COMMISSION STAFF WORKING DOCUMENT Country 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 2016 - 31 December 2016
Date: 2017-11-09
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: association agreement (EU), cooperation agreement (EU), free-trade agreement, investment, service, sustainable development, tariff preference, tariff quota, third country, trade agreement (EU)

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 9.11.2017  SWD(2017) 364 final  COMMISSION STAFF WORKING DOCUMENT Country 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 2016 - 31 December 2016 {COM(2017) 654 final}  
 
 
Country reports and info sheets on implementation of EU Free Trade Agreements 

TABLE OF CONTENTS 

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62 

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83 

87 

91 

95 

100 

104 

108 

113 

121 

125 

132 

Georgia 

Moldova 

Ukraine 

Chile 

Mexico 

Norway 

Serbia 

South Africa 

Switzerland 

Turkey 

Algeria 

Egypt 

Israel 

Jordan 

Lebanon 

Morocco 

Palestine 

Tunisia 

Cariforum 

Cameroon 

Eastern and Southern Africa 

Pacific 

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ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND 
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN 
THE EU AND GEORGIA 

1. 

INTRODUCTION 

On  27  June  2014  the  European  Union  and  Georgia  signed  an  ambitious  Association 
Agreement  (AA),  including  a  Deep  and  Comprehensive  Free  Trade  Area  (DCFTA).1 
Following the completion of the ratification process, the Association Agreement entered into 
force on 1 July 2016 after being applied on provisional basis since 1 September 2014.2 

In  the  preamble  of  the  Association  Agreement  the  EU  has  acknowledged  the  European 
aspirations  and  European  choice  of  Georgia  and  welcomed  its  European  choice. 
Simultaneously  both  partners  take  into  account  that  the  AA  will  not  prejudice  and  leaves 
open, the way for future progressive developments in EU-Georgia relations. The AA aims at 
closer political association and economic integration of Georgia with the EU, in particular 
through  the  DCFTA  which  includes  commitments  on  regulatory  approximation  in  trade-
related  areas,  and  in  compliance  with  the  rights  and  obligations  arising  out  of  the  WTO 
membership. This process is based on shared values i.e. respect for democracy and the rule of 
law,  human  rights  and  fundamental  freedoms  as  well  as  market  economy.  The  general 
objective  of  the  Agreement  is  to  contribute  to  political,  socio-economic  and  institutional 
development of Georgia through wide-ranging cooperation in many areas of common interest 
e.g.  development  of  civil  society,  good  governance, 
integration,  sustainable 
development,  enhanced  economic  cooperation  (including  in  energy3  and  transport  sectors), 
institution building and fight against corruption. Both Parties believe that fulfilment of these 
objectives will create a new climate for economic relations, for the development of trade and 
investment,  stimulate  competition,  and  hence  contribute  to  economic  restructuring  and 
modernization of Georgia.  

trade 

The  Deep  and  Comprehensive  Free  Trade  Area,  (Title  IV  of  the  Association  Agreement), 
consists of two main components: 

1)  Reciprocal commitments on market access opening through elimination of import 

and export tariffs and non-tariff barriers in bilateral trade; 

1 The EU-Georgia Association Agreement was published in OJ L 261, 30.08.2014. http://eur-lex.europa.eu/legal-

content/EN/TXT/PDF/?uri=OJ:L:2014:261:FULL&from=EN  

2 When it comes to DCFTA application to breakaway regions Abkhazia and South-Ossetia, the EU gives its full 
support to Georgia's territorial integrity, however, in accordance with Article 429 (Territorial application) of 
the Association Agreement, conditions enabling effective implementation of the DCFTA, and notably de facto 
government control over those territories, would need to be created in either Abkhazia or South Ossetia, which 
is not the case at present. 

3  Georgia  committed  to  enhance  the  security  of  energy  supply,  including  through  the  development  of  the 
Southern  Gas  Corridor,  to  promote  energy  efficiency  and  the  use  of  renewable  energy  resources,  and  to 
increase  market  integration  and  gradual  regulatory  approximation  towards  key  elements  of  the  EU  acquis, 
including through the accession to the Energy Community Treaty. 

2 

 
 
                                                 
2) Progressive approximation of Georgia's legislation with the EU laws in the relevant 
sectors, including trade-related areas and notably those which effectively contribute (e.g. EU 
compliant  technical  regulations,  sanitary  and  phytosanitary  measures)  to  benefiting  from 
opportunities created by trade liberalization. 

The  regulatory  obligations  commit  Georgia  to  ensure  the  effective  implementation  of  the 
domestic law approximated under DCFTA and to undertake any action needed to reflect the 
developments  in  EU  law  in  its  domestic  legislation  (the  concept  of  the  so  called  dynamic 
approximation). Therefore the EU committed itself to inform Georgian authorities about any 
final  European  Commission  proposals  to  adopt  or  amend  Union  law  relevant  to  Georgia's 
approximation obligations. 

Since  the  provisional  application  of  the  DCFTA  the  amendments/updates  have  been 
introduced in the Association Agreement annexes containing:  

1)  List  of  EU  agricultural  products  and  foodstuffs  other  than  wine  and  spirits  to  be 
protected in  Georgia  (Annex  XVII-C)  and  List of  spirit  drinks  of  the  EU  to  be  protected  in 
Georgia (part B of Annex XVII-D);4 

2) List of the EU sanitary, phytosanitary (SPS) and animal welfare acquis (Annex XI-
B) to which Georgia intends to approximate its domestic legislation.5 This jointly agreed SPS 
roadmap  is  to  serve  as a  reference  document  for  the implementation  of  SPS  Chapter  of  the 
DCFTA.  

This is the first report on the implementation of the EU-Georgia DCFTA prepared as part of 
the annual Report on implementation of FTAs concluded by the EU. Moreover, it responds to 
the requirements of the Regulation implementing the anti-circumvention mechanism provided 
for in the EU-Georgia Association Agreement.6  

Apart from the presentation of the statistics on evolution of EU-Georgia trade, the report gives 
an overview of the implementation of the DCFTA in terms of approximation in trade-related 
areas and activities of the specific Association Committee in Trade configuration as well as 
supporting Sub-Committees established in order to monitor a progress in implementation of 
the trade part (Title IV) of the Association Agreement. Those committees meet at least once a 
year. 

4 OJ L 335, 9.12.2016. 
5 Decision No 1/2017 of the EU-Georgia Sanitary and Phytosanitary Sub-Committee of 7 March 2017 modifying 
the  Association  Agreement  OJ  L  98,  11.04.2017  http://eur-lex.europa.eu/legal-

Annex  XI-B 
content/EN/TXT/PDF/?uri=CELEX:22017D0683&from=EN  

to 

6 Regulation (EU) 2016/401 of the European Parliament and of the Council of 9 March 2016 implementing the 
anti-circumvention  mechanism  provided  for  in  the  Association  Agreement  between  the  European  Union  and 
the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other 
part (OJ L 77/2016). According to its Article 4, the Commission shall submit annual report on implementation 
of  this  Regulation  and  Title  IV  (DCFTA) of  the  Association Agreement.  The  report  shall,  inter  alia,  include 
information about the application of the anti-circumvention mechanism and set out a summary of the statistics 
and the evolution of trade with Georgia. 

3 

 
 
                                                 
2. 

METHODOLOGY USED FOR THE ANALYSIS  

The analysis, based on the Eurostat statistics on trade in goods, covers two years of DCFTA 
implementation  i.e.  2015-2016  and  presents  the  comparison  of  data  with  2014  -  the  year 
preceding  the provisional  application of the trade  part  of AA which started on 1 September 
2014. As regards trade in services, the analysis is based on annual data 2013-2015. It should 
be noted however, that the observed trade flows dynamics cannot be attributed solely to the 
DCFTA  implementation,  as  also  other  internal  and  external  factors  may  influence  bilateral 
trade. The summary of the activities of the association bodies covers the calendar year 2016.  

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

3. 
PROVISIONAL APPLICATION)  

3.1. Trade in Goods  

3.1.1. The scope of trade liberalization 

At  the  start  of  provisional  application  of  the  DCFTA  on  1  September  2014  both  partners 
eliminated import duties for all goods with few exceptions on the European Union side, 
related  to  sensitive  agriculture  products.  Nevertheless  market  access  for  these  products  has 
been  improved.  To  this  end  the  fresh  or  chilled  garlic  originating  from  Georgia  has  been 
covered  by  the  annual  duty-free  tariff  rate  quota  (TRQ)  and  for  28  agricultural  products 
(including  fresh  and  chilled  fruits  and  vegetables)  that  are  subject  to  entry  prices,  the  ad 
valorem component of the import duty has been exempted by the EU. 

The anti-circumvention mechanism is applied to several agricultural goods i.e. beef, pork, 
sheep  and  poultry  meat,  dairy  products,  eggs  and  albumins,  mushrooms,  cereals,  malt, 
starches  and  sugars  as  well  as  to  processed  agricultural  products  such  as:  sweetcorn, 
processed sugars and cereals and cigarettes. 

Both Parties agreed on a review clause i.e. that after five years from the entry into force of 
the  DCFTA,  they  would  consult  (if  there  is  a  request  from  either  party)  to  consider 
broadening the scope of the liberalization of customs duties in bilateral trade. 

3.1.2. Overall evolution of trade in goods in 2014-2016 

In  accordance  with  2016  Eurostat  data,  the  EU  is  the  most  important  trade  partner  of 
Georgia with 30% share in its overall trade (27% in total export and 31% imports). In terms 
of  share  in  total  Georgian  exports,  the  EU  is  followed  by  Canada  (15%),  Turkey  (13%), 
Russia (7%), China (6%) and Azerbaijan (5.5%). Georgia is the EU's 77th trade partner and 
accounts for only 0.1% of its total trade. 

In 2016 the overall trade between the EU and Georgia slightly declined on year-on-year-basis 
by 2% and amounted to EUR 2.51 billion. EU exports to Georgia increased in that time by 
6.7% (by 3% since 2014 i.e. from EUR 1.91 billion to 1.96 billion) while EU imports from 
Georgia noted a decline of 25% compared to 2015 (by16% between 2014 and 2016 (from 
EUR 659 million to 551 million). Considering the fact that the structure of Georgian exports 
is dominated by raw materials and semi-finished products, the world prices of which tend to 

4 

 
 
fluctuate, the price drop for a number of commodities at world level is one of the main causes 
of declining value of exports from Georgia to the EU, whereas in volume terms the level of 
exports  remained  stable.  This  nominal  decrease  was  driven  by  a  drop  in  prices  of  exported 
mineral  fuels  (-81%), nuts  (-8%), fertilizers (-60%), and  mining products (-4%). These four 
products account for almost 60% of total Georgian export to the EU. 

The EU trade surplus with Georgia has grown slightly since 2014, from EUR 1.25 billion 
to 1.4 billion. 

Table 1: EU trade in goods with Georgia, 2014-2016 (million EUR) 

EU trade with 
Georgia 

EU Exports 
EU Imports 
Total trade 
Trade balance 

2014 

1,910 
659 
2,569 
+1,251 

2015  % change 
2015/2014 
3.7 
11.7 
0.2 
- 

1,840 
736 
2,576 
+1,104 

2016  % change 
2016/2015 
6.7 
-25.2 
-2.4 
- 

1,964 
551 
2,515 
+1,413 

% change 
2016/2014 
2.8 
-16.4 
-2.2 
12.9 

Source: Eurostat COMEXT. 

In  terms  of  presented  statistics,  it  should  be  noted  that  a  relatively  short  period  of  DCFTA 
implementation  does  not  allow  drawing  thorough  conclusions  on  trade  dynamics  and  their 
sustainability. The results of the free trade area are to be seen rather in  mid-term period and 
once  approximation  of  Georgian  legislation  progresses.  The  timeline  for  the  latter  has  been 
back-loaded by Georgia in the negotiation process to the extent that basically approximation 
intensifies  in  2017  and  will  be  continued  e.g.  until  2022 in  TBT  area  or  even  until  2027  as 
concerns certain veterinary measures, plant protection and food safety.  

3.1.3. The structure of the EU-Georgia trade 

As  concerns  the  structure  of  EU  exports  to  Georgia  (2016),  the  most  important  product 
categories (by Sections of the Harmonized System Nomenclature – HS) are: machinery and 
appliances, mineral and chemical products. The observed shares and dynamics on year-on-
year  basis  were  as  follows:  Machinery  and  appliances  (Section  XVI)  amounted  to  22%  of 
overall  EU  exports  to  Georgia  and  increased  by  22%;  Mineral  products  (Section V)  -  18%, 
similar  levels  in  2016  compared  to  2015;  Products  of  chemical  or  allied  industries  (Section 
VI)  -  17%,  increase  by  15%  year-on-year  (pharmaceutical  products  represented  the  largest 
proportion  of  EU  exports  to  Georgia  in  this  category,  accounting  for  11.8%,  an  increase  of 
17% compared to 2015). Other products categories that showed an increase in EU exports are 
Transport  equipment  (Section  XVII),  Optical,  photographic  and  precision  instruments 
(Section  XVIII),  Miscellaneous  manufactured  articles  including  furniture  and  toys  (Section 
XX). 

In  terms  of  structure  of  EU  imports  from  Georgia  (2016),  the  most  important  product 
categories  are:  mineral  products,  fruits  and  vegetables  (notably  nuts)  and  chemical 
goods.  The  following  shares  and  dynamics  on  year-on-year  basis  were  observed:  Mineral 

5 

 
 
products  (Section  V)  accounted  for  31.3%  of  the  total  EU  imports  from  Georgia  and 
decreased  by  48%  year-on-year  (due  to  a  sharp  decline  in  EU  imports  of  mineral  fuels); 
Vegetable products (Section II) - 24.2%; a decrease by 7% (by far the largest sub-categories 
of imported products were edible fruits and nuts accounting for 23.2% of the total EU imports 
from Georgia); Products of chemical or allied industries" (Section VI) - 9.2%; a decrease by 
49%  compared to  2015,  mostly due to  a drop  in imports of  fertilisers by the EU); Prepared 
foodstuffs, beverages, spirits and vinegar (Section IV) - 8.6%; an increase of 13% compared 
to  2015.  Other  categories  of  products  that  have  shown  an  increase  in  EU  imports  from 
Georgia  are  Precious  stones  and  metals  (Section  XIV),  Base  metals  and  articles  thereof 
(Section  XV).  It  should  be  underlined  that  throughout  the  first  two  years  of  DCFTA 
implementation some new products started to be exported from Georgia to the EU, e.g. kiwi 
and blue berries. This shows a potential of the DCFTA to attract new product categories to be 
commercialized on the markets of both Parties. 

3.2. Establishment, trade in services and investments 

3.2.1. Market access related to establishment and trade in services 

In the DCFTA the EU and Georgia laid down the necessary arrangements for the progressive 
reciprocal  liberalization  of  establishment  and  trade  in  services  and  for  cooperation  on 
electronic commerce. Both Partners made commitment on freedom of establishment as from 
the  start  of  DCFTA  provisional  application  by  granting  each  other  national  treatment  and 
most  favoured-nation  treatment  (subject  to  several  reservations  specified  by  EU  Member 
States and few reservations by Georgia) as well as liberalization of  cross-border supply of 
services (by granting each other national treatment with several limitations and reservations 
on  both  sides).  In  four  services  sectors  (postal  and  courier  services,  telecommunication, 
financial  services  and  international  maritime  transport  services)  Georgia  recognized  the 
importance  of  gradual  approximation  (lasting  between  4-8  years)  of  its  existing  and  future 
legislation to the list of the EU acquis (in case of financial services also to the international 
best  practice  and  standards).  Further  market  opening  in  those  sectors  is  conditioned  upon 
Georgia  fulfilling  its  commitments  of  gradual  regulatory  approximation  (timeframe  up  to 
2022). 

The EU and Georgia also agreed on a review clause with a view to liberalizing establishment 
(regular review), cross-border supply of services (regular review) and capital movement (by 
the end of the fifth year following the date of the entry into force of the DCFTA). This review 
shall  take  into  account,  inter  alia,  the  process  of  gradual  approximation  foreseen  in  the 
DCFTA  and  its  impact  on  the  elimination  of  remaining  obstacles  to  cross  border  supply  of 
services between the parties. 

3.2.2. EU trade in services with Georgia 

In  general,  trade  in  services  between  the  EU  and  Georgia  has  more  than  doubled  between 
2006 and 2014, both in terms of imports and exports. In 2014-2015 the total trade in services 
between both Partners amounted to EUR 0.9 billion and basically stayed on the same levels in 
case of EU exports and imports (see Table 2). 

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Table 2: EU trade in services with Georgia, 2013-2015 (billion EUR) 

EU trade with 
Georgia 

2013 

2014 

2015 

0.5 
0.3 
0.8 
+0.2 

EU exports 
EU imports 
Total trade 
Trade balance 
Source: European Commission, DG Trade. 
The  structure  of  exports  of  services  by  Georgia  to  the  world  is  dominated  by  travel  and 
transport  services,  in  imports  the  most  important  sectors  are  transport, travel,  insurance  and 
pension services as well other business services. 

0.6 
0.3 
0.9 
+0.3 

0.6 
0.3 
0.9 
+0.3 

% change 
2014/2013 
20.0 
0.0 
12.5 
- 

% change 
2015/2014 
0.0 
0.0 
0.0 
- 

3.2.3. EU foreign investment with Georgia 

In  2015  foreign  direct  investments  (FDI)  stocks  in  Georgia  originating  from  the  EU  (see 
Table 3) accounted for EUR 3.6 billion (a slight decrease compared to 2014). Inward FDI in 
that  year  amounted  to  EUR  101  million  and  were  at  lower  level  than  in  2014  when  they 
reached EUR 197 million. Top EU Member States investing in Georgia are: the Netherlands, 
United Kingdom, Luxembourg and France. 

Table 3: EU foreign direct investment with Georgia, 2014-2015 (billion EUR)  

Foreign direct investment 
stocks  

2013 

2014 

2015 

Georgia in EU28 (inward) 
EU28 in Georgia (outward) 
Stocks: balance 
Foreign 
flows  
Georgia into EU28 (inward) 
EU28 into Georgia (outward) 
Flows: balance 

direct 

investment 

0.1 
2.9 
2.8 

2013 

2014 

-0.0 
0.1 
0.1 

0.1 
3.8 
3.7 

0.0 
0.2 
0.2 

2015 

0.1 
3.6 
3.5 

-0.0 
0.1 
0.2 

Source: European Commission, DG Trade. 

According to data provided both by the EU and the Georgia, the main sectors chosen by EU 
investors are: telecommunications, transport, infrastructure and manufacturing. 

The above statistics show that positive impact of the DCFTA on attracting more investments 
from the EU is still ahead of Georgia.7  

7 Georgia performs very well in international rankings in terms of business climate. According to the 2017 
World Bank Doing Business Index 2017 Georgia is on 16th position amongst 190 countries. In the 2016 
Transparency International – Corruption Perception Index Georgia appeared on 44th position among 176 
countries. 

7 

 
 
                                                 
3.3. Market access in public procurement 

The  DCFTA  envisages  mutual  access  to  public  procurement  markets  on  the  basis  of  the 
principle  of  national  treatment  at  national,  regional  and  local  level  for  public  contracts  and 
concessions  in  the  traditional  sectors  as  well  as  in  the  utilities  sector.  It  provides  for  the 
progressive approximation (in 5 phases up to 2022) of the public procurement legislation in 
Georgia  with  the  EU  public  procurement  acquis,  accompanied  with  an  institutional  reform 
and the creation of an efficient public procurement system based on the principles governing 
public  procurement  in  the  EU.  The  implementation  of  each  phase  shall  be  evaluated  by  the 
Association  Committee  in  Trade  configuration  and,  following  a  positive  assessment,  will 
allow  the  reciprocal  market  opening  as  set  out  in  Annex  XVI-B  to  the  AA.  After  the 
completion of the first phase which has been foreseen for 2017, both sides may seek to grant 
the access to their markets for supplies for central government authorities. 

3.4. Trade preferences utilisation rate  

The preference utilization rate (PUR) on imports into the EU from Georgia amounted to 78% 
in  2014,  reaching  83%  in  2015  and  80%  in  2016.  At  HS  Section  level,  the  highest  overall 
PURs  are  found  in  Animal  and  vegetable  fats  and  oils  (Section  III)  at  100%,  Vegetable 
products  (Section  II)  at  99%,  Articles  of  stone,  plaster,  cement,  asbestos  (Section  XIII)  at 
98%, Chemical products (Section VI) at 89% and Prepared foodstuffs, beverages, spirits and 
vinegar (Section IV) at 89%. 

3.5. Utilization of the annual duty-free tariff rate quotas 

In 2015 and 2016 the EU annual duty-free TRQ of 220 tonnes for Georgian fresh & chilled 
garlic  (Annex  II-A  of  the  Association  Agreement)  was  not  used,  mainly  due  to  marketing 
reasons. 

4. 

ACTIVITIES OF THE IMPLEMENTATION BODIES  

The  main  body  under  institutional  framework  of  the  EU-Georgia  Association  Agreement  is 
the  Association  Council  (at  ministerial  level)  which  is  supported  by  the  Association 
Committee (at senior official level) in the supervising and monitoring of the application and 
implementation  of  AA.  Due  to  the  importance  of  the  Title  IV  on  Trade  and  Trade  Related 
Matters of the AA (i.e. DCFTA) a dedicated Association Committee in Trade configuration 
(ACTC) has also been established. The ACTC is assisted by four specialised Sub-Committees 
at  experts'  level:  (1)  the  Sanitary  and  Phytosanitary  Sub-Committee;  (2)  the  Customs  Sub-
Committee;  (3)  the  Geographical  Indications  Sub-Committee;  and  (4)  the  Trade  and 
Sustainable Development Sub-Committee.8  

8  Official  Journals  of  the  EU  where  the  decisions  on  the  Rules  of  Procedure  for  the  EU-Georgia  Association 
bodies  were  published:  of  the  Association  Council  and  those  of  the  Association  Committee  and  of  Sub-
Committees (OJ L 321, 5.12.2015); of the Customs Sub-Committee (OJ L 114, 5.5.2015); of the Sanitary and 
Phytosanitary  Sub-Committee  (OJ  L  123,  23.05.2017);  of  the  Trade  and  Sustainable  Development  Sub-
Committee (publication pending); of the Geographical Indications Sub-Committee (OJ L 134, 23.05.2017).  

8 

 
 
                                                 
The  3rd  meeting  of  the  EU-Georgia  Association  Committee  in  Trade  configuration  was 
held on 1 December 2016 in Brussels, and preceded the 3rd EU-Georgia Association Council 
held on 2 December 2016. The meeting provided an opportunity to review all issues related to 
the  comprehensive,  timely  and  inclusive  implementation  of  the  EU-Georgia  DCFTA.  Both 
Parties  reviewed  progress  made  in  all  DCFTA  Chapters,  including  trade  in  goods,  sanitary 
and  phytosanitary  measures,  intellectual  property  rights,  customs  and  trade  facilitation, 
technical barriers to trade, public procurement, establishment, trade in services and electronic 
commerce,  trade-related  energy,  competition,  trade  and  sustainable  development.  The 
Committee assessed the development of bilateral trade after two years of implementation of 
the DCFTA. The Georgian side expressed concerns about their trade deficit with the EU and 
declining trade trends in 2016. The latter were related inter alia to decreasing world prices for 
commodities and did not impact the volumes traded between Parties. 

Both  Partners  raised  their  respective  concerns  related  to  the  implementation  of  the 
commitments  on  approximation  with  the  EU  law  in  particular  in  the  area  of  sanitary  and 
phytosanitary measures, technical barriers to trade, intellectual property rights and instructed 
the  specialized  Sub-Committees  to  continue  to  seek  solutions.  Both  sides  underlined  the 
importance  of  EU  financial  and  technical  assistance  in  the  implementation  of  the  DCFTA, 
notably projects aimed at supporting both the Georgian administration and the SMEs to align 
with the acquis and reap the benefits from the Agreement. 

The 2nd Customs Sub-Committee met in Batumi on 20 April 2016. The discussion focused 
on:  the  legislative  and  policy  developments,  including  Georgia's  progress  report  on  the 
implementation of DCFTA customs provisions, information about initiatives in strengthening 
the fight against terrorism financing to be shared by the Parties; strategic framework for EU-
Georgia  Customs  Cooperation;  Georgia's  prospects  for  accession  to  the  Convention  on  a 
Common Transit Procedure; risk management and fight against fraud; rules of origin; customs 
enforcement of intellectual property rights. 

The  2nd  Geographical  Indications  (GIs)  Sub-Committee  took  place  in  Brussels  on  10 
November 2016. The committee discussed updates of the lists of EU Geographical Indications 
for agricultural products and foodstuffs, wines, spirit drinks and aromatized wines. During the 
meeting  the  Parties  adopted  a  Decision  amending  Annex  XVII-C  (list  of  EU  agricultural 
products and foodstuffs other than wine and spirits to be protected in Georgia) and part B of 
Annex XVII-D (list of spirit drinks of the EU to be protected in Georgia) of the DCFTA. The 
provisions on exchange of information on all the updates on EU as well as Georgian GIs (new 
ones, removals from the list, modifications) were also discussed in view of the need for each 
Party to have the possibility to run objection procedures for the new names and for any other 
procedures necessary for the next update of GI Annexes to the DCFTA. 

The  1st  Trade  and  Sustainable  Development  (TSD)  Sub-Committee  took  place  on  30 
November  2016.  The  discussions  highlighted  the  importance  of  the  TSD  chapter 
implementation also for the non-governmental stakeholders and civil society. EU underlined 
that the process of implementation of the free trade agreements taking care about sustainable 

9 

 
 
development and inclusiveness belong to its trade policy, notably due to a growing political 
and  public  perception  of  the  importance  of  the  environmental  and  labour  provisions  in  EU 
agreements. The meeting was also an occasion to note Georgia's progress in implementing the 
fundamental  International  Labour  Organisation  (ILO)  conventions,  to  welcome  cooperation 
by  both  Parties  on  sustainable  development  and  in  particular  on  environmental  aspects  and 
encourage Georgia to ratify the Paris Agreement on Climate Change. 

The 2nd Sanitary and Phytosanitary Sub-Committee met in Tbilisi on 7 March 2017. Both 
Parties  signed  a  decision  to  modify  Annex  XI-B  of  the  DCFTA  to  include  the  list  of  EU 
sanitary, phytosanitary and animal welfare legislative measures to which Georgia decided to 
approximate  its  domestic  legislation.  The  approximation  list  is  to  serve  as  a  reference 
document for the implementation of Chapter 4 Sanitary and Phytosanitary Measures of Title 
IV of the Association Agreement. The discussion also focused on: progress in reforms in the 
SPS  area  and  a  timeframe  for  legislative  approximation  submitted  by  Georgian  authorities 
(including  a  timetable  for  preparing  the  tables  of  correspondence  for  already  approximated 
legislation);  improvement  in  the  food  safety  control  system  and  animal  health  situation,  in 
particular  the  strengthening  of  the  National  Food  Agency's  (NFA)  role  in  ensuring  overall 
food safety; as well as on a potential of Georgia in exports of goods to foreign markets. 

IMPLEMENTATION OF THE PROVISIONS ON TRADE AND 

5. 
SUSTAINABLE DEVELOPMENT  

As indicated in point 4, the Trade and Sustainable Development Sub-Committee gathered for 
the first time in Brussels on 30 November 2016. At the same time discussions were held with 
the Civil Society Forum and the Domestic Advisory Groups. Discussion on the content of the 
TSD Sub-Committee's work plan for the next 3-4 years also took place. 

Both  Parties  highlighted  the  importance  of  the  TSD  Chapter,  and  noted  some  progress  in 
implementing  the  fundamental  labour  conventions.  It  was  underlined  that  in  a  number  of 
specific  areas  more  efforts  need  to  be  undertaken  to  effectively  implement  the  fundamental 
ILO  conventions,  notably  with  regards  to  child  labour  and  freedom  of  association  and 
collective  bargaining  and  to  establish  a  comprehensive  labour  inspection  system..  Tripartite 
discussions on labour policy enforcement, labour inspections and occupation and health and 
safety need to be strengthened. 

The  EU  welcomed  the  cooperation  on  environmental  aspects  of  the  TSD  Chapter, 
encouraging Georgia to adopt the Environmental Assessment Code. The EU reminded that it 
had  ratified  the  Paris  Agreement,  enabling  a  rapid  entry  into  force  in  time  for  the  COP  in 
Marrakesh (the first meeting of the Parties to the Paris Agreement). Georgia was encouraged 
to ratify the Paris Agreement but stressed the challenges in its implementation. 

The  representatives  of  Georgian  underlined  the  developments  in  the  forestry  sector.  Final 
draft  of  the  Forestry  Code  had  been  elaborated  by  the  Government  with  the  aim  to  be 
submitted to the Parliament in 2017. Sustainable forestry management and risk assessment are 
being  developed  along  with  wildlife  trade  and  other  biodiversity  aspects.  The  draft  law  on 

10 

 
 
biodiversity was prepared in 2016 and will undergo public hearings in order to be adopted in 
2017. 

6. 

SPECIFIC AREAS SUBJECT TO REPORTING OR MONITORING  

6.1. Entry price system and anti-circumvention mechanism 

In 2015-2016 there was no overshooting for products subject to entry price (Annex II-B of the 
Association Agreement). When it comes to agricultural products subject to anti-circumvention 
mechanism, none of the trigger levels were exceeded in 2015 or in 2016, due to the low trade 
levels for those products. Worth to note, that in the analysed period there were no imports of 
products  to  be  potentially  affected  by  anti-circumvention  mechanism  with  exception  of 
poultry. 

6.2. Use of unilateral EU preferences under GSP+ 

Between 1 January 2014 and 31 August 2016 Georgia benefited from the General System of 
Preferences  (GSP)  i.e.  its  GSP+  scheme,  a  special  incentive  whereby  the  EU  rewards 
sustainable development and good governance in some of its trade partners. As the unilateral 
trade preferences under GSP+ started to apply already several months before the provisional 
application  of  the  DCFTA  (on  1  September  2014),  this  transition  period  allowed  Georgian 
exporting  companies  to  adjust  to  a  new  and  reciprocal  preferential  trade  regime  provided 
within the free trade area with the EU. 

The data for 2015 and 2016 shows that out of the total imports from Georgia to the EU (EUR 
741 and 541 million respectively), 44% (2015) and 47% (2016) (EUR 324 and 254 million) 
qualified  for  a  preferential  treatment  under  the  GSP+  scheme.  Out  of  these  figures,  83% 
(2015)  and  2.6%  (2016)  of  eligible  products  (worth  EUR  270  and  6.6  million  respectively) 
entered the EU using the GSP+ preferences and the related rules of origin. This diminishing 
trend in GSP+ use was caused by the move of Georgian exports to the free trade regime under 
DCFTA accompanied by different rules of origin as well as – more generally - by decrease in 
value of exports caused by a drop in commodity prices on international markets. 

7. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS  

Without prejudice to a general commitment to achieve economic integration with the EU, 
during the DCFTA negotiations Georgian authorities applied a back-loading strategy, setting 
itself longer deadlines for gradual approximation with the EU acquis (up to 8 years from the 
entry  into  force  of  the  Agreement)  in  such  areas  like  technical  regulations,  sanitary  and 
phytosanitary measures (SPS), public procurement and services. As a result the intensification 
of the approximation process should be noted only in 2017.  

