European Union WT/TPR/S/102
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II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(1) GENERAL FRAMEWORK
(i) Overview1
1. The 1993 Treaty on European Union (EU Treaty), amended in 1999 by the Treaty of
Amsterdam, bases the Union on three "Pillars":  Pillar One is the European Communities (EC), the
European Coal and Steel Community (ECSC)2, and the European Atomic Energy Community
(EAEC);  Pillar Two is foreign policy and security; and Pillar Three is justice and home affairs.3  
Pillar One includes Economic and Monetary Union (EMU).4
2. The Intergovernmental Conference (IGC) of 2000 was concluded by the Treaty of Nice,
agreed by the European Council in December 2000 and signed on 26 February 2001.5  Entry into
force requires ratification by all Member States, of which ten (Austria, Denmark, Finland, France,Germany, Luxembourg, Netherlands, Portugal, Spain, and Sweden) had deposited their instruments of
ratification as of 1 May 2002;  Ireland’s referendum on 7 June 2001 had a negative outcome.
6
3. The Treaty of Nice (once ratified) will amend the existing treaties to prepare EU institutions
for enlargement.  It will also change, completely or partly, 27 provisions of the EC Treaty from
unanimity to qualified majority vote (QMV) in the Council.7  Of particular interest to WTO Members
is the shift to QMV for Commission proposals for the negotiation and conclusion of international
agreements on services (with certain exceptions) and the commercial aspects of intellectual property
rights.  Progress on QMV in qualitative terms, however, was considered to be disappointing; the
Commission’s President noted that "little or no progress was made on cohesion, tax regulation and
social regulation, all areas in which the Conference came up against the intransigence of some
Member States".8  The Treaty also provides for "a deeper and wider debate about the future of the
European Union"9, which was formally opened in March 2002 by the Convention on Europe, to
provide the basis for the IGC of 2004.10
(ii) Institutional framework
4. There have been no changes in the EU's instit utional framework related to trade policy during
the period under review.  The European Council gives political direction to the European Union.  The
Commission has the exclusive right of initiative for proposed Community Acts, which may consist of:
regulations, binding and directly applicable in all Member States; directives, which requiretransposition into Member State law and practice (e.g., Internal Market legislation); decisions, binding
upon the Member State/person to whom they are addressed; and recommendations and opinions,
which have no binding force.  Depending on the type of decision and the area covered, decisions are
taken by the Commission, or by the Council, or by  the Council and European Parliament through co-
decision.  Depending on the treaty provision, the Council decides by simple majority, qualified
                                                     
1 European Commission (2001).
2 The ECSC Treaty will expire on 23 July 2002, 50 years after it laid the foundation of the Community.
3 European Communities (1997).
4 Twelve Member States comprised the euro area as of 1 January 2002.  Denmark and the United
Kingdom have an opt-out clause for Stage Three of EMU, while Sweden does not fulfil the convergence criteria.
5 OJ C 80, 10/3/2001.
6 European Union online information.  Available at:  http://europa.eu.int/comm/nice_treaty
[1 May 2002].
7 SEC(2001)99.
8 European Commission SPEECH/00/499.
9 Treaty of Nice "Declaration on the Future of the Union", (OJ C OJ C 80, 10/3/2001, p. 85).
10 European Union online information.  Available at:  http://europa.eu.int/futurum/index_en.htm.WT/TPR/S/102 Trade Policy Review
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majority vote (QMV) or unanimity.  Decisions by the European Parliament are taken by absolute
majority of votes cast by Members (MEPs).
5. Community Acts are implemented at Community level or at Member State level, overseen by
the Commission.  The Council and/or European Parliament may delegate implementing powers to the
Commission, which then takes decisions assisted by a committee composed of Member State
representatives ( comitologie ) operating under the advisory, management, or regulatory procedure,
depending on the EC Treaty provisions that apply to the matter.11  To provide for transparency in this
area, a complete list of the 244 committees was published in 200012, and a report on their functioning
was issued in February 2002, indicating that the Commission adopted 2,838 decisions in 2000.13
6. Of the 12 independent EU agencies, three have decision-making roles to implement
regulations:  the Office of Harmonisation in the In ternal Market, the Community Plant Variety Office,
and the European Agency for the Evaluation of Medicines.  In February 2002, the European Food
Safety Agency was established to provide risk -assessment services to the Commission and to the
Member States (Chapter III(1)(viii)).  Proposals fo r the creation of two new agencies are before the
Council and the European Parliament:  a maritime safe ty agency, and an air safety agency.  Only the
latter will have decision-making powers.
7. The European Court of Justice ensures that, in the interpretation and application of the EC
Treaty, the law is observed.14  The Court of Auditors examines the revenue and expenditure accounts
of the Community to ensure the reliability of the accounts and the legality and regularity of the
underlying transactions, on which it reports annually to the European Parliament and the Council.15
8. Citizens may enforce their rights under Commun ity law or may complain to the European
Ombudsman.16
(iii) Transparency and public consultations
(a) Transparency
9. Publication of Community Acts is required in the Official Journal of the European
Communities  (Article 254).  The 1999 Treaty of Amsterdam created a right of access to documents of
Community institutions, subject to limits for the protection of public and private interests
(Article 255), given legislative effect in 2001.17  The new legislation continues the existing policy on
access to documents, with several improvements.  These are:  to extend the scope of the policy to
documents submitted by third parties, not just the documents produced by the institutions
themselves18;  to release a document protected by an exception if the public interest demands it;  to
establish a document register;  and reduce time limits for replies to 15 working days.  There are no
                                                     
11 Council Decision 1999/468/EC.  For a summary of comitologie see WTO (2000a), Box II.1.
12 OJ C225, 9/8/2000.
13 OJ C 37, 9/2/2002.  The report indicates that agri cultural issues account for about two thirds of the
total, and that only six were referred to the Council as a result of the Commission not obtaining the necessarymajority for adoption, indicating that "the committees’ wo rk is characterised by a high degree of consensus".
