EUROPEAN COMMISSION Brussels, 14.10.2019 SWD(2019) 370 final COMMISSION STAFF WORKING DOCUMENT Individual reports and info sheets on implementation of EU Free Trade Agreements Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

on Implementation of Free Trade Agreements







1 January 2018 - 31 December 2018



{COM(2019) 455 final}



DATA USED FOR THE COMPILATION OF INDIVIDUAL REPORTS AND INFORMATION SHEETS PART I: NEW GENERATION FREE TRADE AGREEMENTS ANNUAL REPORT ON THE IMPLEMENTATION OF THE COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT (CETA) BETWEEN THE EU AND ITS MEMBER STATES AND CANADA 1. Introduction 2. Evolution of trade 3. Activities of the implementation bodies 4. Implementation of the provisions on trade and sustainable development 5. Agriculture 6. Regulatory Cooperation 7. Conclusions and outlook 8. Statistics ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-SOUTH KOREA FREE TRADE AGREEMENT 1. Introduction 2. Evolution of bilateral trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct Investment (FDI) 3. Activities of the implementation bodies

4. Implementation of the provisions on trade and sustainable development 5. Specific areas subject to monitoring 6. Progress, main open issues and follow-up actions 7. Conclusions and outlook 8. Statistics ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-COLOMBIA/ECUADOR/PERU TRADE AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.1.1 Overall evolution 2.1.2 Trade in agricultural goods 2.2 Trade in Services and development of investment 2.2.1 Trade in Services 2.2.2 Foreign Direct investment (FDIs) 3 Activities of the implementation bodies 4. Implementation of the provisions on trade and sustainable development 5. Specific areas subject to reporting or monitoring 6. Conclusions and outlook 7. Statistics ANNUAL REPORT ON THE IMPLEMENTATION OF PART IV OF THE ASSOCIATION AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES AND CENTRAL AMERICA

1. Introduction 2. Overall assessment: evolution of bilateral trade 2.1 Trade in Goods overall Sectoral structure of trade Country-by-Country analysis 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) Trade in Services Development of Foreign Direct investment (FDI) 3 Activities of the implementation bodies 4 Implementation of the provisions on trade and sustainable development 5 Specific areas subject to reporting or monitoring 6 Conclusions and outlook 7 Statistics PART II: ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND UKRAINE, MOLDOVA AND GEORGIA ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND UKRAINE 1. Evolution of trade 1.1 Trade in goods overall Scope of trade liberalisation Sectoral structure of EU-Ukraine trade in goods

1.2 Trade in agricultural goods Use of Tariff Rate Quotas 1.3 Autonomous trade measures 1.4 Establishment, trade in services and investments Market access related to establishment and trade in services Trade in services Foreign Direct investment (FDI) 1.5 EU support to the implementation of the DCFTA 1.5 EU support for Small and Medium sized Enterprises (SMEs) 2 Activities of the implementation bodies 2.1 Joint decisions of the Association Bodies 2.2 Meetings of the Association Bodies 3 Implementation of the provisions on trade and sustainable development 4 Progress made, main open issues and follow-up actions 4.1 Wood export ban 4.2 Value added tax law 2440 4.3 Poultry meat imports 4.4 Technical barriers to trade 4.5 SPS aspects 4.6 Customs and Trade facilitation

4.7 Intellectual property rights (IPR) 4.8 Geographical indications (GIs) 4.9 Competition and State aid 4.10 Public procurement 5 Conclusions and outlook 6 Statistics ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND GEORGIA 1. Evolution of trade 1.1 Trade in Goods overall The scope of trade liberalisation Overall evolution of EU–Georgia trade in goods Sectoral structure of EU-Georgia trade in goods 1.2 Trade in agricultural goods 1.3 Use of Tariff Rate Quotas (TRQ) 1.4 Establishment, trade in services and investments Market access related to establishment and trade in services Trade in services Foreign Direct investment 2. Activities of the implementation bodies 2.1 Joint decisions of the Association Bodies

2.2 Meetings of the Association Bodies 3. Implementation of the provisions on trade and sustainable development 4. Specific areas subject to reporting or monitoring 5. Progress made, main open issues and follow-up actions 6. EU support to DCFTA implementation 7. Conclusions and outlook 7. Statistics ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND MOLDOVA 1 Evolution of trade 1.1 Trade in goods overall The scope of trade liberalisation Overall evolution of EU-Moldova trade in goods Sectoral structure of EU-Moldova trade in goods 1.2 Trade in agricultural goods Review clause for agricultural products Anti-circumvention mechanism for agricultural products Use of Tariff Rate Quotas (TRQs) 1.3 Establishment, trade in services and investments Market access related to establishment and trade in services Trade in Services

Foreign Direct investment (FDIs) 2. Activities of the implementation bodies 2.1 Joint decisions of the Association Bodies 2.2 Meetings of the Association Bodies 3. Implementation of the provisions on trade and sustainable development 4. Progress made, main open issues and follow-up actions 4.1 SPS aspects 4.2 Technical Barriers to Trade 4.3 Customs and Trade Facilitation 4.4 Energy 4.5 Competition policy 4.6 Intellectual Property Rights 4.7 Services 4.8 Public Procurement 5. EU support to DCFTA implementation 5.1 EU Support to DCFTA-related reforms 5.2 EU Support for SMEs 6. Outlook and Conclusion 7. Statistics PART III: FIRST GENERATION FREE TRADE AGREEMENTS

FIRST GENERATION FREE TRADE AGREEMENTS WITH MEDITERRANEAN PARTNERS ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ALGERIA ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Investment 3. Issues addressed in the Sub-Committee meetings 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-EGYPT ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct Investment 3. Issues addressed in the Joint Committee meetings 4. Specific areas of importance

5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ISRAEL ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct Investment (FDI) 3. Issues addressed in the Annual (Joint Committee/Trade Committee) meeting 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-JORDAN ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1. Trade in Goods 2.2. Trade in agricultural goods 2.3. Trade in Services and Investment

3. Issues addressed in the Annual (Joint Committee/Trade Committee) meeting 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-LEBANON ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct Investment (FDI) 3. Issues addressed in the Annual Joint Committee meetings 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-MOROCCO ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods

2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the Joint Committee meetings 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-PALESTINE INTERIM ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the Annual (Joint Committee/Trade Committee) meeting 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-TUNISIA ASSOCIATION AGREEMENT 1. Introduction

2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.4 Trade in Services and Investment 3. Issues addressed in the Joint Committee meetings 4. Specific areas of importance 5. Progress, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics FIRST GENERATION FREE TRADE AGREEMENTS WITH THE WESTERN BALKAN PARTNERS ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-ALBANIA STABILISATION AND ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the Joint Committee meetings 4. Specific areas of importance 5. Main open issues and follow-up actions 6. Conclusions

7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-BOSNIA AND HERZEGOVINA STABILISATION AND ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the annual Committee meetings 4. Specific areas of importance 5. Main open issues and follow-up actions 6. Conclusions 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR OF THE STABILISATION AND ASSOCIATION AGREEMENT BETWEEN THE EU AND NORTH MACEDONIA 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and FDI 3. Issues addressed in the annual Committee meetings 4. Specific areas of importance

5. Main open issues and follow-up actions 6. Conclusions 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-KOSOVO STABILISATION AND ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.4 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the annual Committee meetings 4. Specific areas of importance 5. Main open issues and follow-up actions 6. Conclusions 7. Statistics ANNUAL INFO SHEET ON the IMPLEMENTATION OF the trade pillar of the EU-MONTENEGRO STABILISATION AND ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in Agricultural Goods 2.3 Trade in Services and Foreign Direct investment (FDIs)

3. Issues addressed in the annual Committee meetings 4. Specific areas of importance 5. Main open issues and follow-up actions 6. Conclusions 7. Statistics ANNUAL INFO SHEET ON the IMPLEMENTATION OF the TRADE PILLAR OF THE EU-SERBIA STABILISATION AND ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the annual trade committee meeting 4. Specific areas of importance 5. Main open issues and follow-up actions 6. Conclusions 7. Statistics FIRST GENERATION FREE TRADE AGREEMENTS WITH LATIN AMERICAN COUNTRIES ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-CHILE ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade

2.1 Trade in Goods 2.2 Trade in agricultural products 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Annual Trade Coordinators Meeting and Trade-related Sub-committees 4. Progress made, Main open issues and follow-up actions 5. Conclusions and outlook 6. Statistics ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-MEXICO ASSOCIATION AGREEMENT 1. Introduction 2. Evolution of trade 2.2 Trade in goods 2.2 Trade in agricultural goods 2.3 Trade in services and Foreign Direct investment (FDIs) 3. Issues addressed in the joint committee meetings 4. Progress made, main open issues and follow-up actions 5. Conclusions and outlook 6. Statistics FIRST GENERATION FREE TRADE AGREEMENTS WITH THE EFTA COUNTRIES NORWAY AND SWITZERLAND ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-NORWAY FREE TRADE AGREEMENT 1. Introduction

2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in agricultural goods 2.3 Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the EEA and FTA Joint committees 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-SWITZERLAND FREE TRADE AGREEMENT 1. Introduction 2. Evolution of trade 2.1. Trade in Goods 2.2. Trade in agricultural goods 2.3. Trade in Services and Foreign Direct investment (FDIs) 3. Issues addressed in the annual joint committee meeting 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics

THE CUSTOMS UNION WITH TURKEY ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-TURKEY CUSTOMS UNION AND TRADE AGREEMENTS 1. Evolution of trade 1.1 Trade in Goods 1.2 Trade in agricultural goods 1.3 Trade in Services and Foreign Direct investment (FDIs) 2 Issues addressed in the Committee Meetings 3 Specific areas of importance 4 Progress made, main open issues and follow-up actions 5 Conclusions and outlook 6. Statistics PART IV: ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENTS (EPAs) WITH AFRICAN, CARRIBEAN AND PACIFIC COUNTRIES ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND THE SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) 1. Introduction 2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct Investment (FDI) 3. Issues addressed in the annual EPA Committee meeting 4. Specific areas of importance