The  only  approximation  commitments  for  2015-2016  concerned  the  submission  (6  months 
after  the  entry  into  force  of  the  Agreement)  of  a  list  of  the  EU  sanitary  and  phytosanitary, 
animal  welfare  and  other  legislative  measures  for  approximation  as  well  as  completion  of 
approximation  to  the  two  EU  legal  acts  on  anti-money  laundering  and  the  Regulation  on 
customs enforcement of IPR (not yet adopted). 

11 

 
 
The  list  of  the  EU  SPS  acquis  that  Georgia  will  approximate  was  submitted  to  the  EU  in 
December  2015  and  formally  adopted  by  the  EU-Georgia  SPS  Sub-Committee  on  7  March 
2017.  The  very  long  deadlines  for  building  compliance  with  the  EU  SPS  system  has  been 
committed  by  Georgia,  to  the  extent  that  about  45%  of  the  legal  acts  will  be  subject  to 
approximation only after 2020 (35 legal acts in case of veterinary measures, 41 on food safety 
and 46 in case of plant protection). The institutional capacity in terms of food safety control 
still needs to be enhanced. A number of Georgian establishments are authorized to export 
fruits, vegetables, honey and as from mid-2017 also fishery products to the EU. 

In terms of technical regulations and standards, Georgia has committed to approximate by 
the end of 2018 its legislation on horizontal quality infrastructure to that of the EU as well as 
to  several  EU  New  and  Global  Approach  Directives.  In  this  field  reform  efforts  should  be 
intensified. Better situation is observed as concerns adoption of technical standards (over 95% 
of  the  existing  Georgian  Standards  are  International  or  European  Standards).  Market 
surveillance system needs strengthening. As concerns institutional capacity building Georgia 
needs to speed up enhancement of certification/accreditation infrastructure. 

The  institutional  part  in  public  procurement  approximation  has  been  accomplished.9  Both 
Parties  should  formally  adopt  a  roadmap  developed  by  the  Government  and  State 
Procurement  Agency  (GSPA).  The  roadmap  will  be  a  point  of  reference  and  facilitate  the 
implementation of Public Procurement Chapter of the DCFTA, including on alignment of the 
Georgian legislation to the EU acquis in this area. The institutional capacity needs to be built 
within the GSPA and the contracting authorities. 

After having submitted a written request in 2015 Georgia has been invited on 28 September 
2016  to  accede  to  the  Convention  on  pan-Euro-Mediterranean  preferential  rules  of  origin 
(PEM Convention)10 and formally joined it on 1 July 2017.  

Georgia  officially  became  a  Contracting  Party  to  the  Energy  Community  Treaty  on  1  July 
2017.  The  Protocol  of  Accession  to  the  Energy  Community  Treaty  commits  Georgia  to 
approximate  its  legislation  to  key  energy  and  energy-related  EU  acquis    between  2017  and 
2020. 

On 4 January 2016, Georgia ratified the WTO Trade Facilitation Agreement which is in 
force since February 2017 and contains commitments on simplifying border procedures and 
modernization of customs techniques and instruments and customs control. 

An  unresolved  issue  for  the  time  being  is  the  application  of  the  DCFTA  to  the  breakaway 
territories  of  Abkhazia  and  Southern  Ossetia.  According  to  Article  429  (Territorial 

9  In  accordance  with  the  Association  Agreement  the  first  approximation  stage  relates  to  the  setting  up  the 
institutional framework: executive body at central government level to be responsible for coherent policy in all 
areas related to public procurement and an impartial, the independent body tasked with the review of decisions 
taken by the contracting authorities and entities as well as introduction of basic standards regulating the award 
of contracts. 

10  The  Decision  of  the  Joint Committee  of  the  PEM Convention on  Georgia  accession was  published in  OJ  L 

329, 3.12.2016 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:22016D2126 

12 

 
 
                                                 
application)  of  the  Association  Agreement,  conditions  enabling  effective  implementation  of 
the DCFTA need to be created in either Abkhazia or South Ossetia for the AA/DCFTA to be 
able to be applied in those areas.  

8. 

CONCLUSIONS  

After two years of the DCFTA implementation by both Partners, it should be underlined that 
external trade and FDI remain key for the overall economic growth of a small open economy 
like Georgia. Economic slowdown in some key trading partners in the region (Russia, Turkey, 
and  Azerbaijan)  and  the  double-dip  recession  from  which  the  EU  was  recovering  created  a 
relatively adverse external environment for Georgia's trade in 2016.  

The EU is constantly encouraging Georgia to accelerate the necessary reforms, notably in SPS 
area  as  they  would  not  only  enhance  the  food  safety  in  the  country  but  also  facilitate  and 
determine effective access to the EU market for agricultural products. 

In  the  medium  term,  the  benefits  from  legislative  approximation  to  the  EU  acquis  should 
translate  into  an  increase  of  bilateral  trade,  and  especially  grow  in  Georgia's  exports  to  the 
EU.  Notwithstanding  the  new  products  like  kiwi  and  blueberries  which  have  started  to  be 
exported to  the EU, Georgia has  an untapped trade potential not  only  in relation  to trade in 
goods, but also services and public procurement. Trade diversification and the enhancement 
of regional trade should also be an advantage for Georgia to diversify its economy. 

The  continuation  of  the  DCFTA  implementation,  notably  through  regulatory  approximation 
(that  has  a  dynamic  character  due  to  developments  of  EU  acquis)  and institutional  capacity 
building will require continuous efforts by Georgian authorities as well as on the EU side in 
terms  of  assisting  Georgia  in  this  process.  To  this  end  the  Association  Committee  in  Trade 
configuration  as  well  as  the  specialised  Sub-Committees  established  under  DCFTA  will  be 
the main fora for discussions and comprehensive evaluation of that progress. 

Simultaneously,  in  order  to  effectively  enhance  export  from  Georgia,  the  EU  delivers 
financial and technical support  to the reforms  and administrative capacity  building in  trade-
related  areas  like  TBT  (e.g.  standardization  and  metrology  infrastructure;  accreditation  and 
surveillance system), SPS (notably in institutional capacity building in food safety control) as 
well  as  in  promotion  of  producers  organizations,  value  chain  optimization  and  the  SMEs 
development. As concerns the latter Georgia started (together with Moldova and Ukraine) to 
benefit from the EU4Business support11, including the DCFTA Facility for SMEs (EUR 200 
million for all three countries). 

11  Small  and  medium-sized  enterprises  (SMEs)  in  the  EU’s  Eastern  Partnership  region  have  the  potential  to 
create  jobs  and  drive  economic  growth.  Obstacles  such  as  limited  access  to  finance,  burdensome  legislation 
and difficulties entering new markets are hindering their progress. The European Union’s EU4Business breaks 
down  these  barriers  with  finance,  support  and  training  to  help  small  businesses  realize  their  full 
potential. EU4Business support is delivered together with other organizations such as the European Bank for 
Reconstruction and Development and the European Investment Bank. http://www.eu4business.eu/  

13 

 
 
 
 
                                                 
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND 
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN 
THE EU AND THE REPUBLIC OF MOLDOVA 

1. 

INTRODUCTION 

On  27  June  2014  the  European  Union  and  the  Republic  of  Moldova  (hereafter  'Moldova') 
signed  an  ambitious  Association  Agreement  (AA)  with  a  Deep  and  Comprehensive  Free 
Trade  Area  (DCFTA)  as  its  integral  part.12  The  DCFTA  as  the  main  economic  pillar  of  the 
Association  Agreement  has  been  provisionally  applied  since  1  September  2014.  Following 
completion of the ratification process, the Association Agreement fully entered into force on 1 
July 2016. In November 2015, Moldova announced that the conditions had been fulfilled for 
DCFTA  application  on  the  entirety  of  its  internationally  recognised  territory,  on  this  basis 
allowing to keep the EU market open to goods from the breakaway region Transnistria (to this 
end the trade facilitation measures are in force since January 2016).  

It should be emphasized that in the preamble of Association Agreement the EU acknowledges 
the  European  aspirations  of  the  Republic  of  Moldova  and  welcomes  its  European  choice. 
Simultaneously  both  partners  take  into  account  that  the  AA  will  not  prejudice  and  leaves 
open, the way for future progressive developments in EU-Moldova relations. The Association 
Agreement  provides  for  deepening  of  political  association  and  gradual  economic 
integration  between  Moldova  and  the  EU,  based  on  shared  values  and  principles  i.e. 
democracy and the rule of law, respect for human rights and fundamental freedoms, as well as 
a  free  market  economy.  Furthermore,  the  Agreement  is  to  contribute  to  the  socioeconomic 
development  of  Moldova  through  an  ambitious  reform  agenda  and  enhanced  economic 
cooperation with  the EU in  key fields such  as sustainable development, trade, transport and 
environment,  employment  and  social  policy,  financial  management.  In  energy  sector  both 
sides  acknowledged  the  need  for  enhanced  energy  cooperation  and  implementation  of  the 
Energy Community Treaty (Moldova joined it on 1 May 2010) and committed to enhance the 
security  of  energy  supply,  facilitating  the  development  of  infrastructures,  increasing  market 
integration and regulatory approximation with key elements of the EU acquis and promoting 
energy efficiency and renewable energy. Good governance and institutional capacity building 
including  in  the  public  administration  have  been  recognized  as  horizontal  areas  of  common 
interest and cooperation. 

The Deep and Comprehensive Free Trade Area (Title V of the Association Agreement) covers 
two main components: 

1)  A gradual,  reciprocal  market opening  (removal/reduction of tariff and elimination 
of non-tariff barriers to trade) by both partners with a timeline asymmetry benefiting 
Moldova;  

12  The  EU-Republic  Moldova  Association  Agreement  was  published  in  OJ  L  260,  30.08.2014.  http://eur-

lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:260:FULL&from=EN  

14 

 
 
                                                 
2)  A  far-reaching  dynamic  regulatory  approximation  with  EU  laws  in  trade-related 
areas  which  should  stimulate  competition,  create  a  new  predictable  environment  for 
business  cooperation,  development  of  trade  and  investment,  and  hence  contribute  to 
economic restructuring, modernization and diversification of Moldovan economy.  

Due  to  the  concept  of  dynamic  regulatory  approximation  embedded  in  the  DCFTA, 
Moldova  has  to  ensure  the  effective  implementation  of  the  approximated  domestic  law  and 
undertake  any  action  necessary  to  reflect  the  development  in  the  EU  acquis  in  its  domestic 
law in the trade-related areas. The EU on its side shall inform Moldova of any final European 
Commission  proposals 
legislation  relevant  for  Moldova's 
approximation obligations. As a result of the above mentioned commitments after the start of 
the  provisional  application  of  the  DCFTA  in  September  2014,  several  annexes  to  the 
Association  Agreement  which  include  the  lists  of  EU  laws  as  well  as  the  deadlines  for 
approximation by Moldova have been amended. The modifications introduced before the end 
of  2016  by  means  of  the  Joint  Decisions  of  the  Association  bodies  relate  to  the  following 
Annexes: 

to  adopt  or  amend  EU 

1) XXIV-B (sanitary, phytosanitary and animal welfare law),13 

2)  XXX-C  (geographical  indications  (GIs):  list  of  EU  agricultural  products  and 
foodstuffs other than wine and spirits to be protected in Moldova) and XXX-D (GIs: list of 
EU wines to be protected in Moldova),14 

3)  XVI  (technical  regulations:  horizontal  legislative  framework,  the  New  Approach 

and Global Approach as well as sectorial legislation),15 

4) XXIX (public procurement).16 

Moreover, Protocol II to the Association Agreement concerning the definition of the concept 
of 'originating products' and methods of administrative cooperation has been replaced by the 
updated one and the list of arbitrators for dispute settlement17 (in accordance with Article 404) 

13  Decision  No  1/2016  of  the  EU-Republic  of  Moldova  Sanitary  and  Phytosanitary  Sub-Committee  of  1  June 
2016  modifying  Annex  XXIV-B  to  the  Association  Agreement  (OJ  L  178,  2.07.2016)  http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22016D1074&from=EN 

14  Decision  No  1/2016  of  the  EU-Republic  of  Moldova  Geographical  Indications  Sub-Committee  amending 
Annexes XXX-C and XXX-D to the Association Agreement between the European Union and the European 
Atomic  Energy  Community  and  their  Member  States,  of  the  one  part,  and  the  Republic  of  Moldova,  of  the 
other part (OJ L 335, 9.12.2016). 

15  Decision  No  1/2016  of  the  EU–Republic  of  Moldova  Association  Committee  in  Trade  configuration  of  19 
October  2016  updating  Annex  XVI  to  the  Association  Agreement  (OJ  L  313,  19.11.2016)  http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22016D2027&from=EN  

16  Decision  No  2/2016  of  the  EU-Republic  of  Moldova  Association  Committee  in  Trade  configuration  of  19 
October  2016  updating  Annex  XXIX  to  the  Association  Agreement  (OJ  L  313,  19.11.2016)  http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22016D2028&from=EN 

17  Council  Decision  (EU)  No  2016/2355  of  12  December  2016  on  the  position  to  be  taken  on  behalf  of  the 
European  Union  within  the  Association  Committee  in  Trade  configuration  established  by  the  Association 
Agreement  between  the  European  Union  and  the  European  Atomic  Energy  Community  and  their  Member 

15 

 
 
                                                 
as  well  as  the  list  of  experts  for  a  consultation  Panel  on  issues  covered  by  the  Trade  and 
Sustainable  Development  Chapter18  (in  accordance  with  Article  379(3)  of  the  Association 
Agreement) have also been adopted.  

This is the first report on the implementation of the EU-Moldova DCFTA presented as part of 
the  annual  Report  on  implementation  of  FTAs  concluded  by  the  EU.  Moreover,  it  has  been 
prepared  in  accordance  with  the  provisions  of  the  Regulation  implementing  the  safeguard 
clause and the anti-circumvention mechanism.19 In addition to providing an overview of the 
statistics  on  the  evolution  of  EU-Moldova  trade,  information  about  the  application  of  trade 
defence  measures  and  anti-circumvention  mechanism  has  been  included.  The  progress  in 
regulatory approximation in trade-related areas as well as activities of the specific Association 
Committee  in  Trade  configuration  and  the  assisting  Sub-Committees  established  to  monitor 
the implementation of the DCFTA, are presented in the report.  

2. 

METHODOLOGY USED FOR THE ANALYSIS 

The analysis of the bilateral trade in goods between the EU and Moldova is based on Eurostat 
data  for  the  two  years  of  DCFTA  implementation  i.e.  2015-2016  compared  with  2014  as  a 
year preceding the DCFTA provisional application, which started on 1 September 2014.  As 
regards  trade  in  services  and  investment,  the  analysis  is  based  on  data  for  2014-2015.  It 
should be noted, however, that the dynamics of trade flows cannot be attributed solely to the 
DCFTA  implementation,  as  other  internal  and  external  factors  may  also  influence  bilateral 
trade. Though the figures provided below give an indication of how the DCFTA has worked 
between  September  2014  and  the  end  of  2016.  The  summary  of  the  activities  of  the 
association bodies covers the calendar year 2016.  

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

3. 
PROVISIONAL APPLICATION) 

3.1. Trade in goods 

States, of the one part, and the Republic of Moldova, of the other part, as regards the establishment of a list of 
arbitrators (OJ L 348, 21.12.2016). 

18 Decision No 2/2015 of the EU-Republic of Moldova Trade and Sustainable Development Sub-Committee of 7 
July 2015 adopting the list of experts on Trade and Sustainable Development in accordance with Article 379(3) 
of the Association Agreement between the European Union and the European Atomic Energy Community and 
their Member States, of the one part, and the Republic of Moldova, of the other part (OJ L 264, 9.10.2015). 
19 Regulation (EU) No 2016/400 of the European Parliament and of the Council of 9 March 2016 implementing 
the  safeguard  clause  and  the  anti-circumvention  mechanism  provided  for  in  the  Association  Agreement 
between the European Union and the European Atomic  Energy Community  and their Member States, of the 
one part, and the Republic of Moldova, of the other part (OJ L 77, 23.03.2016). According to Article 14 of the 
Regulation, the Commission shall submit an annual report to the European Parliament and to the Council on 
the application and implementation of this Regulation and Title V of the Agreement. Furthermore, the report 
shall, inter alia, include information about the application provisional and definitive safeguard measures, prior 
surveillance measures, the termination of investigations and proceedings without measures, and the application 
of  the  anti-circumvention  mechanism.  The  report  shall  also  set  out  a  summary  of  the  statistics  and  the 
evolution of trade with Moldova. 

16 

 
 
                                                                                                                                                         
3.1.1. The scope of trade liberalization 

At the start of the DCFTA provisional application on 1 September 2014, the European Union 
eliminated all customs duties on goods imported from Moldova. Six agricultural products i.e. 
apples,  table  grapes,  plums,  grape  juice,  garlic and  tomatoes  are  subject  to  annual  duty-free 
tariff rate quotas (TRQs). Twenty agricultural products (fruits and vegetables) are covered by 
the system of entry prices for which the ad valorem component of the import duty has been 
exempted. Import of 14 groups of agricultural and processed agricultural products (pig meat, 
poultry,  dairy  products  and  processed  dairy  products,  cereals,  cigarettes,  sugar  processed 
goods and sweet corn) is duty-free but monitored under anti-circumvention mechanism (if 
the  imports  to  the  EU  reaches  certain  agreed  levels  the  EU  may  temporarily  suspend  the 
preferential treatment of the products concerned). 

Similarly, Moldova liberalised import duties on 93.6% of tariff lines for goods imported from 
the EU at the start of provisional application of the DCFTA. 1% of tariff lines (for agricultural 
products) are covered by preferential tariff rate quotas. Customs duties on 4.8% of products in 
terms of tariff lines are to be liberalised in stages (3, 5, 7 or 10 years; the longest liberalisation 
period  has  been  reserved  for  agricultural  and  food  products).  This  schedule  of  tariff 
elimination reflects an asymmetric market opening for the benefit of Moldova.  

3.1.2. Overall evolution of trade in goods in 2014-2016 

According to Eurostat data for 2016, the EU is a key trade partner of Moldova, accounting 
for 55% of its total trade (66% of the total exports and 49% of Moldova's total imports). In 
terms  of  the  share  in  overall  Moldovan  exports,  the  EU  is  followed  by  Russia  (10%)  and 
Belarus  (6%).  Moldova  is  the  EU's  68th  trade  partner  and  accounts  for  0.1%  of  the  EU's 
total trade. 

In 2016 (after contracting in the wake of the banking crisis and recession in 2014-2015), the 
total bilateral trade between the EU and Moldova resumed and grew by 1.5% on a year-on-
year basis to EUR 3.3 billion. EU exports have decreased by 2% from EUR 2.07 billion to 
EUR 2.02 billion while EU imports from Moldova have increased in that period by 7.7% from 
EUR 1.2 to EUR 1.31 billion (see Table 1). 

Table 1: EU trade in goods with Moldova, 2014-2016 (million EUR) 

2014 

2015 

% change 
2015/2014 

2016 

% change 
2016/2015 

% change 

2016/2014 

EU trade with 
Moldova 

EU Exports 

EU Imports 

Total trade 

2,352 

1,160 

3,512 

2,070 

1,223 

3,293 

Trade balance 

+1,192 

+847 

Source: Eurostat COMEXT. 

2,026 

1,317 

3,343 

+708 

-2.0 

7.7 

1.5 

- 

-13.0 

13.5 

-5.0 

- 

-12.0 

5.0 

-6.0 

- 

17 

 
 
In 2014-2016 EU exports to Moldova decreased by 13% due to declining domestic demand, 
domestic  problems  (fraud  in  banking  sector)  and  economic  difficulties  in  the  region.  In  the 
same  time  EU  imports  from  Moldova  experienced  an  increase  of  13.5%  (from  EUR  1.1 
billion to EUR 1.3 billion). This has been driven by a better export performance of Moldovan 
companies  as  concerns  certain  agricultural  products,  but  also  machinery,  furniture  and 
clothing articles (see point 3.1.3).  

In 2016 the EU trade balance with Moldova has remained positive but declined since 2014 
from  EUR  1.2  billion  to  EUR  0.7  billion.  It  was  a  result  of  the  changing  trade  structure 
characterized by growing share of goods with high value added in its exports to Moldova (i.e. 
machinery  and  appliances,  mineral  products,  chemical  products  and  transport  equipment), 
whereas its imports from Moldova have been dominated by agricultural goods and beverages, 
machinery and appliances, textiles and textile articles (see point 3.1.3.). 

The EU's share in the total Moldovan exports has been steadily increasing since the start 
of the provisional application of the DCFTA, from 54% in 2014 to 63% in 2015 and 66% in 
2016. The EU's share in the total Moldovan imports has also increased from 48% in 2014 to 
49%  in  2016.  The  EU's  share  in  the  total  trade  of  Moldova  has  similarly  increased  in  that 
period from 50% to 55%. 

The EU and Moldova have agreed on a review clause which stipulates that after the entry into 
force of the DCFTA, the Parties may consider accelerating and broadening the scope of the 
elimination of customs duties on their bilateral trade. During the third year after the entry into 
force of the Agreement, the Parties shall assess the situation, taking account of the pattern of 
trade in agricultural products, the particular sensitivities of such products and the development 
of  agricultural  policy  on  both  sides.  They  shall  examine,  in  the  Association  Committee  in 
Trade  configuration,  on  an  appropriate  reciprocal  basis,  the  opportunities  for  granting  each 
other  further  concessions  with  a  view  to  improving  liberalisation  of  trade  in  agricultural 
products, in particular those subject to TRQs. 

3.1.3. The structure of the EU-Moldova trade 

The  main  product  categories  (according  to  the  Sections  of  the  Harmonized  System 
Nomenclature  –  HS)  exported  by  the  EU  to  Moldova  in  2016  were  machinery  and 
appliances,  mineral  products,  chemical  products  and  transport  equipment.  Machinery 
and appliances (Section XVI) accounted for 19% of the total EU exports to Moldova (EUR 
382  million).  Exports  have  decreased  by  8%  since  2014  (from  EUR  416  million),  although 
they have stabilised at a similar level as in 2015. Mineral products (Section V) accounted for 
16% of the total EU exports to Moldova (EUR 321 million) and their exports have decreased 
by  31%  since  2014,  when  they  stood  at  EUR  469  million.  Chemical  product  (Section  VI) 
accounted for 11% of the total EU exports to Moldova in 2016 (EUR 223 million) and their 
exports have remained at a similar level as in 2014, and have increased by 3% compared to 
2015.  Transport  equipment  (Section  XVII)  accounted  for  9%  of  the  total  EU  exports  to 
Moldova  (EUR  183  million)  and  its  exports  have  decreased  by  37%  compared  to  2014, 
although a 10% increase can be observed when compared to 2015. 

18 

 
 
It should be emphasized that EU exports in certain key sectors have declined in 2014-2015 in 
large  part  due  to  the  weak  performance  of  the  Moldovan  economy  which  in  2016  has  been 
slowly climbing back from a recession in 2015 (when GDP shrunk by 0.5%, net FDI by 22% 
and remittances by 25%). This was visible in Moldova's trade with the world which dropped. 
Trade appears to  be resuming  in  2016, with  EU exports slightly decreasing by 2% year-on-
year, compared to 11% decrease in 2015. Prior to that, exports had grown by 3.2% in 2014. 

The  main  products  in  EU  imports  from  Moldova  in  2016  were  agricultural  goods  and 
beverages,  machinery  and  appliances,  textiles  and  textile  articles  and  miscellaneous 
manufactured  articles.  Vegetable  products  (HS  Section  II)  accounted  for  23%  of  the  total 
EU imports from Moldova (EUR 303 million) and their imports have increased by 50% since 
2014, with a 26% increase compared to 2015. 

Top imported products include fruits and nuts (walnuts), cereals, oil seeds (sunflower seeds) 
and crude sunflower seed oil. Machinery and appliances (Section XVI) accounted for 17.5% 
of  the  total  EU  imports  from  Moldova  (EUR  231  million),  and  textiles  and  textile  articles, 
with  a  similar  share  of  the  total  EU  imports  (EUR  230  million).  Imports  of  machinery  and 
appliances have increased by 18% since 2014, with 3% year-on-year increase in 2015-2016. 
The  foodstuffs,  beverages  and  tobacco  (Section  IV)  accounted  for  11%  of  the  total  EU 
imports from Moldova (EUR 146 million). Imports of this product category have increased by 
56% since 2014, mainly due to an increase in the imports of beverages, spirits and vinegar by 
76%.  Finally,  miscellaneous  manufactured  articles  (Section  XX)  accounted  for  8.5%  of  the 
total  EU  imports  from  Moldova.  The  biggest  share  in  this  category  has  been  recorded  for 
furniture, the imports of which increased by 53% since 2014 to EUR 109 million.  

3.2. Establishment, trade in services and investments 

3.2.1. Market access related to establishment and trade in services 

In the DCFTA the EU and Moldova laid down the necessary arrangements for the progressive 
reciprocal  liberalization  of  establishment  and  trade  in  services  and  for  cooperation  on 
electronic commerce. Both Partners committed the freedom of establishment by granting each 
other  national  treatment  and  most  favoured-nation  treatment  (subject  to  several  reservations 
specified by EU Member States and a few reservations by Moldova) as well as liberalization 
of  cross-border  supply  of  services  (by  granting  each  other  national  treatment)  with  several 
limitations  and  reservations  on  both  sides).  In  four  services  sectors  (postal  and  courier 
services, telecommunication, financial services and international maritime transport services), 
Moldova recognized the importance of gradual (lasting between 3 and 8 years) approximation 
of its existing and future legislation to the list of the EU acquis (in case of financial services 
also to the international best practice and standards). 

Both  Parties  agreed  on  a  review  clause  with  a  view  of  liberalizing  establishment  (regular 
review), cross-border supply of services (regular review) and capital movement (by the end of 
the fifth year following the date of entry into force of the DCFTA). This review shall take into 
account, inter alia, the process of gradual approximation foreseen in the Agreements and its 

19 

 
 
impact on the elimination of remaining obstacles to cross border supply of services between 
the parties. 

3.2.2. EU trade in services with Moldova 

The total trade in services between the EU and Moldova has more than doubled between 2006 
and  2015.  The  same  trends  were  observed  in  imports  and  in  exports  (see  Table  2).  In  2015 
compared  to  2014,  EU  exports  of  services  to  Moldova  have  increased  by  3%  (from  EUR 
521 million to 616 million). EU imports have increased in the same time by 17% (from EUR 
565 million to EUR 660 million).  

Table 2: EU trade in services with Moldova, 2014-2015 (million EUR) 

EU trade with 
Moldova 

EU Exports 

EU Imports 

Total trade 

Trade Balance 

Source: Eurostat COMEXT. 

2014 

2015 

% change 
2015/2014 

596 

565 

1,161 

31 

616 

660 

1,276 

-44 

3.0 

17.0 

10.0 

- 

Trade  in  services  remained  overall  in  balance  in  2015,  with  EU  imports  worth  EUR  660 
million  and  EU  exports  accounting  for  EUR  616  million.  Main  sub-sectors  of  services 
exported  by  Moldova  to  the  world  are:  transport,  travel,  telecommunications,  computer  and 
information services as well as manufacturing services on physical inputs owned by others. In 
terms  of  imports,  the  most  important  sub-sectors  belong  to  transport  and  travel-related 
services. 

3.2.3. EU foreign investments with Moldova 

Foreign  direct  investments  (FDI)  in  Moldova  have  been  traditionally  dominated  by  the  EU 
Member States (53% of FDI stock in 2014), followed by the Russian Federation (9.2%), the 
US,  Switzerland,  Turkey  and  Ukraine.  Almost  30%  of  FDI  stock  was  allocated  to  financial 
intermediation,  followed  by  the  manufacturing  sector  (22.4%),  wholesale  and  retail  trade 
(14.2%); real estate (11%); transport, storage and communication (10.3%); electricity, gas and 
water supply (7.1%).20 

In 2015 the FDI stocks originating from EU (see Table 3) amounted to approximately EUR 1 
billion, a similar level as in 2014.  

20 WTO, Trade Policy Review, Report by the Secretariat, Republic of Moldova, WT/TPR/S/323, 14 September, 
2015 https://www.wto.org/english/tratop_e/tpr_e/s323_e.pdf  

20 

 
 
 
 
                                                 
Table 3: EU foreign direct investments with Moldova, 2014-2015 (million EUR) 

Foreign Direct Investment stocks  

2014 

2015 

Moldova in EU28 (inward) 

EU28 in Moldova (outward) 

Net investment stocks 

62 

1,002 

940 

Foreign Direct Investment flows  

2014 

2015 

Moldova into EU28 (inward) 

EU28 into Moldova (outward) 

Net investment flows 

Source: Eurostat. 

9 

51 

42 

84 

1,007 

923 

15 

116 

111 

Direct  investment  flows  from  EU  have  increased  to  EUR  116  million  in  2015,  following  a 
sharp decrease in the context of the banking fraud scandal in 2014 (to EUR 51 million in 2014 
from EUR 264 million in 2013).  

There  is  untapped  potential  related  to  the  level  of  foreign  direct  investments  in  Moldova 
which badly needs them for modernization and diversification of the economy. The effective 
fight  against  corruption,  policy  stability  and  improved  access  to  finance  would  certainly 
attract  more  investors.  To  this  end  The  Investment  Attraction  Strategy  for  the  Promotion  of 
Exports for 2016-2020 has been adopted by the Government of Moldova on 25 April 2016.21 
It  has  been  designed  to  contribute  to  the  enhancement  and  structural  diversification  of 
Moldovan exports which have traditionally heavily relied on several commodities only. More 
productive  and  diversified  exports  will  be  the  key  in  stabilizing  the  trade  balance,  creating 
new jobs and ensuring sustainable economic development of the country. 

3.3. Market access in public procurement 

The  DCFTA  envisages  mutual  access  to  public  procurement  markets  on  the  basis  of  the 
principle  of  national  treatment  at  national,  regional  and  local  level  for  public  contracts  and 
concessions in the traditional sectors as well as in the utilities sector. It provides for a gradual 
approximation (in four phases up to 2022) of the public procurement legislation in Moldova 
with  the  EU  public  procurement  acquis,  accompanied  with  an  institutional  reform  and  the 
creation of an efficient public procurement system based on the principles governing public 
procurement  in  the  EU.  The  implementation  of  each  phase  shall  be  evaluated  by  the 
Association  Committee  in  Trade  Configuration  and,  following  a  positive  assessment,  will 
provide for the reciprocal granting of market access as set out in Annex XXIX to the AA. The 

21 The Investment Attraction Strategy for the Promotion of Exports for 2016-2020, adopted by the Decision 511 
2016 

of 
http://www.mec.gov.md/sites/default/files/snaipe_2016-2020_eng.pdf  

of  Moldova 

Government 

Republic 

April 

the 

the 

25 

of 

of 

21 

 
 
                                                 
completion of the first phase by Moldova (foreseen for 2016) that may lead to the reciprocal 
opening of market for supplies for central government authorities is pending. 

3.4. Trade preferences utilisation rate  

The preference utilisation rate (PUR) on imports into the EU from Moldova has amounted to 
around  89%  in  2014,  reaching  91%  in  2015  and  88%  in  2016.  At  HS  Section,  the  highest 
overall  PURs  are  found  in  Live  animals  and  animal  products  (Section  I)  and  Animal  or 
vegetable  fats  and  oils  (Section  III)  at  100%,  as  well  as  in  Prepared  foodstuffs,  beverages, 
spirits and tobacco (Section IV) and Footwear (Section XII) at 99%. The lowest overall PURs 
(below 50%) are found in Wood and articles of wood (Section IX), Mineral products (Section 
V) and Optical, photographic and measuring instruments (Section XVIII). 

