EUROPEAN COMMISSION Brussels, 16.12.2015 COM(2015) 653 final 2015/0297(NLE) Proposal for a COUNCIL DECISION authorising the signature of an Agreement in the form of an Exchange of Letters between the European Union and the People's Republic of China pursuant to Article XXIV:6 and Article XXVIII of the General Agreement on Tariffs and Trade (GATT) 1994 relating to the modification of concessions in the schedule of the Republic of Croatia in the course of its accession to the European Union



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal With the accession of the Republic of Croatia, the European Union enlarged its customs union. Consequently, the European Union was required under World Trade Organisation (WTO) rules (Article XXIV:6 of the GATT 1994) to enter into negotiations with WTO Members having negotiating rights related to the tariff schedule of Croatia in order to eventually agree on a compensatory adjustment. Such adjustment is due if the adoption of the EU’s external tariff regime results in an increase in tariff beyond the level for which the acceding country has bound itself at the WTO. On 15 July 2013, the Council authorised the Commission to open negotiations under Article XXIV:6 of the GATT 1994. The Commission has negotiated with the Members of the WTO holding negotiating rights with respect to the withdrawal of specific concessions in relation to the withdrawal of the schedule of the Republic of Croatia in the course of its accession to the European Union. Negotiations with the People's Republic of China resulted in a draft Agreement in the form of an Exchange of Letters that was initialled on 7 October 2015 in Brussels (the Agreement). Consequently, the European Commission proposes to the Council to authorise the signature of the Agreement. •Consistency with existing policy provisions in the policy area The proposal is consistent with EU practice followed in previous EU enlargements. •Consistency with other Union policies The proposal follows EU practice which is consistent with the EU external action, industrial and agricultural policies. 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(5) of the TFEU for the signature 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 People's Republic of China was affected by the withdrawal of Croatia's concessions. The compensatory adjustments do not exceed China's rights in this respect. The proposal complies with the proportionality treatment. •Choice of the instrument A Decision of the Council authorising the signature of the Agreement is required under Article 218(5) TFEU.

3.STAKEHOLDER CONSULTATIONS •Stakeholder consultations The Council (Trade Policy Committee) has been regularly consulted on the content and advancement of the negotiations. The European Parliament (INTA Committee) has been informed. 4.BUDGETARY IMPLICATIONS See Financial Statement. 5.OTHER ELEMENTS •Implementation plans The Commission proposes to the Council that the Agreement in the form of an Exchange of Letters with the People's Republic of China be signed on behalf of the Union. In parallel, a separate proposal on the conclusion of this Agreement is also being submitted to the Council. The results of the Agreement will have to be incorporated, for industrial goods, into Annex I of Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff by means of a Commission implementing regulation amending the Annex, on the basis of Article 9 of Regulation, to reduce the conventional rate of duty fixed in the Common Customs Tariff as follows: –On tariff line 6404 19 90 (footwear with outer soles of rubbers or plastics - other) lower the current bound EU duty of 17 % to 16,9% –On tariff line 8415 10 90 (window or wall air conditioning machines "split-system") lower the current bound EU duty of 2,7 % to 2,5%. For the agriculture quota increases, the Commission will adopt an implementing Regulaltion to open and administer the following quotas, pursuant to Article 187(a) of the Single Common Market Organisation (CMO) Regulation (Regulation (EU) No 1308/2013): –On tariff line 0703 20 00 add 2 150 tonnes to the allocation for People's Republic of China under the EU tariff rate quota for garlic, maintaining the present in-quota rate of 9.6%. –Add 650 tonnes to the allocation for People's Republic of China under the EU tariff rate quota for mushroom of species agaricus, prepared, preserved or provisionally preserved; maintaining the present in-quota rates. These implementation measures are being prepared in parallel to this proposal. 2015/0297 (NLE) Proposal for a COUNCIL DECISION authorising the signature of an Agreement in the form of an Exchange of Letters between the European Union and the People's Republic of China pursuant to Article XXIV:6 and Article XXVIII of the General Agreement on Tariffs and Trade (GATT) 1994 relating to the modification of concessions in the schedule of the Republic of Croatia in the course of its accession to the European Union THE COUNCIL OF THE EUROPEAN UNION,