5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE INTERIM ECONOMIC PARTNERSHIP AGREEMENT BETWEEN THE EU AND EASTERN AND SOUTHERN AFRICAN STATES 1. Introduction 2. Evolution of trade 2.1 Trade in Goods 2.2 Trade in Services 2.3 Foreign Direct investment (FDI) 3. Issues addressed in the annual EPA Committee Meeting 4. Development Cooperation 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics Madagascar Mauritius Seychelles Zimbabwe ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND COTE D’IVOIRE 1. Introduction

2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct investment (FDI) 3. Issues addressed in the annual EPA Committee meeting 4. Development Cooperation 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND GHANA 1. Introduction 2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct investment (FDIs) 3. Issues addressed in the first meeting of the joint EPA Committee 4. Development Cooperation 5. Follow-up actions 6. Conclusions and outlook 7. Statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CAMEROON 1. Introduction 2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct investment (FDI) 3. Issues addressed in the annual EPA Committee meeting 4. Development Cooperation 5. Main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CARIFORUM 1. Introduction 2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct investment (FDI) 3. Issues addressed in the EPA Committee meetings 4. Specific areas of importance 5. Progress made, main open issues and follow-up actions

6. Conclusions and outlook 7. Statistics ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND PACIFIC STATES 1. Introduction 2. Evolution of trade 2.1 Trade in goods 2.2 Trade in services 2.3 Foreign Direct investment (FDI) 3. Issues addressed in the EPA Committee meetings 4. Development Cooperation 5. Progress made, main open issues and follow-up actions 6. Conclusions and outlook 7. Statistics



DATA USED FOR THE COMPILATION OF INDIVIDUAL REPORTS AND INFORMATION SHEETS The trade statistics used in this report and the attached staff working document on the evolution of trade and investment flows are based on EUROSTAT data as available on 30 March 2019, except where indicated otherwise. The most recent annual data available for trade in goods are for 2018, and for services and investment for 2017, except where indicated otherwise.



PART I: NEW GENERATION FREE TRADE AGREEMENTS





ANNUAL REPORT ON THE IMPLEMENTATION OF THE COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT (CETA) BETWEEN THE EU AND ITS MEMBER STATES AND CANADA 1.Introduction The EU-Canada Comprehensive Economic and Trade Agreement (“CETA”) has been provisionally applied since 21 September 2017. 2018 was the first full year of provisional application. While it is too early to take a definitive view on the economic impact of the Agreement, trade flows suggest a positive trajectory with EU goods exports rising by 15% compared to the average of the previous three years. Good progress has also been achieved in implementing the institutional structure foreseen by the Agreement, with the parties identifying the co-chairs and contact points for the twenty committees and dialogues established under CETA and almost all committees and dialogues held their first meetings in the course of 2018 (more details below). Important efforts were made to ensure that the conduct of these meetings is transparent and inclusive. Meeting schedules, provisional agendas and reports of all CETA committees and dialogue meetings were made public on DG TRADE's website ( http://trade.ec.europa.eu/doclib/press/index.cfm?id=1811 ). Civil society mechanisms as foreseen by agreement were set up and further initiatives of civil society engagement were implemented for committees like the Regulatory Co-operation Forum, in light of the interest of stakeholders regarding the Forum. On 26 of September 2018, the EU and Canada held the first CETA Joint Committee, which is the highest body under the agreement. They reviewed progress made by the various CETA committees and dialogues and discussed the effective implementation of the agreement. Several Member States and Canadian provinces participated in the meeting. Issues of concern that the EU raised related notably to the cheese TRQ management by Canada, access to the Canadian Wines & Spirits and Geographical Indications (GI) protection in Canada. From the Canadian side, main concerns relate to EU legislation in the Sanitary and phytosanitary (SPS) field (Country of Origin Labelling, Maximum Residue Levels), the implementation of the conformity assessment protocol and the beef and pork TRQ management. The Joint Committee formally adopted three recommendations, which set the stage for further work, namely to encourage small and medium-sized enterprises (SMEs) to use opportunities offered by CETA, to work jointly on climate action measures and the implementation of the Paris Agreement within the CETA context, and to work jointly to better understand how trade agreements can contribute to gender equality. The Parties also set up dedicated contact points for trade and gender and trade and SMEs. Work is underway to implement the concerned recommendations. For instance, a CETA Workshop on Trade and Gender, co-organised by the Commission and by the Mission of Canada to the EU, took place in Brussels on 1 April 2019. Participants from business, civil society, EU Member States and international organisations engaged with the objective to learn from women-led businesses about their experiences under CETA and challenges faced when participating in international trade more generally. Participants also discussed potential actions to implement CETA’s trade and gender recommendation. To help SMEs, the EU and Canada put online a dedicated webpage with information useful to smaller businesses on accessing Canadian and EU markets such as import requirements and other information considered to be useful for SMEs. In line with its commitments in the recommendation on climate action, a joint EU-Canada conference on Trade and Climate was organised in Brussels on 24 January 2019. The event provided a platform for policy makers, businesses, non-governmental organisations to engage (more details below). Work has also been ongoing on the foundations of the Investment Court System (ICS) already established in CETA. Although the ICS provisions are not provisionally applied, the contours of the further work on the ICS has been agreed between EU and Canada in the Joint Interpretative Instrument on CETA and is also reflected in the Commission and Council Statement No 36 . In the course of 2018, the Commission has consulted with Member States and discussed with Canada on how to bring forward the work that has been committed to during the CETA ratification process. In particular, the Commission has been working with the Member States at the Trade Policy Committee (Services and Investment) on four strands of action for the implementation of the Investment Court System: (1) the rules regarding the functioning of the Appellate Tribunal, (2) the code of conduct for the Members of the Tribunals, (3) the rules for mediation and (4) the procedure to adopt binding interpretations. The European Parliament has been kept informed of the discussions. At the first inaugural meeting of the CETA Committee on Services and Investment on 18 September 2018, the EU and Canada had first positive exchanges on the draft decisions. The Commission continued technical discussions on the texts with the EU Member States and with Canada. The aim is to reach a technical agreement on those texts in due course. The Commission started work on other areas related to the implementation of the Investment Court System, in particular on the selection mechanism for the Members of the Court. Discussions on this issue with the Member States at the Trade Policy Committee (Services and Investment) started in December 2018 and are ongoing. In its Opinion 1/17 delivered on 30 April 2019, the Court of Justice of the EU confirmed the compatibility of the CETA’s provisions on the Investment Court System with EU law. At the time of writing, 13 Member States had notified the completion of their ratification process (Austria, Czech Republic, Denmark, Estonia, Spain, Croatia, Latvia, Lithuania, Malta, Portugal, Finland, Sweden and the UK). The ratification process is still ongoing in other Member States and the Commission continues to be engaged with Member States and stakeholders to create awareness of the opportunities and to ensure EU stakeholders are able to derive full benefits of the agreement. As part of these efforts, the Commission developed specific guides to assist EU businesses which are or want to become active on the Canadian market (notably on the protection of geographical indications and public procurement). More such guides are in the process of being developed (notably on services and investment). The Commission also updated its Market Access Data Base to provide more information useful to EU exporters to Canada, in particular SMEs. 2.Evolution of trade In terms of trade in goods, Canada is now the EU’s 10th largest trading partner (imports plus exports), with total trade flows worth €72 billion, or 2% of the EU’s total trade with third countries. The EU had a trade surplus of €10.4 billion, which amounted to a €3.9 billion improvement compared to the average between 2015 and 2017. Although one year after the provisional application of CETA some caution is needed to interpret the limited data available, EU exports were on a positive trajectory in 2018. EU goods exports to Canada increased by 15% percent when compared to the average of the three previous years (€36 billion). This meant a stronger increase than for EU goods exports to third countries, which went up by 8% during the same period. Over the same period, total EU goods imports from Canada increased by 5% or €1.5 billion. The EU’s most important export items all experienced a significantly stronger export performance when compared to the average of the three previous years: ‘Machinery and mechanical appliances’ were up 16% (accounting for almost one-fifth of total EU exports to Canada); ‘Vehicles and parts’ were up 11% (accounting for 14% of total EU exports to Canada); ‘Pharmaceuticals’ were up 29% (accounting for 12% of total EU exports to Canada); ‘Agricultural goods’ were up 7% (accounting for 9% of total EU exports to Canada); ‘Electrical machinery’ was up 2% and ‘Organic chemicals’ were up by 77%.