3.5. Utilization of the annual duty-free tariff rate quotas 

In accordance with Annex XV-B of the Association Agreement the EU applies annual duty-
free  tariff  rate  quotas  (TRQs)  for  6  agricultural  product  categories  imported  from  Moldova: 
tomatoes, garlic, table grapes, apples, plums and grape juice. Only the TRQs for table grapes 
and plums were used in 2016 (100% and 75% utilization respectively).  

4. 

ACTIVITIES OF THE IMPLEMENTATION BODIES IN 2016 

The main body under the institutional framework of the EU-Moldova Association Agreement 
is  the  Association  Council  (at  ministerial  level),  which  is  supported  by  the  Association 
Committee  (at  senior  civil  servant  level)  in  supervising  and  monitoring  the  application  and 
implementation  of AA. Due to  the importance of the trade and trade-related  part of the AA 
(i.e. DCFTA) a dedicated Association Committee in Trade configuration (ACTC) has also 
been established. The ACTC is assisted by 4 specialised Sub-Committees at experts' level: 
(1) the Sanitary and Phytosanitary Sub-Committee; (2) the Customs Sub-Committee; (3) the 
Geographical  Indications  Sub-Committee;  and  (4)  the  Trade  and  Sustainable  Development 
Sub-Committee.22  In  2016  the  ACTC  and  the  Sub-Committee  meetings  took  place  in 
Brussels. 

The  3rd  Association  Committee  in  Trade  Configuration  met  on  19  October  2016.  Both 
Parties reviewed progress made in all DCFTA chapters, including trade in goods, sanitary and 
phytosanitary measures, intellectual property rights, customs and trade facilitation, technical 
barriers  to  trade,  public  procurement,  establishment,  trade  in  services  and  electronic 
commerce,  trade-related  energy,  competition,  trade  and  sustainable  development.  The 
Committee also assessed the development of bilateral trade after two years of implementation 
of the DCFTA. The Moldovan side presented the progress achieved in the approximation of 
its  legislation  to  that  of  the  EU  in  all  relevant  chapters.  The  EU  stressed  the  need  for 

22  The  Official  Journals  of  the  EU  (OJ)  where  the  decisions  on  the  Rules  of  Procedure  for  the  EU-Moldova 
Association bodies were published: of the Association Council and those of the Association Committee and of 
Sub-Committees (OJ L 9, 15.01.2015); of the Customs Sub-Committee (OJ L 185, 10.07.2015); of the Sanitary 
and  Phytosanitary  Sub-Committee  (OJ  L  114,  30.04.2015);  of  the  Trade  and  Sustainable  Development  Sub-
Committee (OJ L 264, 9.10.2015); of the Geographical Indications Sub-Committee (OJ L 11, 17.01.2015).  

22 

 
 
                                                 
Moldovan authorities  to  focus  on the  implementation  and  enforcement  of  new  laws and  the 
strengthening  of  its  institutions  so  as  to  provide  visible  benefits  to  businesses  and  citizens. 
The  representatives  of Moldova requested the EU  to  examine the  possibility  to  increase  the 
trigger  level  for  a  number  of  agricultural  products  such  as  grapes  and  plums.  The  EU  side 
expressed  concerns  about  Moldova  failing  to  meet  the  SPS  requirements  for  exports  of 
poultry meat and eggs and weak diagnostic and surveillance capabilities for animal diseases. 
Both sides underlined the importance of the EU financial assistance for the implementation of 
the DCFTA which aims at supporting both the Moldovan administration and the companies 
(notably SMEs) in aligning with the acquis and reap the benefits of the Agreement. 

The 2nd Sub-Committee on Sanitary and Phytosanitary measures (SPS Sub-Committee), 
which met on 1 June 2016, saw the appointment of new SPS focal points as well as discussion 
on  the  action  plan/roadmap  for  the  reorganisation  of  laboratories  and  possibilities  for  EU 
technical assistance. Discussions touched upon the need to accelerate accreditation of animal 
health laboratories and establish a common channel of communication and action on African 
swine fever. The Sub-Committee also adopted the SPS reform plan reflected in the list of EU 
legal acts to which Moldova will approximate its legislation, as an Annex to the Association 
Agreement.  

The 3rd Sub-Committee on Customs and Trade Facilitation took place on 6 October 2016. 
The Parties discussed legislative developments in the EU, customs cooperation, the concept of 
authorized  economic  operator,  and  fight  against  fraud.  An  update  of  the  relevant  DCFTA 
regulatory  approximation  Annex  was  touched  upon,  as  the  new  reference  to  the  Union 
Customs  Code  is  now  in  force.  Following  Moldova's  adherence  to  the  Pan  Euro-
Mediterranean  Convention  on  preferential  rules  of  origin  (PEM)  on  1  September  2015,  the 
replacement of the bilateral rules of origin protocol by a link to the PEM Convention was also 
discussed.  

The  3rd  Geographical Indications  (GIs)  Sub-Committee,  which  met  on  18  October  2016, 
touched upon relevant food quality issues, endorsed new GI products that have been approved 
by  the  legislators  on  both  sides,  and  amended  Annexes  XXX-C  and  XXX-D.  Both  sides 
discussed the latest developments in the "Prosecco" Court case. In that context the EU urged 
Moldovan  authorities  to  pursue  in  all  instances  the  respect  for  the  terms  of  the  Association 
Agreement  in  what  concerns  the  protection  of  EU  GIs.  The  Moldovan  side  informed  about 
priority actions being undertaken to prevent future cases of breach of the AA on protection of 
GIs, such as training of judges on EU law and raising the awareness of economic operators on 
the need to protect GIs. Technical assistance in the field of GIs was also discussed.  

As regards the 2nd Trade and Sustainable Development (TSD) Sub-Committee meeting -
see point 5.  

IMPLEMENTATION OF THE PROVISIONS ON TRADE AND 

5. 
SUSTAINABLE DEVELOPMENT 

23 

 
 
The  Trade  and  Sustainable  Development  (TSD)  Sub-Committee  has  been  established  under 
TSD  Chapter  of  the  AA  and  met  twice  before  the  end  of  2016.  During  the  meeting  on  17 
October  2016,  the  Parties  reviewed  the  state  of  play  in  the  implementation  of  labour  and 
environment provisions of the TSD Chapter, including the ratification and implementation of 
international  conventions  and  other  multilateral  treaties.  The  situation  of  the  State  Labour 
Inspectorate appeared as highly problematic in view of the implementation of the ILO labour 
standards.  Discussion  on  the  content  of  a  TSD  work  plan  for  the  next  3-4  years  also  took 
place. The Sub-Committee meeting was followed by the Joint Civil Society Dialogue Forum. 
Both the Parties and civil society representatives made a statement about the implementation 
of  the  TSD  Chapter,  and  agreed  that  a  more  focused,  sectorial  approach  is  needed  for  its 
implementation. It was also agreed that civil society should be consulted on the priority topics 
identified in the draft work plan. 

6. 

SPECIFIC AREAS SUBJECT TO REPORTING OR MONITORING 

Anti-circumvention mechanism 

Fourteen groups of agricultural and processed agricultural products included in Annex XV-C 
(pig  meat,  poultry,  dairy  products  and  processed  dairy  products,  cereals,  cigarettes,  sugar 
processed  goods  and  sweet  corn)  are  imported  duty-free  from  Moldova  to  the  EU  but  their 
imports  are  monitored  under  anti-circumvention  mechanism  (the  EU  may  temporarily 
suspend the preferential treatment of the products concerned if the imports to the EU reaches 
certain trigger volumes and is not justified and reflected in the increased production capacity 
of  Moldova).  In  2016  those  levels  were  exceeded  for  wheat,  barley,  maize,  sugar  and 
processed  cereals.  The  information  provided  about  the  increased  production  in  Moldova  in 
that  period  was  accepted  by  the  European  Commission  therefore  exports  exceeding  those 
trigger volumes could continue to benefit from preferential treatment by the EU. 

Twenty agricultural products (fruits and vegetables) are covered by the system of entry prices 
for  which  the  ad  valorem  component  of  the  import  duty  is  exempted.  Some  fresh  apricots, 
cherries,  peaches  and  some  grapes  were  imported  into  the  EU  in  2016  being  subject  to  the 
entry price.  

7. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

In view of a desire to achieve gradual economic integration with the EU internal market, inter 
alia,  through  the  DCFTA,  Moldova  agreed  on  far-reaching  market  access  liberalization  and 
regulatory approximation and, notably in the areas that are instrumental (like technical as well 
sanitary  and  phytosanitary  (SPS)  standards)  in  effective  benefiting  from  the  opportunities 
created  by  the  gradual  market  opening  for  goods,  services  and  public  procurement.  To  this 
end Moldova has very ambitious legal approximation commitments and the first three years of 
DCFTA implementation require the most extensive work.  

In  terms  of  SPS  measures  Moldova  timely  submitted  a  list  of  the  EU  sanitary  and 
phytosanitary,  animal  welfare  and  other  laws  which  it  will  approximate  its  legislation  with. 

24 

 
 
This list, which was jointly adopted in June 2016, serves as a reference for the implementation 
of the SPS Chapter by the end of 2020.23  

Moldovan authorities need to further reinforce the institutional capacity of the National Food 
Safety  Agency  (ANSA)  with  the  aim  to  eliminate  the  appearing  delays  in  the  regulatory 
approximation timetable as well as enhance law enforcement. The legislative and governance 
measures  should  also  be  intensified  in  order  the  relevant  enterprises  were  able  to  receive 
authorisations for exports e.g. fish, eggs and egg products to the EU.  

Moldova adopted a very ambitious plan of reforms in technical barriers to trade (TBT) up 
to  2021  which  was  endorsed  by  the  Decision  of  the  Association  Committee  in  Trade 
configuration in October 2016. While the reform plan was prepared by Moldova on time, the 
work  on  the  approximation  of  sectorial  legislation  in  TBT  area  should  continue  and  delays 
caused either by the complexity of legislation or lack of financial resources to implement it, 
should  be  addressed.  Investments  in  quality  infrastructure  should  be  enhanced  and 
institutional capacity improved. The Roadmap for initiating the negotiations of the Agreement 
on  Conformity  Assessment  and  Acceptance  of  Industrial  Products  (ACAA)  was  approved  in 
2016 and in January 2017 submitted to the EU together with the table of correspondence for 
horizontal legislation for the European Commission's assessment. Moldovan authorities have 
chosen 3 product sectors to be covered by future ACAA: construction products, toys and 
low voltage equipment.24 

Moldova  consolidated  its  Reform  Strategy  in  Public  Procurement  ("a  comprehensive 
roadmap")  on  which  the  Association  Committee  in  Trade  configuration  will  need  to  give  a 
favourable opinion in 2017. In 2017, Moldova will also run a pilot project for e-procurement. 
Phase  2  reforms  are  to  be  completed  by  the  end  of  2019.  Good  governance  in  public 
procurement  needs  to  equally  be  reinforced  by  strengthening  the  administrative  capacity  of 
the Public Procurement Agency and ensuring the independence of the review body. The latter 
i.e. the National Complaint Settlement Agency (NCSA) has been created in December 2016 
and  is  accountable  to  the  Parliament.  It  is  important  to  make  it  fully  operational.  Worth  to 
underline that Moldova became a Member of the WTO Government Procurement Agreement 
(GPA) on 14 July 2016. 

With  regards  to  implementation  of  Trade-related  energy  Chapter  of  the  DCFTA,  the 
independence of the energy regulator has not been ensured yet and hampers governance of the 

23 When  the  foreseen  legislative  approximation  is achieved as  a  result of the  monitoring stipulated in  the AA, 
Moldova  shall notify  this fact the  EU  and  this notification shall be  considered  to  be  a  request  to  initiate  the 
process of recognition of equivalence of relevant SPS measures. The equivalence may be recognized in respect 
of:  and  individual  or  group  of  SPS  measures,  or  a  system  applicable  to  a  sector,  subsector,  commodities  or 
group of commodities. 

24 ACAA will provide that trade between the EU  and Moldova in goods in the sectors that it covers shall take 
place under the same conditions as those applying to trade in such goods between the Member States of the 
EU. Until a product is covered under the ACAA, the relevant existing legislation of the Parties shall apply to it, 
taking into account the provisions of the WTO TBT Agreement. 

25 

 
 
                                                 
sector, including for investors from the EU. Market practices and lack of transparency in the 
electricity distribution sector are also concerns that need to be addressed.  

On services, Moldova is making progress in postal services reform but has yet to deliver on 
the  2016  approximation  commitments  in  the  international  maritime  transport.  Delays  have 
also occurred in telecommunications services. Legal approximation in financial services has 
become secondary in the face of major corruption crisis in the banking sector, resolution of 
which depends on restoring the fundamentals of good governance among key institutions. An 
update of Annex XXVIII-A (Rules applicable to financial services with regards to anti-money 
laundering),  Annex  XXVIII-B  (Rules  applicable  to  telecommunication  services)  and  Annex 
XXVIII-D  (Rules  applicable  to  international  maritime  transport)  is  foreseen  for  2017.  As 
concerns financial services, due to the last financial crisis and significant changes related to 
the regulation of the EU financial sector and notably more centralized supervisory framework 
which  does  not  have  legal  authority  to  act  beyond  the  EU  borders,  it  is  not  feasible  for 
Moldova  to  implement  in  full  EU  acquis  in  this  area.  On  the  other  hand  Moldova  can  take 
inspiration  from  the  EU  law  to  design  its  own  regulatory  and  supervisory  frameworks 
conducive to financial stability.  

Moldovan  legislation  on  protection  of  intellectual  property  rights  (IPR)  has  been 
harmonized  with  the  WTO  TRIPS  Agreement  and  EU  law  (Directive  2004/48/EC  and 
Regulation  608/2013  on  customs  enforcement  of  IPR).  The  protection  of  EU  geographical 
indications has to be enhanced in line with commitments undertaken in the DCFTA. To this 
end,  the  Moldovan  authorities  should  undertake  necessary  actions  in  order  to  ensure  the 
protection of the GI "Prosseco". 

On 24 June 2016, Moldova ratified the WTO Trade Facilitation Agreement (in force since 
February  2017)  which  contains  commitments  on  simplifying  border  procedures  and 
modernization  of  customs  techniques  and  instruments  and  customs  control.  The  EU 
Authorised  Economic  Operator  recognition  pilot  project  that  is  being  implemented  at  the 
Moldova-Romania border crossing point since July 2015 has been extended to 2017. 

In  the  context  of  approximation  of  competition  policy  to  the  EU  standards,  the  Moldovan 
Competition  Council  (set  up  in  2012)  is  well  advanced  in  setting  up  the  framework  for 
competition enforcement and state aid control. The new competition law and the state aid law 
were adopted in 2012 and most of the implementing regulations are in place. The electronic 
state  aid  notification  and  monitoring  system  has  been  established.  The  priorities  for  future 
work include approving a National Program on Competition and State Aid. In the years 2017-
2022 full alignment of aid schemes with EU state aid rules is to take place. 

8. 

CONCLUSIONS 

After  two  years  of  implementation  of  the  trade-related  part  of  Association  Agreement,  one 
can  conclude  that  the  EU-Moldova  DCFTA  has  been  working  well.  In  2014-2016  the  EU 
share in the total Moldovan trade has increased from 50% to 55% and EU imports from 
Moldova  grew  by  13.5%  reaching  EUR  1.3  billion.  Compared  to  the  decade  before  the 

26 

 
 
implementation of the Association Agreement/DCFTA, exports from Moldova have increased 
significantly: the value of exported goods was 3.5-4 times as high in 2015 as it had been in 
2005. Access to the EU market is of key importance to the economy of Moldova. Examples of 
companies  across  a  wide  range  of  sectors  testify  to  the  benefits  of  free  trade  with  the  EU. 
Among successful ones there are producers of juices and conserved fruit and vegetables (the 
DCFTA  has  brought  grow  in  sales  by  up  to  25%)  as  well  as  alcoholic  beverages,  notably 
wines (exports to the EU increased several times). Products from Moldova are appreciated by 
the most  prestigious  brands in the EU, for example, Moldovan electrical cables are used by 
European  car  brands,  such  as  Audi,  BMW,  Mercedes-Benz,  Maserati,  Mini  and  Porsche. 
Apparel factories in Moldova also sew clothes for European luxury brands including Giorgio 
Armani.  

Good  progress  has  been  made  in  implementing  the  DCFTA  in  terms  of  regulatory 
approximation  despite  political  and  economic  turbulence.  With  extensive  support  from  the 
EU, Moldova has adopted a number of trade-related reforms, including for example the plan 
for  SPS  reform  and  the  roadmaps  for  the  approximation  of  legislation  in  TBT  and  public 
procurement. However, further reform efforts are needed to improve the rule of law and 
the business environment, which is still negatively affected by prevalent corruption, as well 
as inconsistent policy making.25 Strong implementation and enforcement measures are needed 
in order to deliver tangible results for business, consumers and citizens. Weak governance and 
institutional capacity and/or absence of regulatory independence slow down the trade-related 
reforms,  notably  in  the  fields  of  food  safety,  procurement  and  energy  market  regulation.  In 
this  regard,  the  specialised  Sub-Committees  established  to  implement  the  DCFTA  will 
continue to discuss and seek solutions to the implementation and market access issues, with 
the aim to produce tangible results.  

In  the  medium-term,  the  benefits  from  approximation  of  Moldova's  legal  framework  to  the 
EU  acquis  as  well  as  development  of  export  capacity,  notably  by  small  and  medium-size 
enterprises  (SMEs)  supported  by  EU4Business  actions26  (including  the  DCFTA  Facility  for 
SMEs  –  EUR  200  million  for  Georgia,  Moldova  and  Ukraine)  should  translate  into  an 
increase  in  bilateral  trade,  and  notably  growth  in  exports  from  Moldova  to  the  EU.  The 
accession of Moldova to the Pan-Euro-Mediterranean (PEM) Convention on Rules of Origin 
on  1  September  2015,  allowing  for  cumulation  of  origin  of  products,  may  also  positively 
contribute to foreign trade performance of this country. The country has an untapped export 

25  According  to  the  2017  World  Bank  Doing  Business  Index  (covering  190  countries)  Moldova  has  slightly 
improved  its position  to  44th compared  to  47th  in  the 2016  edition.  In  the  2016  Transparency International  – 
Corruption Perception Index (covering 176 countries) Moldova's position dropped to 123rd from the 103rd place 
in 2015 edition. 

26  Small  and  medium-sized  enterprises  (SMEs)  in  the  EU’s  Eastern  Partnership  region  have  the  potential  to 
create  jobs  and  drive  economic  growth.  Obstacles  such  as  limited  access  to  finance,  burdensome  legislation 
and difficulties entering new markets are hindering their progress. The European Union’s EU4Business breaks 
down  these  barriers  with  finance,  support  and  training  to  help  small  businesses  realise  their  full 
potential. EU4Business support is delivered together with other organizations such as the European Bank for 
Reconstruction and Development and the European Investment Bank. http://www.eu4business.eu/  

27 

 
 
                                                 
potential  in  particular  in  agricultural  products.  The  attraction  of  FDIs  (notably  green  field 
investments)  pursued  currently  in  accordance  with  governmental  strategy  for  2016-2020 
should contribute to the diversification of production and trade, and hence intensification of 
regional trade. 

28 

 
 
 
 
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND 
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN 
THE EU AND UKRAINE 

1. 

INTRODUCTION 

Due to the fact that the ratification process of the EU-Ukraine Association Agreement by all 
EU  Member  States  has  been  pending,27  on  1  January  2016  both  Parties  have  started  to 
implement a Deep and Comprehensive Free Trade Area (DCFTA) on a provisional basis. The 
DCFTA is the main economic pillar of the  Association Agreement28 (AA), the political and 
cooperation provisions of which have been provisionally applied since 1 November 2014. It 
should  be  emphasized  that  in  the  AA  the  EU  acknowledged  the  European  aspirations  of 
Ukraine and welcomed its European choice. Simultaneously both sides took into account that 
this  Agreement  would  not  prejudice  and  leave  open  future  developments  in  EU-Ukraine 
relations. 

The Association Agreement, with the DCFTA as its integral part, provides for deepening of 
political  association  and  gradual  economic  integration  between  the  EU  and  Ukraine, 
based on shared values and principles i.e. democracy and the rule of law, good governance, 
respect for human  rights  and fundamental freedoms, as  well as  free market economy which 
would facilitate the participation of Ukraine in the EU policies. Furthermore, the Agreement 
establishes  conditions  for  enhanced  economic  and  trade  relations  leading  towards  Ukraine's 
gradual  integration  in  the  EU  internal  market  through  the  Deep  and  Comprehensive  Free 
Trade Area as stipulated in Title IV (Trade and Trade-related Matters) of the AA and linked 
to the broader process of progressive approximation of its legislation to that of the Union. The 
AA  also  supports  Ukrainian  efforts  to  complete  the  transition  into  a  functioning  market 
economy  and  hence  to  create  a  new  climate  conducive  to  economic  relations  between  the 
Parties.  Taking  into  account  the  geopolitical  location  of  Ukraine  and  its  energy  transit 
capacity,  both  sides  committed  to  intensifying  energy  cooperation,  building  on  the 
commitment  to  implement  the  Energy  Community  Treaty  of  2005  (Ukraine  joined  it  on  1 
February  2011),  enhancing  energy  security,  facilitating  the  development  of  appropriate 
infrastructure  and  increasing  market  integration  and  regulatory  approximation  towards  key 
elements of the EU acquis.  

The  Deep  and  Comprehensive  Free  Trade  Area  (Title  IV  of  the  Association  Agreement) 
covers two main components: 

1) Gradual, reciprocal market opening (elimination/reduction of tariffs and elimination 
of non-tariff barriers to trade) by both Partners with a timeline asymmetry benefiting Ukraine; 

27 27 EU Member States as well as the European Parliament have completed the ratification process of the EU-
Ukraine Association Agreement but its full entry into took place only on 1 September 2017 due to the delayed 
ratification by the Netherlands. 

28 The EU-Ukraine Association Agreement was published in OJ L 161, 29.05.2014 

http://trade.ec.europa.eu/doclib/docs/2016/november/tradoc_155103.pdf  

29 

 
 
                                                 
2) Far-reaching regulatory approximation to the EU law in trade-related areas29 which 
should  stimulate  competition,  create  new  predictable  environment  for  business  cooperation, 
development  of  trade  and  attracting  foreign  investments,  and  hence  contribute  to  economic 
restructuring and modernization of Ukrainian economy.  

Due  to  a  concept  of  dynamic  and  extensive  regulatory  approximation  embedded  in  the 
DCFTA,  Ukraine  has  to  ensure  the  effective  implementation  and  enforcement  of  the 
approximated domestic law and undertake any action necessary to reflect the development in 
the  EU  acquis  in  its  legislation  in  the  trade-related  areas.  The  EU  on  its  side  shall  inform 
Ukraine about the development in its legal framework. In follow up to the above mentioned 
commitments, after the start of provisional application of the DCFTA, several Annexes to the 
AA which include the lists of EU laws, as well as the deadlines for approximation by Ukraine, 
are being amended with the aim to bring them up to date with the EU legislation. After having 
completed the internal procedures on both sides, the Annexes will be jointly adopted by the 
EU-Ukraine Association Committee in Trade configuration (ACTC) or by the thematic Sub-
Committees. The joint decisions are imminent as concerns: 

-  Update of Annex XXI and a favourable opinion regarding comprehensive roadmap on 

public procurement;30 

-  Addition  of  Annex  V  (a  list  of  provisions  of  the  EU  acquis  regarding  sanitary, 
phytosanitary  and  animal  welfare  to  which  Ukraine  intends  to  approximate  its 
domestic legislation; it is a reference document (Comprehensive SPS Strategy) for the 
implementation  of  Chapter  IV  Sanitary  and  Phytosanitary  Measures  (SPS)  to  the 
Association Agreement.31 

This is the first report on the implementation of the EU-Ukraine DCFTA, prepared as part of 
the  annual  Report  on  implementation  of  FTAs  concluded  by  the  EU.  Apart  from  a  general 
overview  of  the  statistics  and  evolution  of  trade  between  both  Partners,  a  progress  in 
regulatory  approximation  in  trade-related  areas  as  well  as  activities  of  the  Association 

29 It should be noted that the commitments in Title V (Economic and Sector Co-operation) of the AA also relate 
to  regulatory  approximation  in  several  areas  and  hence  contribute  to  the  systemic  reforms  in  the  Ukrainian 
economy.  Moreover,  the  regulatory  approximation  Annexes  related  to  four  sectors  of  services  (financial 
services, postal and courier services, telecommunication and international maritime transport) are common for 
Title IV (Trade and Trade-related matters) and Title V of the AA. 

30 Council Decision (EU) 2017/43 of 12 December 2016 on the position to be adopted, on behalf of the European 
Union,  in  the  EU-Ukraine  Association  Committee  in  Trade  configuration  established  by  the  Association 
Agreement  between  the  European  Union  and  the  European  Atomic  Energy  Community  and  their  Member 
States, of the one part, and Ukraine, of the other part, in relation to the update of Annexes XXI-A to XXI-P in 
the 
http://eur-lex.europa.eu/legal-
6, 
L 
content/EN/TXT/PDF/?uri=CELEX:32017D0043&from=EN  

procurement 

11.01.2017) 

public 

area 

(OJ 

of 

31 The Comprehensive SPS Strategy was approved by the Cabinet of Ministers of Ukraine on 24 February 2016. 
The Union position on the adoption of the Annex V to the Association Agreement at matter was adopted on 17 
July 2017 (OJ L 195, 27.07.2017) and a formal decision by the Sanitary and Phytosanitary Management Sub-
Committee  on  that  matter  will  be  taken  before  the  end  of  2017.  For  the  list  of  EU  legislation  to  be  
approximated by Ukraine see: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017D1391 

30 

 
 
                                                 
Committee in Trade configuration and the Sub-Committees, established under the DCFTA to 
monitor the process of its implementation, are presented here.  

2. 

METHODOLOGY USED FOR THE ANALYSIS 

The  analysis  of  the  bilateral  trade  in  goods  between  the  EU  and  Ukraine  is  based  on  a 
comparison  of  the  Eurostat  data  for  2016,  i.e.  the  first  year  of  DCFTA  provisional 
implementation by both Partners with three preceding years. As regards trade in services and 
investment, the analysis is based on annual data for 2013-2015. It should be noted however, 
that trade flows dynamics cannot be attributed solely to the DCFTA implementation, as also 
other internal and external factors may influence bilateral trade. Though the figures provided 
below give an indication of how the DCFTA has worked so far.  

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

3. 
PROVISIONAL APPLICATION) 

3.1. Trade in goods 

3.1.1. Scope of trade liberalization 

The scope and timeline of tariff elimination/reduction in trade in goods between Ukraine and 
the EU is more complex and the longest in comparison to other DCFTA Partners. Pursuant to 
the  provisions  of  the  DCFTA,  the  EU  and  Ukraine  are  to  establish  a  free  trade  area  over  a 
transitional  period  of  a  maximum  of  10  years.  Based  on  an  asymmetry  approach  the 
transitional period for customs duty elimination will be applied by Ukraine until 2026 (in 2-11 
equal  stages)  and  will  result  in  market  opening  for  96.5%  tariff  lines  for  products  imported 
from  the  EU  (97.7%  in  terms  of  import  value).  The  EU  will  open  its  market  earlier  than 
Ukraine  i.e.  in  2023  for  95.8%  of  tariff  lines  (97.9%  in  value)  for  products  imported  from 
Ukraine  also  by  applying  similar  staging.  For  certain  categories  of  products  both  sides 
decided only to reduce customs duties by 20-60% in 6, 8 or 11 annual stages. Taking also into 
account the reduction of duties for certain products and the annual duty-free tariff rate quotas 
(TRQs)  applied  indefinitely  by  both  sides,  it  means  that  certain  number  of  products  is 
excluded from full liberalization and will remain dutiable; nevertheless the market access will 
be  improved  for  them.  In  case  of  Ukraine  it  concerns  367  products  (animal  and  vegetable 
products, animal and vegetable fats and oils, prepared foodstuffs and beverages); on the EU 
side – 400 goods (live animals, vegetable products, prepared food, and certain chemicals).32 

The specific commitments for Ukraine and the EU are described below. 

The  schedule  of  market  opening  by  the  Ukraine  foresees  that  the  country  has  liberalized 
access  to  its  market  for  over  70%  of  EU  products  (including  almost  38%  tariff  lines 
liberalized  earlier  on  MFN  basis)  immediately  after  the  start  of  DCFTA  application  or 
gradually  in  stages  i.e.  between  3  and  7  years  (with  exception  of  cars  where  10-year 

32  Factual  Presentation:  Deep  and  Comprehensive  Free  Trade  Area  Concluded  as  a  Part  of  the  Association 
Agreement between the European Union and Ukraine (Goods and Services), Report by the WTO Secretariat, 
WT/REG353/1, 13 April 2017. 

31 

 
 
                                                 
transitional period has been foreseen – see below). In general, longer protection is envisaged 
for agricultural products (Chapters 1-24 of the Combined Nomenclature - CN) and for several 
goods  in  those  Chapters  only  certain  reduction  of  tariffs  (between  20%  and  60%)  will  be 
accomplished  after  5,  7  or  10  years  (e.g.  for  some  species  of  fish  and  fish  products  and 
sausages).  Interestingly,  the  highest  average  preferential  tariff  at  the  end  of  implementation 
period will be sugars and sugar confectionary (CN Chapter 17). 

Ukraine  will  protect  its  car  sector  during  10-year  transitional  period  (it  concerns  several 
categories of passenger cars under CN 8703) and simultaneously has a right to apply during 
15-year  period  a  special  safeguard  measure  in  the  form  of  higher  (MFN)  duty  on  cars 
imported from the EU if as a result of the reduction or elimination of customs duty under AA 
cars are imported into Ukraine in such increased quantities, in absolute terms (trigger levels 
apply) or relative to domestic production, and under such conditions as to cause serious injury 
to  a  domestic  industry  producing  like  products.  Special  conditions  will  also  apply  during  5 
years  to  worn  clothing  and  other  worn  articles  (CN  6309  00  00)  imported  from  the  EU  to 
Ukraine. To this end, as from 1 January 2017 Ukraine shall, within 5 years, gradually reduce 
duties on imports during the first four years and shall abolish them not later than the end of 
the fifth year. The minimum entry price will apply in that period. 

As  concerns  agricultural  goods,  Ukraine  applies  (indefinitely)  the  duty-free  TRQs  for  3 
product groups imported from the EU: pork meat, poultry meat and sugar products (91 tariff 
lines on CN 8-digit level). 

In terms of  export duties applied on MFN basis to 5 categories of products (livestock, raw 
hides, certain oil seeds as well as waste and scrap of ferrous and non-ferrous metals), Ukraine 
committed  eliminating  them  over  a  transitional  period  up  to  2026  but  also  maintained  the 
right  to  apply,  during  15  years  starting  in  2017  (for  sunflower  seeds  in  2016)  a  safeguard 
measure  (for  raw  hide  materials,  sunflower  seeds  and  certain  metal  waste  and  scrap)  in  the 
form of a surcharge to the export duty if their exports to the EU exceed a trigger level. 