14 Court of Justice (2001).
15 Court of Auditors (2001).
16 European Ombudsman (2002).
17 Regulation 1049/2001 entered into effect on 3 December 2001 to replace the "Decision of the
European Parliament of 10 July 1997 on public access to European Parliament documents",  Council Decisions
93/730/EC and 93/731/EC, and  Commission Decision 94/90/EC.
18 Declaration 35 of the Treaty of Amsterdam permits a Member State to ask the Commission, or the
Council, to withhold communication of a document from that State to third parties without its prior agreement.European Union WT/TPR/S/102
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nationality restrictions on the natural or legal persons that are beneficiaries of the policy.19  N o
changes have been made regarding public access to deliberations;  the European Parliament holds its
sessions in public, while those of the Council and Commission are closed.
(b) Consultation
10. The Commission’s White Paper on European Governance, issued in July 2001, calls for a
renewal of the "Community Method" by involving more people and organizations in shaping anddelivering EU policy.
20  Such consultation "helps the Commission and other Institutions arbitrate
between competing claims and priorities and assists in developing a long term policy perspective".21
As from 2000, the Commission has applied a code of conduct to consultations, and intends to developmore extensive partnership arrangements.
 22
11. The Commission has created the Consultation, th e European Commission and Civil Society
(CONECCS) database, to:  (a) promote transparency on civil society organizations and consultative
mechanisms;  (b) provide a means for civil society organizations to register as potential partners for
consultation (950 are registered);  and (c) assist the Commission in identifying an appropriate mix of
partners for consultation.23  With respect to trade policy, the Commission consults regularly with
representatives of civil society, business, and trade unions through plenary meetings, issue groups,and ad hoc  meetings.
(2) E
NLARGEMENT24
12. Thirteen countries are candidates for accession to the EU;  if and when all accede, the EU's
population will increase by 45% (by 170 million), its land area by 34%, and its GDP by 7%.25  It has
been estimated that enlargement-related reforms by the ten Central and Eastern Europe countries
(CEECs) would raise their rates of GDP growth on average by up to 2% annually for a decade, while
the effect on the GDP of EU-15 was estimated at a 0.7% rise over ten years.26
13. The Copenhagen European Council of 1993 set the political and economic criteria for
accession to the EU.27  Accession negotiations have been formally launched with Bulgaria, Cyprus,
the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the
                                                     
19 In line with the institutions' transparency polic y, as from 1 January 2002, access to and consultation
of all official documents available in the EUR-Lex portal, in particular to documents published in the Official
Journal , is free of charge, irrespective of adoption or publication date, or the formats involved.
20 COM(2001)428.
21 COM(2001)428, p. 15.
22 On 1 November 2000, a new Code of Good Behaviour for relations between officials and the public
came into force which, inter alia , provides for persons with a direct interest in Commission proposals or
decisions to be allowed to make their views directly known to the Commission, and to be given the reasons onwhich the decisions are based and the arrangements for appeal (European Commission Press Release
IP/00/999).
23 European Union online information.  Available at: http://europa.eu.int/comm/civil_society/
coneccs/index_en.htm .
24 DG Enlargement (2001).
25 Eurostat News Release STAT/01/129.
26 DG Economic and Financial Affairs (2001b).
27 "Membership requires that the candidate country has achieved stability of institutions guaranteeing
democracy, the rule of law, human rights and respect for and protection of minorities, the existence of afunctioning market economy, as well as the ability to cope with competitive pressures and market forces withinthe Union, and the ability to take on the obligations of membership, including adherence to the aims of political,economic and monetary union." (DOC/97/8 of 15 July 1997).WT/TPR/S/102 Trade Policy Review
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Slovak Republic, and Slovenia;  although Turkey’s candidacy was recognized in 1999, negotiations
have not begun.  The negotiations concern the 31 chapters of the acquis communautaire  and include
requests by the candidate country for transitional periods for certain laws and rules;  reports on
progress to date were last issued in November 2001.28  The negotiating positions proposed by the
Commission for unanimous adoption by the Council have included transitional periods of five to
seven years for the free movement of workers from new Members29, and of four or five years for
access of new Members to the road haulage sector.30
14. The Gothenburg European Council in June 2001 set the objective of the candidates’
participation in the 2004 elections to the European Parliament.  The (still to be ratified) Treaty of Nice
covers institutional reform.  The Commission proposes to finance the participation of up to ten new
Member States in the major Community programmes of the Common Agricultural Policy (CAP) andstructural operations to 2006 in the context of the agreement reached at the Berlin European Council
in March 1999.
31  The Commission anticipates new expenditure of € 5.6 billion in 2004 under a
proposal issued on 30 January 2002, mainly as a result of agricultural subsidies, although access to
direct payments in newly acceding Member States would be progressive (Chapter IV(1)).