At the same time, EU imports from Canada increased during the same period by 5% or €1.5 billion, from on average €29.5 billion in 2015-2017 to €31.0 billion in 2018. Imports from Canada grew at a slower pace than overall EU imports from third countries, which over the same period grew by 12%. Canada is the EU’s 12th largest source of imported goods, accounting for 2% of all goods imported from countries outside the EU. To put this into perspective, 20% of the EU’s total imports originate from China (€394 billion), which is the EU’s first trading partner in terms of imports. The EU's most important imports from Canada are displayed in the graph below. With the exception of aircraft and spacecraft and ores, slag and ash, these sectors are also part of the EU's top ten sectors when it comes to overall world imports. Concerning services, total exchanges in 2018 amounted to €38.7 billion, an 11% increase compared to 2017 (see section statistics for the 2017 data). EU exports to Canada amounted to €23.5 billion, whilst Canada’s exports to the EU amounted to €15.1 billion; the EU maintained a trade surplus at around €8.3 billion. In 2017, total FDI stocks amounted to €600 billion. 3.Activities of the implementation bodies In 2018, 18 of the 20 the committees and dialogues established under CETA met (only the Dialogue on electronic commerce and the Mutual recognition of Professional Qualifications Committee did not meet). For more details, the agendas and reports of these meetings can be found on the Commission’s "CETA – Meetings and documents" webpage . Committees The CETA Joint Committee met in Montreal on 26 September 2018 (details provided in the introduction). The activities of the other committees and dialogues were as follows: The first meeting of the CETA Committee on Government Procurement took place on 15 March 2018 in Brussels. The Parties exchanged recent legislative developments and discussed inter alia technical updates that need to be made to Annex 19-8 of Canada’s market access schedule, ongoing work in developing Canada’s single point of access for public procurement, existing bid challenge mechanisms/domestic review procedures, as well as public procurement opportunities, particularly in the space sector. The first meeting of the Sanitary and Phytosanitary Joint Management Committee (JMC) on 26-27 March 2018 in Ottawa, achieved the following outcomes (i) identification of priority SPS issues affecting trade between the European Union and Canada, and (ii) establishing the foundations for bilateral exchanges of information and for ongoing cooperative efforts including cooperation on animal welfare and antimicrobial resistance. More specifically, the EU and Canada identified the topic of long distance transport of animals as a topic for engagement within the context of the CETA Regulatory Cooperation Forum meeting of December 2018. During the 2nd SPS JMC meeting in February 2019 the agreed follow-up actions were further deepened to make the outcome more result- oriented on several pending market access issues, as reflected in more detail in the public report ( http://trade.ec.europa.eu/doclib/docs/2019/march/tradoc_157809.pdf ). The Committee on Geographical Indications (GIs) convened on 17 May 2018. Canada explained the important changes it had made to its legislative framework to meet its CETA commitments on the protection of GIs. Concerns were raised by the EU about Canada’s implementation of CETA articles regarding administrative enforcement of GI protection and the lack of a list of companies entitled to use the grandfathering clause. Canada committed to organising explanatory meetings in certain EU Member States, which notably took place in Brussels, Paris, Madrid and Rome. The Joint Customs Cooperation Committee (JCCC) convened in Brussels on 22 June 2018. Parties exchanged information about recent legislative and regulatory developments in the field of customs, explored bilateral and international cooperation topics and made progress towards the mutual recognition of the EU and Canada Authorised Economic Operator programmes. The Wine and Spirits Committee met in Brussels on 5 July 2018. Parties had a detailed discussion on the implementation of the CETA Joint Declaration on wines and spirits, which contributed to developing a mutual understanding of their respective views. The EU expressed concerns about the enforcement of the protection of certain EU Wines and Spirits GIs, which the Canadian counterparts explained they were resolving. The EU provided an overview of its legislation on certain duty reductions, as well as on the on-going recast of the EU wine legislation, which should address Canada's concern about red ice wine. The Financial Services Committee met in Brussels on 19 June 2018. The Parties discussed financial sector developments as well as regulatory and supervisory issues relating to banking and capital markets. They also discussed issues pertaining to financial stability as well as cybersecurity, consumer and data protection and sustainable finance.

The Committee on Trade and Sustainable Development (TSD) met in Brussels on 13 September 2018. The meeting was preceded and informed by exchanges of the first CETA Civil Society Forum, which took place on 12 September 2018. In addition, the Parties met with the representatives of the domestic advisory groups (DAGs) referred to by the TSD chapters, and debriefed them on the TSD Committee discussions. They exchanged views on the subjects raised during the TSD meeting and discussed expectations for future work between the DAGs and the Parties. The EU and Canada acknowledged the envisaged adoption of three recommendations on trade and climate, trade and gender and trade and SMEs, which had been prepared in the framework of the TSD implementation work and which were subsequently adopted by the CETA Joint Committee on 26 September 2018. The Committee on Services and Investment met in Brussels on 18 September 2018. On investment protection, the Parties discussed the functioning of the Appellate Tribunal, the code of conduct and rules for mediation. Both the EU and Canada agreed that subsequent work will be carried out at technical level to produce a draft decision in early 2019. On services, the Parties exchanged information on Mutual Recognition Agreements, Canada’s coastal shipping legislative reform, ongoing negotiations relating to the development of performance requirements obligations for financial services, and the provision of information on temporary entry. Both Parties agreed that technical level discussions would advance these issues further. The Agriculture Committee met on 19 September 2018 in Brussels. Reviewing their respective trade data, both Parties welcomed increased imports across most agricultural goods. Canada raised concerns about the EU’s beef and pork quota management system and asked about data access, while the EU expressed concern about the Canadian cheese quota administration and the very low uptake of the quota until late in 2018. Other issues discussed were Canada’s price class for milk protein ingredients as well as European national measures on origin labelling. Both Parties agreed to engage in information sharing to remedy the flagged issues, calling for more collaboration in order to take advantage of CETA’s new opportunities. On 16 November 2018, the Joint Sectoral Group (JSG) on Pharmaceuticals convened by videoconference. Six administrative arrangements to facilitate the effective implementation and monitoring of the CETA Good Manufacturing Practices Protocol (GMP) on Pharmaceuticals were approved (Components of the Information Sharing Process; Two-way Alert Program; Procedure for Evaluating New Regulatory Authorities; Equivalence Maintenance Program; Components of a GMP Compliance Program; Contact Points). Canada’s Proposal on a Mutual Recognition Agreement (MRA) for Drug Facility Inspections in third countries and the Recognition of the Active Pharmaceutical Ingredients Program under the CETA GMP Protocol on Pharmaceuticals were discussed, with Parties agreeing to develop a common approach and propose a plan. The JSG confirmed the continued mutual recognition of GMP inspections and batch certification between the Parties. On 29 November 2018, the Trade in Goods Committee convened via videoconference. The Committee welcomed the progress made on the reciprocal exchange of information on the safety of consumer products and discussed the implementation of the Protocol on conformity assessment. The Parties also exchanged information regarding the informal IPR dialogue in June 2018, the joint report of the Joint Sectoral Group on Pharmaceutical products, which took place on 16 November, as well as legislative developments. The Reports of the Agricultural Committee and the Wines & Spirits Committee were discussed thereafter, covering a range of issues (including the cheese TRQ, provincial discriminatory measures against EU wines exporters, enforcement of W&S GI protection, origin declaration on Wines & Spirits, veterinary medicines regulation, and country-of-origin labelling, amongst others). The Regulatory Cooperation Forum met on 14 December 2018 in Brussels (and videoconference) and agreed on a work plan. It was also agreed that the plan should be published online and updates should be published regularly. Topics retained in the work programme were ‘cybersecurity and the Internet of Things’, ‘animal welfare’, ‘cosmetics-like drug products’, and ‘pharmaceutical inspections’. Both Parties emphasised the importance of safety of consumer products and welcomed the new administrative arrangement adopted to exchange non-personal information on dangerous non-food consumer products. Finally, the Forum debriefed civil society stakeholders and in response to requests of stakeholders conveyed openness to receiving suggestions for new topics, if there is a common interest. Stakeholders welcomed the increased transparency. The Joint Committee on Mutual Recognition of Professional Qualifications met in Brussels on 16 April 2019. The Committee officially acknowledged the receipt of documents submitted by the Canadian Architectural Licensing Authorities (CALA) and the Architects’ Council of Europe (ACE) with a view to providing a joint recommendation on a Mutual Recognition Agreement (MRA) between Canada and the EU concerning the profession of architects. The Committee discussed the joint submission in light of Article 11 of CETA and exchanged views about the next steps in the process of the possible negotiation and adoption of the MRA. Dialogues The Bilateral Dialogue on Forest Products held a productive meeting on 23 May 2018 by videoconference, discussing resource efficiency of wood-based products, their sustainable use, product standards, hazard-based approach to regulation of plant protection products/biocides and EU-Canada cooperation on research and innovation. The Bilateral Dialogue on Raw Materials took place on 16 November 2018 and discussed research and innovation aspects of the raw materials life cycle. The EU and Canada also agreed to continue to exchange best practices on sustainable mining as well as to find synergies to boost investment opportunities in exploration and mining in the EU and Canada. Stakeholder representatives joined part of the meeting to report on the main outcome of the EU-Canada Raw Materials Stakeholders Forum. The 14th Joint Science and Technology Cooperation Committee meeting - the first under CETA- acknowledged the importance of the recent research and innovation policy developments in Canada and in the European Union - Budget 2018 and Horizon 2020. Reinforcing the links between industry and research was a key objective of both Parties for this meeting and they agreed to continue their strong cooperation in key areas like marine, health, aeronautics and agricultural research. Mobility of Canadian and European researchers was strongly reaffirmed and continued development of appropriate framework conditions for research cooperation was agreed. The Dialogue on Biotechnology took place on 26 April 2018 by videoconference. Both Parties underlined the importance of information exchange on regulatory and technical issues affecting trade in agricultural products of biotechnology. Both sides exchanged information on legislative and policy developments. The EU raised the issue of Genetically Modified (GM) animals in Canada, specifically about GM salmon and its traceability requirements. Canada reaffirmed that all products exported to the EU, including salmon, must meet EU import requirements and therefore no GM salmon is exported to the EU. The meeting of the Bilateral Dialogue on Motor Vehicle Regulations was held via videoconference on 5 October 2018 and focused on regulatory developments with respect to motor vehicles. Regulatory ambitions in the Automated Driving sector were discussed and the Parties agreed to hold additional technical meetings on regulations of relevance ahead of the UNECE meetings in Geneva. Both sides confirmed their willingness to continue technical exchanges on issues of common interest. 4.Implementation of the provisions on trade and sustainable development In the context of the Trade and Sustainable Development Committee, the EU and Canada discussed issues of common interest in the multilateral context and exchanged views on potential priority areas in the trade and labour, trade and environment and other cross-cutting fields. The Parties recalled the existing high intensity of bilateral relations on environmental issues in general, and noted their commitment to future cooperation under CETA. The Parties updated each other on their relevant processes in relation to multilateral environment agreements (MEAs). In this context, the Parties also exchanged views on areas of mutual interest, such as trade in plastics, trade and biodiversity and clean technology. The Parties provided updates on their respective mechanisms and practices in receiving communications on the Trade and Environment Chapter (Canada) and Trade and Sustainable Development (EU) from non-governmental stakeholders and the wider public. To expand the awareness of EU-Canada trade and climate action in the context of CETA, the EU and Canada hosted a conference in Brussels on 24 January 2019 to explore how to best leverage CETA’s institutional and legal framework to encourage further joint actions to support implementation of the Paris Agreement. At this conference business, civil society and policy communities from both sides of the Atlantic discussed topics such as the application of CETA to support sustainable and green investment, regulatory cooperation and trade in green technologies and services. In relation to trade and labour, the Parties outlined their respective legal mechanisms for monitoring and ensuring compliance with core labour standards, and discussed possible priorities for cooperation. In this context, the EU and Canada expressed their preliminary interest in working jointly on (i) labour issues in relation to global supply chains in third countries; (ii) on collective bargaining in the context of the changing world of work, in particular on the platform economy; and (iii) on gender-related issues in the world of work, also in coordination with the work on the Trade and Gender Recommendation. Under cross-cutting issues, the Parties also stressed the important role of businesses in promoting labour and environmental objectives and outlined their respective ongoing efforts in promoting responsible business conduct/corporate social responsibility with their trade partners. They agreed as a follow-up to explore potential synergies and cooperation activities. Trade and Sustainable Development (TSD) review The review process was formally initiated by an exchange of letters between the EU and Canada after CETA provisionally came into force on 21 September 2017. In the course of 2018, the Parties held several technical level discussions and exchanged views in the context of the early review of the Trade and Sustainable Development chapters. Canada and the EU reconfirmed their commitment to advance this process and agreed to intensify their efforts on this commitment, with a view to reviewing the implementation of the TSD chapters, including their enforcement mechanisms, to propose solutions and outcomes at the second CETA Joint Committee meeting and subsequent Joint Committee meeting as pertinent. In parallel, the EU Commission published a 15-point action plan to make EU trade and sustainable development chapters more effective and which is informing the EU position on TSD. The Parties devised a joint work plan to be implemented in advance of the second CETA Joint Committee meeting.