While  anticipating  the  (provisional)  application  of  the  DCFTA  that  was  signed  on  27  June 
2014,  as  well  as  in  view  of  the  unprecedented  security,  political  and  economic  challenges 
faced  by  Ukraine  and  in  order  to  support  its  economy,  the  EU  unilaterally  started,  on  23 
April 2014, the reduction or elimination of tariffs on goods originating in Ukraine. It was 
done  in  line  with  the  schedule  of  concessions  foreseen  in  Annex  I-A  of  the  Association 
AA/DCFTA.33 In general, import duties for Ukrainian products covering around 90% of tariff 
lines  were  abolished  (including  25%  of  tariff  lines  liberalized  earlier  on  MFN  basis)  and 

33 It was done by means of autonomous trade measures introduced on the basis of Regulation (EU) No 374/2014 
of  the European  Parliament  and  of  the  Council of 16 April  2014 on  the  reduction or  elimination of  customs 
duties  on  goods  originating 
(OJ  L  118,  22.04.2014)  http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32014R0374&from=EN  and  later  amended  by  the  Regulation  (EU)  No 
1150/2014 
http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A32014R1150 As these autonomous trade measures were extended until 31 
December  2015  (thereafter  the  DCFTA  started  to be  provisionally  applied), for  the  purpose  of  predictability 
the customs duties and access to TRQs for the extended period remained the same as for 2014. 

29  October 

in  Ukraine 

31.10.2014) 

(OJ  L 

2014 

313, 

of 

32 

 
 
                                                 
almost  all  of  them  are  to  be  subsequently  liberalized  in  3,  5  or  7  stages  (the  longest  7-year 
period has  been  foreseen for such products as glassware, fertilizers, goods from aluminium, 
certain motor vehicles, bicycles, certain radio and TV equipment). 

The tariffs on imports of agricultural and food products from Ukraine were abolished by the 
EU  at  the  start  of  DCFTA  application  with  exception  of  36  agricultural  product  groups 
(more than 320 tariff lines - CN 8-digit level) which are (indefinitely) subject to annual duty-
free  TRQs:  meat  (beef,  pork,  sheep,  and  poultry),  milk  and  dairy,  eggs,  honey  etc.;  plant 
products:  grains  (wheat,  barley,  oat,  maize),  mushrooms,  garlic,  processed  food  and  other 
products: sugar and products, grape and apple juice, sweet corn, processed tomatoes, ethanol, 
cigarettes  etc.  The  TRQ  amount  is  allocated  on  a  first-come,  first-served  basis  except  for 
some cases where a system of import licences is applied by the EU. After the quantity covered 
by zero duty has been exhausted the MFN rate applies. The EU maintains its minimum entry 
price system for products covered by 28 tariff lines (CN 8-digit level) i.e. for different types 
of  fruits  and  vegetables  e.g.  apples  and  pears,  tomatoes  and  cucumbers.  Those  products  are 
subject  to  a  specific  duty  in  addition  to  its  ad  valorem  tariff  if  their  price  is  below  the 
minimum entry price.  

The  EU  and  Ukraine  agreed  on  a  review  clause  related  to  trade  in  goods  which  may  be 
requested by either Party 5 years after the entry into force of the Agreement whereby both 
sides may consider accelerating and broadening the scope of the elimination of tariffs on trade 
between  themselves.  The  decision  on  that  matter  should  be  taken  by  the  Association 
Committee in Trade configuration. 

3.1.2. Overall evolution of trade in goods in 2013-2016 

According to Eurostat data for 2016, the EU is by far Ukraine's first trading partner with 
the share of around 41% in its total trade (about 44% in Ukraine’s total imports and 38% 
in its total exports). Russia is the second partner representing about 11.4% of Ukraine's total 
trade. Ukraine is the 26th trade partner of the EU (with around 0.9% share in the EU's total 
trade). 

Overall,  in  2016  -  comparing  to  2015  -  the  total  trade  between  the  EU  and  Ukraine 
increased  by  10.1%  (from  EUR  26.9  billion  to  29.6  billion)  while  EU  imports  from 
Ukraine  grew  by  1.9%  (from  EUR  12.8  to  13.1  billion)  and  EU  export  to  Ukraine 
increased  by  17.6%  (from  EUR  14.0  billion  to  16.6  billion).34  Apart  from  the  on-going 
economic reforms (under pressure of International Monetary Fund (IMF) and the EU), it was 
also an effect of the favourable situation on global commodity markets and a drop in prices of 
energy resources as well as good weather conditions contributing to high grain harvests and 
hence increased exports of cereals. In spite of this positive results Ukraine's imports from the 
EU,  similarly  to  its  total  trade,  have  not  regained  the  levels  of  2013,  whereas  Ukrainian 
exports to the EU almost returned to values recorded in 2013-2014 (see Table 1). This may be 

34 It should be noted that exports are of key importance for Ukrainian economy as they generate over 50% of its 

GDP. 

33 

 
 
                                                 
a sign that the economic situation in Ukraine is stabilising (in 2016 GDP grew by around 2%) 
after  the  economic  crisis  of  2014-2015  when  the  illegal  annexation  of  Crimea  and  the  on-
going  conflict  provoked  by  Russian  Federation  (RF)  in  Eastern  Ukraine  coupled  with  an 
unfavourable  global  economic  environment  (low  commodity  prices  on  global  markets  and 
slow GDP growth in emerging countries) and resulted in cumulative decline by over 16% of 
Ukrainian  GDP  and  having  a  negative  impact  on  foreign  trade,  including  with  the  EU  (less 
sharply though). 

It also needs to be recalled that already in 2012-2014 Ukraine has been facing certain trade 
restrictive  measures  imposed  by  Russia.  Moreover,  as  from  1  January  2016  Russian 
Federation  suspended  (indefinitely)  the  application  of  the  Commonwealth  of  Independent 
States  FTA,  hence  reintroduced  MFN  tariffs  on  imports  from  Ukraine  (as  a  response  to  the 
start of provisional application of the EU-Ukraine DCFTA), introduced an embargo (extended 
until  the  end  of  2018)  on  imports  of  agricultural  products  in  the  follow-up  to  Ukraine's 
adherence  to  EU  sanctions  against  Russia  as  well  as  started  to  apply  the  road  and  railway 
transit  restrictions  on  exports  from  Ukraine  to  the  Central  Asia.35  All  these  restrictions 
strongly contributed to the drop in overall exports from Ukraine to the world, including to the 
Russian Federation (noted since 2012 but accelerated over last years) which used to be its first 
trading  partner  for  more  than  two  decades  (drop  in  trade  from  EUR  40.5  billion  in  2014  to 
EUR 32.9 billion in 2016). The reversal of the negative trend in exports from Ukraine to the 
EU  should  therefore  be seen  as  a  positive  sign  of  a  slow  but  successfull reorientation  of  its 
exports towards the EU. 

The EU share in the total Ukrainian exports has been steadily increasing in the last few 
years, i.e. from 26.5% in 2013 to 31.5% in 2014, 34.1% in 2015 and 37.9% in 2016. The EU 
share  in  Ukrainian  imports  has  also  increased  from  35.1%  in  2013  to  38.8%  in  2014, 
40.9% in 2015 and to 43.9% in 2016. The EU share in the total Ukrainian trade (imports plus 
exports)  has  similarly  grown  in  2013-2016  from  31.2%  to  41.0%.  Since  2013  the  EU 
regularly reinforced its position as the first trading partner of Ukraine (which was not the case 
in 2012). This trend was supported by the EU autonomous trade preferences (ATMs) which 
were applied as from April 2014, in anticipation of the DCFTA (provisional) application. 

35 Transit can be carried out only through the territory of the Republic of Belarus and only via 2 checkpoints in 

the BY-RF border and 3 checkpoints in RF-Kazakhstan border. According to the Ministry of Economic 
Development and Trade of Ukraine (MEDT), the transit restrictions, trade embargo and the suspension of the 
CIS FTA by Russia result in annual decrease of Ukrainian exports by around USD 700 million and real loss in 
GDP by 0.65%. 

34 

 
 
                                                 
Table 1: EU trade in goods with Ukraine, 2013-2016 (million EUR) 

2013 

2014 

% 
change 

2014/ 

2013 

2015 

% 
change 

2015/ 

2014 

2016 

% 
change 
2016/ 

2015 

% 
change 

2016/ 

2013 

23,889 

16,986 

-28.9 

14,039 

-17.3 

16,503 

17.6 

-30.9 

13,882 

13,731 

-1.1 

12,833 

-6.5 

13,078 

1.9 

-5.8 

37,771 

30,717 

-18.7 

26,872 

-12.5 

29,581 

10.1 

-21.7 

+10,017 

+3,255 

- 

+1,206 

- 

+3,425 

- 

- 

EU 
trade 
with UA 

EU 
exports 

EU 
imports 

Total 
trade 

Trade 
balance 

Source: Eurostat COMEXT. 

The  EU  continues  to  have  a  positive  trade  balance  with  Ukraine  as  a  result  of  the  trade 
structure characterized by growing share of goods with higher value added in its exports (i.e. 
transport equipment, machinery and appliances, chemical products), whereas its imports from 
Ukraine are dominated by base metals, cereals and mineral products (see point 3.1.3.). 

3.1.3. The structure of the EU-Ukraine trade 

The  main  product  categories  (by  Sections  of  Harmonized  System  Nomenclature  –  HS) 
exported  by  the  EU  to  Ukraine  in  2016  were:  machinery  and  appliances,  chemical 
products, transport equipment as well as mineral products, plastics, rubber and articles 
thereof. Machinery and appliances (Section XVI) accounted for 26.1% of the total EU exports 
to  Ukraine  and  increased  considerably  on  year-on-year  basis  (by  26.1%  -  from  EUR  3.3 
billion to 4.3 billion). Chemical product (Section VI) accounted for 16.8% (EUR 223 million) 
and their exports by the EU grew by 16.3% (from EUR 2.4 billion to 2.8 billion). Transport 
equipment  (Section  XVII)  was  the  next  in  this  ranking  and  accounted  for  10.7%  and  its 
exports  increased  by  69%  compared  to  2015  (from  EUR  1  billion  to  1.7  billion).  Mineral 
products (Section V) amounted to 6.5% (EUR 1.1 billion) but their exports dropped by 21% 
comparing to 2015, when they stood at EUR 1.4 million. 

EU exports in most of the products sectors increased in 2015-2016 due - in large part - to a 
recovery of the Ukrainian economy which is slowly climbing back from a recession in 2015, 
when  the  gross  domestic  product  (GDP)  shrunk  by  9.9%  and  the  net  foreign  direct 
investments (FDI) decreased from EUR 8.2 billion in 2012 to 3 billion in 2015. 

The  traditional  driving  forces  in  Ukrainian  exports  are  raw  materials  and  semi-finished 
products mainly from the agro-food sector and metallurgical industry. The main products in 
EU  imports  from  Ukraine  in  2016  were  base  metals,  vegetable  products  i.e.  mainly 
cereals, mineral products and machinery and appliances. Base metals and articles thereof 

35 

 
 
(Section  XV)  accounted  for  22.1%  of  the  total  EU  imports  from  Ukraine  (EUR  2.9  billion) 
and maintained almost the same level as in 2015. Vegetable products (Section II) accounted 
for  16.0%  of  the  total  EU  imports  (EUR  2.0  billion;  down  from  EUR  2.6  billion  in  2015). 
Mineral products (Section V) reached a slightly lower share than in 2015 amounting to 12.8% 
of the total EU imports from Ukraine (EUR 16.7 billion; approximately the same level as year 
before). EU imports of machinery and appliances have increased by 13.2% reaching EUR 1.5 
billion and represented 11.5% of the total EU imports from Ukraine. From the categories of 
products  most  widely  imported  from  Ukraine,  machinery  and  appliances  were  characterised 
by the highest positive dynamic together with animal or vegetable fats and oils (Section III) 
recording a growth by 67% on year-on year basis and reaching EUR 1.1 billion in 2016. 

The  increased  dynamic  of  exports  of  machinery  and  appliances  from  Ukraine  to  the  EU 
should be seen as a positive sign as they represent a higher added value goods compared to 
the  large  portion  of  the  remaining  products  mainly  from  agro-food  sector,  metallurgical 
industry and raw materials. 

3.2. Establishment, trade in services and investments 

3.2.1. Market access related to establishment and trade in services 

In  the  DCFTA  the  EU  and  Ukraine  laid  down  necessary  arrangements  for  the  progressive 
reciprocal  liberalization  of  establishment  and  cross-border  trade  in  services  and  for 
cooperation in electronic commerce. To this end they committed the freedom of establishment 
by  granting  each  other  national  treatment  and  most  favoured-nation  treatment  (subject  to 
several reservations specified by EU Member States and few reservations by Ukraine) as well 
as liberalization of cross-border supply of services (by granting each other national treatment) 
with  several  limitations  and  reservations  on  both  sides). In  four  services  sectors  (postal and 
courier  services,  telecommunication,  financial  services  and  international  maritime  transport 
services)  both  Parties  recognized  the  importance  of  the  gradual  approximation  of  Ukraine’s 
existing and future legislation to the list of the EU acquis (in case of financial services also to 
the  international  best  practice  and  standards).  The  expansion  of  the  internal  market  may  be 
envisaged for those four sectors once Ukraine effectively implements the EU acquis (foreseen 
within 2 up to 7 years after the entry into force of the Agreement). 

The  EU  and  Ukraine  agreed  on  a  review  clause  with  a  view  of  liberalizing  establishment 
(regular review), cross-border supply of services (regular review) and capital movement (by 
the end  of the fifth  year following the date of entry into  force  of the DCFTA).  This  review 
shall  take  into  account,  inter  alia,  the  process  of  gradual  approximation  foreseen  in  the 
Agreements and its impact on the elimination of remaining obstacles to cross border supply of 
services between the parties. 

3.2.2. EU trade in services with Ukraine 

After  the  decline  in  2014  for  similar  reasons  as  trade  in  goods,  the  total  bilateral  trade  in 
services  between  the  EU  and  Ukraine  increased  by  5.2%  in  2015  (to  EUR  7.7  billion) 
compared to 2014 (EUR 7.3 billion). 

36 

 
 
 
Table 2: EU trade in services with Ukraine, 2013-2015 (billion EUR) 

EU trade with 
Ukraine 

EU exports 

EU imports 

Total trade 

2013 

2014 

% change 

2015 

5.1 

2.9 

8.0 

2014/2013 

-7.9 

-31.0 

-20.5 

4.7 

2.6 

7.3 

5.0 

2.7 

7.7 

Trade balance 

+2.2 

+2.1 

- 

+2.3 

% change 
2015/2014 

6.3 

3.0 

5.2 

- 

Source: European Commission, DG Trade. 

EU exports of services grew in that period by 6.3% (to EUR 5.0 billion) compared to 2014 
(EUR 4.7 billion). EU imports increased in the same time by 3% (from EUR 2.6 billion to 2.7 
billion).  In  accordance  with  the  WTO  statistics  (2015)  the  structure  of  services  exports  by 
Ukraine  (11.1  billion)  to  the  world  has  been  dominated  by  transport,  telecommunications, 
computer  and  information  services  as  well  as  other  business  services.  On  import  side  (9.7 
billion)  travel  services,  transport  and  other  business  services  have  been  top  ranking.  In  the 
analysed period the balance of trade in services was positive for the EU and stayed at similar 
level. 

3.2.3. EU foreign investment with Ukraine 

The EU is the biggest foreign investor in Ukraine accounting for more than 75% of the total 
inward  stocks  (though  this  share  may  be  overstated  given  the  share  of  Cyprus  in  inward 
foreign  direct  investment  (FDI)  stocks).  According  to  Eurostat,  in  2015  EU  FDI  stocks  in 
Ukraine  amounted  to  approximately  EUR  16.1  billion,  down  from  17.3  billion  in  2014  and 
21.6  billion  in  2013.  The  investment  flow  from  EU  into  Ukraine  amounted  to  EUR  116 
million in 2015 and was far from returning to 2013-2014 levels. A certain increases in 2015 
are  to  a  large  extent  explained  by  recapitalization  of  Ukrainian  banks  with  foreign  capital, 
whereas green-field investments remain at low level.  

According to OECD data (October 2015), Cyprus36 has traditionally been the biggest source 
(27.7%) - in terms of inward FDI stocks in Ukraine - followed by the Netherlands (13.0%), 
Germany  (12.4%),  Russian  Federation  (6.7%),  Austria  (6.0%)  and  UK  (4.4%).  In  terms  of 
sectorial structure in mid-2015 the total inward stocks were dominated by financial services 
(26.5%), manufacturing (26.2%), and trade and repair (13%).37 

After  the  military  conflict  provoked  by  Russia  in  the  Eastern  Ukraine  has  started,  the  FDI, 
including from the EU, fell sharply and - due to continuing high political risk of investing - 

36  Investments  from  Cyprus  and  other  tax  havens  are  usually  of  Ukrainian  (round-tripping)  or  Russian 

(transhipping of FDI transactions) origin. 

37  OECD  Investment  Policy  Reviews,  Ukraine  2016.  http://www.oecd.org/countries/ukraine/oecd-investment-

policy-reviews-ukraine-2016-9789264257368-en.htm  

37 

 
 
                                                 
are  far  from  recovering,  despite  the  macroeconomic  stabilization  and  some  improvement  in 
business climate in Ukraine. 

Table 3: EU foreign direct investment with Ukraine, 2013-2015 (billion EUR)  

Foreign 
stocks  

direct 

investment 

2013 

2014 

2015 

Ukraine in EU28 (inward) 

EU28 in Ukraine (outward) 

Stocks: balance 

Foreign 
flows  

direct 

investment 

Ukraine into EU28 (inward) 

EU28 into Ukraine (outward) 

Flows: balance 

Source: European Commission, DG Trade. 

1.3 

21.6 

20.3 

2013 

0.6 

0.0 

-0.6 

3.0 

17.3 

14.3 

2014 

0.4 

-1.9 

-2.3 

0.4 

16.1 

15.8 

2015 

-2,7 

0.1 

2.7 

Notwithstanding  the  uncertainty  around  that  conflict,  Ukrainian  authorities  have  to  address 
the  long-standing  barriers  that  impact  negatively  the  process  of  attracting  foreign  investors 
who  are  preoccupied  with  widespread  corruption,  lack  of  trust  in  judiciary,  unpredictable 
currency and regulatory changes. 

3.3. Reciprocal market access in public procurement 

The DCFTA envisages mutual access to public procurement markets on the basis of national 
treatment  at  national,  regional  and  local  level  for  public  contracts  and  concessions  in  the 
traditional  sector  as  well  as  in  the  utilities  sector.  It  provides  for  the  progressive 
approximation (in 5 phases up to 2024) of the public procurement legislation in Ukraine with 
the  EU  public  procurement  acquis,  accompanied  by  institutional  reform  and  creation  of  an 
efficient public procurement system based on the principles governing public procurement in 
the EU. The implementation of each phase shall be evaluated by the Association Committee 
in Trade configuration, and, following a positive assessment, will be linked to the reciprocal 
granting of market access as set out in Annex XXI-A to the AA. The completion of the first 
phase (foreseen for 2016) and leading to reciprocal opening of market for supplies for central 
government authorities is pending. 

3.4. Trade preferences utilisation rate  

The preference utilisation rate (PUR) on imports into the EU from Ukraine had amounted to 
around  87%  in  2014-2015  and  increased  to  89%  in  2016.  At  HS  Section  level,  the  highest 
PURs are found  in  Animal or  vegetable fats (Section  III)  at 99%,  Articles of stone, plaster, 
cement, asbestos (Section XII) at 96% as well as Chemical products (Section VI) and Wood 
and  wood  products  (Section  IX)  at  95%.  The  lowest  overall  PURs  (below  50%)  have  been 

38 

 
 
recorded  in  Arms  and  ammunition  (Section  XIX),  Pearls  (semi-)precious  stones  and  metals 
(Section  XIV),  Animal  and  animal  products  (Section  I)  and  Optical,  photographic  and 
precision instruments (Section XVIII). 

3.5. Utilization of the annual duty free tariff rate quotas 

In 2016, out of annual duty-free tariff rate quotas (TRQs) for 36 agricultural product groups 
imported from Ukraine to the EU only 11 were fully used and concerned following products: 
honey;  oats;  sugar;  groats,  pellets,  grains;  malt  and  gluten;  preserved  tomatoes;  grape  and 
apple juice; poultry meat; common wheat, flour and pellets; barley flour and pellets; maize, 
flour and pellets. 

For  some  products  such  as:  sheep,  pork  and  beef  meat,  garlic,  mushrooms,  dairy  products 
(e.g.  buttermilk,  cream,  yogurt,  milk  cream  and  condensed  milk,  eggs  and  albumins)  the 
TRQs  were  not  utilised  at  all  due  to  the  lack  of  alignment  with  EU  SPS  requirements  or 
enough marketing capacity. 

4. 

ACTIVITIES OF THE IMPLEMENTATION BODIES BY MID-2017 

level) 

in  supervising  and  monitoring 

The  main  body  under  institutional  framework  of  the  Association  Agreement  is  the 
Association Council (at ministerial  level) which is  supported by the Association  Committee 
the  application  and 
(at  senior  civil  servant 
implementation  of AA. Due to the importance of the trade and trade related part of the AA 
(i.e. DCFTA), a dedicated Association Committee in Trade configuration (ACTC) has also 
been  established.  The  ACTC  is  assisted  by  four  specialised  Sub-Committees  at  experts' 
level:  the  Sanitary  and  Phytosanitary  Sub-Committee;  the  Customs  Sub-Committee;  the 
Geographical Indications Sub-Committee; and the Trade and Sustainable Development Sub-
Committee.  

The Association Committee in Trade configuration met for the first time in Kyiv on 12-
13 April 2016, so only 3 months after the start of provisional application of the DCFTA both 
Parties  analysed  the  statistics  on  bilateral  trade  flows  and  exchanged  information  on  their 
respective  trade  policies.  It  was  also  an  occasion  to  look  at  the  state  of  play  in  all  DCFTA 
chapters, including trade in goods, sanitary and phytosanitary measures, intellectual property 
rights,  customs  and  trade  facilitation,  technical  barriers  to  trade,  public  procurement, 
establishment,  trade  in  services  and  electronic  commerce,  trade-related energy,  competition, 
trade  and  sustainable  development,  transparency  and  communication.  The  Ukrainian 
authorities  presented  the  progress  achieved  in  the  approximation  of  its  legislation  to  that  of 
the  EU  and  on  the  institutional  capacity  building  in  several  areas,  notably  where  these 
processes  had  already  started  before  application  of  the  DCFTA  and  were  facilitated  by  the 
EU’s technical and financial assistance. 

It  was  agreed  that  better  coordination  should  be  ensured  between  the  Parties  as  concerns 
communication and information about challenges and opportunities stemming from DCFTA 
implementation  to  different  Ukrainian  and  EU  stakeholders.  Both  sides  also  discussed  the 

39 

 
 
 
trade  issues  of  bilateral  interest,  notably  on  DCFTA-incompatible  trade  irritants  applied  by 
Ukraine such as wood export ban, increased export duties on metal scrap and the outstanding 
SPS measures. The ACTC meeting resulted in adoption of the Joint Operational Conclusions 
which have streamlined further work to be conducted by both Partners in terms of the DCFTA 
implementation. 

As  the  internal  adoption  processes  of  the  Rules  of  Procedure  of  the  Sub-Committees  have 
been completed at the beginning of 201738, the launching meetings of those association bodies 
have been scheduled for the first half of 2017.  

The  1st  meeting  of  the  EU-Ukraine  Sanitary  and  Phytosanitary  Management  Sub-
Committee (SPS Sub-Committee) took place on 16 May 2017 in Kiev. During that meeting a 
Decision on Rules of Procedure of the SPS Sub-Committee was jointly adopted. Discussions 
touched upon the institutional structure and division of labour among competent authorities in 
the SPS area in Ukraine, the situation as regards export of animal products to the EU and the 
animal and public health situation in Ukraine. The Sub-Committee also exchanged views on 
the state of play of the implementation of the SPS Chapter of the DCFTA, including Ukraine's 
SPS Strategy, and also reviewed the EU's ongoing and planned financial-technical assistance 
in the SPS area. 

The 1st meeting of the Sub-Committee on Geographical Indications (GIs) took place on 18 
May  2017  in  Kyiv.  During  the  meeting  the  Decision  on  Rules  of  Procedure  of  the  Sub-
Committee on GIs was jointly adopted. Both sides exchanged lists of new GIs for the purpose 
of considering their protection under the Agreement. Ukraine debriefed the EU on legislative 
updates  as  regards  AA  annexes  related  to  GIs.  The  EU  informed  about  the  state  of  play  on 
technical  assistance  to  Ukraine  and  provided  papers  for  stakeholder  cooperation.  Both  sides 
discussed  the  issues  related  to  the  protection  and  enforcement  of  Geographical  Indications 
under the DCFTA.  

The 1st EU-Ukraine Sub-Committee on Customs met in Kyiv on 15 June 2017. Apart from 
the joint adoption of the Rules of Procedure, both sides exchanged information among others 
on: implementation of rules of origin, progress in aligning the Ukrainian customs legislation 
with  the  Union  Customs  Code;  resuming  work  by  the  Ukrainian  Common  Transit  Project 
Group; the state of play as concerns Authorised Economic Operator, transit and protection of 
intellectual property rights (the adoption of the relevant laws by the Parliament of Ukraine is 
pending).  The  EU  committed  to  assist  Ukraine  in  customs  legislative  and  implementation 
reforms under the Public Finance Management Support Programme for Ukraine. 

38  Council  Decision  (EU)  2017/189  of  16  January  2017  on  the  positions  to  be  adopted  on  behalf  of  the 
European  Union  within  the  Sanitary  and  Phytosanitary  Management  Sub-Committee,  the  Trade  and 
Sustainable  Development  Sub-Committee,  the  Customs  Sub-Committee  and  the  Sub-Committee  on 
Geographical  Indications  established  pursuant  to  the  Association  Agreement  between  the  European 
Union  and  the  European  Atomic  Energy  Community  and  their  Member  States,  of  the  one  part,  and 
Ukraine, of the other part, as regards the adoption of the Rules of Procedure of those Sub-Committees, 
OJ L 29, 3.02.2017. 

40 

 
 
                                                 
For  information  on  the  1st  meeting  of  the  EU-Ukraine  Sub-Committee  on  Trade  and 
Sustainable Development see section 5. 

IMPLEMENTATION OF THE PROVISIONS ON TRADE AND 

5. 
SUSTAINABLE DEVELOPMENT 

The Sub-Committee on Trade and Sustainable Development (TSD) met for the first time on 
29-30 May 2017 in Brussels. Both Parties reviewed the state of play in the implementation of 
the TSD Chapter of the Association Agreement related to the ratification and implementation 
of international conventions on labour standards (notably the Conventions no. 81 and 129 on 
labour  inspections)  and  on  environmental  aspects  (in  particular  the  implementation  of  the 
Espoo  and  the  Aarhus  Conventions),  including  the  development  of  the  green  and  circular 
economy. The pending adoption of a new Labour code was also discussed. 

The  cooperation  to  improve  forest  law  enforcement  and  sustainable  forest  management,  as 
well as promotion of trade in legal and sustainable forest products was extensively discussed. 
The  EU  presented  concerns  about  the  continuing  wood  export  ban,  including  the  lack  of 
legislative  progress  on  the  draft  law  on  forests  (submitted  to  the  Ukrainian  Parliament  in 
February 2017) and envisaging the removal of this trade restriction. The Ukrainian authorities 
pointed  at  the  challenges  faced  in  terms  of  forest  ownership,  policy  and  administration,  as 
well as wood production, together with some potential ways to solve them. To this end the EU 
was  informed  about  the  established  working  group  on  reforming  the  forest  resources 
management.  The  on-going  cooperation  with  some  EU  Member  States  and  potential  future 
projects were also recalled and discussed in that context. Ukrainian authorities reiterated their 
commitment  to  intensify  efforts  in  appointing  members  of  the  Group  of  Experts  (acting  if 
there is a need to conduct consultations on TSD matters) as well as members of the Advisory 
Group consisting of representatives of different groups of Ukrainian civil society.  

The Parties met with the Joint Civil Society Forum at its first meeting to give an update on the 
state of implementation of the TSD Chapter of the DCFTA.  

6. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

In view of the fact that Association Agreement establishes conditions for enhanced economic 
and  trade  relations  leading  towards  Ukraine's  gradual  integration  in  the  EU  internal 
market,  Ukraine  agreed  on  ambitious  legal  approximation  commitments  in  the  DCFTA, 
notably  in  the  areas  that  are  instrumental  for  the  effective  benefiting  from  the  opportunities 
created  by  the  gradual  market  opening  for  goods,  services  and  public  procurement.39 
Elimination  or  reduction  of  tariffs  by  the  EU  would  not  positively  impact  on  Ukrainian 
exports  if  the  industrial goods  do  not  comply  with  technical  regulations, standards  ensuring 

39  To  this  end  the  Action  Plan  on  Implementation  of  the  Association  Agreement  between  Ukraine  and  the 
European  Union  and  Its  Member  States  for  the  Years  2014-2017  has  been  adopted  by  the  resolution  of  the 
Cabinet of Ministers of Ukraine of 17 September 2014  

http://www.3dcftas.eu/system/tdf/Decree_847_170914_Action%20Plan%20on%20AAg%20%281%29_0.pdf?fil

e=1&type=node&id=84&force=  

41 

 
 
                                                 
products  safety  for  consumers  and  agricultural  products  do  not  respect  food  safety 
requirements ensured by SPS rules. To this end Ukraine embarked on reforms in those areas 
already  before  the  start  of  the  DCFTA  application  by  using  EU  financial  and  technical 
assistance.  

In accordance with the DCFTA commitments Ukraine prepared and submitted to the EU a list 
of  EU  acquis  regarding  sanitary,  phytosanitary  and  animal  welfare  to  which  it  intends  to 
approximate its domestic legislation (Comprehensive SPS Strategy) that was approved by the 
Cabinet of Ministers on 24 February 2016. After having got an endorsement by the EU it will 
be jointly adopted by a Decision of the SPS Management Sub-Committee before the end of 
2017. The list of EU acquis to which Ukraine will approximate its legal framework on SPS 
will  constitute  a  new  Annex  V  to  the  Association  Agreement.  The  legal  approximation 
foreseen in this document will be conducted until 2021. The newly established State Service 
of Ukraine on Food Safety and Consumer Protection will play a crucial role in the  Strategy 
implementation. 

Several  Ukrainian  establishments  have  been  authorised  so  far  to  export  to  the  EU  the 
following agricultural products: poultry meat and products thereof, table eggs for direct use 
(Class  A)  and  for  industrial  use  (Class  B),  eggs  products,  fishery  products,  honey,  casings, 
various  by-products  not  intended  for  human  consumption,  feedstuffs,  straw  pellets  for 
combustion, fruits and vegetables, and - as of January 2016 – dairy products. When legislative 
approximation foreseen in the SPS Strategy is achieved as a result of the monitoring stipulated 
in  the  AA,  this  fact  shall  be  deemed  to  be  a  request  by  Ukraine  to  initiate  the  process  of 
recognition  of  equivalence40  of  relevant  SPS  measures.  In  terms  of  SPS  measures  applied 
towards goods imported from the EU, Ukrainian authorities need to step up their efforts in 
lifting the remaining trade irritants (notably the African Swine Fever (ASF) as well as the 
one related to the draft Order 71 on approving requirements for importing (sending) into the 
customs  territory  of  Ukraine  of  live  animals,  their  reproductive  material,  food  products  of 
animal origin and products not intended for human consumption). 