(3) COMMON COMMERCIAL POLICY
(i) Objectives
15. The broad objectives of the EU's common commercial policy have remained the same since
its last Review in mid 2000.   The common commercial policy (CCP) is established mainly under
Article 133 of the EC Treaty32, subject to the integration of environmental protection requirements, in
particular with a view to promoting sustainable development.  Its aim is "to contribute, in the common
interest, to the harmonious development of world trade, the progressive abolition of restrictions on
international trade and the lowering of customs barriers", in the context of the general aims ofeconomic policy (Chapter I(3)).
(ii) Framework
16. The framework for the CCP has not changed since the previous Review of the EU.  The
Community has exclusive competence for matters under GATT 1994 and competence is shared with
the Member States on matters under the GATS and TRIPS Agreements, although there is no strictlydelimited division of competence.
33  A pending judgement of the Court of Justice on the open-skies
agreements, concluded with the United States and challenged by the Commission, is expected to
outline the allocation of competence on air transport.34  In the WTO, the Commission speaks on
behalf of the Community, and consults actively with the Member States.
                                                     
28 European Union online information.  Available at:  http://europa.eu/int/comm/enlargement/ .
29 European Commission Press Release IP/01/561.
30 European Commission Press Release IP/01/1551.
31 European Commission Press Release IP/02/170.
32 Articles 71 and 74 of the ECSC Treaty apply to coal and steel products until the expiry of the ECSC
Treaty in 2002, when the EC Treaty will apply.
33 Court of Justice ruling 1/94, discussed in WTO (1995), Vol. 1, p. 13;  and Pescatore (1999).
34 Eight Member States are concerned:  Austria, Belgium, Denmark, Finland, Germany, Luxembourg,
Sweden, and the United Kingdom.  The context of the cases (C-466/98, C-467/98, C-468/98, C-469/98, C-
471/98, C-472/98, C-475/98, and C-476/98) was the mandate agreed on 25 July 1996 by the Council for theCommission to negotiate an agreement on a Transatlantic Common Aviation Area with the United States, butwhose realization was hampered by the agreements concluded bilaterally with the United States under its open-skies initiative launched in 1994 (European Commission Press Release IP/98/966).  Although not binding on theEuropean Union WT/TPR/S/102
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17. The Council decides on the CCP by qualified majority vote, except for definitive anti-
dumping and countervailing actions where a simple majority applies.  The negotiating directives from
the Council for the "WTO Millenium Round" rema ined the position of the EU at the Fourth
Ministerial Conference in Doha, which agreed the Doha Development Agenda (DDA).35  The assent
of the European Parliament is required for certain agreements beyond the scope of the CCP, including
the WTO, and association and cooperation agreements.  The Commission has a policy of informingand consulting the European Parliament, which regularly comments on Commission policy or
proposals.
18. Under the (still to be ratified) Treaty of Ni ce, Article 133 is to be modified to bring into
exclusive Community competence the negotiations of agreements that concern services (with certain
exceptions) and the commercial aspects of intellectual property rights.  The Commission willnegotiate such agreements under directives from the Council, which will approve the result by QMV
or by unanimity in limited instances where unanimity is required for internal decisions (the principle
of "parallelism");  the assent of the European Parliament will also be required.  In particular,
unanimity will apply to agreements that relate to trade in cultural and audiovisual services, education
services, and social and human health services.  Transport services are also to remain outside thescope of Article 133 and are governed by the applicable provisions of the EC Treaty.  According to
Commission officials, the revised Article 133 is expected to enhance the effectiveness of the EU in
the WTO and strengthen the hands of the Commission in trade negotiations.
36
(iii) Instruments
19. To achieve its main trade policy objectives, the EU continues to combine multilateral,
regional, and bilateral approaches to trade and economic relations;  a sustainability impact assessment
(SIA) is increasingly being integrated into such  instruments.  In addition to the longstanding
commitment of the Member States to the multilatera l trading system, the EU maintains an extensive
system of regional trade agreements, and preferential agreements and arrangements (Box II.1).
Imports into the EU from nine WTO Members are subject to exclusively MFN treatment in all sectors
– Australia; Canada; Chinese Taipei; Hong Kong, China; Japan; Republic of Korea; New Zealand;
Singapore; and the United States – accounting together for 45.2% of extra-EU imports in 2000.
20. In addition to policies on imports and exports (Chapter III(1) and (2)), the Community has a
market-access strategy for third-country markets.  The Market Access Database identifies barriers to
trade on third-country markets.37  The Commission also publishes annually a report on barriers to
trade and investment maintained by the United States, its most important trade and investment
partner.38  Based on this information, the Commission, after discussion with the Article 133
Committee, identifies priority barriers, which may be addressed by diplomatic or formal processes,
                                                                                                                                                                    
Court, the Opinion of the Advocate General, delivered on 31 January 2002, states that Member States may not
conclude international agreements concerning matters covered by the common rules, and proposes that the
Court of Justice should declare that the open-skies agre ements are contrary to Community law as regards fares
of United States air carriers on intra-Community routes, computerized reservation systems, and national clauses(Court of Justice Press Release 10/02).  In the light of the Opinion of the Advocate General, the Commissionanticipates renewing the negotiation (European Commission Press Release IP/02/190).
35 European Commission "Communication from the Commission to the Council and the European
Parliament on the European Union approach to the World Trade Organization Millenium Round", and
"Preparation of the Third WTO Ministerial Conference: Council Conclusions of 25 October 1999".