5.Agriculture Since the provisional application of CETA on 21 September 2017, the Commission has been closely following the implementation of the commitments made in the field of agriculture. Canada is the 10th most important market for EU agri-food exports. In 2018, the EU’s trade surplus with Canada grew by 31.5% to reach €1.7 billion. EU-28 agri-food exports to Canada were up 4% in value when compared to 2017 and increased by 7% when compared with the average of the last three years (2015-2017). This is just slightly below the 4.3% annual growth recorded in the previous 4 years. Meanwhile EU imports fell by nearly 12%. This was largely due to a sharp decline of 40% in oilseeds (notably rapeseeds and soybeans) and a decline of 26% in wheat imports. The tariff rate quotas opened by the EU for the import of Canadian agricultural products were hardly utilised. The highest fill rate was 11% for the common wheat and sweet corn quotas. For meat, fill rates ranged from 0% for frozen beef to 4% for bison meat. They were particularly low (0%–1%) for the origin quotas for sugar-containing products, chocolate, food preparations and pet food. The additional duty free quotas for cheese are among the major gains for the EU in CETA. The EU therefore pays particular attention to ensure that the administration of this quota by Canada is in line with the principles agreed in CETA. In 2018, the CETA cheese quota was nearly completely filled (96.4%), an even better result than in 2017. The quota uptake, however, was very slow to take off for well over the first half of 2018 and the EU raised its concerns in this regard to Canada, both in CETA’s Agriculture Committee as well as in the CETA Joint Committee. In these forums, the EU also highlighted other concerns with the Canadian quota management system, which notably foresees that 50% of quota licenses be allocated to Canada’s cheese manufacturers, which would not appear to constitute the most likely users of the quota. At the CETA Joint Committee it was agreed that in order to draw meaningful conclusions it was important to have data for the first full year of quota utilisation. The experience of the first full year of application of CETA has confirmed concerns raised by EU stakeholders about a large number of quota licenses (up to 40%) being transferred to other operators. Such transfers add costs to EU cheeses in Canada. In April 2019, the EU therefore requested that Canada conduct a mid-term review of its CETA cheese quota administration system. Utilisation of the CETA quota for EU cheese Tariff Code Product Quota 2018 (tonnes) Utilisation 2018 (tonnes) Utilisation rate 0406 Cheese of which: high quality industrial 5 900 5 333 567 5 693 5 290 403 96,5 % 99,2 % 71,1 % Source: Global Affairs Canada. On various occasions in 2018, the EU also expressed concerns about Canada’s price class for milk protein ingredients (milk class 7), which are made available to the food processing industry at world prices. Canada for its part, raised concerns about the EU’s quota management system for meat quotas, specifically the automatic on-demand issuance of import licenses. The EU explained that for volumes not allocated during the initial application period, import licenses are automatically issued on-demand after they are processed. Canada also called for better access to quota utilisation data. The EU pointed out that data on quota allocation, which is publically available on-line, was a reliable guide to actual imports. Alcoholic beverages, in particular wines and spirits, top the list of EU agricultural exports, accounting for over 40%. Many discriminatory practices remain in Canada against imported wines and spirits, notably at provincial level. Ontario and Quebec have implemented the commitment foreseen in CETA and have moved away from ad-valorem cost of service differential fees to a volume based system. In accordance with the agreement, the EU has requested that Ontario and Quebec carry out new audits of their accounting system. In addition, the EU called for more transparency and clarity on cost allocation in relation to these cost of service differential fees (some costs are seen as unduly absorbed by imported products). The federal excise duty on imported wine (that exists since 2006) was increased in 2017 by 2% and an escalator clause linked to inflation was included. The EU requested that the discriminatory aspects of the tax to be removed. The tax has also been challenged in the World Trade Organisation by Australia. Finally, the Commission is working with the Canadian authorities to seek mutually agreed solutions to the multitude of concerns relating to the discrimatory treatment of EU alcoholic beverages compared to local ones across few provinces. Since the entry into force of CETA 143 EU food geographical indications (GIs) enjoy full protection from imitations in Canada, at a level comparable to that under EU law. The Commission worked with Canada to ensure that the protection of these GIs would be fully enforced. The amendment of Canada’s Trade-Mark Act to protect the geographical indications of food products, which was introduced as a result of CETA, established a procedure for the direct application for protection by EU rights-holders. The new system delivered its first result in September 2018 with the protection of an additional EU GI “Prosciutto di Carpegna”. This progress should be seen as a concrete positive outcome of CETA. European producers who are interested in exporting to Canada have for the first time access to an effective and easy mechanism to protect their geographical indications. In order to assist EU GI right holders to fully avail themselves of this new mechanism, the EU produced a GI guide available to businesses on the Commission’s webpage . Certain concerns remain as to how the administrative enforcement can be ensured notably for the 8 grandfathered GIs for which a specific regime applies in view of certain prior uses on the Canadian market. The Commission will continue to engage with Canada on this issue. In addition, the EU and Canada will also continue to work on updating the Annex of Wines and Spirits GIs. In the case of alcoholic beverages, CETA, as a result of the incorporation of the EU Canada wines and spirits agreement, only provides a list of GI names which are eligible for protection in Canada. EU GI rights-holders would still need to submit an application to Canadian authorities. SPS measures Currently only 17 EU Member States are authorised to export meat to Canada. Work is ongoing to ensure that the remaining EU Member States will also have access to this market. At the end of 2018, a process was agreed for Canada to recognise the EU Meat inspection system, based on an additional set of audits of a selection of EU Member States in 2019. If this were to result in a satisfactory outcome in all audited EU Member States, Canada would allow the exports of meat from all EU Member States for bovine, swine and poultry. This process will not affect ongoing trade for those EU Member States currently authorised to export meat to Canada. Work on the harmonisation of EU export certificates continues, with priorities put forward by both sides aiming at some tangible initial results in 2019. For some plant commodities, Canada does not recognise alternatives to the use of methyl bromide as a pest mitigating measure for trade. In 2018, an EU project on alternatives to the use of methyl bromide was launched in close cooperation with Canadian authorities with the objective to identify risk measures not based on the use of a pesticide which is known to be an ozone depleting compound. A workshop with experts on both sides took place in March 2019. The outcome of this cooperation will result in a guidance document for EU exporters of plants and plant products for the Canadian market.