Ukraine shall take the necessary measures in order to gradually achieve conformity with EU 
technical  regulations  and  standardisation,  metrology,  accreditation,  conformity 
assessment  procedures  and  the  market  surveillance  system.  To  this  end  it  has  started  to 
incorporate  the  relevant  EU  acquis  into  its  legislation  and  to  make  the  administrative  and 
institutional  reforms  that  are  necessary  to  implement  the  AA  and  -  in  the  future  -  an 
Agreement on Conformity Assessment and Acceptance of Industrial Products (ACAA).41 This 
process  is  conducted  on  the  basis  of  the  Strategy  for  the  Development  of  the  Technical 
Regulation System until 2020 and the related Action Plan adopted by Ukrainian Government 

40  The  equivalence  may  be  recognized  in  respect  of:  and  individual  or  group  of  SPS  measures,  or  a  system 

applicable to a sector, subsector, commodities or group of commodities. 

41  ACAA will  provide  that  trade between  the  EU  and Ukraine  in goods in  the  sectors  that it  covers shall take 
place under the same conditions as those applying to trade in such goods between the Member States of the 
EU. Until a product is covered under the ACAA, the relevant existing legislation of the Parties shall apply to it, 
taking into account the provisions of the WTO TBT Agreement. 

42 

 
 
                                                 
in 2016. As concerns approximation process leading to ACAA Ukraine has decided to focus 
on  3  priority  sectors  i.e.  machinery, 
low-voltage  equipment,  and  electromagnetic 
compatibility. 

Having  in  mind  that  due  to  the  relevant  reforms,  the  ACAA  is  a  long-term  objective,  both 
Parties have launched in July 2016 the TBT Regulatory Dialogue (as provided by Article 55 
of  AA)42  as  the  appropriate  technical  cooperation  forum  for  carrying  out  the  detailed 
assessment of the Ukrainian system in order to verify its compliance (in terms of legislation 
its  enforcement  and  institutional  capacity)  with  the  EU  rules  and  standards.  Only  positive 
results of that assessment will allow for a start of negotiations on the ACAA. 

A good progress has been achieved by Ukraine in building a transparent, non-discriminatory, 
competitive  and  open  public  procurement  system  (PP).  The  Public  Procurement  Law 
(almost  fully  compliant  with  the  EU  current  legislation)  was  adopted  at  the  end  of  2015. 
Moreover, in 2016 Ukraine joined the WTO Government Procurement Agreement (GPA) and 
introduced a compulsory e-procurement in the public sector (on the basis of the earlier pilot 
scheme  called  ProZorro)  which  proves  to  be  effective  in  enhancing  efficiency  and  reducing 
corruption.  In  reference  to  the  plans  for  legislative  approximation  and  institutional  capacity 
building  as  stipulated  in  the  DCFTA,  in  February  2016  Ukrainian  Government  adopted  an 
comprehensive  roadmap  on  public  procurement.  The  internal  procedures  have  been 
completed by the EU and Ukraine as concerns adoption of the decision on the update of the 
regulatory  approximation  Annexes  to  the  Association  Agreement  and  a  favourable  opinion 
regarding the comprehensive roadmap on public procurement. The Association Committee in 
Trade configuration will adopt this decision at its meeting on 28-29 September 2017. 

Ukraine  made  ambitious  commitments  in  the  DCFTA  on  alignment  of  its  system  of 
protection of intellectual property rights (IPR) to that of the EU. The progress in this area 
is monitored at technical level within the IPR Dialogue. The meeting of that Dialogue held on 
8 June 2017 showed that further efforts are needed in order to accelerate the submission by 
the  Ukrainian  Government  to  the  Parliament  the  draft  laws  which  are  needed  to  reform  the 
IPR  system.  The  delays  occurred  notably  on  the  package  of  four  laws  (on  Collective 
Management Organisations (CMOs); on the creation of the new IP office; on inventions and 
utility  models;  and  on  copyright  and  related  rights).  Adoption  and  enforcement  of  the  laws 
which  would  implement  Ukraine's commitments  under  the DCFTA  would  assist  Ukraine to 
integrate  better  in  the  world  trading  system,  to  attract  foreign  investment  and  to  prevent 
further major losses for right holders. It should be noted that Ukraine improved its system of 
fighting  against  internet  piracy.  The  adopted  Law  on  Cinematography  introduces  better 
controls  to  prevent  illegal  content  being  shown  on  websites  based  in  Ukraine,  and  the 
activities of the cyber-police to enforce the law in good cooperation with international bodies 
is very encouraging. 

42  Two  meetings  of  the  TBT  Regulatory  Dialogue  took  place  after  its  launch,  i.e.  in  December  2016  and  in 

March 2017. 

43 

 
 
                                                 
In  the  context  of  approximation  of  the  competition  policy  to  the  EU  standards  the 
Antimonopoly  Committee  of  Ukraine  is  well  advanced  in  setting  up  the  framework  for 
competition  enforcement  and  state  aid  and  merger  control  system.  The  priorities  for  future 
work  include  approving  a  National  Program  on  Competition  and  State  Aid.  In  years  2017-
2022 full alignment of aid schemes with EU state aid rules is to take place. 

In  terms  of  progress  in  regulatory approximation  in four  services  sectors in  March  2016 
Ukrainian authorities submitted a Roadmap related to postal and courier services which has 
been  positively  scrutinized  by  EU  experts.  A  roadmap  on  the  implementation  of  the 
regulatory commitments of Ukraine on international maritime transport was approved by 
Ukrainian authorities on 17 August 2017. As regards telecommunication sector, Ukraine has 
shown  a  keen  interest  to  participate  in  the  Digital  Single  Market,  which  comprises 
commitments that go well beyond the DCFTA. As concerns financial services, due to the last 
financial  crisis  and  significant  changes  related  to  regulation  of  the  EU  financial  sector 
(gradual  creation  of  the  Banking  Union  and  Capital  Market  Union)  and  notably  more 
centralized supervisory framework which does not have legal authority to act beyond the EU 
borders, it is not feasible for Ukraine to implement in full EU acquis in the area of financial 
services. On the other hand Ukraine can take inspiration from the EU law to design its own 
regulatory  and  supervisory  frameworks  conducive  to  financial  stability.  To  this  end  a 
Comprehensive Program of Ukraine Financial Sector Development until 2020 was submitted 
by Ukraine to the EU already in October 2015. 

On  16  December  2015,  Ukraine  ratified  the  WTO  Trade  Facilitation  Agreement  which 
entered  into  force  in  February  2017  and  contains  commitments  on  simplifying  border 
procedures and modernization of customs techniques and instruments and customs control. 

to 

In  terms  of  enhancing  its  trade  with  the  EU  and  other  partners  in  the  region  by  means  of 
cumulation of rules of origin for goods, on 12 September 2016 Ukraine submitted a written 
request  for  accession 
the  Regional  Convention  on  pan-Euro-Mediterranean 
preferential rules of origin (PEM Convention). Ukraine has a free trade agreement in force 
with several Contracting Parties to the Convention and therefore complies with the condition 
set  out  in  Article  5(1)  of  the  Convention  to  become  a  Contracting  Party.  As  a  result  on  16 
May  2017  the  Joint  Committee  of  the  Convention  adopted  a  decision  that  Ukraine  shall  be 
invited to accede to that Convention.43  

43 The decision of the Joint Committee of the PEM Convention was published in OJ L 191, 22 July 2017. 

44 

 
 
                                                 
In view of the difficult economic and political situation in Ukraine the European Commission 
adopted on 29 September 2016 a Proposal for a Regulation on the introduction of temporary 
autonomous  trade  measures  (ATMs)  for  certain  agricultural  and  industrial  products, 
supplementing  the  trade  concessions  available  for  Ukraine  under  Association  Agreement.44 
The ATMs Regulation45 entered into force on 1 October 2017. Its aim is to create additional 
opportunities  for Ukrainian exporters by accelerating  tariff elimination (as envisaged by the 
DCFTA) for 22 industrial products and by increasing amounts of annual duty-free TRQs for 8 
agricultural  products  (common  wheat,  maize,  barley,  barley  groats  and  pellets,  oats,  natural 
honey,  processed  tomatoes  and  grape  juice).  Due  to  the  need  of  adoption  of  implementing 
regulations by the European Commission concerning TRQ management for common wheat, 
maize and barley, it was agreed with Ukrainian authorities that these preferential quota are to 
be applied as of 1 January 2018.  

7. 

CONCLUSIONS 

After more than one year of provisional application of the trade-related part of the Association 
Agreement i.e. DCFTA by both partners, one can say that its implementation is on the right 
track.  Bilateral  trade  has  increased  and  the  EU  has  reinforced  its  position  as  the  first 
trading partner of Ukraine. Notwithstanding the traditional exports of agricultural products, 
the  success  stories  of  Ukrainian  companies  finding  access  to  the  EU  market  range  from  a 
variety of sectors such as IT products, aviation industry (airplanes, aerial vehicles, drones for 
use  in  geodesy,  topography  and  agriculture),  production  of  boats  and  kayaks  to  fashion, 
radiation  detectors,  pet  food,  architecture  and  design.  Some  foreign  companies  envisage 
establishing automotive  components  plants  in  Ukraine  which  would  also  be  a  positive 
development  that  could  result  in  increased  exports  of  car  parts  in  the  future.  Nevertheless, 
there is still a potential in further increasing exports by Ukrainian companies. 

The regulatory approximation, which in several areas has already been launched by Ukrainian 
authorities before the start of the DCFTA, gained additional detailed framework in the form of 
roadmaps  and  strategies  (e.g.  in  public  procurement,  SPS,  postal  and  courier  services  and 
financial services). With the EU extensive financial and technical support coordinated by the 
European  Commission's  Support  Group  for  Ukraine,  the  reforms  in  trade-related  fields 
(technical regulations and standards, conformity assessment and market surveillance aiming at 
ensuring  industrial  products  safety  can  be  another  example)  start  to  bring  effects. 
Nevertheless, Ukraine needs to make further efforts in IPR reforms (functioning of collective 
management  organizations  as  concerns  copyright  and  related  rights)  and  in  institutional 
aspects for the implementation of Trade and Sustainable Development Chapter. 

The  reformatory  efforts  by  public  authorities  need  to  be  accompanied  by  export 
promotion and support notably to small and medium-size enterprises (SMEs) which need 
investment  in  order  to  cope  with  the  food  safety  and  products  safety  requirements  on  EU 

44 COM(2016) 631 final, 2016/0308 (COD), 29 September 2016 

https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/1-2016-631-EN-F1-1.PDF  

45 Regulation 2017/1566 of 13 September 2017. 

45 

 
 
                                                 
market. The EU4Business projects46, including DCFTA Facility for SMEs (EUR 200 million 
for  Georgia,  Moldova  and  Ukraine)  will  be  instrumental  in  this  respect.  Moreover,  the 
Government of Ukraine has been working on an Export Promotion Strategy and the Export 
Promotion Office was established in March 2017 that is not only a consultation and advisory 
body to the Ministry of Economic Development and Trade but also the one-stop-shop to help 
Ukrainian exporters in reaching new markets. The Ukrainian authorities also adopted an SME 
Strategy in May 2017 and are elaborating an Action Plan to implement it. The EU expects to 
support both initiatives under the 2018-2020 Single Support Framework. 

In  horizontal  terms  further  reform  efforts  are  needed  in  flanking  policies  related  to 
strengthening  the  rule  of  law  and  the  business  environment,  which  is  still  negatively 
affected by prevalent corruption, as well as inconsistent policymaking. Indeed, transparency 
and predictability of the legal framework as well as effective enforcement of legislation and 
stimulating  development  of 
protection  of  business  property  are  crucial 
entrepreneurship  domestically  as  well  as  the  inflow  of  foreign  investments  which  are 
needed for diversifying and modernizing the economy.47 Getting rid of trade irritants which 
might be linked to the vested interests (wood export ban) is very important. 

for 

46  Small  and  medium-sized  enterprises  (SMEs)  in  the  EU’s  Eastern  Partnership  region  have  the  potential  to 
create  jobs  and  drive  economic  growth.  Obstacles  such  as  limited  access  to  finance,  burdensome  legislation 
and difficulties entering new markets are hindering their progress. The European Union’s EU4Business breaks 
down  these  barriers  with  finance,  support  and  training  to  help  small  businesses  realize  their  full 
potential. EU4Business support is delivered together with other organizations such as the European Bank for 
Reconstruction and Development and the European Investment Bank. http://www.eu4business.eu/  

47 According to the 2017 World Bank Doing Business Index 2017 (covering 190 countries) Ukraine's position 
was  80th  (up  from  83rd  in  2016).  In  the  2016  Transparency  International  –  Corruption  Perception  Index 
(covering  176  countries)  Ukraine's  position  remains  very  low  131sd  (down  from  the  130th  place  in  the  2015 
edition).  

46 

 
 
                                                 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR 
OF THE EU-CHILE ASSOCIATION AGREEMENT 

1. 

INTRODUCTION 

The trade pillar of the EU-Chile Association Agreement entered provisionally into force on 1 
February 2003. No significant amendments have been made to the Agreement since its entry 
into  force.  Although  the  Agreement  includes  review  clauses  on  agriculture  and  on  services, 
attempts between 2006 and 2010 to upgrade it through these clauses failed, as the narrowly 
sectoral approach did not allow a balanced outcome. 

2. 

EVOLUTION OF TRADE  

2.1.  Trade in Goods 

2.1.1.  Overall evolution since the FTA provisional entry into force 

Bilateral trade in goods between 2002 and 2016 almost doubled in value, increasing 97 % in 
total. Overall, the rise is substantially sharper for EU exports, which increased 170% over the 
period, compared to a 50% grow in EU imports from Chile. Chile's share in the total EU trade 
has  remained  stable  since  2003,  at  around  0.5%  of  the  total  EU  trade,  with  a  0.7%  peak  in 
2006. 

Merchandise trade EU28 with Chile (million euro) 

Chile 

Base  Latest 

Growth 

2002 

2016 

total 

average 

EU28 imports 

4.913 

7.367 

49,9% 

EU28 exports 

3.172 

8.572  170,2% 

2,9% 

7,4% 

Balance 

Total trade 

-
1.741 

1.205 

8.085  15.939 

97,1% 

5,0% 

Source Trade G2 Statistics/ISDB  

The  evolution  of  bilateral  trade  in  goods  can  be  divided  into  three  distinct  periods,  with 
marked differences:  

1.  2003-2007 was characterised by a substantial increase in EU imports, a more moderate 

growth in EU exports and an increasing trade deficit. 

2.  2008-2011 saw an initial fall in EU imports, followed by comparable growth rates in 
EU imports and EU exports and a smaller trade deficit. In 2011 bilateral trade reached 
a historic high of EUR 18.9 billion. 

47 

 
 
 
 
3.  Since  2012  EU  imports  have  slightly  fallen,  EU  exports  have  remained  relatively 
stable and bilateral trade has been close to balance, with a slight trade surplus for the 
EU (except in 2014), which is due to price effects rather than quantities.  

Since the entry into force of the Agreement in 2003, Chile enjoyed an abundant trade surplus, 
reaching an accumulated EUR 43.8 billion, with only 2013 and 2015 producing a small trade 
surplus for the EU, and a larger one worth EUR 1.2 billion in 2016. 

2.1.2.  Trade flows in 2016 

In 2016 EU-Chile bilateral trade fell by 4% in value compared to 2015, reaching 15.9 billion. 
The EU experienced a trade surplus worth EUR 1.2 billion, the third and largest trade surplus 
in the EU's favour since 2003. While EU exports increased 3% year-on-year, EU imports fell 
by  10%.  The  main  driver  in  the  decrease  in  imports  is  the  crisis  of  the  Chilean  mining 
industry.  Copper  imports,  which  currently  represent  little  more  than  a  third  of  the  total  EU 
imports from Chile, fell by 15% in 2016. 

2.1.3.  Performance compared to third trading partners 

Despite  the  prima  facie  strong  bilateral  growth  rate  since  2003,  overtime  the  EU  has 
progressively lost market share in Chile to other trading partners. Between 2003 and 2009 the 
EU  was  Chile's  1st  trading  partner.  The  EU  was  overtaken  by  China  in  2009,  by  the  US  in 
2011, and is currently Chile's 3rd trading partner. Whilst China's share in Chile's total trade 
continues  to  increase  (partly  due  to  China's  increasing  imports  of  Chilean  copper),  the  gap 
with the US has narrowed recently. 

48 

-10.000-5.00005.00010.00015.000200220032004200520062007200820092010201120122013201420152016Merchandise trade EU28 with Chile (million euro)ImportsExports04/04/2017Source Trade G2 Statistics/ISDB from Eurostat  
 
 
An external ex-post assessment of the impact of the FTA commissioned by DG  TRADE  in 
2012 concluded that the FTA had helped to prevent the EU market share in Chile from falling 
substantially  further,  thereby  mitigating  the  crowding-out  effect  of  the  FTAs  concluded  by 
Chile  with  3rd  parties  since  2003.  A  2017  ex-ante  external  study  commissioned  by  DG 
TRADE to support the impact assessment on the modernisation of the Agreement confirmed 
that  in  relative  terms  there  is  clear  erosion  in  bilateral  trade  since  2003  in  favour  of  third 
partners. 

2.2.  Trade in Services and Investment 

Bilateral trade in services in 2015 stood at EUR 5.7 billion (EUR 3.8 billion in exports and 
EUR 2 billion in imports), compared to EUR 5.1 billion in 2014. Between 2010 and 2015 EU 
exports of services increased 27%, while EU imports increased 29%. 

EU28 services trade with Chile (million euro) 

EU28 imports 

EU28 exports 

Balance 

Total trade 

2010 

2011 

2012 

2013 

2014 

2015 

1.514  1.333  1.517  1.584  1.744  1.958 

2.972  3.193  3.058  3.093  3.390  3.777 

1.458  1.861  1.541  1.509  1.647  1.819 

4.487  4.526  4.574  4.676  5.134  5.735 

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics 

The EU remains Chile's first FDI provider, with outward FDI stocks worth EUR 42.4 billion 
in 2015. It should be noted, however, that EU FDI flows in 2015 (EUR 3.4 billion) were less 
than half the outward flows registered in 2014.  The decrease in outflows is largely due to the 
crisis in the mining industry, which has historically represented over 45% of the total FDI in 
Chile.  But  it  should  be  noted  that  this  is  a  regional/global  trend,  and  Chile  remains  the  3rd 
recipient  of  FDI  in  Latin  America,  after  Mexico  and  Brazil.  The  sharp  recent  fall  in  FDI 
inflows from Chile, which recorded a negative EUR 741 million in 2015, may be explained 
by lower growth rates in Chile. 

49 

 
 
 
  
Foreign direct investment EU28 with Chile (million euro) 

Stocks 

Flows 

Inward 

Outward 

2013 

2014 

2015 

2013 

2014 

2015 

995 

846 

1.305 

328 

27.564 

40.698 

42.408 

180 

-741 

4.727 

7.580 

3.378 

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics 

2.3. 

Preference Utilisation Rate  

In  2016  the  use  of  preferences  on  EU  imports  from  Chile  was  95%,  a  high  rate  that  has 
remained stable over recent years. 

Use of preferences on imports into EU from Chile 

use as % eligible 

Includes all preferences (FTA, GSP, bilateral) 

Source Trade G2 Statistics/ISDB 

2013 

93% 

2014 

94% 

2015 

2016 

95% 

95% 

The use of preferences for EU exports to Chile was 73.9% in 2016 (adjusted utilisation rate). 

Use of preferences on EU exports to Chile (adjusted utilisation rate) 

use as % eligible 

2013 

78.3% 

2014 

2015 

2016 

77.9% 

75.7% 

73.9% 

Source Trade G2 based on Chilean national statistics 

ANNUAL TRADE COORDINATORS MEETING AND TRADE-RELATED 

3. 
SUB-COMMITTEES 

The 14th meeting of the Trade Coordinators Meeting of the EU-Chile Association Agreement 
took place in Santiago de Chile on 9 November 2016. It was preceded by meetings of all the 
trade-related  subcommittees  created  by  the  Agreement  except  for  the  Joint  Committee  on 
Wines and Spirits.  

The Committee on Standards, Technical Regulations and Conformity Assessment took place 
on 27 October 2017, the Special Committee on Customs Cooperation and Rules of Origin on 
8  November  2017  and  the  Joint  Management  Committee  on  Sanitary  and  Phytosanitary 
Measures on 8-9 November 2017. 

50 

 
 
  
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
 
3.1. 

Trade-related sub-committees 

  The  Special  Committee  on  Standards,  Technical  Regulations  and  Conformity 
Assessment Procedures allowed the EU to question Chile on the amendment to the 
law on nutritional labelling, the classification of meat cuts (solved in the meantime), 
the barriers faced by EU exports of dry meat with starch, and the lack of alignment to 
international standards of a proposed Chilean regulation on cables. 

  The Special Committee on Customs Cooperation and Rules of Origin reached an 
agreement  on  the  update  of  the  Spanish  version  of  the  product  specific  rules  for  the 
Harmonised  System  2012,  and  allowed  for  an  exchange  of  views  on  aspects  of  the 
verification  and  validity  period  of  the  proof  of  origin,  and  clarification  on  the 
reference numbers used by approved exporters. 

  The  Joint  Management  Committee  on  Sanitary  and  Phytosanitary  Matters 
reviewed the implementation of the Action Plan agreed in 2015. Fruitful discussions 
took place on the best way to process EU MS applications for access to the Chilean 
market,  import  requirements  for  apples  and  stone  fruits,  progress  in  negotiations  of 
harmonised  certificates,  and  the  recent  problems  with  additives  in  processed  meat 
products and dairy products.  

3.2. 

Trade Coordinators Meeting 

Relevant  colleagues  reported  on  the  outcome  of  the  trade-related  sub-committees.  Trade 
Coordinators  reviewed  the  most  recent  bilateral  trade  and  investment  flows,  and  exchanged 
information  on  relevant  multilateral  developments  and  on  trade  negotiations  with  third 
partners. EU highlighted a number of issues related to government procurement, urging Chile 
to  make  progress  to  ensure  compliance  with  the  obligations  arising  from  the  existing 
Agreement.  Chile  expressed  concern  about  the  recognition  of  the  Geographical  Indication 
"Pisco"  in  EU  legislation.  Finally,  Chile  informed  about  the  outcome  of  the  1st  EU-Chile 
Joint Consultative Committee, which had taken place in Santiago on 4-5 October 2016. 

4. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The main open issue on FTA implementation is related to some of the existing obligations on 
government  procurement,  which  Chile  is  yet  to  implement.  Although  Chile  has  made  some 
progress  (e.g.  creating  a  common  procurement  portal  and  registry),  a  number  of  pending 
issues remain, and the EU continues to urge Chile to make progress, to ensure full compliance 
with  its  obligations,  and  to  possibly  adopt  interim  measures  in  case  legislative  changes  are 
needed. 

5. 

CONCLUSIONS 

As  in  previous  years,  the  process  of  implementation  through  the  work  of  the  various  trade-
related sub-committees and the Trade Coordinators Meeting has worked very well, dialogue is 
fluid  and  potential  problems  have  been  generally  addressed  early  on.  The  key  issue  that 

51 

 
 
remains  unresolved  is  the  above-mentioned  list  of  pending  obligations  for  Chile  on  public 
procurement.  

Although  in  absolute  terms  the  evolution  of  bilateral  trade  and  investment  is  at  first  sight 
overall  positive,  Chile  has  concluded  numerous  trade  agreements  since  2003,  and  the  EU 
continues to lose market share in Chile to the benefit of other trading partners.  

The  trade  pillar  of  the  EU-Chile  Association  Agreement  was  considered  a  highly ambitious 
FTA  at  its  entry  into  force.  But  after  14  years  of  implementation  it  has  a  number  of 
shortcomings  that  represent  a  burden  for  EU  operators.  These  include:  (1)  limited 
liberalisation in  agriculture  and food products, (2) outdated rules  of origin and customs and 
trade facilitation provisions, (3) lack of sufficient disciplines to address remaining non-tariff 
barriers for industrial and agri-food products, (4) market access limitations for services sectors 
of  key  EU  interest,  (5)  lack  of  comprehensive  investment  liberalisation  disciplines,  (6) 
outdated  public  procurement  rules  and  limited  coverage  in  terms  of  entities,  (7)  limited 
provisions  on  intellectual  property  rights,  and  (8)  lack  of  protection  of  Geographical 
Indications  on  foodstuffs.  Moreover,  the  existing  Agreement  lacks  investment  protection 
provisions for all EU investors (BITs in force cover only 16 MSs) and Trade and Sustainable 
Development provisions. 

Against  this  background  in  2013  the  EU  and  Chile  agreed  to  explore  options  for  a 
comprehensive  modernisation  of  the existing  FTA.  The  2015  Trade  for All  Communication 
highlighted the modernisation of the EU-Chile FTA as one of the concrete initiatives to put 
forward. A scoping exercise was successfully concluded with Chile in January 2017, and the 
Commission is expected to adopt a proposal for a negotiating authorisation and directives in 
mid-2017. 

52 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR 
OF THE EU-MEXICO GLOBAL AGREEMENT 

1. 

INTRODUCTION 

The Global Agreement which entered into force in 2000 covers political dialogue, cooperation 
and trade relations. It includes a trade liberalisation component, the ‘EU-Mexico Free Trade 
Agreement  (FTA)’  covering  trade in  goods  (which  entered  into  force in  2000)  and  partially 
trade in services (which entered into force in 2001). 

At the EU-CELAC Summit in Santiago on 26-27 January 2013, the EU and Mexico agreed 
‘to  explore  the  options  for  a  comprehensive  update  of  the  Economic  Partnership,  Political 
Coordination and Cooperation Agreement between the EU and Mexico. The negotiations for 
modernising the EU-Mexico Global Agreement were launched mid-2016. The first round of 
negotiations, which was of a preparatory nature, took place on 13-14 June 2016 in Brussels. 
The second round took place on 21-25 November 2016 in Mexico City.  

2. 

EVOLUTION OF TRADE  

2.1.  Trade in Goods 

2.1.1.  Overall evolution since the FTA provisional entry into force 

The  EU-Mexico  FTA  contributed  to  achieving  the  strong  growth  in  bilateral  trade  and 
investment between the Parties that has taken place in recent years.  

Bilateral trade in goods between 2002 and 2016 more doubled in value, increasing 145 % in 
total,  and since the EU-Mexico FTA came into force (in 2000),  bilateral trade in  goods has 
increased by 205%48. Overall, the rise is substantially sharper for EU exports, which increased 
416% over the period, compared to a 29% grow in EU imports from Mexico. 

Merchandise trade EU28 with Mexico (million 
euro) 

Base  Latest 

Growth 

2002 

2016 

total  average 

EU28 imports  15.345  19.803 

29% 

2.87% 

EU28 exports 

6.572  33.918  416% 

20% 

Balance 

-8.773  14.116 

Total trade 

21.917  53.721  145% 

10.5% 

Source Trade G2 Statistics/ISDB 

48 From EUR 17.4 billion in 1999 to EUR 53.1 billion in 2016 

53 

 
 
 
 
 
                                                 
The  evolution  of  bilateral  trade  in  goods  can  be  divided  into  distinct  periods,  with  marked 
differences:  

1.  2002-2004 was characterised by a stable trade flows, without significant evolution. 

2.  2004-2009 was characterised by a substantial increase in EU exports and EU imports 

but the EU's trade surplus with Mexico remained stable. 

3.  2009 saw a stronger fall in EU imports and less important fall in EU exports leading to 

a smaller EU's trade surplus with Mexico.  

4.  Since 2010 EU imports and EU imports have increased at a higher pace, with stronger 
growth of EU exports. The trade surplus for the EU almost doubled during this period 
(until 2016). 

Since  2002,  the  EU  has  enjoyed  a  very  significant  trade  surplus,  reaching  an  accumulated 
EUR 134.6 billion. The annual trade surplus was EUR 14.2 billion both in 2015 and 2016. 

2.1.2.  Trade flows in 2016 

In 2016, bilateral trade between the EU and Mexico increased by 1.1 % compared with 2015, 
and totalled EUR 53.7 billion.  

In line with the sector's performance in 2015, and contrary to Mexico's performance with the 
rest  of  its  trading  partners,  the  auto  sector  performed  well  in  the  bilateral  trade  relations, 
registering  an  overall  2.7%  increase.  The  increase  of  Mexico's  auto-related  exports 
compensated for Mexico's decreased imports from the EU in that sector. Trade in agricultural 
products (both primary and processed foods) registered an 8.2% growth, just under Mexico's 
average with the rest of the world. 

2.1.3.  Performance compared to third trading partners 

The total trade with Mexico amounted to almost USD 761 billion in 2016 , which represents a 
1.9% drop compared to 2015 (USD 776 billion), slightly lower than the 2.6% drop in 2015. 
This is the second consecutive year, since the crisis in 2009, where Mexico registers a drop in 

54 

 
 
 
overall  trade.  The  key  difference  this  time  around  is  that  both  manufactured  and  oil-related 
exports fell. The overall trade deficit totalled USD 13.1 billion, which is USD 1.4 billion less 
than the previous year. 

The US maintains its position as Mexico's main trading partner with 63.4 % of the total trade  
even  though  overall  US-Mexico  trade  (USD  482.2  billion  in  2016)  decreased  by  2.7% 
compared  to  2015  when  it  totalled  USD  495.7  billion.  Although  exports  on  both  sides 
decreased in 2016, the fall was mainly fuelled by the 34% drop of Mexican crude and refined 
oil exports to the US. China remained Mexico's second biggest trade partner with 9.8% (USD 
75 billion) of overall trade. The EU is third, with 8.1% (USD 61.7 billion) of trade. Both the 
EU and China maintained the same overall trade share compared with 2015 (0.1% difference 
in both cases). Trade with Canada, which fell 2.1% year on year, maintained its 2.6% share. 

2.2.  Trade in Services and Investment 

Historically, European investments have always been important in Mexico but since the FTA 
came  into  force,  the  average  yearly  investment  flow  originating  in  the  EU  has  tripled.  The 
main foreign investor remains the US, with 45.8% of the total FDI over the period 2000-2016 
but the EU follows second with 37%. In 2016, Mexico attracted USD 26.7 billion of foreign 
investments,  which  represents  a  19.4%  decrease  compared  with  2015.  Of  the  USD  26.7 
billion  in  FDI  flows,  61%  belonged  to  the  manufacturing  sector  and  25%  to  services.  The 
EU's FDI represents 31% of the total FDI stock in Mexico, behind the US with 39%. Israel is 
third with USD 2 billion worth of investments, followed by Japan with USD 1.5 billion. Over 
90% of the EU's contribution came from three member states (Spain, Germany and Belgium). 
The total accumulated EU FDI in Mexico since 2000 has now reached USD 167 billion and 
represents 37% of Mexico's total accumulated FDI.  

Bilateral trade in services in 2015 stood at EUR 14.4 billion (EUR 9.4 billion in exports and 
EUR  5.0  billion  in  imports)  compared  to  EUR  12.3  billion  in  2014.  This  represents  an 
increase of 19%. Similarly, between 2010 and 2015 EU exports of services increased by 54%, 
while EU imports increased 47%.  

EU28 services trade with Mexico (million euro) 

EU28 imports 

EU28 exports 

Balance 

Total trade 

2010 

2011 

2012 

2013 

2014 

2015 

3.371 

3.572 

3.617 

3.697 

4.034 

4.968 

6.110 

7.114 

7.657 

7.923 

8.322 

9.399 

2.739 

3.542 

4.040 

4.226 

4.288 

4.432 

9.481  10.685  11.274  11.620  12.356  14.367 

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics 

2.3. 

Preference Utilisation Rate  

In 2016 the use of preferences on EU imports from Mexico was at 68%. 

