed Directive
forthelegalprotection ofdesigns hassofardelayed harmonization inthisarea.89AllMember States
haveimplemented theDirectives onsemiconductors, computer software andtrade marks. Forother
Directives, transposition ratesvarybetween twothirds andthreequarters. Recent efforts byMember
States toimplement EUlegislation andimprove enforcement atthenational level arelikely tohelp
reduce piracy incertain sensitive fields ofcopyrights.90
118. Under EUlaw,customs services intheMember States areentitled toseizeinfringing imports
uponrequest inwriting bytheowner oftheintellectual property rightorex-officio, where, inthecourse
ofchecks made byoneofthecustoms procedures, itisevident thatgoods arecounterfeited orpirated
(Council Regulation 3295/94).
119. Inaccordance withtheTRIPS Agreement, theCommunity anditsMember States havenotified
IPRlegislation totheWTO. Themain applicable legislation attheEUlevel, asnotified, islisted in
Table III.5).
(b) Provisions governing parallel imports
120. Parallel imports ofgoods containing industrial property rights within theterritory ofthe
Community andtheEEA ("Community exhaustion") areallowed byEUlaw(trade marks and-in
draftform-industrial designs) orrecognized bythejurisprudence oftheECJ(patents andcopyrights).
However, Community lawexcludes either explicitly orimplicitly anyapplication oftheprinciple of
international (orglobal) exhaustion withregard toparallel importation from thirdcountries intothe
88In1997 theCommission published aGreen Paper onsimplifying theEuropean patent system. Consultations
withindustry andgovernments aretaking place toevaluate theneed toreplace theEuropean Patent Convention
byCommunity legislation. Thenewsystem would enable firms tofileonly onepatent application forthe
Community asawhole. Thepresent system isoften described ascostly andcomplex. According totheEuropean
Chemical Industry Council, filing andmaintaining apatent ineight Member States would costabout tentimes
asmuch asintheUnited States (Financial Times, 26June 1997).
89TheCommission'sproposal,introducedin1993,containedadraftDirectiveprovidingfortheharmonization
ofdesign protection together withadraftRegulation foraCommunity design pursuant towhich adesign would
qualifyforprotectionthroughouttheEUthroughasingleregistrationataCommunityDesignOffice.Ascurrently
drafted, theDirective would provide protection forupto25years forregistered industrial designs. The"repair
clause" ofthedraft Directive, which would have allowed carspare-parts manufacturers tocopy visible spare
parts upon payment ofa"fair andreasonable" remuneration ofthemanufacturer andwould, after three years,
have totally eliminated IPRprotection onthese parts, wasrejected inlate1996 byamajority intheCouncil.
90Some EUtrading partners havereported inthepasthigh(although declining) levels ofcomputer software,
television orvideo piracy incountries suchasItaly, Greece andSpain (USTR, 1996, National Trade Estimate,
European Union, Washington D.C).WT/TPR/S/30
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Community.91Totheextent thatharmonization fortheprotection ofcomputer software, rental and
lending rights anddatabases hasbeenachieved between theMember States, parallel imports intothe
Community ofthesubject matter maybeprevented bytheowner oftherights.
Table III.5
Main applicable EUlegislation bymain category ofintellectual property rights
Copyright
andrelated
rightsDirective 250/91 of14May1991 onthelegal protection ofcomputer programmes.
Directive 100/92 of19November 1992 onrental rights andlending rights andoncertain rights related to
copyright inthefieldofintellectual property.
Directive 83/93 of27September 1993 onthecoordination ofcertain rules concerning copyright andrights
related tocopyright applicable tosatellite broadcasting andcable retransmissions.
Directive 98/93 of29October 1993, harmonizing thetermofprotection ofcopyright andcertain related rights.
Directive 9/96of11March 1996 onthelegal protection ofdatabases.
Trademarks
andrelated
rightsDirective 104/89 of21December 1988 toapproximate thelawsoftheMember States relating totrade marks.
Commission Regulation 2868/95 of13December 1995, implementing Council Regulation 40/94 onthe
Community trademark.
Commission Regulation 2869/95 of13December 1995 onthefeespayable totheOffice forHarmonization inthe
Internal Market (Trademarks andDesigns).
Geographical
indicationsRegulation 2081/92 of14July1992 ontheprotection ofgeographical indications anddesignations oforigin for
agricultural products andfoodstuffs (and several regulations regarding geographical indications forwines, spirits
andother products).
Industrial
designCommission Regulation 2869/95 of13December 1995 onthefeespayable totheOffice forHarmonization inthe
Internal Market (Trademarks andDesigns)
Patents and
related rightsAgreement 695/89 of15December 1989 onCommunity Patents.
Regulation 1768/92 of18June1992 onthesupplementary protection certificate formedicinal products.
Regulation 2100/94 of27July1994 onCommunity plant variety rights, amended byRegulation 2506/95 of
25October 1995
Topographies
ofintegrated
circuitsDirective 54/87 of16December 1986 onthelegal protection oftopographies ofsemiconductor products.
Decision 520/90 of9October 1990 ontheextension ofthelegal protection oftopographies ofsemiconductor
products topersons from certain countries andterritories, amended byDecision 93/17 of21December 1992.
Decision 824/94 of22December 1994 ontheextension ofthelegalprotection oftopographies ofsemiconductor
products topersons from aMember country oftheWTO.
Other Regulation 3378/94 of22December 1994, following theUruguay Round ofMultilateral Trade Negotiations.
Regulation 3295/94 of22December 1994, laying down measures toprohibit therelease forfreecirculation,
export, re-export orentry forasuspensive procedure ofcounterfeit andpirated goods.
Commission Regulation 1367/95 of16June 1995, laying down provisions fortheimplementation ofCouncil
Regulation 3295/94.
Source: WTO Secretariat onthebasis ofEUnotifications.
91TheECJisexpected toruleshortly onthequestion ofwhether theTrade Marks Directive allows Member
States theoption ofextending EEA-wide exhaustion tointernational exhaustion (ECJ case355/96, Silhouette ).European Union WT/TPR/S/30
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(c) Anti-competitive practices
121. Anti-competitive practices incontractual licences having effect intheMember States are
controlled bynational competition authorities, while those affecting intra-EU trade liewith the
Commission. Inearly 1996, theCommission introduced anewBlock Exemption Regulation under
Treaty Article 85(3)toregulate agreements andconcerted practices which include restrictions regarding
theacquisition ortheuseofIPR(notably patents, designs, trademarks, utility model, etc.).
(d) Reciprocity provisions andIPRprovisions inpreferential agreements
122. There arenoDirectives intheareaofindustrial property which contain reciprocity provisions
forthirdparties, butinthefieldofcopyrights, theDirectives onsemiconductor layouts, communication
bycable andsatellite re-transmissions, anddatabases contain suchclauses.
123. Several types ofEUpreferential tradeagreements contain general commitments fortherespect
ofIPR,inparticular theEurope Agreements andEuro-Mediterranean Agreements.