Several other SPS issues are still outstanding and are being further discussed with Canada with a view to finding a solution. For example, the export of EU bovine semen is limited only to Schmallenberg Virus serologically negative animals, while there is no scientific basis to justify this restriction. Exports from the EU to Canada are also not authorised for potatoes for planting (called also “potato mini tubers” by Canada) and fresh tomato with vines, stems, and calyces, due to restrictive plant health requirements for Canadian imports. Discussions are ongoing with the Canadian authorities to identify appropriate solutions. 6.Regulatory Cooperation Chapter 21 of CETA lays out the framework for voluntary regulatory cooperation activities, including the establishment of the “Regulatory Cooperation Forum” (the Forum). The Forum builds on the existing regulatory cooperation agreement between the EU and Canada signed in 2004. To prepare for this first meeting, both the EU and Canada held stakeholder consultations to identify issues, priorities, and sectors that the Forum could consider to include into its first work plan. In January 2018, the Commission published a call for proposals inviting civil society to come forward with suggestions for topics for regulatory cooperation with Canada. The Commission received 26 responses to this call, which were made public . From February to April 2018, Canada also sought comments from stakeholders on potential areas for regulatory cooperation with the EU. Canada received close to 40 responses, which were also made public . The first meeting of the Forum took place on 14 December 2018 in Brussels (and via video conference). The topics to be included in the work plan were drawn from the consultations following feedback from EU and Canadian regulators, before being agreed between the EU and Canadian Co-chairs. In choosing the topics, the EU and Canada also took into account the readiness of the topics proposed for regulatory cooperation and whether or not the topics were already dealt with in other CETA committees or existing bilateral or international dialogues. Regulators from both sides provided an update on the feedback received during the consultations, how the initiatives were identified for cooperation, bilateral discussions to date and next steps. On this basis, the parties agreed on a work-plan including the following 5 topics: (i) cybersecurity and the internet of things; (ii) animal welfare – transportation of animals; (iii) re-testing of cosmetics-like products; (iv) co-operation on pharmaceutical inspections in third countries; and (v) exchange of information on the safety of consumer products. The last topic already saw the conclusion of an administrative arrangement for the exchange of information on dangerous non-food consumer products between the European Commission’s Directorate-General for Justice and Consumers (DG JUST) and Health Canada on 13 November 2018, during International Product Safety Week. The Forum welcomed the agreed administrative arrangement and took stock of the context, scope, and type of information that will be exchanged under the administrative arrangement. Furthermore, it was agreed that it would be relevant for the Forum to receive a report of the implementation of the administrative arrangement at the next meeting. During the civil society meeting, co-chairs and regulators from the EU and Canada debriefed civil society stakeholders about the Forum’s activities. Audiences from multiple physical locations participated in this exchange: stakeholders participating in person in Brussels, in Ottawa via video conference, and from desks and conference rooms via web streaming. Several stakeholders in Brussels and Ottawa participated and had the opportunity to comment on the outcomes of the Forum and indicated their interests for future initiatives to strengthen regulatory cooperation. 7.Conclusions and outlook The first year of provisional application of CETA showed good results. The institutional structure of the Agreement was set up and committees and dialogues started their activities. Important efforts were made to ensure the conduct of meetings was transparent and inclusive and this was welcomed by stakeholders and civil society. Trade statistics for 2018 indicated that companies were starting to benefit from the signficant reduction of duties applicable since 21 September 2017 (i.e. 98% of the overall duties which will be ultimately reduced by CETA). We can observe an increase in trade in many sectors, particularly in those sectors where duties were high before the entry into force of CETA. The preliminary statistics also indicated an increase of EU exports to Canada for agricultural products, in particular for processed agricultural products and cheeses where the EU has strong economic interests. CETA also offers the protection of 143 distinctive EU food products labelled with GIs. Thanks to CETA, the Canadian Trade Mark Act was amended to allow for a procedure for the direct application for protection by EU rights-holders of food GIs. A first successful additional protection of an EU GI was delivered through that mechanism in September 2018. CETA also provides for a significant further opening of the Canadian procurement market, including at provincial and local level which represent an important percentage of public procurment. These openings have been vigourously welcomed by EU companies. CETA also gives unparalleled services market access for the EU, including new market access in maritime services, and more globally establishes legal certainty in all key economic sectors. It also includes provisions to facilitate the movement of professionals and the recognition of qualifications. A first proposal for a Mutual Recognition Agreement (MRA) was made in 2018 by the Canadian Architectural Licensing Authorities (CALA) and the Architects’ Council of Europe (ACE) aiming to facilitate recognition and licensing procedures of architects in the EU and in Canada, thus completing a first step of the mutual recognition framework outlined in CETA. The Commission will continue its work to ensure correct implementation of CETA in all areas and will collaborate with EU Member States and stakeholders in order to make sure that EU companies and citizens take full advantages of the benefits created by CETA. 8.Statistics Merchandise trade EU28 2014-2018 2014 2015 2016 2017 2018 EU28 trade with Canada (mio €) Imports 27.431 28.027 29.016 31.509 30.988 Exports 31.654 35.145 35.228 37.704 41.355 Balance 4.223 7.118 6.212 6.195 10.366 Share Canada in EU28 trade with Extra-EU28 Imports 1,6% 1,6% 1,7% 1,7% 1,6% Exports 1,9% 2,0% 2,0% 2,0% 2,1% Total (I+E) 1,7% 1,8% 1,9% 1,9% 1,8% Share EU28 in trade Canada with world Imports 11,3% 11,4% 11,4% 11,7% 12,3% Exports 7,4% 7,2% 7,7% 7,3% 7,4% Total (I+E) 9,4% 9,4% 9,6% 9,6% 10,0% Source Trade G2 Statistics/ISDB 25-mars-19 Trade EU28: Eurostat COMEXT; Trade Canada: IMF Dots Total merchandise trade EU28 with Canada (mio €) Canada 2017 2018 Growth mio € annual % Imports 31.509 30.988 -521 -1,7% Exports 37.704 41.355 3.651 9,7% Balance 6.195 10.366 4.172 Total trade 69.213 72.343 3.130 4,5% Source Trade G2 Statistics/ISDB from Eurostat COMEXT Agrifood trade EU28 with Canada (mio €) Canada 2017 2018 Growth mio € annual % Imports 2.251 1.988 -263 -11,7% Exports 3.560 3.707 147 4,1% Balance 1.309 1.720 411 Total trade 5.810 5.695 -116 -2,0% Source Trade G2 Statistics/ISDB from Eurostat COMEXT NAMA trade EU28 with Canada (mio €) Canada 2017 2018 Growth mio € annual % EU28 imports 29.258 29.001 -258 -0,9% EU28 exports 34.144 37.647 3.503 10,3% Balance 4.886 8.647 3.761 Total trade 63.403 66.648 3.245 5,1% Source Trade G2 Statistics/ISDB from Eurostat COMEXT Services trade EU28 with Canada (mio €) Canada 2016 2017 Growth mio € annual % Imports 12.067 13.228 1.160 9,6% Exports 20.221 21.681 1.460 7,2% Balance 8.154 8.454 300 Total trade 32.288 34.909 2.620 8,1% Source Trade G2 Statistics/ISDB from Eurostat BOP statistics Services trade EU28 with Canada (mio €) 2013 2014 2015 2016 2017 Imports 11.684 11.036 12.640 12.067 13.228 Exports 17.976 16.558 19.376 20.221 21.681 Balance 6.292 5.522 6.736 8.154 8.454 Total trade 29.661 27.594 32.017 32.288 34.909 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics FDI EU28 with Canada (mio €) 2013 2014 2015 2016 2017 FDI Stocks Inward 165.239 211.486 245.556 299.979 292.998 Outward 256.748 286.867 283.214 315.153 304.782 FDI Flows Inward 20.367 17.856 30.507 40.437 29.400 Outward 22.243 9.291 -10.475 21.918 4.058 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics



ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-SOUTH KOREA FREE TRADE AGREEMENT 1.Introduction The Free Trade Agreement (FTA; referred to as ‘the Agreement’) between the EU and its Member States and the Republic of South Korea (in this report referred to as "South Korea") has been provisionally applied since July 2011. On 13 December 2015, it entered formally into force after ratification by EU Member States. The Additional Protocol to the FTA, to take into account the accession of Croatia to the EU, has been provisionally applied since 26 May 2014 and it entered into force on 1 January 2016.

The EU-South Korea FTA is the first of a new generation of comprehensive FTAs meaning that apart from providing market opening commitments as well as a basis for regulatory co-operation in key sectors, it includes a substantial chapter on sustainable development that upholds and promotes social and environmental standards. This is the 7th Annual Report on the implementation of the EU-South Korea FTA, which presents the recent evolution of EU-South Korea bilateral trade and investment and against 2010, which is the last year before the Agreement went into force. An overview of activities of the FTA Working Groups and Committees is also included in the report. Special attention is given to the Trade and Sustainable Development chapter. According to the ex-post evaluation of the EU-South Korea FTA conducted by an independent contractor, published in March 2019, the EU economy gained additional €4.4 billion and the South Korean economy €4.9 billion through the FTA. This happened despite the fact that the external environment, notably the post financial crisis period was not particularly supportive, weighing on demand and international trade. 2.Evolution of bilateral trade 2.1 Trade in Goods In 2018, South Korea accounted for 2.5% of the EU’s total trade in goods and was the EU's eighth largest trading partner. The liberalisation of trade in goods has been beneficial for EU exports as the introduction of the EU-South Korea FTA saw EU exports in goods rise from €27.9 billion in 2010 to €49.2 billion in 2018, a 76% increase. EU imports of South Korean products also grew significantly over the same period, albeit at a slower pace, as values increased from €39.5 billion in 2010 to €51 billion in 2018. While historically, the EU has had a trade deficit with South Korea, the sharp rise in exports since the introduction of the FTA led to an EU trade surplus from 2013 to 2016. Data for 2018 shows that the EU has a slight trade deficit of -€1.9 billion, however it is clear that there is now a more balanced level of trade in goods between the two partners.

The increase in EU exports over the 2010-2018 period was driven by a surge in trade in some key product categories. Machinery and appliances accounted for almost 30% (€14.2 billion) of EU exports to South Korea. Exports in this category have increased by 31% since 2010. The largest gains over the 2010-2018 period have been in transport equipment (+187%) which accounts for just under one fifth (€9.6 billion) of total EU exports. This was driven by a +226% increase in motor vehicles (including parts) which were valued at €8.6 billion (17% of total EU exports) in 2018. At the same time, EU imports of machinery and appliances made up over one third of total EU imports (€18.4 billion) in 2018. There was a sharp decline in the import of these products in the first years after the FTA’s entry into force (falling as low as €13 billion in 2013), however since 2015 there has been a resurgence and imports of machinery and appliances are now at a very similar level as they were in 2010 (i.e. €18 billion). Imports of transport equipment grew by 16% and made up a quarter (€12.7 billion) of EU imports in 2018. Again, this increase was triggered by a substantial rise in imports of motor vehicles (including parts) (+165%) over the 2010-2018 period. Motor vehicles (including parts) accounted for 20% (€10.2 billion) of total EU goods imported from South Korea in 2018. Annual comparisons show that both the EU total exports and imports from South Korea slithly decreased in 2018, compared to 2017, in line with the overall slowdown of international trade dynamics. 2.2 Trade in agricultural goods With respect to trade in agriculture goods, EU exports to South Korea continued to grow in 2018 at 4.8%, albeit at a slower pace than in previous years and stood at €3 billion in 2018. Imports from South Korea in the agri-food sector stagnated at the record high of €201 million reached in 2017, resulting in a surplus of € 2.8 billion in 2018. Overall, EU exports have increased by 37.8% and imports have increased by 62% since 2014, the strongest growth rate in the agri-food sector among FTA partners. Main products exported by the EU are pork (24.6% of EU agricultural exports to South Korea), followed by beer, cheese, chocolate, confectionery and ice cream, spirits and liqueurs and wine. The main impediments to expanding trade were again the following: first, approvals of EU beef (due to a Bovine Spongiform Encephalopathy (BSE)-related import ban) remained pending and have been for some Member States since 2004, and also for poultry there was no progress in revising the Korean policy of country-wide import bans in the event of an outbreak of avian influenza. Similarly, the country-wide bans of pork imposed on Belgium, Hungary and Poland due to African Swine Fever (ASF) were not lifted by South Korea. South Korea recently filed applications for beef exports to the EU, which might indicate a stronger trade orientation in the South Korean administration.