36 Financial Times , 5 December 2000.
37  Market Access Database [Online].  Available at:  http://mkaccdb.eu.int .
38 DG Trade (2001b).WT/TPR/S/102 Trade Policy Review
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and multilateral (e.g., WTO dispute settlement procedures or multilateral negotiations) or bilateral
approaches.
Box II.1:  Parties to regional tr ade or preferential  trade agreements with th e European Union, and
beneficiaries of EU preferential arrangements, in force as of April 2002
Europe Agreements:  Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania,
Slovakia, Slovenia
Association Agreements:  Cyprus, Malta, Turkey
Stabilization and Association Agreements:  Former Yugoslav Republic of Macedonia (FYROM), Croatia
Euro-Mediterranean A ssociation Agreements : Israel, Morocco, the Palestinian Authority, Tunisia
Cooperation Agreements ( Euro-Med Association Agreements concluded, but not in effect, or under
negotiation) : Algeria, Egypt, Jordan, Lebanon, Syria
Other Free-Trade Agreements :  Denmark (Faroe Islands), Iceland, Liechtenstein, Mexico, Norway, South
Africa, Switzerland
Other Customs Unions :  Andorra, San Marino
Association of Overseas Count ries and Territories (OCT): Anguilla , Antarctica, Aruba, British Antarctic
Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, FrenchPolynesia, French Southern and Antarctic Territories, Greenland, Mayotte , Montserrat , Netherlands Antilles,
New Caledonia, Pitcairn, Saint Helena,  Ascension Island,  Tristan da Cunha ; South Georgia and the South
Sandwich Islands, St. Pierre and Miquelon , Turks and Caicos Islands , Wallis and Fortuna Islands .
EU-African, Caribbean and Pa cific (ACP) Partnership: Angola , Antigua and Barbuda, Bahamas,
Barbados, Belize, Benin , Botswana, Burkina Faso , Burundi , Cameroon, Cap Verde ,
Central African Republic , Chad , Comoros , Congo, Cook Islands, Dem. Rep. of Congo , Cote d'Ivoire,
Djibouti , Dominica, Dominican Republic, Equatorial Guinea , Eritrea , Ethiopia , Federated States of
Micronesia, Fiji, Gabon, Gambia , Ghana, Grenada, Guinea , Guinea-Bissau , Guyana, Haiti , Jamaica, Kenya,
Kiribati , Lesotho , Liberia , Madagascar , Malawi , Mali , Marshall Islands, Mauritania , Mauritius,
Mozambique
, Namibia, Nauru, Niger , Nigeria, Niue Islands, Palau, Papua New Guinea, Rwanda ,
St. Christopher and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa , Sao Tome and Principe ,
Senegal , Seychelles, Sierra Leone , Solomon Islands , Somalia , South Africa, Sudan , Suriname, Swaziland,
Tanzania , Togo , Tonga, Trinidad and Tobago, Tuvalu , Uganda , Vanuatu , Zambia , Zimbabwe
Autonomous Trade Measures for the Western Balkans: Albania, Bosnia-Herzegovina, the Federal
Republic of Yugoslavia, Kosovo
Generalized System of Preferences (GSP) only:  Afghanistan , Argentina, Armenia, Azerbaijan, Bahrain,
Bangladesh , Belarus, Bhutan , Bolivia, Brazil, Brunei Darussalam, Cambodia , Chile, People’s Republic of
China, Colombia, Costa Rica, Cuba, East Timor, Ecuador, El Salvador,  Georgia, Guatemala, Honduras,India, Indonesia, Iran, Iraq, Kazakhstan, Kyrgyzstan, Kuwait, Lao People’s Dem. Rep. , Libyan Arab
Jamahiriya, Malaysia, Maldives , Moldova, Mongolia, Myanmar , Nepal , Nicaragua, Oman, Pakistan,
Panama, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Sri Lanka, Tajikistan,Thailand, Turkmenistan, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Viet Nam,Yemen ;  American Samoa, Bermuda, Bouvet Island, Cocos Islands, Cook Islands, Gibraltar, Guam, Heard
and McDonald Islands, Macao, Norfolk Island, Northe rn Mariana Islands, United States Minor Outlying
Islands, Tokelau Islands, Virgin Islands (USA)
Note: Least-developed countries (LDCs) in  italics .
Source: WTO Secretariat, based on DG Trade (2001a).European Union WT/TPR/S/102
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21. Complaints may also originate with a Community industry, enterprise or Member State under
the Trade Barriers Regulation (TBR).39  Since 1995, 17 complaints have been initiated, of which
eleven remain active (the others have been suspended or terminated).  Recourse to WTO dispute
settlement procedures is provided for, where applicable, and has been used in seven of the 17
complaints.  During the period under review, two new complaints were initiated:  on the Republic of
Korea’s shipbuilding subsidies;  and on Colombia’s VAT regime for imported motor vehicles.
(4) EXTERNAL TRADE RELATIONS
(i) WTO
(a) Overview
22. The EU exercises a leadership role among WTO Members, due to its significance in world
trade and the world economy.  The EU was in the forefront of building a coalition in favour of thelaunch of the Doha Development Agenda at the Fourth Ministerial Conference, in November 2001.
The EU worked with its trading partners to re build confidence and cooperation within the WTO
following the failure to launch th e "Millenium Round" at the Third Ministerial Conference in Seattle.
It also participated actively in the ongoing negotiations on agriculture and services resulting from the
build-in agenda.  The EU has worked to improve public understanding of the WTO by supportingmeasures to enhance external transparency, including through interaction with parliamentarians and
representatives of civil society.  The EU has also sought to promote closer cooperation between the
WTO and other intergovernmental organizations.