55 

 
 
  
  
 
ANNUAL TRADE COORDINATORS MEETING AND TRADE-RELATED 

3. 
SUB-COMMITTEES 

The  EU  and  Mexico  is  engaged  in  an  intensive  negotiation  process  for  modernising  the 
Global  Agreement.  Given  this  process  no  formal  meetings  of  the  institutions  under  the 
existing  agreement  were  organised  in  2016.  As  a  result,  Mexico  and  the  EU  have  profited 
from the negotiation meetings to take up a number of trade irritants in the margin.  

4. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The main open issue on FTA implementation is related to some of the existing obligations on 
sanitary  and  phytosanitary  requirements,  where  the  position  of  Mexico  and  the  EU  diverge 
Although  Mexico  has  made  some  recent  although  limited  progress  (e.g.  in  the  area  of  pig 
meat  exports),  a  number  of  SPS  obstacles  continue  to  hinder  EU  exports  of  agri-food 
products. The Commission continues seeking progress on these issues. 

5. 

CONCLUSIONS 

The  EU-Mexico  trade  flow  has  experienced  a  strong  and  constant  over-the-average  growth 
since the entry into force of the Agreement with the exception of EU exports of  agricultural 
products. In 2016, this feature was confirmed. The most recent statistical data shows that the 
trade flow between Mexico and the EU is highly dynamic with strong annual increase, up to 
19% in services in 2015. 

Despite these positive developments, there is no doubt that the EU-Mexico Global Agreement 
is outdated and does not address some of the important trade and investment issues relevant 
today  in  the  way  other  comprehensive  agreements,  concluded  since  then  by  the  EU  or 
Mexico, do. As a consequence, there is an unfulfilled bilateral trade and investment potential 
on both sides which results in lost opportunities to capture welfare, labour and wage benefits. 
This  is  why  the  negotiations  for  modernising  the  EU-Mexico  Global  Agreement  were 
launched mid-2016 and why the EU, as the 2015 Trade for All Communication highlighted, 
lists  the  modernisation  of  the  EU-Mexico  Global  Agreement  as  a  concrete  initiative.  The 
areas for modernisation include in particular sanitary and phyto-sanitary requirements,  trade 
in goods, services and public procurement. 

56 

 
 
 
 
ANNUAL INFO SHEET ON IMPLEMENTATION OF 
THE EU-NORWAY FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

1.1.  EU-Norway FTA 

On 1 July 1973, a Free Trade Agreement between Norway and the EU entered into force. It 
foresees the progressive abolition of customs duties and the creation of a Joint Committee. It 
concerns  goods  only  and  is  one  of  the  oldest  trade  agreements  signed  by  the  EU.  It  is 
accompanied by a number of protocols: 

  Protocol No 1 concerning the treatment applicable to certain products 
  Protocol No 2 concerning products subject to special arrangements to take account 

of differences in the cost of agricultural products incorporated therein  

  Protocol No 3 concerning the definition of the concept of "originating products" 

and methods of administrative cooperation 

  Protocol No 4 concerning certain provisions relating to Ireland 
  Additional protocol concerning trade in fish and fishery products between Norway 

and the European Union  

1.2.  EEA agreement 

Although  the  bilateral  EU-Norway  trade  agreement  is  still  in  force,  it  has  been  in  practice 
superseded  in  many  respects  by  the  Agreement  on  the  European  Economic  Area  (EEA), 
which entered into force on 1 January 1994, and brings the EU Member States and the three 
EEA  EFTA  States  —  Iceland,  Liechtenstein  and  Norway  —  together  into  the  "Internal 
Market".  The  EEA  agreement  ensures  the  free  movement  of  goods,  services,  capital  and 
persons  between  Norway  and  the  EU  and  is  the  backbone  of  EU-Norway  cooperation. 
Members  of  the  EEA  fully  apply  the  whole  acquis  communautaire  related  to  the  "four 
freedoms"  through  dynamic  incorporation  of  the  relevant  legislative  acts  into  the  Protocols 
and Annexes of the EEA Agreement via Joint Committee Decisions. 

The  EEA  Agreement  does  not  cover  the  common  agricultural  and  fisheries  policies,  the 
customs union, the common trade policy, the common foreign and security policy, the field of 
justice and home affairs, the economic and monetary union (EMU).49 

49 Article 19 of the EEA Agreement encourages further liberalisation of agricultural trade. Negotiations to this 

end started in 2015 and are currently in the finalisation phase. 

57 

 
 
 
 
                                                 
EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

2. 
PROVISIONAL APPLICATION) 

2.1 Trade in Goods 

58 

Merchandise trade EU28 with Norway and Extra-EU28 2002-2016200220032004200520062007200820092010201120122013201420152016Merchandise trade EU28 with Norway (million euro)Imports48,05951,08555,34167,19981,92279,29595,94568,91879,02695,32599,84389,55985,06574,12862,943Exports28,16227,67130,78633,74638,38043,47043,71937,49241,93346,81949,93050,08050,16848,74148,379Balance-19,897-23,414-24,556-33,453-43,542-35,824-52,226-31,426-37,093-48,506-49,913-39,479-34,897-25,387-14,564Merchandise trade EU28 with Extra-EU28 (million euro)Imports937,036934,9741,027,3921,183,9091,368,2541,450,3401,585,2311,235,6361,531,5181,729,9801,798,7571,687,4401,692,1851,729,2071,707,748Exports885,313861,923945,1851,049,4771,152,4851,234,4821,309,1471,093,9611,354,0551,554,5111,684,9281,736,3711,702,9151,789,1541,745,479Balance-51,723-73,051-82,207-134,432-215,768-215,858-276,084-141,675-177,463-175,469-113,82948,93110,73159,94737,731Share Norway in total EU28 trade with Extra-EU28Imports5.1%5.5%5.4%5.7%6.0%5.5%6.1%5.6%5.2%5.5%5.6%5.3%5.0%4.3%3.7%Exports3.2%3.2%3.3%3.2%3.3%3.5%3.3%3.4%3.1%3.0%3.0%2.9%2.9%2.7%2.8%Total (I+E)4.2%4.4%4.4%4.5%4.8%4.6%4.8%4.6%4.2%4.3%4.3%4.1%4.0%3.5%3.2%Source Trade G2 Statistics/ISDB from Eurostat COMEXT06/04/2017Merchandise trade Norway with EU28 and World 2002-2016200220032004200520062007200820092010201120122013201420152016Merchandise trade Norway with EU28 (million euro)Imports26,14625,26227,70231,02635,39840,35241,27232,46036,93640,91843,67043,78742,78141,83340,912Exports49,30846,75851,85567,42574,46080,46497,74566,67979,74093,615101,80995,68088,47175,39762,952Balance23,16221,49624,15336,39939,06140,11256,47434,22042,80452,69758,13951,89245,69033,56522,040Merchandise trade Norway with World (million euro)Imports36,12135,40738,94344,59551,19358,57861,39148,95958,32865,22167,96166,37565,96365,79965,497Exports64,00660,39366,21983,39597,26299,509116,78383,72498,566115,162125,331114,906106,55993,12280,415Balance27,88524,98627,27738,80046,06940,93155,39234,76540,23849,94157,37048,53140,59627,32314,918Share EU28 in merchandise trade of Norway with worldImports72.4%71.3%71.1%69.6%69.1%68.9%67.2%66.3%63.3%62.7%64.3%66.0%64.9%63.6%62.5%Exports77.0%77.4%78.3%80.8%76.6%80.9%83.7%79.6%80.9%81.3%81.2%83.3%83.0%81.0%78.3%Total (I+E)75.4%75.2%75.7%76.9%74.0%76.4%78.0%74.7%74.4%74.6%75.3%76.9%76.1%73.8%71.2%Source Trade G2 Statistics/ISDB from IMF DoTS06/04/2017Merchandise trade EU28 with Norway (million euro)Merchandise trade EU28 with Extra-EU28 (million euro)BaseLatestGrowthNo data on FTA validity availableBaseLatestGrowth20022016totalaverage20022016totalaverageEU28 imports48,05962,94331.0%1.9%EU28 imports937,0361,707,74882.2%4.4%EU28 exports28,16248,37971.8%3.9%EU28 exports885,3131,745,47997.2%5.0%Balance-19,897-14,564Balance-51,72337,731Total trade76,222111,32246.0%2.7%Total trade1,822,3493,453,22789.5%4.7%Source Trade G2 Statistics/ISDBNorwayExtra-EU28-60,000-40,000-20,000020,00040,00060,00080,000100,000120,000200220032004200520062007200820092010201120122013201420152016Merchandise trade EU28 with Norway (million euro)ImportsExports06/04/2017Source Trade G2 Statistics/ISDB from Eurostat  
 
 
 
 
2.2 Trade in Services and Investment 

2.3 Preference Utilisation rate 

ISSUES ADDRESSED IN THE ANNUAL JOINT COMMITTEE/TRADE 

3. 
COMMITTEE MEETING 

In practice, since the signing of the EEA agreement, the bilateral FTAs have been less active 
and no FTA Joint Committee meetings have been called in the last years. Joint committee 
decisions, often of technical nature and limited in number, are taken by written procedure.  

The EEA Joint Committee meets six to eight times per year. Four subcommittees assist the 
Joint Committee (on the free movement of goods, the free movement of capital and services 
including company law, the free movement of persons and horizontal and flanking policies). 
They mainly deal with the incorporation of the acquis.  

Bilateral trade issues are often raised on a case-by-case basis, notably at the occasion of high 
level meetings.  

A recurring trade irritant since 2012 was linked to the reclassification and tariff switch by 
the  Norwegian  Customs  Authorities  of  several  products  under  different  HS  tariffs  codes.  In 
2012, Norway indeed announced an increase of import duties by switching from specific to ad 
valorem duties for six tariff lines of agricultural products (cheese, beef and lamb meat). The 
increase is significant (up to 429%). In the same year, Norway has also reclassified a garden 
type of Hortensia, which resulted in an increase of the import duty from 0 to 72%. These tariff 
measures  were  addressed  in  the  framework  of  the  EU-Norway  Article  19  negotiations, 
concluded on negotiators' level on 5 April 2017. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

The integration into the Internal market via the EEA agreement is  the  main achievement of 
the overall EU-Norway relations and the main driver of our trade relations. 

Norway however suffers from a backlog in taking over the acquis, which is causing problems. 
One recent example was the delay in taking over EU organic legislation. As a consequence, 
Norwegian organic salmon could not be certified against the EU organic legislation and could 

59 

EU28 services trade with Norway (million euro)EU28 services trade with Extra-EU28 (million euro)201020112012201320142015201020112012201320142015EU28 imports11,18712,01012,77414,30315,97216,229EU28 imports460,537480,514520,023543,503602,159685,657EU28 exports21,40022,57024,88627,09728,08528,016EU28 exports568,697615,157684,889721,251772,531831,529Balance10,21310,56012,11212,79412,11311,787Balance108,160134,643164,865177,748170,372145,872Total trade32,58734,57937,66141,40044,05644,244Total trade1,029,2351,095,6711,204,9121,264,7551,374,6901,517,185Source Trade G2 Statistics/ISDB from Eurostat BOP statisticsForeign direct investment EU28 with Norway (million euro)Foreign direct investment EU28 with Extra-EU28 (million euro)InwardOutwardInwardOutward201320142015201320142015201320142015201320142015Stocks68,17971,37675,98866,99477,43684,531Stocks4,130,3464,758,4795,841,9145,456,1926,000,1946,894,054Flows1,0073,3761,1528,2686,64810,236Flows506,79998,740466,881546,77858,287529,496Source Trade G2 Statistics/ISDB from Eurostat BOP statisticsUse of preferences on imports into EU from Norway2013201420152016use as % eligible74%72%71%66%Includes all preferences (FTA, GSP, bilateral)Source Trade G2 Statistics/ISDB 
 
 
 
not  bear  the  EU  organic  logo.  Some  Member  States  decided  to  ban  organic  salmon  from 
Norway. This was solved when Norway adopted equivalent legislation. 

In 2015, negotiations between EU and Norway were concluded on the Additional Protocol to 
the  Agreement  between  the  European  Economic  Community  and  the  Kingdom  of  Norway 
(i.e., to the FTA Agreement). Trade concessions on imports of fishery products from Norway 
were revised and agreement was reached on Norway's financial contribution to the EEA. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

5.1.  Agricultural products 

Agriculture and fisheries are not covered by the EEA agreement, which however encourages 
further liberalisation of agricultural trade through its article 19. Negotiations started in 2015 
and  have  been  concluded  successfully  at  negotiators'  level  in  April  2017.  The  concessions 
consist of 36 fully liberalised tariff lines and tariff rate quotas to be opened by both sides. This 
will offer new trade opportunities for EU and Norwegian exporters of agricultural products. 
The impact will be duly monitored.  

5.2. 

Processed agricultural products 

Trade in processed agricultural products is regulated by Protocol 3 to the EEA agreement (and 
by Protocol 2 to the FTA, which still offers a more preferential treatment than the EEA for 
few  products).  Protocol  3  EEA  foresees  the  possibility  to  levy  customs  duties  based  on  the 
costs of the basic agricultural products in the EU and in  Norway. In practice, EU exports of 
processed agricultural products are hindered by high customs tariffs. Despite the fact that the 
Protocol  foresees  annual  consultations  to  make  sure  that  the  terms  are  adapted  to  market 
developments and new concessions, there have been only two adaptations since the entry into 
force of the EEA Agreement in 1994. 

The  EU  is  ready  to  engage  in  discussions  on  further  liberalisation  of  trade  in  processed 
agricultural  products.  This  was  discussed  at  three  meetings  between  the  autumn  2012  and 
December  2014.  At  that  last  meeting,  Norway  said  that  such  negotiations  might  only  be 
envisaged  if  and  when  Article  19  negotiations  on  trade  in  agricultural  products  would  be 
successfully concluded – which eventually happened in April 2017. 

5.3.  Geographical Indications 

The  last  EU-Norway  bilateral  agreement  under  Article  19  of  the  EEA  Agreement  contains 
also  a  commitment  of  the  parties  to  encourage  trade  of  agricultural  products  with 
Geographical  Indications  (GIs).  The  GIs  negotiations  were  launched  on  20  November  2013 
but were suspended at the request of the Norwegian side following the 5th negotiating round 
on 5 April 2016. The EU is ready to resume these negotiations. 

5.4. 

Trade irritants 

Individual  companies  or  business  associations  often  highlight  burdensome  customs 
procedures  when  exporting  to  Norway.  The  issue  will  have  to  be  further  examined  and  if 
appropriate raised with our Norwegian partners.  

6. 

CONCLUSIONS 

Norway  and  the  EU  are  very  close  trading  partners:  the  figures  illustrate  it.  Norway  is  the 
EU's sixth top trading partner and the EU is Norway's number one trading partner. 

60 

 
 
Institutionally, through the EEA agreement, Norway is as closely linked to the Internal market 
as a third country can be. There is however room for further strengthening trade relations in 
some of the areas not covered by the EEA agreement. 

Politically, Norway and the EU are close allies. Norway actively aligns itself with EU foreign 
policy instruments, including the EU's sanction policy towards Russia and is also subject to 
the  Russian  agricultural  ban,  which  has  severely  hit  its  salmon,  herring  and  mackerel 
producers.  Nonetheless,  Norway  has  been  generally  able  to  compensate  for  the  negative 
effects of the ban on its fisheries exports, by expanding their exports to other markets.  

In  multilateral  trade  fora,  notably  WTO,  the  EU  and  Norway  very  often  defend  the  same 
positions. 

61 

 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-SERBIA FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

On  29  April  2008,  the  EU  and  Serbia  signed  a  Stabilisation  and  Association  Agreement 
(SAA).  The  SAA  is  the  prime  instrument  of  the  EU  overall  policy  towards  the  Western 
Balkan  countries'  Stabilisation  and  Association  process.  Under  this  process,  all  Western 
Balkans countries, including Serbia, have common futures to EU Member States.  

The SAA entered into force on 1 September 2013. However, the trade related part of the SAA 
already applied through an Interim Agreement from 1 July 2008. This Agreement established 
a free-trade area over a transitional period of six years. As regards the EU, in 2010, 97.5% of 
tariff lines were already duty-free, representing 96% of the value of imports from Serbia. By 
2016, Serbia liberalised 95.6% of tariff lines for imports from the EU. 

The  Agreement  covers  products  in  all  Chapters  of  the  Harmonised  System.  Only  few 
exceptions,  concerning  few  agricultural  and  fishery  products,  are  not  fully  liberalized,  and 
subject to preferential quantitative concessions.  

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

2. 
PROVISIONAL APPLICATION) 

2.1 Trade in Goods 

In 2007, the total trade between the EU and Serbia amounted to EUR 12.5 billion. In 2016, 
eight years after the entry into force of the agreement - this figure has now reached EUR 20.4 
billion, an increase of 62.4%. 

62 

Current account \ TIME2010201120122013201420152016EU28 exports to Serbia7,8819,1169,6609,92710,35711,15411,692EU28 imports from Serbia4,3495,1475,0536,5887,1107,8808,732EU28 trade balance with Serbia3,5323,9694,6063,3393,2473,2742,961EU 28 trade in goods with Serbia  (mio €) 
 
  
Merchandise trade EU28 with Serbia (million EUR) 

EU28 exports to Serbia

EU28 imports from
Serbia

EU28 trade balance
with Serbia

12.000
11.000
10.000
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0

2.2 Trade in Services and Investment 

EU 28 trade in services with Serbia (million EUR) 

3.000

2.500

2.000

1.500

1.000

500

0

2010 2011 2012 2013 2014 2015 2016
EU28 credit

EU28 debit

63 

2010201120122013201420152016EU28 credit1.9271.8462.1062.2942.5202.337:EU28 debit1.4541.6481.5711.5451.8031.962:EU28 balance473198535748717375:EU 28 trade in services with Serbia  (mio €) 
 
 
 
 
 
EU 28 trade in goods + services with Serbia  (mio €) 

14.000

12.000

10.000

8.000

6.000

4.000

2.000

0

2010

2011

2012

2013

2014

2015

2016

EU28 exports to Serbia

EU28 imports from Serbia

EU28 trade balance with Serbia

2.3 Preference Utilisation rate 

3. 

ISSUES ADDRESSED IN THE ANNUAL TRADE COMMITTEE MEETING 

Commercial  issues  are  discussed  on  an  annual  basis  in  the  context  of  Sub-committee  on 
Trade,  Industry,  Customs  and  Taxation.  The  last  meeting  took  place  on  7  February  2017, 
during  which  the  positive  trade  trends  were  again  highlighted,  with  the  EU  remaining 

64 

2010201120122013201420152016EU28 exports to Serbia9.80710.96211.76512.22112.87713.490:EU28 imports from Serbia5.8036.7956.6248.1338.9129.842:EU28 trade balance with Serbia4.0054.1675.1414.0883.9643.649:EU 28 trade in goods + services with Serbia  (mio €)Current account \ TIME2010201120122013201420152016EU28 in Serbia5251.433-861 582,5465,426,2:Serbia in EU28-496 81-129 2,7301,714,3:EU28 trade balance with Serbia1.0211.352-732 579,8163,711,9:EU 28 FLOWS direct investments with Serbia  (mio €)trade preference coverage20102011201220132014% of tariff lines95,5%97,3%97,6%97,6%97,6%% of imports goods in value97,3%96,9%96,9%97,6%98,9%EU28 imports goods from Serbia 
 
 
 
 
 
 
 
 
Serbia's first trade partner with a share of nearly 64% of its global trade. Serbia's decision 
to discontinue the nearly two-year long safeguard measures against EU originating imports of 
dairy and pork products as of 1 January 2017 was welcome and the importance to respect the 
smooth implementation of the SAA was emphasised. Other trade issues addressed include the 
importance for Serbia to finalise its WTO accession; the need to effectively and consistently 
implement  a  risk-based  methodology  for  the  import  control  of  goods  to  avoid  systematic 
controls at the border and concerns about the excise discrimination against whisky and other 
EU spirits. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

The  EU  has  repeatedly  encouraged  Serbia  to  finalise  its  accession  to  the  WTO  as  it  will 
anchor  economic  reform  and  trade  liberalization  carried  out  in  the  context  of  the  EU 
Stabilisation  and  Association  Process.  In  addition,  WTO  accession  is  a  pre-condition  or 
requirement  for  the  conclusion  of  the  External  Relations  Chapter  (Chapter  30)  of  its  EU 
accession negotiations50. 

Serbia applied for WTO membership in 2005. Serbia's WTO membership remains dependent 
on the adoption of a WTO and EU acquis-compliant law on genetically modified organisms 
and on the completion of market access negotiations with a few WTO members.  

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The most pressing open issues remain the excise discrimination against whisky and other EU 
spirits  that  puts  EU  exports  of  spirits  at  a  competitive  disadvantage.  The  excise  tax  regime 
favours  the  domestic  spirit  rakija,  taxed  2.5  times  lower  than  whisky.  This  issue  was  once 
again raised in the 4th meeting of the EU-Serbia Stabilisation and Association Committee in 
Belgrade on 27 April 2017. 

6. 

CONCLUSIONS 

Serbia  and  the  EU  are  very  close  and  growing  trade  partners  having  increased  their  total 
trade  by  over  60%  since  the  entry  into  force  of  the  trade  agreement.  The  EU  is  the 
country’s main trading partner by far, accounting for 63.6 % of the total exports and 62.3 % 
of the total imports of goods. The EU continued to be the main source of foreign investment 
too, with a share in net FDI of 82 % in 2015 and more than three-quarters of the cumulative 
FDI stock. 

50The  negotiating  position  of  the  EU  is  being  finalised  and  the  chapter  should  be  open  in  the  third  quarter  of 

2017  

65 

 
 
 
 
                                                 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-SOUTH AFRICA (SA) TRADE, DEVELOPMENT AND CO-OPERATION 
AGREEMENT (TDCA) 

1. 

INTRODUCTION 

The  TDCA  was  signed  on  11  October  1999,  started  being  applied  on  1  January  2000  and 
entered into force on 1 May 2004. Its full implementation has been effective since the end of 
2012.  After  the  last  three  EU  enlargements,  the  10+2+1  new  EU  Member  States  became 
contracting parties in 2004, 2007 and 2016 respectively. 

The  Agreement  was  amended  in  2006  to  phase  out  and  eliminate  the  duties  on  some 
automotive products, and was complemented in 2002 and 2010 by two separate agreements, 
respectively on "trade in wine and spirits" as well as on "cheese". 

The  trade  and  trade-related  provisions  of  the  TDCA  were  replaced  by  the  EU-SADC 
Economic  Partnership  Agreement  as  ruled  therein  in  Article  111  and  Protocol  4.  Hence,  as 
from  the  entry  into  provisional  application  of  the  new  agreement  on  10  October  2016,  the 
trade and trade-related provisions of the TDCA were repealed. 

2. 

EVOLUTION OF TRADE 

2.1 Trade in goods 

The agreed tariff elimination schedules were complemented over a period of 12 years (92% of 
EU  tariff  lines,  72%  of  SA  tariff  lines),  while  the  tariff  rate  quotas  on  some  agricultural 
products were managed under a first-come/first-served basis. 

In  2016,  the  EU  remained  SA's  first  trade  partner  (representing  31%  of  SA  imports  –  from 
DE, FR and UK in decreasing order -, followed by China, USA, India and Saudi Arabia; and 
23%  of  SA's  exports  –  to  DE,  UK  and  BE  in  decreasing  order  -,  followed  by  China,  USA, 
Botswana and Namibia). SA ranked #14 in imports into the EU (1.4% of the overall imports) 
and #18 as EU export destination (1.3% of overall exports). 

Looking  at the evolution over the last 8 years, the peak  of imports  into the EU from SA in 
2008 decreased at its lowest level in 2013 to catch up again afterwards but not to same levels 
as 2016; while EU exports to South Africa peaked in 2011 to slightly decrease but still above 
2008  levels.  It  is  interesting  to  note  that  the  trade  balance  –  very  much  in  favour  of  SA  in 
2008 - reached a positive peak for the EU in 2013 to decrease again on an almost parity level 
today. 

66 

EU and South AfricaFlows in 1000 euros200820092010201120122013201420152016Imports24,617,58119,251,61420,421,68721,759,95320,513,64015,560,27318,512,83819,398,91422,885,853Exports20,593,99515,860,39521,287,15626,232,40425,580,17824,481,38823,317,86125,432,14022,976,987Balance of trade-4,023,586-3,391,219865,4694,472,4505,066,5388,921,1154,805,0236,033,22791,134 
 
 
s
o
r
u
e
0
0
0
1
n

i

e
m
u
o
V

l

Evolution of EU balance of trade 

10.000.000

5.000.000

0

-5.000.000

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

Balance of trade

2.2 Trade in services and Investment 

Trade in services is covered by the TDCA only in so far it calls upon the Parties to observe 
GATS  obligations,  to  endeavour  to  extend  the  scope  of  the  TDCA  with  a  view  to  further 
liberalising trade in services (it never happened) and to foster co-operation in general and in 
the area of banking, insurance and other financial services. The TDCA does not contain any 
provision on investments. 

From 2010 to 2015, imports of services into the EU increased by 14% while exports by 16%. 
The trade balance has not fluctuated significantly and remains in favour of the EU. 

Services 

Debits (imports) 
Credits (exports) 
Net (balance) 

2013 

2011 

2012 

2010 
2015 
4,437  4,437  4,399  4,501  4,509  5,057 
6,711  7,431  7,491  7,284  7,241  7,769 
2,274  2,994  3,092  2,783  2,732  2,712 

2014 

10.000

8.000

6.000

4.000

2.000

0

Trade in Services EU-28 with South Africa (million 
euro) 

Debits (imports)
2011

2010

Credits (exports)
2012

2013

Net (balance)

2014

2015

With regard to investment, the EU remained in 2016 the SA's undisputed dominant partner, 
representing 78% of FDI SA stocks (NL ranking first, followed by UK and DE). 

67 

 
 
 
 
 
 
 
 
2.2 Preference utilisation rate 

With  regard  to  the  utilisation  rates  in  2016  of  the  preferences  granted  by  the  EU  in  the 
framework of the TDCA, 29.2% of overall imports from SA entered duty-free (against 58.4% 
entering duty free because already at a 0% MFN rate), 1% with a preferential rate and 0.8% 
under TRQs management. 

ISSUES ADDRESSED IN THE TDCA TRADE CO-OPERATION 

3. 
COMMITTEE (TCC) 

The  TCC  had  been  meeting  regularly  on  an  annual  basis  alternatively  in  Pretoria  and  in 
Brussels.  The  2016  meeting  was  dominated  by  discussions  about  the  transition  to  the  new 
trade  regime  under  the  EU-SADC  EPA,  the  investment  environment  in  SA  following 
termination by the latter of Bilateral Investment Treaties also with EU Member States, and the 
several irritants affecting the bilateral trade relationship. In this last respect, SPS issues ranked 
high  on  the  agenda,  ranging  from  the  recognition  of  principle  of  regionalisation  (for  avian 
influenza in the EU, and for FMD in SA), to SA game – including ostrich – and SA citrus. 
The ongoing safeguard investigation by SA on imports of poultry originating in SA was also 
extensively discussed. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

Trade  in  agricultural  products  has  remained  the  most  sensitive  area  in  EU-SA  bilateral 
relations,  with  SA  challenging  our  interpretation  of  human  and  animal  risk  and  our  SPS 
requirements. EU SPS requirements for game, ostriches, horses and citrus have ranked at the 
top of bilateral dialogues under the TDCA. Additionally, imports of poultry from the EU have 
also  been  cause  of  serious  concerns  to  the  domestic  industry,  which  managed  to  obtain  the 
application of anti-dumping duties on three EU Member States in 2015, to close imports from 
10 EU Member States on the same year because of avian influenza and the refusal to accept 

68 

 
 
 
the containment measures adopted in the EU, and to initiate a safeguard investigation under 
Article 16 of the TDCA. Additionally, issues relating to trade in wines and spirits had to be 
addressed  in  a  separate  agreement,  raising  the  obligation  taken  by  the  EU  to  provide  an 
assistance fund of EUR 15 million to SA. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

All areas mentioned in the previous point remain open at this stage, and are being dealt with 
in  the  framework  of  the  EU-SADC  EPA.  With  specific  regard  to  the  assistance  of  EUR  15 
million promised under the wine and spirits agreement, discussions are currently ongoing on 
the development of a EUR 10 million programme to be financed under the Development Co-
operation Instrument as well as of a EUR 5 million programme funded under the Partnership 
Instrument. 

6. 

CONCLUSIONS 

The  TDCA  has,  all  in  all,  being  assessed  positively  by  both  EU  and  SA  stakeholders  and 
created a platform on the basis of which the EU-SADC EPA could be built. 

69 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-SWITZERLAND FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The  EU-Swiss  trade  relations  are  among  the  deepest  worldwide  outside  the  context  of  a 
customs  union/Internal  market.  The  trade  relations  between  the  EU  and  Switzerland  are 
among the closest. For Switzerland, the EU is by far the most important trading partner (with 
more than 50% of exports and 70% of imports going to or coming from the EU). For the EU, 
Switzerland  is  overall  trading  partner  number  3  (number  2  for  services).  The  EU  trade  in 
goods surplus with Switzerland amounted to more than EUR 20 billion in 2016 (third biggest 
EU  surplus  worldwide)  while  the  services  surplus  reached  EUR  44  billion  in  2015  (biggest 
EU surplus worldwide). 

EU-Switzerland FTA of 1972 

The cornerstone of EU-Swiss relations is the free trade agreement of 1972. It concerns goods 
only  and  is  one  of  the  oldest  trade  agreements  signed  by  the  EU.  It  does  not  contain 
provisions  on  services,  investment,  IPR  or  government  procurement.  No  dispute  settlement 
mechanism is foreseen beyond the regular annual dialogue at Joint Committee meetings.  

As  a  consequence  of  the  rejection  of  EEA  membership  in  1992  by  the  Swiss  people, 
Switzerland and  the EU  agreed  on a package of seven  sectoral  agreements signed in  1999 
(known in Switzerland as "Bilaterals I"). These include: free movement of persons, technical 
trade  barriers,  public  procurement,  agriculture  and  air  and  land  transport  (road  and  rail).  In 
addition, a scientific research agreement fully associated Switzerland into the EU's framework 
research  programmes.  A  further  set  of  sectoral  agreements  was  signed  in  2004  (known  as 
"Bilaterals II") covering,  inter  alia, Switzerland's  participation  in  Schengen  and  Dublin,  and 
agreements  on  taxation  of  savings,  processed  agricultural  products,  statistics,  combating 
fraud, and participation in some EU programmes and agencies. 

The EU-Swiss relationship is therefore characterised by a complex web of approximately 120 
bilateral sectoral agreements.  

70 

 
 
 
 
EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

2. 
PROVISIONAL APPLICATION) 

2.1 Trade in Goods 

2.2 Trade in Services and Investment 

2.3 Preference Utilisation rate  

3. 