For sensitive agricultural products the EU-South Korea FTA foresees specific tariff rates quotas (TRQs). The fill rate of these import quotas applied by South Korea to goods originating in the EU decreased for 3 out of 10 product groups. Only in case of oranges the TRQ was not used in the two reference periods. EU-South Korea FTA TRQ Fill Rates Utilisation Rate 7/2016 to 6/2017 7/2017 to 6/2018 Milk Powder, Condensed milk (cream) 99.9 % 100.0 % Butter 100.0 % 99.9 % Food Whey 98.3 % 99.0 % Cheeses 99.9 % 99.1 % Prepared dry milk 99.8 % 60.5 % Natural honey 98.9 % 49.1 % Oranges 0.0 % 0.0 % Marling barley, malt 99.0 % 80.8 % Supplementary feed 99.0 % 99.2 % Dextrin 78.7 % 70.6 % Source: South Korean authorities 2.3 Trade in Services and Foreign Direct Investment (FDI) EU exports of services to South Korea increased from €7.4 billion in 2010 to €13.5 billion in 2017 while EU imports rose by 66% (€3.1 billion) over the same period to €7.9 billion in 2017. Although trade in services have grown in both directions, the EU has consistently held a trade surplus with South Korea that peaked at €6.3 billion in 2015. This fell to €5.6 billion of a surplus in 2017, which is greater than the 2010 balance (€2.6 billion). Transport services account for the highest share of both EU imports (€2.4 billion) and exports (€2.9 billion) of services to South Korea. EU imports of construction services have increased significantly since the introduction of the EU-South Korea FTA, rising from €87 million in 2010 to €818 million in 2017 while other business services increased by 161% over the same period to €2.8 billion in 2017. The largest gains in EU exports to South Korea include travel (+120%), telecommunications (+125%) and intellectual property (+189%) which account for over 40% (€5.3 billion) of total EU exports to South Korea in 2017. As is the case with goods and services, the EU-South Korea FTA has also stimulated growth in FDI between the two partners. Latest available data shows that the stock of EU FDI in South Korea rose from €37.5 billion in 2010 to €51.3 billion in 2017, a 37% increase. The stock of South Korean FDI in the EU more than doubled, rising from €13.1 billion in 2010 to €28.3 billion in 2017. 3.Activities of the implementation bodies The institutional provisions of the EU-South Korea FTA (Article 15) established seven Specialised Committees, seven Working Groups and an Intellectual Property (IP) and Electronics Dialogue. The annual meeting of the Trade Committee at ministerial level plays a supervisory role and ensures that the FTA operates properly. The summary below presents activities of Working Groups and Committees that took place between June 2018 and May 2019. The Trade Committee met for the 8th time on 9 April 2019 in Seoul. Both sides agreed that the FTA is a success that has significantly increased bilateral trade and investment even though some concerns on implementation persist, including the long delayed market access for EU beef and the non-ratification of four fundamental ILO Conventions. Furthermore, the deteriorating business climate in South Korea remains a challenge for businesses to fully benefit from the FTA. While recognising some positive developments related to the beef issue, the EU highlighted that the market remained closed and South Korea agreed to rapidly complete the technical steps for the most advanced applicants. On TSD, the EU recognized that some efforts have been made by the South Korean government but progress has been insufficient for South Korea to comply with its commitments. With regard to the car sector, both sides endorsed the finalisation of the administrative amendment of the car annexes under the written procedure. The Commissioner also raised the concerns that the car sector has highlighted regarding the difficult business climate. The EU also raised the well-known Intelletual Property Rights related issues (i.e. public performance rights and geographical indications) while South Korea repeated its request for market access for Samgyetang (chicken ginseng soup) and asked for a solution for the long-standing surimi issue. South Korea was also concerned about the adverse effect of the EU steel safeguards measures. The 6th meeting of the Working Group on Geographical Indications was held in Brussels, on 30 May 2018. The extension of the initial list of EU Geographical indications remains a significant irritant with respect to the implementation of the FTA provisions on protection of intellectual property. With the recent adoption of the rules of procedures of the said Working Group, the EU now expects Korea to examine the 2014 EU request to add 46 GIs to the list of EU GIs protected under the FTA.

On 22 November 2018, the Customs Committee met in Brussels. It mostly addressed issues related to rules of origin, in particular origin verification procedures and issues related to the approved exporter system. The EU also raised duty relief on goods re-entered after repair and both sides discussed mutual administrative assistance, including the exchange of information points and cooperation on specific cases in which the level of co-operation from South Korea was considered by the EU side as unsatisfactory. On 7 November 2018, the 4th EU-South Korea Dialogue on Electronics took place in Brussels. A wide range of issues was discussed, including the following: the implementation and enlargement of the scope of Annex 2-B of the agreement to include radio equipment testing; the review of Appendix 2-B-3 of the agreement to simplify conformity assessment procedures; a future cooperation on the development of new standards; modifications on the EU Eco-design Regulation for Electronic Display asked by South Korea. Discussions were also held on EU energy labelling requirements for electronic displays, light source and household refrigerating appliances. The Working Group on Motor Vehicles and Parts met in Brussels on 4 December 2018 and addressed environmental issues, technical standards, harmonization, convergence and market access issues. Compared to previous years, the Working Group also discussed different issues related to broader cooperation on trade policy, including international developments, the state of play of bilateral trade flows and investments and the business climate in the sector. During the April 2019 Trade Committee the EU and South Korea concluded to endorse the administrative amendment of Annex 2-C in order to be implemented by September 2019. On the regulatory side, the parties agreed to share information on CO2 emission regulations for passenger cars, heavy-duty vehicles and “Emission Related Components” certification procedures. The EU agreed to provide additional information on the entry into force of the EU “Whole Type Approval”. Market access issues discussed included, inter alia, truck-tractors, self-certification and marking of car parts, vehicle width limit, homologation certificates and producers responsibility for end of life vehicles. The 7th meeting of the Working Group on Pharmaceuticals and Medical Devices took place on 5 December 2018. In the area of medical devices, the parties exchanged information on i.a. the current draft of the Unique Device Identifier (UDI) rules in South Korea and on the objective and future implementation of the Integrated Medical Device Information System (IMDIS) in South Korea. Concerning pharmaceuticals, both sides discussed i.a. the draft amended premium pricing policy published on 7 November 2018 by South Korea that amends the conditions for rewarding innovations in new pharmaceutical products in South Korea. The Working Group on Chemicals organised a videoconference on 5 March 2019 and engaged in useful exchanges on regulatory developments of interest to both sides. The EU notably requested additional information and clarifications on i.a. the amendments to the South Korean REACH legislation implemented in January 2019 and on the requirements for treated articles placed on the South Korean market under the South Korean Biocidal Product Regulation. The Committee on SPS Measures met in Brussels on 19 September 2018. The Parties discussed pending applications for import of EU and South Korean beef, the recognition of regionalisation measures for avian influenza and African swine fever, and policies related to certification. South Korea also requested to discuss the pending application for export of chicken-ginseng soup and dairy products to the EU. The meeting was followed by a one-day seminar to discuss regionalisation policies in the EU and South Korea to control outbreaks of highly pathogenic avian influenza. The 7th EU-South Korea Trade in Goods Committee was held on 6th December 2018 in Brussels. A number of sectoral issues wre discussed including the preparation of the next Trade Committee foreseen for April 2019. The meeting brought many clarifications on the cosmetics sector legislation in South Korea and the F-gas quota system in the EU. While no breakthrough was registered at the meeting, enhanced cooperation on electronics with the view to enlarge the annex to radio equipment was agreed. EU concerns were raised with regard to an increased support to shipbuilding by the South Korean government and the EU requested more transparency and a dedicated dialogue. The implementation of the competition chapter was also raised. Finally, both sides discussed the preparation of the Trade Committee. The 5th and the 6th meetings of the Trade Remedy Cooperation Working Group were held on 7 December 2018 in Brussels and 20 May 2019 in Seoul, respectively. The latter meeting took place back-to-back with the International KTC Seoul Forum on Trade Remedies in which the EU side participated. During the 5th and the 6th meetings of the Trade Remedy Cooperation Working Group, the two sides updated each other on latest developments in domestic trade remedy laws, policies and practice. The EU side notably debriefed South Korea on the entry into force and implementation of the two latest amendments to the EU Trade Remedy basic legislation, namely the ‘new anti-dumping methodology’ and the ‘modernisation of trade defence instruments’, which had entered into force in December 2017 and June 2018 respectively . South Korea expressed concerns with respect to the EU steel safeguard measures and the EU briefed South Korea on the upcoming review investigation of the steel safeguard measures. The EU expressed concerns with the respect of general fairness and transparency principles in a recent investigation conducted by South Korea against Italian exports of stainless steel bars. The EU invited South Korea to revise its policy and methodology accordingly. The two sides also shared statistics on Trade Defence cases and exchanged views on global trends in trade remedy investigations, and related WTO litigation. The meeting of the Working Group on Government Procurement took place in Brussels on 26 November 2018. The Parties provided information on recent legislative developments, discussed market access issues and potential irregularities raised by European and South Korean industries. Both sides are committed to ensure that the FTA is implemented and any irregularity in the effective public procurement market access is corrected. Among other issues the Parties exchanged views on cooperation on SME policy (that may require a follow up with a recently established Ministry for SMEs in South Korea) and the EU inquired about a possible interest from the South Korean side to integrate a machine translation tool for tender notices in its e-procurement portal. The 6th EU-South Korea Cultural Cooperation Committee convened on 13 May 2019 in Seoul, followed by a 2 day study visit to various South Korean cultural institutions. The topics discussed included performing arts, culture and cities, new developments in cultural and creative sectors- namely cultural entrepreneurship, the cultural content industry and the connections between arts, science and technology- architecture and audio-visual co-productions.