23. Within the WTO, the EU’s efforts during the period under review have included:
- adopting the "Everything-But-Arms (EBA)"  initiative for least-developed countries
(LDCs) (section (iii)(d));
- seeking resolution of the implementation issues that many developing countries had
made a condition for their support for the launch of a new work programme;  and
- supporting enhanced technical assistance to facilitate implementation, in particular by
contributing to the Integrated Framework Trust Fund for Least Developed Countries.
24. At the Doha Ministerial Conference, the EU, noting the need to find the right mix of trade and
other related policies, stressed the urgency of launching trade negotiations that would bring short- andlong-term benefits and that would be capable of conclusion within a short (preferably three-year)
time-scale.
40  The EU supports the integration of sustainability into the work of all negotiating groups.
In the run-up to the Ministerial Conference, the EU showed flexibility in its negotiating positions
(particularly regarding investment, competition, environment, and on the question of implementation).
(b) WTO market-access commitments
25. The tariff commitments of EU-15 are contained in Schedule CXL.  All tariff lines are bound.
On agricultural products (WTO definition), the EU maintains market-access commitments in the form
of tariff quotas on certain products.  The EU has also bound and reduced the Aggregate Measurement
of Support (AMS), as well as the value and volume of subsidized exports.
                                                     
39 Council Regulation 3286/94, as amended by Council Regulation 356/95.
40 WTO document WT/MIN(01)/ST/4.WT/TPR/S/102 Trade Policy Review
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26. The quotas maintained by the EU under the WTO Agreement on Textiles and Clothing (ATC)
are to be eliminated by the end of 2004.  During the period under review, the EU integrated (on
1 January 2002) a further 18.08% of 1990 imports of textiles and clothing from WTO Members
(excluding China), bringing to 51.39% the imports integrated since 1995 (Chapter III(1)(vi)).  The EU
has to date eliminated the quantitative restrictions on 20% of imports restricted in 1990, leaving the
liberalization of 80% for the final stage on 31 December 2004.
27. The specific services commitments of EU-12 are contained in their common GATS Schedule
(GATS/SC/31);  those of Austria, Finland, and Sweden are scheduled separately (GATS/SC/7,
GATS/SC/33, and GATS/SC/82, respectively), except  for those on basic telecommunications and
financial services (GATS/SC/31/ Suppl.3 and GATS/SC/31/Suppl.4, respectively).  The EU's list of
GATS Article II (MFN) exemptions (GATS/EL/31) relate to audio-visual services, transportationservices, and subsidies;  exemptions for Austria, Finland, and Sweden are listed separately
(GATS/EL/7, GATS/EL/ 33, and GATS/EL/82, respectively).
(c) Notifications
28. The EU submits its notifications to the WTO as unrestricted documents, in principle, which
makes them available to the public and supports immediate derestriction of "most WTOdocuments".
41  Notifications concern legislation on covered measures as well as regular reports on
developments in the use of covered instruments (Table AII.1).  The EU regularly notifies its applied
most-favoured-nation tariff (the latest is for 2002) to the WTO's Integrated Database (IDB).  The EU
also notifies its regional trade agreements after their entry into force, for examination by the
Committee on Regional Trade Agreements (CRTA);  notification of a number of agreements, or of
their provisions concerning trade in services, is pending (Table AII.2).
(d) WTO dispute settlement
29. The EU has been directly involved in 91 of the 252 requests for consultations filed under the
WTO dispute settlement proceedings between 1995 and 27 March 2002.  The EU initiated 57
complaints, of which 21 have been completed, 12 have been settled, 20 are pending, and 4 are active.
The EU has been a respondent in 34 complaints, of which 11 have been completed, 5 have been
settled, 16 are pending, and 2 are active.42  Most complaints do not proceed to the panel stage.
30. The United States is the trading partner most often concerned by the EU's complaints (24 of
the 57 complaints)43, and most frequently lodges complaints against the EU or its Member States.
Developments in high-profile disputes during the period under review include the U.S. Foreign Sales
Corporation (FSC) scheme, involving an estimated US$4.04 billion in annual export subsidy benefits
to U.S. companies.44  In March 2002, the EU lodged a complaint on the definitive safeguard measure
imposed by the United States on imports of certain steel products.45 During the period under review, a
solution was found in the "bananas" case and the U.S. suspension of concessions was eliminated
                                                     
41 The EU is of the view that, with a few limited exceptions, it should be possible to provide for the
immediate derestriction of working documents, Secretariat background papers, meeting minutes, and agendas
and panel reports once translated into all three official languages (WTO document WT/GC/W/412,6 October 2000).
42 WTO documents WT/DSB/26/Add.1 and WT/DSB/OV/1 to 5.
43 The EU has joined consultations as a third party on ten complaints where the United States is the
respondent.
