EUROPEAN COMMISSION Brussels, 5.7.2018 COM(2018) 518 final 2018/0281(NLE) Proposal for a COUNCIL DECISION on the conclusion, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the Union and the People's Republic of China in connection with the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal Following the WTO panel report adopted on 19 April 2017 in the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products brought by the People's Republic of China against the European Union, the EU needed to comply with the findings. In particular, the panel found that when allocating quantities within tariff rate quotas to supplying countries under WTO rules, the EU should have taken into account as a “special factor” China's increased ability to export poultry products to the EU following the relaxation of sanitary measures in July 2008. The reasonable period of time for the implementation of the Panel Report under the WTO rules began on 19 April 2017. On 12 March 2018, the Council authorised the Commission to open negotiations on a mutually agreed solution ("MAS") with China. Negotiations with China resulted in an Agreement in the form of an Exchange of Letters that was initialled on 18 June 2018 in Geneva ("the Agreement"). The Agreement should respect rights of other suppliers, which were agreed in the context of past Article XXVIII GATT negotiations. The Commission also needs to provide for transparent and appropriate tariff quota management. Thailand has indicated that it is in agreement with the allocation of TRQs to China as set out in the Agreement and we expect to receive their written confirmation shortly (and in any case before the formal signature of this Agreement). Consequently, the European Commission proposes to the Council to adopt a decision to conclude the Agreement. •Consistency with existing policy provisions in the policy area Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Consistency with other Union policies Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis Article 207 of the Treaty on the Functioning of the European Union (TFEU), in conjuction with Article 218(6) of the TFEU for conclusion of international agreements. •Subsidiarity (for non-exclusive competence) The proposal falls under exclusive competence of the Union, Article 3(1)(e) of the Treaty on the Functioning of the European Union. The subsidiarity principle therefore does not apply. •Proportionality The measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Choice of the instrument

A Decision of the Council authorising the conclusion of the Agreement is required under Article 218(6) TFEU. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Ex-post evaluations/fitness checks of existing legislation Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Stakeholder consultations Publication of the roadmap, regular consultation with the industry, stakeholders and Member States. Feedback from the European Poultry, Egg and Game Association (EPEGA) received in January 2018 following the publication of the roadmap clearly stated their support for the opening of these additional quotas. •Collection and use of expertise Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Impact assessment Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Regulatory fitness and simplification Not applicable – the measure is taken in implementation of a WTO Panel Report, a Union obligation under the WTO Agreement. •Fundamental rights Not applicable. 4.BUDGETARY IMPLICATIONS See Financial Statement. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements The Commission proposes to the Council that the Agreement in the form of an Exchange of Letters with China be concluded on behalf of the Union. The results of the Agreement are as follows:

The European Union shall open the following Tariff Rate Quotas (TRQ): a TRQ of 6060 tonnes for the tariff line 1602.3929 (with specific country allocation of 6000 tonnes to China and 60 tonnes to all others), with an in-quota duty rate of 10.9% a TRQ of 660 tonnes for the tariff line 1602.3985 (with specific country allocation of 600 tonnes to China and 60 tonnes to all others), with an in-quota duty rate of 10.9% an erga omnes TRQ of 5000 tonnes for the tariff line 1602.3219, with an in-quota duty rate of 8% The Commission will adopt implementing Regulations to expand and manage the relevant quotas, pursuant to Article 187(a) of the Single Common Market Organisation (CMO) Regulation (Regulation (EC) No 1308/2013). These implementation measures are being prepared in parallel with this proposal. Once the quotas are opened, the EU and China will notify the Agreement to the WTO Dispute Settlement Body as a MAS in relation to the dispute DS492. 2018/0281 (NLE) Proposal for a COUNCIL DECISION on the conclusion, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the Union and the People's Republic of China in connection with the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular first subparagraph of Article 207(4), in conjunction with point (a)(v) of the second subparagraph of Article 218(6) thereof, Having regard to the proposal from the European Commission, Having regard to the consent of the European Parliament, Whereas: (1)On 12 March 2018, the Council authorised the Commission to open negotiations on a mutually agreed solution with China as part of the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products. (2)Those negotiations have been concluded and an agreement in the form of an Exchange of Letters between the European Union and China was initialled on 18 June 2018. (3)The agreement was signed on behalf of the Union on […], subject to its conclusion at a later date, in accordance with Council Decision […] (4)The Agreement should be approved on behalf of the European Union,