4.Implementation of the provisions on trade and sustainable development The Commission continued to express its serious concerns and stepped-up its messages vis-à-vis the South Korean government regarding FTA commitments related to international (ILO) standards and agreements. These concerns have been raised in the framework of regular FTA committees including at the 6th meeting of the TSD committee of 13 July 2018. Also, civil society has again raised these concerns in the context of regular work of the Domestic Advisory Groups and the Civil Society Forum under the FTA. Due to insufficient progress on the envisaged steps presented by Korea at the 6th Committee on Trade and Sustainable Development, and in line with the more assertive approach to enforcement of commitments as outlined in the TSD 15-point action plan of February 2018, on 17 December 2018 the Commission formally requested the government request consultations under Article 13.14 of the FTA to seek a mutually satisfactory solution. In that context, the EU raised concerns with regard to Korea’s issues with respecting in law and practice of the core International Labour Organisation (ILO) principles of the freedom of association and right to collective bargaining, and with regard to the insufficient efforts by Korea towards the ratification of four outstanding fundamental ILO Conventions. Government consultations are a first step of dispute settlement proceedings. This is the first dispute settlement initiated by the EU under bilateral trade agreement. The EU held government consultations with Korea on 21 January 2019. Korean government has engaged cooperatively however the consultations however these did not lead to any satisfactory solution and the progress made until now by Korea has been insufficient. In the follow-up to the government consultations, the Commission raised the insufficient progress on labour commitments at meetings with Korean trade and labour ministers at the occasion of 8th Trade Committee on 9 April 2019 in Seoul. Since the outcome of the efforts by the Korean government remain uncertain, on 4 July 2019, the EU requested the establishment of a panel (the 2nd stage of the arbitration procedure under the FTA) to examine the matters that have not been satisfactory addressed through government consultations. During the panel proceedings, the Commission will remain open to continue looking for a mutually agreed solution to the dispute. If Korea does not comply with its commitments in a timely manner, the panel of experts will deliver a public report with recommendations on achieving compliance. The implementation of the recommendations of the panel report will then be monitored by the Trade and Sustainable Development Committee created under the terms of the EU-Korea trade agreement. 5.Specific areas subject to monitoring In line with Article 14 of the protocol on Rules of Origin, South Korea’s imports of key car parts and electronics from the most important suppliers (outside the EU) have been monitored. China and Japan remain the largest car parts suppliers. Japan still pays full duty on car parts while China benefits from tariff reduction (within the South Korea-China agreement most car parts will be liberalised in 10 or 15 years). Source: KITA In conclusion, the import pattern has not fundamentally changed since the EU-South Korea FTA was signed and there was no significant increase in imports of car components and key electronics from the largest suppliers to South Korea in 2018 compared to 2017. Based on these trade statistics, it is not possible to establish a link between the allowance of duty drawback and the increase in EU imports of cars from South Korea. 6.Progress, main open issues and follow-up actions Progress on the implementation of the Trade and Sustainable Development chapter of the FTA by South Korea has not been sufficient with regard to the ratification of the four pending ILO conventions and protection of labour rights. Therefore, the Commission stepped up the engagement with South Korea and launched dispute settlement proceedings under the FTA in order to address these issues.

Access of EU beef to the South Korean market, which has been closed to all EU imports since January 2001, remains another EU key concern. By mid-2019, South Korea carried out audits in two Member States (Denmark and The Netherlands) which depending on the conclusions of the auditors, open the door to beef from these two Member States on the South Korean market. However, the acceptance of the principle of regionalisation for animal diseases by South Korea remains an important topic in the sanitary and phyto-sanitary area in particular for the exports of pig meat and poultry products. In the area of Intellectual Property, South Korea still needs to establish an effective remuneration system for public performance rights. Lack of progress in this area remains a concern to the EU. The revised Presidential Decree, which entered into force in August 2018 did not sufficiently address the core issues of exempting the majority of retail venues from paying remunerations and the low level of fees. These issues will be discussed again at the next EU-South Korea Intellectual Property Dialogue under the FTA in autumn 2019. The extension of the geographical indications’ (GI) list protected by the FTA is also still pending. Recent adoption of the Rules of Procedure of the EU-South Korea GIs Working Group should ease the way towards adding further EU and South Korean geographical indications to the Annex of the FTA. Improvements in the area of customs procedures could contribute to increase the preference utilisation rates, and further facilitate the participation of small and medium sized enterprises (SMEs). 7.Conclusions and outlook The EU-South Korea FTA offers a sound institutional framework for bilateral trade between the EU and South Korea despite the fact that some difficulties persist as outlined in section 6. The ex post evaluation study of the FTA published by the EU Commission in March 2019 concluded that in the vast majority of areas the implementation works well, supporting economic development on both sides. Both parties continue working on the implementation of the EU-South Korea FTA in order to bring further benefits to their businesses and consumers. In this respect, the specialised committees and working groups established under the EU-South Korea FTA serve as a forum to discuss and seek solutions to the implementation and market access issues, including regulatory developments on both sides. 8.Statistics Total merchandise trade EU28 with South Korea (mio €) South Korea 2017 2018 Growth mio € annual % Imports 51.734 51.089 -645 -1,2% Exports 50.132 49.250 -882 -1,8% Balance -1.601 -1.839 -238 Total trade 101.866 100.339 -1.527 -1,5% Source Trade G2 Statistics/ISDB from Eurostat COMEXT Agrifood trade EU28 with South Korea (mio €) South Korea 2017 2018 Growth mio € annual % Imports 203 201 -2 -0,9% Exports 2.889 3.028 139 4,8% Balance 2.686 2.827 141 Total trade 3.092 3.229 137 4,4% Source Trade G2 Statistics/ISDB from Eurostat COMEXT NAMA trade EU28 with South Korea (mio €) South Korea 2017 2018 Growth mio € annual % EU28 imports 51.531 50.888 -643 -1,2% EU28 exports 47.244 46.222 -1.021 -2,2% Balance -4.287 -4.666 -378 Total trade 98.774 97.110 -1.664 -1,7% Source Trade G2 Statistics/ISDB from Eurostat COMEXT Services trade EU28 with South Korea (mio €) South Korea 2016 2017 Growth mio € annual % Imports 7.215 7.939 724 10,0% Exports 12.608 13.520 912 7,2% Balance 5.393 5.581 188 Total trade 19.823 21.459 1.637 8,3% Source Trade G2 Statistics/ISDB from Eurostat BOP statistics Services trade EU28 with South Korea (mio €) 2013 2014 2015 2016 2017 Imports 5.653 6.310 6.917 7.215 7.939 Exports 10.662 11.761 13.247 12.608 13.520 Balance 5.010 5.451 6.330 5.393 5.581 Total trade 16.315 18.071 20.164 19.823 21.459 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics FDI EU28 with South Korea (mio €) 2013 2014 2015 2016 2017 FDI Stocks Inward 15.517 17.922 18.571 24.308 28.288 Outward 32.105 42.976 42.520 47.013 51.286 FDI Flows Inward 1.868 4.286 2.068 1.809 2.245 Outward 868 7.731 -5.195 3.244 4.978 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics



ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-COLOMBIA/ECUADOR/PERU TRADE AGREEMENT 1.Introduction 2018 marked the fifth full year of implementation of the Trade Agreement between the European Union and its Member States, of the one part, and Colombia and Peru, of the other part , as amended by the Protocol of Accession of Ecuador (‘the Agreement’). The Agreement has been provisionally applied with Peru since March 2013, with Colombia since August 2013, and with Ecuador since 1 January 2017. Ratification by Member States of both the Trade Agreement and the Protocol of Accession of Ecuador is ongoing . The Agreement was also amended through the Protocol of Accession of Croatia to the EU. After completion of the ratification procedure by Peru on 6 April 2017, this Protocol entered into force with Peru on 1 May 2017. The ratification process by Colombia is ongoing. This report shows that the results after almost six years of provisional application in the case of Peru and Colombia, and almost three years in the case of Ecuador, remain positive, although bilateral trade with Colombia and Peru in 2018 underwent a slight decrease after the rebound of 2017. The Agreement offers tariff-free access for virtually all industrial and fishery products from the three Andean countries, and substantial tariff preferences for the few agricultural products which were not fully liberalised, with very few exceptions. This improved market access, more predictable trade and investment relationship and the better rules have helped partner countries diversify trade and notably Andean countries’ exports of agri-food products. Regarding EU exports, several industrial sectors including pharmaceuticals, machinery and vehicles, have also strongly benefitted from the improved market access.

The Parties are dedicating important resources to the implementation process through the work in the bodies under the Agreement, notably the Trade Committee and its eight specialised Sub-committees. The Trade Committee and its Sub-Committees have met on an annual basis since 2013. Ecuador joined the institutions in 2017. The institutional structure of the Agreement is common and the Trade Committee and the Sub-committees take place in the presence of all Parties, i.e. between the EU and the three Andean partner countries. In December 2018, the annual meetings of the Trade Committee and eight Sub-committees met in Quito (Ecuador) (see below). In accordance with Article 13 of Regulation (EU) No 19/2013 of the European Parliament and of the Council of 15 January 2013 implementing the bilateral safeguard clause and the stabilisation mechanism for bananas of the Trade Agreement between the European Union and its Member States, of the one part, and Colombia and Peru, of the other part (‘Regulation’), the Commission committed to submit an annual report to the European Parliament and the Council on the application, implementation and fulfilment of obligations of the Agreement and the Regulation. This report responds to this requirement (see section 5 below). 2.Evolution of trade 2.1 Trade in Goods The present section focuses on bilateral trade in goods as well as on Non-Agricultural Market Access (NAMA) products. As per the definition in the WTO Agreement on Agriculture, these non-agricultural products include industrial goods, manufactured goods, textiles, fuels and mining products, footwear, jewellery, forestry products, fish and fisheries, and chemicals. 2.1.1 Overall evolution Colombia In 2018, the EU has gone from Colombia´s second to third trading partner (14%), after the US (26%) and China (16%). In fact, bilateral trade between the EU and Colombia decreased by 4%. Colombian exports to the EU saw a 9% decline amidst falling global prices of coffee, a key export product. Compared to 2012 (year before the application of the Agreement), bilateral trade decreased by 22%, in line with the 22% decrease of Colombia’s total trade with the rest of the world over the same period. In 2018, bilateral trade amounted to €11 billion, compared to €11.5 billion in 2017. While historically, Colombia ran a trade surplus with the EU, this trend reversed since 2017 and the EU now posts a trade surplus of €925 million. EU exports to Colombia increased by 1% in 2018 to €6 billion. The headings that recorded the largest increases were pharmaceutical products, vehicles, electrical machinery and base metals while exports of machinery products and aircrafts suffered the greatest declines. EU imports from Colombia amounted to €5.1 billion in 2018, down from €5.6 billion in 2017, representing a 9% decrease. It is noteworthy that for the first time agricultural products represented the same share (43%) of total exports from Colombia as minerals. Overall, the export basket of Colombia to the EU is more diversified than Colombia's trade with China and the US, more dominated by coal and petroleum products.