44 WTO document WT/DS108.
45 WTO document WT/DS248.  See European Commission Press Release IP/02/367.European Union WT/TPR/S/102
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definitively on 1 January 2002.46  The EU remains subject to the suspension of concessions by the
United States in the "hormone-treated beef" case.47  Also during the period under review, complaints
were lodged by Thailand and India on the conditions under which the EU grants tariff preferences to
developing countries under its Generalized System of Preferences (GSP) scheme (section (iii)
below).48
(ii) Regional trade agreements
(a) European Free Trade Association (EFTA)
31. The Community's free-trade agreements with i ndividual members of EFTA, concluded in the
early 1970s, remain in force for Iceland, Liechtenstein, Norway, and Switzerland.49  The European
Economic Area (EEA) established in 1994 extends the Internal Market to Iceland, Liechtenstein, and
Norway.  Provisions in the (old) bilateral agreements apply only to the extent that the matter is notdealt with by the EEA.  Switzerland decided agai nst participation in the EEA in 1992, and seven
bilateral agreements – on land-based transport, air transport, the free movement of people, agriculture,
research, procurement, and technical barriers to trade – should enter into force in 2002.
50  Protocols on
rules of origin provide for a diagonal cumulation of origin on industrial products between the
Community, the EFTA countries and the CEECs, plus Turkey.51
(b) Europe Agreements52
32. The Community’s Europe Agreements with the CEECs contain provisions on free trade in
goods and services.  On industrial products, the parties have a liberalization schedule for tariff and
non-tariff barriers that is faster for the EU than  for the CEECs.  The EU grants duty-free and quota-
free treatment to imports of industrial products originating in the CEEC.  Protocols on rules of origin
provide for a diagonal cumulation of origin on industrial products between the Community, the EFTA
countries, and the CEECs, plus Turkey.
33. During the period under review, protocols on reciprocal tariff concessions on agricultural
products entered into force on 1 July 2000 with Bulgaria, Estonia, Hungary, the Czech Republic,
Latvia, Lithuania, Romania, the Slovak Republic, and Slovenia, and on 1 January 2001 with Poland.
These protocols have raised the share of CEEC duty-free agricultural exports to the EU to 75%, and
have raised the share of EU duty-free exports of agricultural products to the CEEC to 61%.53  Further
                                                     
46 The United States has DSB authorization to susp end tariff concessions on products to a value of
US$191.2 million (WT/DS27/49), and Ecuador has authori zation to suspend TRIPS obligations (WT/DS27/52),
to a value of US$201.6 million (WT/DS27/ARB/ECU).  The solution also suspends the EU’s procedure on"carousel" legislation (WT/DS/200).
47 The United States has DSB authorization to susp end tariff concessions on products to a value of
US$116.8 million (WT/DS26/21), and Canada has authorizatio n to suspend tariff concessions on products to a
value of Canadian $11.3 million (WT/DS48/19).
48 WTO documents WT/DS242 and WT/DS246, respectively.  The EU settled a related WTO
complaint by Brazil (WTO document WT/DS209), in the form of a tariff-free quota on soluble coffee.
49 EFTA was established in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and
the United Kingdom.  EFTA's membership has been reduced by the accession to the EC of Denmark and theUnited Kingdom in 1973, Portugal in 1986, and Austria, Finland, and Sweden in 1995.
50 WTO (2000c).  See also L’Agefi -  Guide des PME , "Contenu des 7 accords", Novembre 2000.
51 WTO documents WT/REG1, 2, 12, 15, 16/N/1;  WT/REG7-9, 20, 28-30, 32-35/N/2, 37, 41 42, 45-
48, 62/N/2;  WT/REG18/N/3;  and WT/REG11/N/4.
52 See European Union online information.  Available at:  http://europa.eu/int/comm/enlargement/ , for
the progress reports issued in November 2001.
53 European Commission Press Release IP/00/982.WT/TPR/S/102 Trade Policy Review
Page 22
negotiations are in progress.  Protocols on Conformity Assessment and Acceptance of Industrial
Products (PECAs) were also agreed (Chapter III(1)(viii)).
(c) Association agreements
34. The Community concluded interim agreements leading to the eventual formation of a customs
union with Turkey in 1963, and with Cyprus and Malta in the early 1970s;  each party has also
requested accession to the EU (section (2)). A Customs Union Agreement with Turkey entered intoforce in 1996
54, and negotiations on services and government procurement were launched in 2000.55
Protocols on rules of origin provide for a diagonal cumulation of origin on industrial productsbetween the Community, the EFTA countries and the CEECs, plus Turkey.  With Cyprus, the
agreement provides for the customs union to be completed by 2003.  According to the Commission,
full trade liberalization was to take place as the next stage, but has not been completed due to the startof accession negotiations. No date for a customs union has been set with Malta, but the Malta-EU
Association Committee met in 2001 for the first time since 1990.  Negotiations on the reciprocal
liberalization of fish and fishery products have been concluded.
(d) Euro-Mediterranean association agreements
35. The trade objective of the "Euro-Mediterranean Partnership" launched in 1995 is a
Euro-Mediterranean free-trade area by 2010.
56  Euro-Mediterranean association agreements have been
concluded between the EU and Egypt, Israel, Jordan, Morocco, the Palestinian Authority, and Tunisia.
The agreements have entered into force with Israel, Morocco, and Tunisia and, on an interim basis
with the Palestinian Authority;  although signed, th e agreements with Algeria, Egypt, and Jordan are
not yet in force.  Negotiations have been concluded with Lebanon, and are in progress with Syria.
36. These agreements provide for a greater degree of liberalization by the EU’s partner than the
cooperation agreements they replace.  These provided for non-reciprocal access to the EU market,while the new agreements provide for the establishment of a bilateral free-trade area, covering
industrial products and including concessions on certain agricultural and fishery products.  An
asymmetric liberalization schedule applies, generally immediate for the EU, with a transition period
for full implementation by the other partner, except for Israel, which is immediate.  For example, the
transition period is 15 years in the agreement with Egypt
57, and 12 years in the agreements with
Morocco and Tunisia.