ISSUES ADDRESSED IN THE ANNUAL JOINT COMMITTEE MEETING 

At  the  62nd  meeting  of  the  Joint  Committee  under  the  EU-Swiss  FTA,  which  took  place  in 
Bern on 23 November 2016, the main points on the agenda have been the following: 

71 

Merchandise trade EU28 with Switzerland (million euro)Merchandise trade EU28 with Extra-EU28 (million euro)BaseLatestGrowthNo data on FTA validity availableBaseLatestGrowth20022016totalaverage20022016totalaverageEU28 imports61 863121 62796,6%4,9%EU28 imports937 0361 707 74882,2%4,4%EU28 exports72 856142 48895,6%4,9%EU28 exports885 3131 745 47997,2%5,0%Balance10 99320 860Balance-51 72337 731Total trade134 719264 11596,0%4,9%Total trade1 822 3493 453 22789,5%4,7%Source Trade G2 Statistics/ISDBSwitzerlandExtra-EU28020 00040 00060 00080 000100 000120 000140 000160 000180 000200220032004200520062007200820092010201120122013201420152016Merchandise trade EU28 with Switzerland (million euro)ImportsExports12/04/2017Source Trade G2 Statistics/ISDB from Eurostat EU28 services trade with Switzerland (million euro)EU28 services trade with Extra-EU28 (million euro)201020112012201320142015201020112012201320142015EU28 imports46 44147 38050 87354 01863 98472 550EU28 imports460 537480 514520 023543 503602 159685 657EU28 exports77 09182 15096 288100 055110 376116 649EU28 exports568 697615 157684 889721 251772 531831 529Balance30 65034 77045 41646 03746 39244 099Balance108 160134 643164 865177 748170 372145 872Total trade123 532129 531147 161154 072174 360189 198Total trade1 029 2351 095 6711 204 9121 264 7551 374 6901 517 185Source Trade G2 Statistics/ISDB from Eurostat BOP statisticsForeign direct investment EU28 with Switzerland (million euro)Foreign direct investment EU28 with Extra-EU28 (million euro)InwardOutwardInwardOutward201320142015201320142015201320142015201320142015Stocks491 505501 643626 849676 816691 774828 900Stocks4 130 3464 758 4795 841 9145 456 1926 000 1946 894 054Flows18 30926 91675 46920 142-32 96251 164Flows506 79998 740466 881546 77858 287529 496Source Trade G2 Statistics/ISDB from Eurostat BOP statisticsUse of preferences on imports into EU from Switzerland2013201420152016use as % eligible92%91%86%83%Includes all preferences (FTA, GSP, bilateral)Source Trade G2 Statistics/ISDB 
 
 
 
 
  Processed  agricultural products:  Both parties exchanged reference prices  for basic 
agricultural products, concluding technical discussions among experts that will result 
in a new compensatory duties being imposed on imports of EU processed agricultural 
products into Switzerland as of Spring 2017. The level of compensation granted to the 
Swiss was slightly reduced in comparison to previous years, upon request of the EU. 

  Anti-dumping:  Both  parties  exchanged  views  with  regard 

to 

the  use  of 

preferential/non-preferential rules of origin in the context of anti-dumping measures.  
  Flanking measures: The EU considers that certain aspects of the so-called "flanking 
measures",  which  accompany  the  Free  Movement  of  Persons  Agreement  are 
disproportionate and an impediment to trade in services. 

  Steel  surveillance:  Switzerland  raised  questions  about  the  EU's  steel  surveillance 

measures.  

  "Swissness"  rules:  EU  asked  questions  about  the  practical  implementation  of 

Swissness rules as of 01/01/17 and notification to WTO.  

  FTAs: Both parties informed about concluded and negotiated FTAs.  
  Company  tax  reform  in  Switzerland:  the  abolition  of  certain  tax  regimes  in  the 

context of the company tax reform in Switzerland was discussed.  

  Reform VAT regime for low value consignment both in Switzerland and in the EU 
was  raised  as  there  are  reflexions  on  both  sides  on  this  topic,  with  possible  impact 
notably on e-commerce. 

In addition to the yearly meeting of the FTA joint committee, about a dozen joint committees 
under  other  bilateral  agreements  take  place  on  a  regular  basis  but  there  is  no  overarching 
committee which oversees bilateral economic relations in their entirety.  

4. 

SPECIFIC AREAS OF IMPORTANCE 

Unlike the three EEA EFTA countries Norway, Iceland and Liechtenstein, Switzerland does 
not  have  full  access  to  the  four  freedoms  of  the  Internal  market  and  does  not  dynamically 
integrate  EU  acquis.  On  the  basis  of  the  sectoral  bilateral  agreements,  Switzerland  has 
however access to two of them: free movement of goods (with the exception of agricultural 
products and processed agricultural products where access is limited), and free movement of 
persons (which includes also cross-border provision of services limited in time).  

The sectoral agreements are largely static: the arrangements between Switzerland and the EU 
are  usually  based  on  recognition  of  the  identical  or  equivalent  nature  of  EU  and  Swiss 
legislation in the sector up to the date of the agreements' signature without the obligation to 
take  on  new  EU  legislation  dynamically.  However,  the  Swiss  are  taking  over  –  on  a 
contractual or even on an autonomous basis - part of the EU acquis, for example in the area of 
recognition of professional qualifications. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The  main  issues  have  been  highlighted  by  the  Council  in  its  conclusions  of  28/02/2017  on 
Switzerland:  "Switzerland  is  the  EU's  third  largest  economic  partner  and  the  EU  is 
Switzerland's  main  trading  partner.  While  today  the  bilateral  trade  relationship  generally 
works smoothly to the benefit of both partners, there are a number of restrictions on access to 

72 

 
 
the  Swiss  market  for  operators  from  the  EU,  notably  in  the  agri-food  and  services  sectors. 
These restrictions need to be addressed in order to remedy asymmetries in bilateral economic 
relations. The Council is concerned by an inconsistent application of certain agreements and 
the introduction by Switzerland of  subsequent legislative measures  and practices, at  federal 
or cantonal level, that are incompatible with those agreements, in particular the FMPA. The 
Council  calls  upon  Switzerland  to  abrogate  such  flanking  measures  and  to  refrain  from 
adopting new measures incompatible with the Agreement". 

5.1.  Agriculture 

Liberalisation  of  agricultural  products  is  very  limited  (the  most  notable  exception  being 
cheese  which  is  broadly  liberalised).  Although  there  was  a  commitment  in  2002  to 
progressively  further  liberalise,  the  negotiations  stalled  in  2009.  In  addition,  a  protocol 
annexed  to  the  FTA  in  2004  foresees  a  rather  burdensome,  and  asymmetric,  mechanism  to 
compensate  Switzerland  for  the  very  significant  price  differential  between  the  EU  and 
Switzerland as  regards some inputs to  processed agricultural products. It has also led in  the 
past  to  significant  increases  in  duties  on  imports  of  processed  agricultural  products  into 
Switzerland from the EU. A recent study shows that Swiss agri-food exports to the EU have 
increased much more (around 150%) than EU exports to Switzerland (around 50%)51. 

5.2. 

Services 

There  is  no  overall  services  agreement  between  the  EU  and  Switzerland.  But  there  are 
services-related liberalisation commitments in a number of sector specific agreements such as 
land and air transport or FMOPA. While the EU and Switzerland have a mandate to negotiate 
a services agreement, negotiations have never really taken off.  

5.3. 

Trade barriers 

The main trade barriers for EU businesses in Switzerland are linked to the service sector, in 
particular  the  implementation  of  the  EU-Swiss  Free  Movement  of  Persons  Agreement 
(FMOPA).  The  declared  objective  of  the  flanking  measures  is  to  monitor  the  respect  of 
minimum  working  conditions  in  Switzerland  and,  where  deemed  necessary,  to  provide  for 
sanctions to prevent an erosion of (comparatively very high) Swiss salaries. The EU considers 
these  market  access  barriers  as  burdensome  and  disproportionate.  Three  new  barriers  were 
reported  for  Switzerland  in  2016.  Two  concern  the  services  sectors:  new  VAT  registration 
rules  for  companies  and  new  registration  requirement  for  artisan  workers.  The  third  is  a 
significant  tariff increase  for  seasoned meat, following  a border  measure reclassifying these 
products. 

5.4.  Dispute settlement 

The bilateral trade relationship lacks any reliable dispute settlement mechanism. 

6. 

CONCLUSIONS 

The  EU-Swiss  relations,  since  2014  overshadowed  by  the  popular  vote  "against  mass 
immigration", ended the year 2016 on a positive note. The vote on 16 December 2016 by the 
Swiss Parliament of the Federal Act on Foreign Nationals was indeed welcomed  by the EU, 
now awaiting further details on implementation. This is however creating positive dynamics 
overall. The next step will hopefully bring progress on the institutional agreement between the 

51  

https://ec.europa.eu/agriculture/external-studies/2016-bilateral-trade-agreements_en 

73 

 
 
                                                 
European Union and Switzerland that has been negotiated for the last three years, to provide 
legal certainty in EU-Swiss bilateral relations. 

The  institutional  setting  for  EU-Swiss  bilateral  trade  relations  remains  complex  with  the 
coexistence of an old FTA and sectoral agreements partially addressing trade issues. Clearly, 
the  lack  of  a  credible  dispute  settlement  mechanism  –  together  with  gaps  in  the  sectoral 
coverage (agriculture, services) - are among the most important shortcomings of the otherwise 
very dense bilateral trade relationship. 

74 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-TURKEY CUSTOMS UNION 

1. 

INTRODUCTION 

The contractual relations between the EU and Turkey date back to 1963 when the European 
Economic  Community  (i.e.  the  EU`s  predecessor)  and  Turkey  signed  an  Association 
Agreement (the "Ankara Agreement"), in which both parties agreed to progressively establish 
a  Customs  Union  over  a  period  of  several  years.  An  Additional  Protocol  was  signed  in 
November  1970  setting  out  a  timetable  for  the  abolition  of  tariffs  and  quotas  on  industrial 
goods circulating between the parties. The final phase of the Customs Union was completed 
on  1  January  1996  by  the  EU-Turkey  Association  Council  Decision  No  1/95,  which  is 
currently in force.  

The  Customs  Union  ensures  free  circulation  of  all  industrial  goods  and  certain  processed 
agricultural  products  between  the  EU  and  Turkey.  It  also  established  a  requirement  for 
Turkey`s  alignment  to  the  EU`s  customs  tariffs  and  rules,  commercial  policy,  competition 
policy, intellectual property rights, as well as to the EU`s technical legislation related to the 
scope of the Customs Union. The Customs Union with Turkey therefore goes well beyond the 
traditional free trade agreements which the EU has concluded with other third countries.  

In  addition  to  the  Customs  Union,  the  EU  and  Turkey  concluded  two  further  bilateral 
preferential  trade  agreements.  The  Agreement  between  the  European  Coal  and  Steel 
Community (ECSC) and Turkey on trade in products covered by the Treaty establishing the 
ECSC established a free trade agreement for coal, iron and steel products, along with relevant 
competition rules. Association Council Decision No 1/98 (amended by Decision No 2/2006) 
provides for preferential concessions on trade in certain agricultural and fishery products. 

On 21 December 2016, the European Commission adopted its Recommendation for a Council 
Decision  authorising  the  opening  of  negotiations  with  Turkey  on  an  Agreement  on  the 
extension of the scope of the bilateral preferential trade relationship and on the modernisation 
of the Customs Union. 

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

2. 
PROVISIONAL APPLICATION) 

The Customs Union has led to substantial increase in trade between the EU and Turkey. Since 
its  entry  into  force  in  1996,  the  value  of  bilateral  trade  increased  more  than  fourfold52.  The 
rise in foreign direct investment to Turkey from the EU has been similarly significant, as has 
been  the  deeper  integration  in  production  networks  between  Turkish  and  European  firms. 
Turkey is now the EU's 4th biggest export market and 5th largest trading partner overall, whilst 
the EU is by far Turkey's most important trading partner.  

2.1 

Trade in Goods 

Trade  in  goods  between  the  EU  and  Turkey  has  seen  a  sharp  increase  over  the  last  two 
decades.  In  2016,  the  EU  exported  goods  worth  EUR  78  billion  to  Turkey  and  imported 
products worth EUR 66.6 billion. The EU's biggest export category in 2016 was machinery 
and  appliances  (27.9%  of  overall  exports),  followed  by  transport  equipment  (20.6%)  and 

52 World Bank: Evaluation of the EU - Turkey Customs Union, March 2014  

75 

 
 
                                                 
chemical products (11.3%). Turkey`s biggest export sector was transport equipment (23.8%), 
followed by textiles and textile articles (21.6%) and machinery and appliances (17.4%). The 
following graph shows the overall evolution of trade in goods since 2002.  

Merchandise trade EU28 with Turkey (Mio €) 

90.000
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0

Imports

Exports

Balance

2.2 

Trade in Services and Investment 

The  EU-Turkey  Customs  Union  only  covers trade  in  industrial  goods  and  certain  processed 
agricultural products. Services and investment are not covered under the current agreement.  

As regards services, the latest data available are for the year 2015 and show that the EU has a 
negative balance with Turkey, reflecting the high barriers to enter the Turkish market as well 
as the net surplus of EU visitors to Turkey.  

EU28 services trade with Turkey (million euro) 

2010 

2011 

2012 

2013 

2014 

2015 

EU28 imports 

14,336 

15,054 

14,584 

15,253 

15,883 

16,392 

EU28 exports 

8,233 

9,147 

9,501 

10,441 

10,873 

12,245 

Balance 

-6,103 

-5,907 

-5,084 

-4,813 

-5,010 

-4,148 

Total trade 

22,569 

24,201 

24,085 

25,694 

26,755 

28,637 

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics 

As for investment, the EU is by far the biggest source of foreign direct investment (FDI) in 
Turkey, with the total FDI stock exceeding EUR 75 billion in 2015 (the latest available data) 
and more than EUR 10 billion of European investment in Turkey in 2015 alone. 

76 

 
 
 
  
 
 
Foreign direct investment EU28 with Turkey (million euro) 

Inward 

Outward 

2013 

2014 

2015 

2013 

2014 

2015 

7,841 

8,510 

6,962 

57,275  66,655 

75,874 

2,848 

1,349 

-746 

2,576 

3,964 

10,277 

Stocks 

Flows 

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics 

2.3 

Preference Utilisation rate  

One of the specific features of the Customs Union is the free circulation of goods between the 
partner  countries,  without  the  need  to  prove  compliance  with  the  rules  of  origin,  thereby 
significantly  reducing  the  overall  cost  of  trade.  It  also  makes  it  easier  for  traders  to  benefit 
from  the  preferential  arrangements.  The  below  mentioned  utilisation  rate  relates  to  trade  of 
products  covered  by  preferential  agreements,  including  all  industrial  goods  and  certain 
agricultural and fishery products. All other products are subject to the applicable duties in line 
with the provisions of both sides under the World Trade Organisation.  

Use of preferences on imports into EU from Turkey 

use as % eligible 

2013 

92% 

2014 

93% 

2015 

93% 

2016 

93% 

Includes all preferences (FTA, GSP, bilateral), Source Trade G2 Statistics/ISDB 

ISSUES ADDRESSED IN THE CUSTOMS UNION JOINT COMMITTEE 

3. 
MEETINGS 

The  33rd  Customs  Union  Joint  Committee  (CUJC)  meeting  took  place  on  25  May  2016  in 
Ankara  and  the  34th  CUJC  meeting  was  held  on  11-12  May  2017  in  Brussels.  It  discussed 
issues linked to the proper functioning of the Customs Union, notably as regards: 

 

Increasing  number  of  trade  barriers  and  breaches  of  the  Customs  Union  by  Turkey, 
including  measures  such  as  additional  duties  imposed  on  imports  of  products  from 
third countries but put into free circulation in the EU, increased duties on sweet corn, 
surveillance  measures  of  certain  products,  export  restrictions  of  copper  and 
aluminium, unnecessary testing requirements and customs procedures, import licenses 
for  old-second  hand-renovated  goods.  Issues  related  to  agricultural  trade  have  also 
been raised here and in the sub-committee on agriculture. 

  Turkey's  alignment  to  EU  technical  legislation  in  areas  which  are  essential  for  the 

functioning of the Customs Union. 

77 

 
 
  
 
 
 
 
  
  
  Update on recent EU trade policy developments, in particular as regards negotiations 
of  free  trade  agreements  with  third  countries,  linked  to  Turkey's  obligation  to  align 
with the EU's commercial policy. 

  The non-discriminatory implementation of the Additional Protocol to the Association 

Agreement towards all Member States including the Republic of Cyprus. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

In 2016, the Turkish economy was affected by the aftermath of the  attempted coup d'état of 
15  July.  This,  combined  with  a  series  of  terrorist  attacks,  had  an  impact  on  the  business 
environment,  number  of  foreign  visitors  and  domestic  consumption.  Nevertheless,  in  2016, 
Turkey's GDP grew by 2.9%. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

Turkey  has  introduced  various  trade  and  market  access  barriers  which  also  affect  European 
companies.  A  number  of  these  measures  are  in  breach  of  the  Customs  Union  rules.  The 
European  Commission  has  been  raising  and  addressing  these  barriers  in  various  fora, 
including the Customs Union Joint Committee and other bilateral meetings.  

6. 

CONCLUSIONS 

Turkey's  obligation  to  align  to  the  EU's  common  customs  tariff,  as  well  as  to  EU  technical 
legislation which are important for the free movement of goods, go much beyond classic trade 
agreements  and  thus  make  the  bilateral  trade  relationship  unique.  The  Customs  Union  has 
therefore led not only to significant increase in bilateral trade over the last 20 years, but also 
to important investment and production links between the two parties. However, the economic 
and trading environment has  changed substantially since the creation of the Customs Union 
and  it  has  become  less  well  equipped  to  deal  with  the  modern  day  challenges  of  trade 
integration.  

The  European  Commission  has  therefore  adopted,  on  21  December  2016,  a  proposal  to 
modernise the Customs Union to improve its functioning and to further extend the scope of 
the bilateral preferential trade arrangements in line with modern free trade agreements and the 
Trade for All Communication, thus also covering areas such as services, public procurement, 
specific  rules  for  SMEs  and  sustainable  development,  as  well  as  further  liberalisation  of 
agricultural products. It will also contain an effective dispute settlement mechanism to address 
the  increasing  number  of  trade  and  market  access  problems  faced  by  European  companies. 
Moreover,  it  aims  at  improving  Turkey's  involvement  and  information  as  regards  EU  trade 
policy towards third countries and technical legislation in line with its obligations to align to 
the EU common customs tariff and the EU acquis. 
The  proposal  was  accompanied  by  an  Impact  Assessment53  and  also  took  into  account  the 
results of a public consultation which was held between 16 March and 9 June 2016. 

53 COM SWD(2016) 475 final, 21.12.2016, available here:  

http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2016/swd_2016_0475_en.pdf    

78 

 
 
 
 
                                                 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-ALGERIA FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The  EU  and  Algeria  established  a  free  trade  area  under  the  EU-Algeria  Association 
Agreement,  signed  in  2002  and  entered  into  force  on  1  September  2005.  The  Agreement 
provides  for  a  reciprocal  liberalisation  of  trade  in  goods,  with  elements  of  asymmetry  in 
favour  of  Algeria,  such as  a  12  years  transitional  period  for dismantling tariffs  of  industrial 
goods  and  a  selective  liberalisation  on  agriculture.  In  2012,  the  EU  and  Algeria  agreed  to 
review the timetable of tariff dismantling set forth in the Association Agreement for certain 
products  (steel, textile, electronics, and  automobiles),  extending  the  transitional  period  from 
12 to 15 years. Complete dismantling of tariffs and therefore full implementation of the EU-
Algeria  free  trade  area  is  now  foreseen  for  2020.  Market  opening  for  agricultural  products 
concerns  a  limited  number  of  tariff  lines  subject  to  full  liberalisation,  Tariff  Rate  Quotas 
(TRQs), or a reduction of MFN rates on both side. The Agreement also features provisions on 
investment and services, although far less reaching than those on goods.  

Algeria is also a member of the Regional Convention on pan-Euro-Mediterranean preferential 
rules of origin, which it signed in 2012 and notified the EU of ratification in January 2017. 
Algeria is negotiating its accession to the WTO.  

2. 

EVOLUTION OF TRADE  

2.1 

Trade in Goods 

Trade  in  goods  between  the  EU  and  Algeria  has  intensified  within  the  free  trade  area 
established by the Association Agreement: in 2016, the total two-way trade amounted to EUR 
36.9 billion, an increase of 48.6% from its 2004 value of EUR 24.8 billion, the year preceding 
the  entry  into  force  of  the  Association  Agreement.  Two-way  trade  peaked  in  2012  at  EUR 
53.9 billion. 

n
b
€

35

30

25

20

15

10

5

0

EU Exports

EU Imports

EU imports of mineral fuels

79 

 
 
 
EU  exports  to  Algeria  grew  by  113.6%  between  2004  and  2016.  In  2016,  EU  exports  to 
Algeria were mainly made of machinery and transport equipment (35.3%), chemicals (14.9%) 
and  agricultural  products  (14.3%).  The  three  biggest  EU  exporters  to  Algeria  were:  France, 
Italy and Spain. As regards Algeria's exports to the EU, mineral fuels amounted to 94.0% of 
the  total  exports54.  The  three  biggest  EU  export  markets  for  Algeria  were:  Italy,  Spain,  and 
France. 

EU imports from Algeria are dominated by trade in oil and gas – mineral fuels amount to over 
90% of Algeria's exports to the EU –, which has a significant impact on overall volumes. EU 
imports  from  Algeria  8.2%  between  2004  and  2016,  from  EUR  15.2  billion  to  EUR  16.5 
billion  (with  a  peak  of  EUR  32.7  billion  in  2012,  which  represented  a  115.1%  increase 
compared to 2004). Since 2012, the sharp decline of oil prices has led to a sharp fall in the 
value of Algeria's exports to the EU. After many years of surplus, Algeria registered its first 
limited trade deficits with the EU in 2015 and 2016, of EUR 1.3 billion and EUR 3.9 billion 
respectively.  Trade  deficits  are  expected  to  diminish  or  at  least  stabilise  in  upcoming  years 
thanks to the rise of oil prices. 

The  EU  was  Algeria's  first  partner  for  merchandise  trade  in  2016,  accounting  for  53%  of 
Algeria's total trade, before China (10%), the United States (7%), and Turkey (4%). The EU is 
Algeria's first export market: 67% of Algerian exports were directed towards the EU in 2016, 
followed by the United States (8%), and Brazil (4%). The EU is also Algeria's first source of 
imports,  with  44%  of  Algerian  imports  originating  from  the  EU.  Algeria  is  the  EU's  first 
trading  partner  amongst  all  Euromed  countries:  in  2015  (latest  available  data),  32.8%  of 
Euromed exports to the EU originated from Algeria, and Algeria was the destination of 22% 
of  all  EU  exports  to  Euromed  countries.  This  privileged  position  is  mainly  due  to  the 
prevalence of hydrocarbons in EU-Algeria trade flows. 

2.2 

Trade in Services and Investment 

The total trade in services between the EU and Algeria remained stable from 2010 to 2015, 
from  EUR  4.6  billion  to  EUR  4.8  billion.  In  2015,  Algeria  exported  EUR  1.6  billion  in 
services to the EU and the EU exported EUR 3.2 billion in services to Algeria.  

FDI  flows  between  the  EU  and  Algeria  remained  relatively  low  and  volatile  between  2013 
and 2015, with most investments coming from the EU to Algeria (EUR 1.5 billion in 2015, 
for the total stock of EU FDI of EUR 16.4 billion). The weakness of EU-Algeria FDI flows is 
mainly  due  to  the  overall  concern  regarding  the  business  climate  in  the  country.  Algeria 
currently ranks 156th out of 190 countries in the Wold Bank ranking Doing Business 2017, up 
seven ranks from 2016. 

2.3 

Preference Utilisation rate  

Algeria  had  an  average  utilisation  rate  of  preferences  of  95%  in  2016.  For  EU  exporters  to 
Algeria, the preference utilisation rate was 64.8% in 2013 (latest available year). 

54 Despite what the above graph suggests, mineral fuels continuously accounted for more than 90% of Algerian 
exports since the entry into force of the Agreement. The discrepancy between the lines "EU imports" and "EU 
imports  of  mineral  fuels"  prior  to  2009  is  presumably  due  to  a  change  in  computation  and/or  reporting 
methods. 

80 

 
 
 
                                                 
Regarding agricultural TRQ, Algeria's 2016 fill rate was low for a limited number of products 
such as couscous (19%) and remained nil or close to zero for the majority of products, such 
as tomato juice, fruit juices, yogurt apricots, strawberries, or wine.   

3. 

ISSUES ADDRESSED IN THE SUB-COMMITTEE MEETINGS 

The last Sub-Committee on Trade, Industry, and Services was held in May 2016. Major trade 
irritants  were  addressed,  chiefly  the  new  quantitative  restrictions  under  a  non-automatic 
licensing regime in force since January 2016 (see 5). Legal restrictions to foreign investments 
were  also  addressed,  such  as  the  so-called  '49/51'  Law,  which  sets  a  49%  cap  for  foreign 
ownership of any company established in Algeria, regardless of the sector of activity. Other 
longstanding  issues  were  also  mentioned,  such  as  restrictions  to  imports  of  medicines  or 
vehicles and the issue  of ship-owners' disbursement accounts. Notwithstanding these issues, 
the EU recalled its commitment to support Algeria's accession to the WTO.  

The last Sub-Committee on Agricultural and Fisheries Products was held in October 2015. No 
major issues were addressed apart from SPS issues, following the 2014 and 2015 epidemics of 
aphthae epizooticae in Algeria. Several technical assistance programmes were also discussed, 
as  well  as  potential  ways  to  reinforce  EU  technical  assistance  to  Algeria  in  the  field  of 
conformity assessment. 

The  last  EU-Algeria  Sub-Committee  on  Customs  Cooperation  was  held  in  February  2015. 
Parties  discussed  the  development  of  their  respective  customs  legislation  and  procedures, 
problems  concerning  the  implementation  of  the  rules  of  origin,  the  fight  against  counterfeit 
goods. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

The recent fall in oil prices has significantly impacted Algeria's finances. Algerian authorities 
have  resorted  to  administrative  measures  to  restrict  imports,  with  a  view  to  limiting  trade 
deficits  and  foreign  exchange  shortage.  The  EU  has  reacted  forcefully  to  these  trade-
restrictive measures and has communicated its concerns to the Algerian authorities, insisting 
on compliance with the provisions of the Association Agreement. Algeria has argued that the 
present economic conjuncture justifies exceptional measures. Algeria has also recognised the 
need  for  economic  reforms  in  order  to  encourage  greater  economic  diversification  and  to 
foster  investment.  Several  steps  have  already  been  taken  in  that  direction,  in  the  "New 
Algerian Model for Growth" set forth by the government.  

The  Partnership  Priorities  adopted  by  the  EU  and  Algeria  at  the  Association  Council  of  13 
March 2017 mention cooperation for the socio-economic development of Algeria, including 
trade and access to  the European single market. The EU and Algeria also conducted a  joint 
evaluation of the Association Agreement in 2016-17. The findings of the evaluation are that 
Algerian  efforts  and  EU  assistance  should  focus  on  the  following  areas:  diversification  and 
competitiveness  of  the  Algerian  economy,  improvement  of  the  business  climate,  and 
facilitation of investments. A number of trade related reforms were discussed and Algeria was 
encouraged to commit to the improvement of business climate, new financing mechanisms for 
SMEs, a fine-tuning of subsidies, and the reduction of red tape.  

The EU is providing support to Algeria through various trade-related assistance programmes 
such as DIVECO I, II (Programme d'appui à la diversification de l'économie), P3A I and II 
(Programme  d'appui  à  la  mise  en  oeuvre  de  l'Accord  d'Association),  or  PADICA 

81 

 
 
(Programme  d'appui  à  la  diversification  industrielle  et  à  l'amélioration  du  climat  des 
affaires),  implemented  in  partnership  with  the  Algerian  authority  for  trade  promotion 
(ALGEX).  Such  programmes  aim  to  strengthen  export  competitiveness,  to  modernise  the 
legal  framework,  to  diversify  the economy,  and  to  improve  the  business  climate  in  Algeria. 
The  EU  is  also  supporting  Algeria  in  preparation  of  negotiations  on  an  Agreement  on 
Conformity Assessment and Acceptance of industrial products (ACAA), in sectors identified 
as  key priorities  by Algerian authorities such as construction materials, domestic appliances 
and  low  voltage  electric  goods.  This  work  has  been  conducted  since  2013  through  TAIEX 
missions, resulting for instance in twinning programmes involving the Algerian authority for 
certification  and  accreditation  (ALGERAC).  Additional  programmes,  such  as  PASSEM 
(Programme  d'appui  spécifique  à  la  surveillance  et  à  l'encadrement  du  marché),  focus  on 
specific areas, such as market surveillance and consumer protection.  

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

Several market access issues remain in Algeria, primarily the non-automatic licensing regime 
for  imports,  imposed  on  an  increasing  number  of  products,  among  which:  automobile 
vehicles, steel rebar and iron rod (since 2016). In April 2017, the import licence scheme was 
extended  to  a  new  set  of  products,  bringing  the  total  to  22  sets  of  products:  besides  those 
already covered in 2016, the list now features wood, ceramic and several foodstuffs (notably 
fruit, certain meats and certain cereals). Other trade-related issues include: the ban on imports 
of medicines for which exists a locally-produced equivalent; technical standards; particularly 
stringent  mandatory  security  devices  for  vehicles,  coupled  with  obligatory  inspections.  The 
EU  has  engaged  in  an  active  political  and  technical  dialogue  with  Algerian  authorities  on 
these issues. 

Another  long-standing  issue  is  the  business  climate  in  Algeria,  and  the  reluctance  to  relax 
restrictions on foreign investment. Numerous obstacles to foreign investment remain and most 
notably the horizontal '49%/51%' cap that applies across the board to all sectors. The Algerian 
government  has  recently  shown  some  willingness  to  consider  changes,  notably  through  the 
repeal of the relevant provision from the new Investment Code, which was vocally advertised. 
While the rule remains enshrined in the Budget Law 2009 and 2012, this may render easier 
for  the  Algerian  government  to  amend  the  provision  in  the  future.  Such  a  blanket  foreign 
equity cap sends negative signals to potential investors and further delay Algeria's prospects 
of  accession  to  the  WTO.  The  EU  has  routinely  raised  the  issue  with  Algerian  authorities, 
suggesting a more limited scope of application of the rule.  

6. 

CONCLUSIONS 

There  has  been  a  positive  overall  trend  in  EU-Algeria  trade  since  entry  into  force  of  the 
Association  Agreement,  although  Algeria's  heavy  dependency  on  hydro-carbons  has  held 
back  any  significant  diversification  of  its  exports,  and  led  to  Algeria  registering  its  first 
negative trade balance with the EU in 2015 and 2016, at a time when oil prices reached an all-
time  low.  Efforts  by  the  Algerian  government  to  diversify  its  economy  should  therefore  be 
supported by the EU. At the same time, pressure should be stepped up on Algeria in order to 
dissuade the country from continuing with the implementation of trade restrictive measures, 
notably  on  the  non-automatic  licensing  scheme  discussed  above.  So  far,  no  additional 
negotiations have been opened between the EU and Algeria regarding potential agreements on 
liberalisation  of  trade  in  agricultural  and  fisheries  products,  on  liberalisation  of  trade  in 
services or on a Dispute Settlement Protocol. 

82 

 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-EGYPT FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The  EU  and  Egypt  established  a  free  trade  area  as  part  of  the  EU-Egypt  Association 
Agreement,  signed  in  2001.  The  Agreement  was  provisionally  applied  from  21  December 
2003  and  officially  entered  into  force  on  1  June  2004.  It  provides  for  a  reciprocal 
liberalisation of trade in goods, with elements of asymmetry in favour of Egypt: all industrial 
products covered by the Agreement could be exported by Egypt to the EU tariff-free from the 
day of entry into force of the Agreement, while Egypt benefitted from a transitional period of 
3 to 15 years to dismantle tariffs depending on products. To this day, tariffs applied to most 
industrial products have been dismantled by Egypt, with the exception of certain automotive 
imports,  for  which  the  transitional  period  runs  until  January  2019.  This  agreement,  which 
already included preferential arrangements on agricultural, processed and fisheries products, 
was complemented by an agreement on additional liberalisation in agricultural and fisheries 
products signed in October 2008, and entered into force on 1 June 2010. In November 2010, 
the EU and Egypt signed a protocol establishing a Dispute Settlement Mechanism, for which 
the ratification process is still pending. Negotiations were launched on liberalisation of trade 
in services but have not yet been completed.  