EU-Colombia trade in non-agricultural products (NAMA) EU exports to Colombia of NAMA products amounted to €5.6 billion in 2018, increasing by 1%. The most important categories in 2018 were: ·Machinery and mechanical appliances (HS 84) represented the largest share of EU exports at 16%, amounting to €978 million despite suffering the largest drop in absolute terms, with a decrease of 17% compared to 2017. ·Pharmaceutical products (HS 30), totalling €813 million, or 14% of EU exports, increased by 12%; ·Motor vehicles (HS87), registered a 17% increase up to €556 million, now representing 9% of total EU exports. EU imports from Colombia of NAMA products amounted to €2.9 billion in 2018, decreasing by 9% compared to the previous year. The main categories in 2018 were: ·Minerals (HS 27), €2.1 billion, representing 43% of total EU imports from Colombia, versus 46% in 2017; ·Precious stones and minerals (mainly emeralds and gold) (HS 71); increased by 171% compared to 2017, now representing €156 million, or 5% of total imports, ·Base metals (HS 72 to 83) (of which mainly iron and steel) amounted to €99 million, representing 2% of EU imports, an increase of 3% compared to 2017. Peru The EU is Peru’s third largest trading partner (14% of total Peruvian trade), after China (24%) and the US (19%). In 2018, bilateral trade with the EU amounted €9.9 billion, decreasing by 3% compared to 2017, while Peru’s overall trade with the rest of the world increased by 17% over the same period. The EU’s trade deficit increased from €2.1 billion to €2.4 billion. EU exports to Peru amounted to €3.7 billion, an 8% decrease when compared to 2017. 93% of EU exports are industrial products, mostly machinery and appliances, chemical products and transport equipment. EU imports from Peru remained stable when compared to 2017 (€6.2 billion), Peru increased its exports to the rest of the world by 23%. Key export items are ores, slag and ashes, minerals, fruits, coffee and fishery products. The share of agricultural products in imports from Peru into the EU continued to increase.

EU-Peru trade in non-agricultural products (NAMA) EU exports to Peru of non-agricultural products amounted to €3.47 billion in 2018, a 9% decrease (from €3.8 billion in 2017). The most important categories in 2018 were: ·Machinery, mechanical appliances (HS 84), amounting to €898 million representing 24% of total EU exports to Peru, with a 7% decrease compared to 2017; ·Electrical machinery and equipment (HS 85), or €327 million, accounting for 9% of total EU exports to Peru, and with a 18% contraction compared to 2017; ·Vehicles and parts (HS 80), worth €300 million or 8% of EU exports, decreasing by 1% compared to 2017; ·Pharmaceutical products (HS30), amounting to €198 million, or 5% of EU exports, decreasing by -3% compared to 2017. EU imports from Peru of non-agricultural products also decreased by 4% amounting to €3.87 billion in 2018 (from €4.02 billion the previous year). The main categories in 2018 were: ·Ores (HS 26), amounting to €1.7 billion representing 27% of total EU imports from Peru, versus 30% in 2017, with a 10% decrease compared to 2017; ·Mineral fuels (HS27) mainly natural gas, worth €496 million, representing 8% of EU imports, a 26% decrease of 26% compared to 2017; ·Fish and crustaceans (HS 03), amounting to €308 million or 5% of EU imports, with a strong 18% increase compared to 2017. Ecuador In 2018, the EU remained Ecuador´s second largest trading partner (14% of total Ecuador trade) after the US (27%) and ahead of China (12%). In 2018, bilateral trade amounted to €5.4 billion, a 3% increase compared to €5.2 billion in 2017, a much slower rate compared to the remarkable 20% growth registered in 2017, the first year of application of the Agreement. Ecuador’s trade with the rest of the world increased by 12% in 2018, compared to 16% in 2017. Several factors may explain these figures: i) a strong dollar reducing the competitiveness of Ecuadorian products in international markets; ii) a slowdown in Ecuador´s domestic consumption; and iii) a trade diversion towards Central American countries and China. While the EU has historically maintained a trade deficit with Ecuador, this deficit is getting progressively reduced. EU exports to Ecuador increased by 6% year-on-year (2017: €2.2 billion; 2018: €2.3 billion) and concentrated on agricultural products and fishery products. EU imports from Ecuador grew by 1% year-on-year (2017: €3 billion; 2018: €3 billion). Key categories were machinery and appliances, chemical products and mineral products.

EU-Ecuador trade in non-agricultural products (NAMA) EU exports to Ecuador of NAMA products increased by 5% amounting €2.2 billion in 2018. The most important categories in 2018 were: ·Machinery and mechanical appliances (HS84), worth €425 million and accounting for 18% of total EU exports to Ecuador, shrunk by 3% compared to 2017; ·Mineral fuels (HS 27), amounting to €350 million, or 15% of total EU exports, contracted by 11%; ·Vehicles and parts (HS87), of a value of €171 million, or 7% of EU exports, grew by 70%; Railways and trams (HS86), of €15 million, registering a 730% increase, as a consequence of works on the public transportation system (the metro of Quito, the tramway of Cuenca, and the cableway in Guayaquil). ·Pharmaceutical products (HS 30), €166 million, or 7% of EU exports, grew by 6%; ·Fishery products (HS03), worth €98 million accounting for 4% of EU total exports to Ecuador. EU imports of NAMA products from Ecuador decreased by 2% amounting to €1.42 billion in 2018. The main categories in 2018 were: ·Fish and crustaceans (HS 03), amounted to €657 million, and accounted for 22% of total EU imports from Ecuador, shrunk by 3%; ·Preparation of fish (tuna) (HS 16) worth €656 million, or 22% of total EU imports, shrunk by 2%; 2.1.2 Trade in agricultural goods This section focuses on agricultural products as defined by Article 2 of the WTO Agreement on Agriculture and as listed in Annex 1 of the same agreement. Colombia EU exports to Colombia of agricultural products increased by 7% in 2018, and were dominated by:

·Beverages and spirits (HS22) at €91.4 million, or 21% of EU exports of agricultural products to Colombia; ·Preparations of cereals, flour, starch (HS19) and preparation of vegetables, fruits, nuts or plants (HS20) account for 1% of agricultural exports each. ·Animal and vegetable fats and oils (HS15) increased by 5%, representing 1% of EU agricultural exports. EU imports of agricultural products from Colombia amounted to €2.2 billion, decreasing by 9% from 2017 to 2018. The most important categories in 2018 were: ·Fruits (HS08), worth €1 billion, accounting for 20% of total EU imports from Ecuador, down by 5% when compared to 2017. Bananas represented 83% of all fruits exported, followed by avocados with 6%. From 2017 to 2018, there was a strong increase in exports of limes (78%), guavas, mangoes and mangosteens (31%) and oranges (19%); ·Coffee (HS09), €491 million, decreased by 20%, represents 10% of EU imports; ·Crude palm oil (HS151110) and crude palm kernel oil decreased by 15% and 5% respectively but still accounted for 5% and 1% of imports. Total EU imports of agricultural products from Colombia have increased by 45% since 2012, and now account for 43% of Colombian exports to the EU, versus 18% in 2012. Use of Tariff-rate quotas (TRQs) The Agreement provides for Tariff Rate Quotas (TRQs) which grant the other party preferential tariff treatment up to the quota’s quantitative threshold, above which imports are subject to the applicable Most-Favoured Nation tariff. Colombia’s use of the TRQ for cane sugar and chemically pure sucrose decreased to 64.8%. The TRQ for Rum was used for the first time in 2018. Other TRQs are hardly utilised or not utilised at all. Rate of utilisation of EU TRQs by Colombia 2013 2014 2015 2016 2017 2018 Cane sugar and chemically pure sucrose 88.4% 85.7% 93.8% 96.2% 94.8% 64.8% Sugar confectionery 1.4% 1.3% 1.2% 1.5% 1.5% 1.3% Rum in containers holding > 2 litres 0% 0% 0% 0% 0% 58.8% Source: TAXUD, Surveillance Database

The EU is fully using the TRQs established for mushrooms, milk and cream in powder and sweetcorn, to a somewhat lesser extent the TRQs on preparations for infant use (almost fully used) and ice cream, which experienced a substantial increase through a better implementation of the Agreement. The TRQ for yogurt has experienced a sharp decrease after two years being almost fully used, while the one for cheese has increased although it remains low (13.4%). The EU barely uses its TRQ on sugar confectionery (less than 5% in 2018). Rate of utilisation of Colombia TRQs by the EU 2013 2014 2015 2016 2017 2018 Mushrooms 1.6% 5% 100% 100% 100% 100% Milk and cream in powder 0% 34.9% 100% 100% 82.5% 100% Whey 57.6% 50% 92.9% No more TRQ Preparations for infant use 40.4% 67.5% 99.1% 100% 100% 99% Yogurt 0% 0.5% 0.8% 100% 99% 17.4% Sweetcorn 0.4% 54.2% 100% 100% 100% 100% Ice cream 5.3% 13.4% 7.4% 25.9% 45.7% 87% Cheese 9% 8% 8.2% 7.9% 3.1% 13.4% Sugar confectionary 1.8% 3.4% 3.1% 3.8% 3.9% 4.7% Source: DIAN (Dirección de Impuestos y Aduanas nacionales) Peru EU exports to Peru of agricultural products in 2018 increased by 1% compared to 2017. The most important categories in 2018 were: ·Beverages and spirits (HS22), accounting for 23% of total EU exports of agricultural products to Peru have decreased by -6% compared to 2017; ·Preparations of vegetables (HS20), representing 11% of total EU exports of agricultural