(e) Stabilisation and Association Agreements
37. The EU signed a Stabilisation and Association  Agreement (SAA) with the Former Yugoslav
Republic of Macedonia (FYROM) on 9 April 2001;  and an Interim Agreement implements the
provisions on trade and trade-related matters since 1 June 2001.58  The EU also signed an SAA with
Croatia on 29 October 2001 with provisional implementation of provisions on trade and trade-related
matters as of 1 March 2002.59  For the EU, the SAAs contractualize the elimination of customs duties
on imports of goods originating in Croatia an d the FYROM under the Autonomous Trade Measures
                                                     
54 Imports from Turkey, however, remain subject to the application of anti-dumping and countervailing
procedures.  For a full description of the trade provisions , see "Turkey – Restrictions on Imports of Textile and
Clothing Products", complaint by India (WTO document WT/DS34).
55 Decision 2/2000 of the EC-Turkey Association Council of 11 April 2000.
56 COM(1994)427.
57 European Commission MEMO/01/11.
58 WTO document WT/REG129/N/1.
59 European Commission Press Release IP/01/1503.European Union WT/TPR/S/102
Page 23
(ATM) for the Western Balkans (section (iii)(c)).  The FYROM is to progressively reduce customs
duties each year over a maximum period of ten years,  with the exception of agricultural, textile, and
steel products, which are subject to separate provisions.  Croatia is to progressively reduce customs
duties each year over a maximum period of five year s, with the exception of agricultural products,
which are subject to separate provisions.
(f) Other European agreements
38. Customs union agreements are in existence for Andorra and San Marino while a free-trade
agreement applies with the Faroe Islands.
(g) Interregional agreements
Africa
39. The EU’s Trade, Development and Coopera tion Agreement (TDCA) with South Africa
entered into force provisionally on 1 January 2000.  Under the TDCA, 95% of EU imports from South
Africa will be fully liberalized at the end of a ten-year period, and 86% of South Africa's imports from
the EU will be fully liberalized at the end of a 12-year period, covering more than 90% of bilateral
trade.  The separate agreement on the recognition, protection and control of wine-name and spirits
designations was signed and entered into force on a provisional basis on 28 January 2002.  A separateagreement for concessions on fisheries products remains under negotiation.  The TDCA may also
have implications for Botswana, Lesotho, Namibia and Swaziland, which are South Africa’s partners
in the Southern African Customs Union (SACU).
Latin America
40. The EU has the goal of closer political and economic ties with Latin America and the
Caribbean.
60  The free-trade agreement between the EU and Mexico entered into force on 1 July 2000
and covers: market access in goods;  rules of origin;  technical regulations;  sanitary and phytosanitarymeasures;  safeguards;  investment;  trade in services;  government procurement;  competition policy; 
intellectual property;  and dispute settlement.
61  The FTA provides for a liberalization schedule on
goods that is faster for the EU than for Mexico.  Fo r industrial goods, the EU is to eliminate all import
duties by 1 January 2003 (on the basis of the GSP rates applied to Mexican imports in 1998), while
Mexico is to do so by 1 January 2007.  For covered agricultural and fisheries products, the EU is toeliminate tariffs for most products by 2008 and Mexico by 2010.  Tariff quotas apply for certain
agricultural and fisheries products.  Negotiations on bilateral association agreements are also in
progress with Chile and MERCOSUR.
Middle East
41. A cooperation agreement was concluded w ith the Gulf Coope ration Council (GCC)
62 in 1988
and negotiations on a free-trade agreement began in 1990. The negotiations have not progressed since
1993, due to proposals on the GCC side for the energy sector, which would have limited the ability of
the EU to introduce a carbon energy tax.63  In March 2002, the negotiations were restarted following a
                                                     
60 European Commission SPEECH/00/346.
61 WTO document WT/TPR/S/97.
62 Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.
63 COM(1995)541.WT/TPR/S/102 Trade Policy Review
Page 24
new directive from the Council.64  The GCC had previously decided to advance the timetable for
completion of their customs union from 2005 to 1 January 2003.
(iii) Preferential trade agreements and arrangements
(a) Association with Overseas Countries and Territories (OCT)65
42. A new Council Decision on the OCT association arrangements was adopted on 27 November
2001 to continue the regime until the end of 2011.66  The EU has granted duty-free treatment on all
products originating in the OCT on a non-reciprocal basis since 1963, subject to a safeguard
provision.67  Origin rules provide for cumulation with the Community and the ACP (section (b)
below), without limits, except for rice and sugar.  Transshipment is a unique feature of the EU’s trade
arrangements with the OCT, according to which non-originating OCT products in free circulation in
the OCT gain access to the EU market, with exceptions, provided they have paid the applicable ECcustoms duty, which amounts to a transfer to the OCT budget.
(b) ACP-EC Partnership Agreement
43. The ACP-EC Partnership Agreement was si gned on 23 June 2000 in Cotonou, Benin.
68  Of
the 77 ACP countries signatories to the Cotonou Ag reement, 55 are WTO Members and 40 are LDCs.
The Cotonou Agreement provides for the eventual shift from the non-reciprocal trade preferencesgranted under the Fourth Lomé Convention to Economic Partnership Agreements (EPAs), to be
negotiated with ACP partners starting in September 2002 with entry into force by 1 January 2008 at
the latest.  Meanwhile, the EU continues to grant duty-free treatment on industrial and processed
agricultural products, as well as fishery products, originating in 76 ACP countries on a non-reciprocal
basis (South Africa is subject to the TDCA (section (i i)), and protocols apply to sugar, beef, and veal.
The EU obtained a waiver from WTO Members for obligations under Article I:1 of GATT 1994
(which concerns MFN treatment) on 14 Novemb er 2001, once opposition from a number of WTO
Members was withdrawn in the context of the launch of the DDA.
69
(c) Autonomous Trade Measures (ATMs) for the Western Balkans
44. The EU introduced new autonomous trade meas ures (ATMs) in September 2000 for imports
from Albania and from certain countries and territories of the former Yugoslavia – Bosnia-
Herzegovina, Croatia, the Federal Republic of Yugoslavia, including Kosovo, and the formerYugoslav Republic of Macedonia (FYROM) – which are applicable until 31 December 2005.
70  The
                                                     
64 European Commission Press Release IP/02/442.
65 The 20 overseas countries and territories (OCT) are those with which Denmark, France, the
United Kingdom, and the Netherlands have special relations (COM(1999)163).
66 Council Decision 2001/822.  The Commission had originally proposed a continuation until 2007, in
keeping with the transitional arrangements for the ACP (COM(2000)732).  The Commission notes "the issue of
the Association’s compatibility with the WTO rules is of particular concern as the Community has reaffirmed its
solidarity with the OCTs and expressed the importance it attaches to undertakings entered into under the WTO"
(COM(2000)732, p.14).
67 The 1971 decision was notified under GATT 1947 Article XXIV and examined in a working party
(GATT document L/3611, 18S/143).
68 The trade provisions of the Partnership Agreement entered into force, on the basis of transitional
measures, on 1 March 2000 (WTO document G/C/W/187, 2 March 2000).
69 WTO document WT/MIN(01)/15, 14 November 2001.
70 Council Regulation 2007/2000, as amended by Council Regulation 2563/2000.  In December 2000,
the EU obtained a waiver from its obligations un der Article I:1 of GATT 1994 until 31 December 2006 (WTO
document WT/L/380 and Corr.1).European Union WT/TPR/S/102
Page 25
new regime eliminates the remaining tariff ceilings for industrial products, except for certain textile
products, and aluminium (from the Federal Republic of Yugoslavia only), and has a more extensive
coverage of agricultural and fishery products, as well as an extended geographical coverage, and
longer duration (more than four years).  The regime is considered to be a forerunner to the conclusionof SAAs, such as those concluded with  Croatia and FYROM (section (ii)(e)).
(d) Generalized System of Preferences (GSP)
45. A revised GSP scheme is in effect for the period 1 January 2002 to 31 December 2004.
71  The
new regime incorporates the "Everything-But-Arms (EBA)" initiative for LDCs, which took effect on
5 March 2001 and grants duty-free treatment for all products (except for arms), with certain
exceptions (rice, bananas, sugar), for which transitional arrangements apply.72
46. GSP is available to 143 independent countries and 36 dependent countries and territories.
"Preference modulation" continues to apply, but to tw o categories rather than four as was the case in
the previous GSP regime, to offset the "erosion of preferential tariff margins".  For sensitive products
(many agricultural products, textiles and textile articles, iron, and steel), the MFN ad valorem  duties
are either reduced by a flat 3.5 percentage points (with certain exceptions, notably textiles and
clothing products) or specific duties are re duced by 30%.  All other products are deemed non-
sensitive and are duty free.  Product exclusions apply, however, for certain beneficiaries, either
because the sector has never been included for the beneficiary concerned (e.g., ECSC products for
transition economies), or because the tariff preferences have been removed for that country undergraduation (subsequent re-instatement may occur).  Brazil and China have, for example, each been
graduated from nine sectors.
47. Treatment better than this regime is provided for certain products from countries that combat
drug production and trafficking.  Special incentive arrangements may also be granted to countries that
so request, upon demonstration of adherence to certain internationally recognized core labourstandards or to certain standards set by the International Tropical Timber Organization.
73  T h e
incentives on core labour standards have been improved to encourage more countries to make a
request;  under the previous GSP regime, only four applications were made;  Moldova was granted the
special incentive as of 1 October 2000.74
48. Many of the GSP beneficiary countries also benefit from preferences under other agreements
or arrangements (Box II.1).  However, LDCs enjoy the most favourable preferential treatment under
GSP due to EBA initiative, including in relation to  the ACP-EU Partnership Agreement, excluding the
commodity protocols (section (b) above).  The 65 countries that benefit from preferences in the EU
market only under the GSP scheme (GSP-only countries) are transition economies of the former
USSR, non-OCT and non-ACP developing countries in Asia and Latin America, and in particular, the
nine LDCs among them.
                                                     
71 Regulation 2501/2001 to replace Regulation 2820/98,  as amended.   See "The Community 2002-
2004 GSP:  an instrument of sustainable development", Speech by Pascal Lamy [Online].  Available at:http://europa.eu.int/comm/trade  [11 November 2001].
72 Regulation 416/2001.
73 In relation to the previous GSP regime, the scope of "core" labour standards, developed by the
International Labour Organization (ILO), has been enlarged from ILO Conventions 87, 98 and 138, to include29, 100, 105, 111 and 82.  ILO online information.  Available at:  http://www.ilo.org .
74 European Commission Press Release IP/00/892.