Egypt also signed the Regional Convention on pan-Euro-Mediterranean preferential rules of 
origin on 9 October 2013 and notified it on 1 June 2014. The Commission received from the 
Council  a  mandate  to  negotiate  a  DCFTA  with  Egypt  in  November  2011,  but  Egypt  has 
shown little interest so far.  

2. 

EVOLUTION OF TRADE 

2.1 

Trade in Goods 

25

n
b
€

20

15

10

5

0

EU Exports

EU Imports

EU imports of mineral fuels

EU imports of agricultural
products

EU imports of other products
(non-fuel industrial products,
textiles, etc.)

83 

 
 
 
 
EU exports increased 207.4% between 2002 and 2016, from EUR 6.7 billion in 2002 to EUR 
20.6  billion  in  2016.  In  2016,  the  EU  mainly  exported  machinery  and  transport  equipment 
(37.9%),  chemicals  (15.7%),  fuels  and  mining  products  (12.6%),  and  agricultural  products 
(12.0%) to Egypt. The three biggest EU exporters in Egypt were: Germany, Spain, and Italy  

EU imports increased by 103% between 2002 and 2016, from EUR 3 billion in 2002 to EUR 
6.7  billion  in  2016.  A  reduction  in  Egyptian  exports  from  2011  onwards  has  resulted  in  a 
widening trade  imbalance between the EU and Egypt. This decrease is largely imputable to 
the fall of oil prices (fuels accounted for more than one third of Egyptian exports to the EU). 
EU imports of agricultural products and in non-fuel industrial products remained stable since 
2011, increasing slightly during 2016 – most notably agricultural imports increased by 4.3%. 
There are encouraging trends in 2017, as Egypt's exports to the EU market surged by 26.1 % 
in the first quarter.  

Trade deficit with the EU remains limited compared with the one Egypt has accumulated with 
other  trading  partners  over  the  same  period.  In  2016,  EU  imports  were  made  of  fuel  and 
mining products (43.2%), chemicals (13.2%), and textiles and clothing (12.3%). In 2016, the 
EU  was  Egypt's  main  trading  partner,  accounting  for  34%  of  the  total  Egyptian  trade.  The 
three biggest importers of Egyptian products in the EU were: Italy, Germany and Spain. 

2.2 

Trade in Services and Investment 

After a period of instability from 2011 to 2014, the total trade in services between the EU and 
Egypt had fully recovered its pre-2011 level in 2015, amounting to EUR 10.0 billion (EUR 
10.2 billion in 2010). In 2016, however, Egypt witnessed a significant reduction in the export 
of services, due to the reduced inflow of tourists, aggravated by the crash of a Russian airliner 
in  November  2015  over  the  Sinai,  and  slightly  lower  revenues  of  the  Suez  Canal  due  to 
reduced global trade.  

The  EU  remains  the  biggest  investor  in  Egypt  but  EU  foreign  investment  in  Egypt  remains 
highly  volatile,  with  divestments  exceeding  investments  by  EUR  1.6  billion  in  2015,  for  a 
remaining  the  total  stock  of  EUR  41.5  billion  of  EU  investments  in  Egypt.  Overall,  Egypt 
underperforms  as  regards  its  business  climate,  only  ranking  122nd  out  of  190  in  the  World 
Bank ranking Doing Business 2017, up 4 ranks from 2016. 

2.3 

Preference Utilisation rate  

Egypt  had  an  average  utilisation  rate  of  preferences  of  96%  in  2016.  For  EU  exporters  to 
Egypt, the preference utilisation rate was 50.9% in 2013 (latest available year).  

Regarding  agricultural  TRQs,  Egypt's  2016  fill  rate  was  high  for  a  limited  number  of 
products  such  as  broken  rice  (100%)  and  sweet  oranges  (74%),  intermediate  for  other 
products such as garlic (57%) or strawberries (45%), but remained nil or close to zero for the 
majority  of  products,  such  as  cucumbers,  brown  rice,  cereal  preparations,  etc.  It  is  worth 
mentioning that, apart from 49 products under TRQ, other agricultural exports from Egypt to 
the EU enter duty-free on the European market. So far, Egypt has made little use of its TRQs 
and  has  requested  assistance  on  SPS  issues  to  fully  benefit  from  existing  provisions  of  the 
FTA. 

3. 

ISSUES ADDRESSED IN THE JOINT COMMITTEE MEETINGS 

84 

 
 
The last Sub-Committee on Industry, Trade, Services, and Investment was held in February 
2015.  Bilateral  issues  addressed  during  the  sub-committee  include:  the  ongoing  process  for  
Egypt's tariff dismantling on industrial products according to the timeline set forth by the EU-
Egypt Association Agreement – for which most deadlines have been met with some concerns 
as regards future completion of tariff dismantling for automotive products set for 2019 in light 
of  the  possible  future  adoption  of  an  Automotive  Development  Strategy  introducing  tax 
incentives  for  local  car  industry,  progress  made  on  the  preparation  of  the  Agreement  on 
Conformity Assessment and Acceptance of Industrial Products (ACAA - see 4), and various 
long-standing and new trade irritants (see 5). Multilateral issues were also mentioned, such as 
efforts  to  improve  regional  trade  integration  or  the  accession  of  Egypt  to  the  WTO  Trade 
Facilitation Agreement.  

During  the  last  Sub-Committee  on  Agricultural  and  Fisheries  products  (February  2016), 
several  issues  were  discussed,  among  then  SPS  issues,  the  creation  of  the  Egyptian  Food 
Safety  Authority,  and  EU  technical  assistance  aimed  at  improving  Egyptian  testing  and 
certification capacities and approximation of Egyptian standards with EU acquis.  

The  last  Sub-Committee  on  Customs  Cooperation  was  held  in  Cairo  in  March  2015.  Main 
issues  discussed  were  related  to  the  modernization  process  of  customs  administrations  and 
simplification  of  customs  legislation  and  procedures,  including  computerization.  Other 
important  issues  were  related  to  the  origin  of  goods,  the  PEM  Convention,  as  well  as  risk 
based customs control. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

Since  2015,  the  Egyptian  economic  slowdown  and  currency  crisis  have  had  serious 
consequences on trade. Facing growing trade deficits and a shortage of foreign exchange, the 
Egyptian  government  implemented  a  series  of  administrative  measures  aimed  at  restricting 
imports  in  2015  and  2016  (see  5).  In  November  2016  Egyptian  authorities  liberalized  the 
exchange rate and adopted an economic reform programme supported by the IMF. Demand 
for  imports  remains  unchanged,  and  the  import  bill  has  significantly  increased  due  to  the 
depreciation of the Egyptian Pound, while it was not compensated by equivalent increase of 
exports  Exported  manufactured  goods  have  a  high  import  component,  and  petroleum 
products,  which  make  up  around  30%  of  Egyptian  exports,  are  factored  in  US  dollars, 
therefore  not  benefitting  from  lower  exchange  rates.  Indirectly,  devaluation  of  the  local 
currency contributed to increasing food subsidies and decreasing energy subsidies at the same 
time. Services receipts are limited. Tourism, while steadily recovering, remains far lower than 
mid-2015  levels.  Despite  expansion  of  Suez  Canal,  the  revenue,  dependent  on  global  trade 
flows, is stagnant. Social and economic costs of the consolidation (inflation, borrowing costs) 
risk  slowing  down  the  reform  momentum.  Price  pressures  are  exacerbated  by  high 
unemployment rates (13% overall).  

In  the  context  of  the  revised  European  Neighbourhood  Policy,  EU-Egypt  Partnership 
Priorities were adopted in July 2017 and will guide future bilateral cooperation, including on 
trade  matters.  Trade-related  assistance  in  Egypt  has  been  conducted  mainly  under  the  20 
million  euro  Trade  and  Domestic  Market  Enhancement  Programme  (TDMEP),  structured 
around  two  components  i)  foreign  trade  and  trade  agreements  and  ii)  industrial  policy  and 
quality infrastructure. The programme delivered significant results, such as the creation of a 
policy unit within the trade ministry and the adoption of a trade and industrial development 
strategies. The TDMEP has also assisted Egypt  on the establishment of a proper regulatory 

85 

 
 
environment  on  ACAA  including  National  Quality  Policy,  market  surveillance  strategy, 
horizontal  and  sector  legislation,  and  supporting  the  alignment  of  quality  infrastructure 
bodies. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

EU-Egypt  trade  is  currently  being  affected  by  a  two  main  TBTs:  a  registration  scheme  and 
pre-shipment  inspections  imposed  on  entities  importing  certain  goods  to  Egypt.  These 
measures  apply  to  25  categories  of  manufactured  goods  since  the  beginning  of  2016.  The 
measures  have  been  discussed  in  WTO  TBT  Committee  several  times,  and  Commissioner 
Malmström has written to the Egyptian Minister of Trade raising concerns. The Commission 
also  raised  this  issue  at  a  Technical  Meeting  in  February  2017,  insisting  on  more 
transparency, rapidity, and streamlining of the administrative processes, in order to facilitate 
registration from a practical point of view. 

Other  ongoing  trade  irritants  are  arbitrary  customs  valuations  by  the  Egyptian  authorities, 
labelling 
problems  with  acceptance  of  origin  declarations  by 
requirements,  mainly  affecting  the  textile  and  ceramic  tiles  sectors  and  SPS  issues,  mainly 
affecting  wheat  importers.  The  EU  is  also  closely  following  the  drafting  of  a  future  tax 
incentives scheme targeting the automobile sector. The draft text of the legislation has yet to 
be disclosed by the Egyptian government, but several aspects of the future scheme may be at 
odds with Egypt's commitments under the WTO and the Association Agreement, notably in 
terms of discrimination against imports and trade-related investment measures.  

importers,  restrictive 

Egypt  yet  has  to  ratify  the  protocol  establishing  a  Dispute  Settlement  Mechanism  signed  in 
November 2010.  

6. 

CONCLUSIONS 

Two-way  trade  has  grown  significantly  since  the  entry  into  force  of  the  FTA,  although  a 
mixture of political and economic factors have impeded Egyptian exporters from taking full 
benefit from the opportunities it created. The EU is therefore engaged in several trade-related 
assistance projects with Egypt in order to create the conditions in which the FTA can deliver. 
Implementation  issues  are  now  mainly  focused  on  the  abovementioned  trade  irritants,  for 
which the EU and Egypt are engaged in an active dialogue, both at the political and technical 
level.  Facilitating  trade  has  been  made  one  of  the  priorities  under  the  Partnership  Priorities 
adopted by the EU and Egypt in 2017 which should cover issues such as reduction of trade 
barriers  as  well  as  technical  assistance  on  SPS  and  ACAA-related  fields.  Negotiating  a 
DCFTA remains a medium-long term objective to be followed when Egypt is ready for it. 

86 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-ISRAEL FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The EU and Israel have an Association Agreement, creating a Free Trade Area, provisionally 
applied since 1996 and fully entered into force on 1 June 2000 The Association Agreement 
liberalised  two-way  trade  in  industrial  goods.  The  liberalisation  process  was  asymmetrical 
with the EU eliminating tariffs from the first day of the agreement, while Israel enjoyed a 12 
year  transition  period  which  was  completed  in  2013.  The  Association  Agreement  included 
selected arrangements on agri-food trade. The EU and Israel however subsequently upgraded 
the Free Trade Area with further liberalisation of agricultural, processed agricultural and fish 
products,  in  force  since  2010.  Israel  has  expressed  some  limited  interest  in  using  the 
Agreement's review clause which has not yet been activated.  

The EU and  Israel  have an Agreement  on Conformity Assessment and Agreement (ACAA) 
on pharmaceuticals, in force since January 2013, which facilitates trade on both sides. 

Israel is a member of the Regional Convention on Pan-Euro-Mediterranean preferential rules 
of origin (PEM Convention) which it signed in 2013 and notified the EU of its ratification and 
entry into force in 2014.  

2. 

EVOLUTION OF TRADE 

2.1 

Trade in Goods 

n
b
€

25

20

15

10

5

0

EU Exports

EU Imports

EU imports of agricultural
products

EU imports of other products
(non-fuel industrial products,
textiles, fisheries etc.)

Since the Association Agreement came into force, the value of imports and exports between 
the  EU  and  Israel  has  increased  in  both  directions.  In  2002,  the  first  year  in  which  data  is 
available,  the  value  of  trade  in  goods  was  EUR  23.1  billion  and  by  2016  it  was  EUR  34.3 
billion representing an increase of 48%.  

The value of EU exports to Israel has risen by 52% from EUR 13.9 billion in 2002  to EUR 
21.4 billion in 2016. With the exception of 2009 (financial crash), EU exports to Israel have 
demonstrated fairly consistent growth, reaching an all-time high of EUR 21.4 billion in 2016. 
In  2016,  the  most  important  groups  for  export  by  value  were  machinery  and  transport 

87 

 
 
 
 
equipment (45.4%), chemicals (16.2%), and other semi manufactured products (12.3%). The 
four largest exporters to Israel from the EU28 were Germany, the United Kingdom, Belgium 
and Italy. 

The  value  of  EU  imports  from  Israel  has  risen  from  EUR  9.1  billion  in  2002  to  EUR  13.2 
billion in 2016, representing a 45% rise. Imports from Israel have been steady with an overall 
upward trend, the only year in which imports fell heavily was 2009 (financial crash). In 2016 
the  most  important  groups  for  import  by  value  were  chemicals  (39.2%),  manufacturing  and 
transport products (21.3%), other semi-manufactured goods (12.7%) and other manufactured 
goods (10%). In 2016, the four largest importers from Israel within the EU28 were the United 
Kingdom, Belgium, Netherlands and Germany. 

It should be noted that the value of EU exports to Israel has increased more than in the other 
direction.  The  EU's  annual  trade  surplus  with  Israel  has  therefore  increased  over  the  same 
period. The annual trade balance in the EU's favour was EUR 4.8 billion in 2002 compared to 
EUR 7.9 billion in 2016. 

In 2016, the EU was Israel's first trading partner, representing 32% of Israeli trade. Israel is 
the EU’s 25th largest trading partner and the 3nd largest one in the Euro-Mediterranean region 
after Algeria and Morocco. The EU was the largest importer into Israel holding a 37% market 
share,  ahead  of  China  and  the  US  both  on  11%.  The  EU  was  Israel's  second  largest  export 
market in 2016 receiving 26% of Israeli exports, slightly behind the USA on 29%.  

2.2 

Trade in Services and Investment 

In 2015 trade in services between the EU and Israel was worth EUR 12 billion. In the last 5 
years,  there  has  been  an  overall  increase in  the value  of  services  imported  from  Israel  from 
EUR  3.2  billion  in  2010  to  EUR  4.7  billion  in  2015.  In  the  same  period  there  has  been  an 
increase in EU export of service to Israel from EUR 3.8 billion in 2010 to EUR 7.3 billion in 
2015. 

On  FDI  flows  there  is  no  consistent  image  either  on  volume  or  on  partner  country.  Figures 
show fluctuations every year and no trend can be identified. Despite the lack of consistency, it 
can be seen that FDI flows between the US and Israel clearly exceed those between the EU 
and  Israel.  However,  FDI  in  both  stocks  and  flows  both  in  and  out  of  Israel  have  grown 
continuously  since  2001.The  EU  accounts  for  a  substantial  40%  of  all  outgoing  Israeli 
investments, followed by the US with 20%. For incoming investments into Israel, the share of 
the EU is 20% which is similar to that of the US.55  

According to The World Bank Doing Business Index 2017 which ranks 190 countries, Israel, 
an OECD member, was ranked 52nd in the world – down three places on the previous year.  

2.3 

Preference Utilisation rate  

In  2016  Israel's  use  of  the  preferential  utilisation  rates  was 90%.  In  the  same  year  the  EU's 
preferential utilisation rate was 79.4%.  

Israel has made good use of its TRQ access. In 2015 Israel used 100% of its tariff rate quota 
on  new  potatoes,  sweet  peppers,  and  wine  of  fresh  grapes.  They  used  100%  of  the  original 
quota on fresh clementines, mandarins and wilkings and 32.75% of the supplementary quota. 

55 Both Eurostat and IMF data was used for investment figures. 

88 

 
 
                                                 
Israel  also  used  a  significant  level  of  the  tariff  rate  quota  on  tomatoes  other  than  cherry 
(68.41%) and glues based on starch or on dextrines or other modified starches (88.86%).   

ISSUES ADDRESSED IN THE ANNUAL (JOINT COMMITTEE/TRADE 

3. 
COMMITTEE) MEETING 

The most recent EU-Israeli Sub-committee on Industry, Trade and Services met in December 
2016. A range of bilateral issues were discussed including the state of EU-Israeli trade under 
the  Association  Agreement  and  the  experience  of  the  ACAA  on  Pharmaceuticals  already 
concluded.  Regarding  trade  barriers,  the  recent  resolution  of  a  previous  distinction  between 
"new" and "old" Member States (pre and post-2004) for import of pharmaceuticals into Israel 
was  noted  with  satisfaction  and  the  need  to  resolve  a  similar  distinction  still  existent  for 
medical devices was stressed by the EU. A number IPR issues were also raised, including on 
the  protection  of  biological  medicines.  Both  parties  provided  an  update  on  their  ongoing 
bilateral  and  multilateral  trade  negotiations  –  positive  collaboration  on  TiSA  was  also 
recorded.  

The EU-Israeli Sub-Committee on Agriculture and Fisheries also met in December 2016. A 
range of issues were discussed including the current trade in agricultural products between the 
two  partners  and  related  issues,  such  as  sanitary  and  phytosanitary  regulations  in  both 
directions. On agricultural issues, Israel provided an update on changes to agricultural policy 
and the EU stressed the importance of GIs. Organic issues were also discussed including the 
ongoing  process  of  reviewing  the  regulation  on  organic  farming.  Israel  sought  reassurance 
that  there  would  be  no  gaps  between  the  EU's  new  regulation  on  organic  farming  and  the 
current bilateral relationship – the EU reassured Israel that the five year transition period from 
2020 would allow for any necessary adjustments. Israel also expressed its request to extend 
the  current  arrangement  to  aquaculture  products  to  which  the  EU  clarified  that  any 
modification  of  current  arrangements  would  have  to  be  done  through  a  bilateral  agreement. 
On fisheries, there was discussion on sustainable Mediterranean fisheries and the EU provided 
an  update  on  its  Maritime  Spatial  Planning.  Israel  signalled  its  intention  to  request  EU 
technical  support  in  several  areas,  such  as  the  sustainable  use  of  pesticides  and  flood  risk 
prevention,  while  Israel  also  offered  technical  support  to  the  EU  on  tackling  lumpy  skin 
disease.  

The  latest  EU-Israel  Customs  Cooperation  and  Taxation  Subcommittee  took  place  in  June 
2016. Parties informed each other of the development of their customs legislation and on the 
enforcement by customs of IPR. There was also an exchange of views on the VAT treatment 
of digital services. The PEM Convention on Rules of Origin was also discussed.  

4. 

SPECIFIC AREAS OF IMPORTANCE 

The EU and Israel continue to work together on the implementation of the ACAA. Following 
this success, Israel will  consider additional areas  on which  to  focus. To this  end,  the Israeli 
authorities have made an increasing number of requests for technical assistance from the EU 
in  the  form  of  TAIEX  workshops  and  Twining  programmes  –  the  only  type  of  capacity 
building assistance the EU provides to Israel being a developed country. In a wide range of 
areas  (including  environment,  energy,  statistics  and  agriculture)  EU  regulatory  practice 
(norms, standards and procedures) is shared with the Israeli authorities to help specific policy 
formulation and implementation. For trade, it is particularly important to continue to provide 
support for ongoing market reforms, in particular those that relate to the opening of the Israeli 

89 

 
 
domestic  market  –  such  as  in  the  areas  of  agricultural  policy,  accreditation,  import 
authorization procedures, conformity assessments and standard setting etc. – as this could also 
improve market access conditions for EU operators. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

No  significant  roll  back  of  commitments  on  the  Association  Agreement  has  been  recorded; 
however  there  are  a  number  of  persistent  trade  irritants.  These  include  the  discriminatory 
treatment of Member States who joined since 2004 which particular reference to restrictions 
on import authorization of medical devices. Other technical barriers to trade include the lack 
of data protection (IPR) on biological medicines, and the rigid regime of kosher certification 
of  slaughtered  meat.  A  number  of  technical  meetings  are  to  take  place  to  look  into  these 
issues. Discussions between the EU and Israel on a Dispute Settlement Agreement under the 
Association Agreement are still to be finalised. 

The  EU  is  trying  to  support  the  ongoing  and  challenging  market  reforms  needed  through 
sharing  its  best  practices  on  issues  such  as  import  procedures,  conformity  assessments, 
agricultural  support  policy,  etc.  In  a  general  way  the  EU's  technical  assistance  programmes 
help  policy  formulation  in  Israel.  TAIEX  workshops  and  Twinings  assistance  projects  are 
increasingly  demanded  by  the  authorities  in  wide  ranging  areas  such  as  energy  efficiency, 
telecommunication, vocational training, and veterinary standards. 

6. 

CONCLUSIONS 

Overall  the  value  of  trade  between  the  EU  and  Israel  has  increased  during  the  period  of 
implementation of the Association Agreement. This is true in both directions. Goods continue 
to account for the majority of trade, although services and foreign investment are also present. 
Trade fell in both directions in 2009 due to the financial crisis. It should be noted, however, 
that it has recovered and exceeded pre-crash levels in both directions, and has remained strong 
despite wider regional instability. There  have  been  some  recent successes  in resolving trade 
irritants  (e.g.  for  pharmaceuticals),  which  is  a  path  that  we  aim  to  continue  on  to  further 
strengthen  our  trade  relations.  The  EU  and  Israel  continue  to  cooperate  in  bilateral  and 
multilateral trade talks.  

90 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-JORDAN FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The EU and Jordan have an Association Agreement, creating a Free Trade Area, which was 
signed  on  24  November  1997  and  entered  into  force  on  1  May  2002.  The  Association 
Agreement liberalized two-way trade in goods, with asymmetrical transition periods in favour 
of Jordan which allowed Jordan to phase in tariff reductions over a 12 year period, although 
tariff  dismantling  has  already  been  completed  by  Jordan.  The  EU  and  Jordan  upgraded  the 
Association  Agreement  in  2006  with  an  agreement  on  trade  in  agricultural  and  processed 
agricultural  products.  Today  all  Jordanian  agricultural  products  can  enter  the  EU  duty  free 
with  the  exception  of  virgin  olive  oil  and  cut  flowers  which  are  under  Tariff  Rate  Quotas 
(TRQs), while agricultural liberalisation on the Jordanian side is substantial but not complete. 
This  was  followed  by  a  protocol  establishing  a  bilateral  Dispute  Settlement  Mechanism  in 
2011.  

Jordan is a member of the Regional Convention on pan-Euro-Mediterranean preferential rules 
of origin (PEM Convention) which it signed in 2011 and notified the EU of its ratification in 
2013.  

In  2011  the  EU  Council  adopted  negotiating  directives  to  further  enhance  the  trade 
relationship through a Deep and Comprehensive Free Trade Area (DCFTA) with Jordan, but 
negotiations have not yet started. 

2. 

EVOLUTION OF TRADE  

2.1 

Trade in Goods 

n
b
€

4,5

4

3,5

3

2,5

2

1,5

1

0,5

0

EU Exports

EU Imports

EU imports of
agricultural products

The  value  of  trade  between  the  EU  and  Jordan  has  increased  in  both  directions  since  the 
Association Agreement came into force. Since 2002, the first year for which data is available 
and also the year the Agreement came into force, there has been an overall growth in trade in 
goods in both directions. In 2002 the value of trade in goods was EUR 2.4 billion and in 2016 
it was EUR 4.4 billion - a growth of 83%.  

91 

 
 
 
 
The value of EU exports to Jordan has risen by 95% from EUR 2.1 billion in 2002 to EUR 4.1 
billion  in  2016.  Exports  to  Jordan  have  risen  year-on-year  with  the  exception  of  2009 
(financial crisis) and 2014; which may be a reflection of regional instability. In 2016 the value 
of  exports  reached  an  all-time-high  of  EUR  4.1  billion.  The  most  important  exports  sectors 
were  agricultural  machinery  and  transport  equipment  (32%),  agricultural  products  (21.6%) 
and  chemicals  (15.3%).  In  2016  the  three  largest  exporters  to  Jordan  from  the  EU28  were 
Germany, Italy and France.  

The value of EU imports from Jordan has risen from EUR 314 million in 2002 to EUR 338 
million in 2016 – an increase of EUR 24 million or 8%. Within the lifespan of the agreement 
however the value of imports has fluctuated. In 2015 imports reached an all-time high of EUR 
386  million,  but  have  since  declined.  In  2016  the  most  important  import  sectors,  were 
chemicals (31%), machinery and transport equipment (20.8%), agricultural products (11.9%), 
fuels and mining products (11.7%) and clothing (10.2%). In 2016 the three largest importers 
of products from Jordan among the EU 28 were Italy, Netherlands and the United Kingdom.   

The  value  of  EU  exports  to  Jordan has  increased  more  than  in  the  other  direction. This  has 
increased Jordan's trade deficit with the EU over the same period. This is broadly consistent 
with Jordan's overall trade pattern. As the largest supplier to Jordan, the EU is also the trading 
partner  with  which  it  has  its  largest  trade  deficit  –  EUR  3.6  billion  (35%)  of  its  EUR  10.3 
billion total deficit. In 2016 the EU was Jordan's largest trade partner, representing 19% of its 
total  trade.  The  EU  was  the  largest  importer  into  Jordan  with  a  24%  market  share.  It  was 
however  only  Jordan's  8th  largest  export  market  behind  the  US,  India  and  regional  players 
including Saudi Arabia, Iraq and the UAE.  

2.2 

Trade in Services and Investment 

In 2015 trade in services between the EU and Jordan was worth EUR 1.2 billion. In the last 5 
years, there has  been an overall decline in the value of services imported from Jordan from 
EUR  0.6  billion  in  2010  to  EUR  0.5  billion  in  2016;  no  doubt  explained  by  the  protracted 
instability  in  the  region.  In  the  same  period  there  has  been  an  increase  in  EU  export  of 
services to Jordan from EUR 0.6billion in 2010 to EUR 0.9 billion in 2015. Jordan's exports 
of services are dominated by services in the travel sector, while Jordan's imports of services 
are dominated by the transport sector. 

In 2015, the flow of Foreign Direct Investment (FDI) between the EU and Jordan amounted to 
EUR 145 million, of which EUR 167 million was the flow into Jordan and EUR 22 million 
was  a  disinvestment  from  the  EU.  The  total  FDI  stocks  were  EUR  3.06  billion  (EUR  2.6 
billion EU FDI in Jordan and EUR 454 million Jordanian FDI in the EU). According to the 
World  Bank  2017  ease  of  doing  business  index  which  ranks  190  countries,  Jordan  ranked 
118th in the World for overall ease of doing business – up one place on last year.  

2.3 

Preference Utilisation rate  

In  2016  Jordan's  use  of  the  preferential  utilisation  rates  was  68%.  Data  on  the  EU's  use  of 
preferential utilisation rates in not available for Jordan. 

Regarding agricultural TRQs,  Jordan's 2016 fill rate of the two TRQs was minimal. It used 
0.02% of the virgin olive oil tariff rate quota and 0% of its cut flower bud quota. 

92 

 
 
3. ISSUES ADDRESSED IN THE ANNUAL (JOINT COMMITTEE/TRADE 
COMMITTEE) MEETING 

The  most  recent  EU-Jordan  Sub-Committee  on  Industry,  Trade  and  Services  met  in  2015, 
ahead  of  the  recent  relaxation  of  Rules  of  Origin  (see  below).  Much  of  the  sub-committee 
discussion  focused  on  the  Syrian  refugee  crisis  and  the  Jordanian  preference  to  revise  the 
Rules of Origins applicable under the EU-Jordan Association Agreement. Progress to improve 
Jordan's  investment  climate  was  also  noted.  On-going  trade  related  assistance  and  capacity 
building was also discussed.  

The  Agriculture  and  Fisheries  Sub-Committee  last  met  in  October  2015  in  Brussels  and 
discussed:  a  possible  expansion  of  Jordan's  protection  of  geographical  indications,  possibly 
under  the  DCFTA;  organic  farming  on  which  Jordan  provided  an  update  on  legislative 
amendments; and further technical assistance and capacity building for Jordan in agriculture 
field. Jordan is heavily dependent on imports; discussions covered fish farming, an update on 
trade  fish  flows  and  the  importance  of  tackling  illegal  fishing.  Further  co-operation  on  SPS 
issues  was  discussed.  Jordan  also  outlined  the  impact  of  the  Syrian  Refugee  Crisis  on  the 
agricultural sector.  

The  latest  EU-Jordan  Customs  co-operation  sub-committee  met  in  June  2015.  Issues 
discussed  included  the  simplification,  rationalization  and  harmonisation  of  customs 
legislation,  code  and  procedures.  Other  points  of  discussion  were  Jordan's  strategic  plan  on 
Jordanian  customs  to  improve  their  efficiency.  The  action  plan  to  improve  the  safety  and 
security of imported goods was also discussed and the PEM Convention on Rules of Origin.  

4. 

SPECIFIC AREAS OF IMPORTANCE 

The protracted Syrian crisis has had serious consequences for the Jordanian economy and its 
trade. The closure of traditional trade routes has resulted in significant losses and downscaling 
of production for the export market. The presence of more than 1.3 million Syrians refugees 
in Jordan has compounded the unemployment crisis. In the absence of meaningful reform to 
the  regulatory  environment,  attracting  foreign  investments  to  offset  the  negative  trend  has 
proven difficult. In order to address the problems caused by the Syrian Refugee Crisis, the EU 
is providing Jordan with a package of support of which the trade angle is a simplification of 
the rules of origin applicable to trade between the two partners. This initiative was agreed in 
July 2016 and will apply until the end of 2026.  Under the initiative, Jordanian exporters to 
the  EU  can  now  benefit  from  the  same  rules  of  origin  for  manufactured  products  as  those 
applied  by the  EU  for  Least  Developed  Countries,  provided  that  certain  conditions are  met. 
These  rules  are  simpler  than  those  that  would  otherwise  apply  under  the  Association 
Agreement.  This  simplification  applies  to  52  product  groups.  To  qualify  to  use  the  simpler 
rules, production must take place in one of 18 designated industrial zones and Syrian refugees 
must also account for no less than 15% of a manufacturer's workforce in the first 2 years of 
the scheme and 25% from the third year.  

A renewed effort of regulatory coherence forms part of the Partnership Priorities adopted in 
December 2016, which also cover actions to enhance Jordan's social and economic resilience. 
The EU seeks to work with Jordan to promote a stronger, more competitive economy whereby 
an enhanced trade and investment climate will encourage and enable Jordanian enterprises to 
take better advantage of preferential access to the EU market and act as a powerful incentive 
for  job  creation.  In  the  same  context,  cooperation  will  intensify  on  skills  development  and 

93 

 
 
related  educational  reform,  to  promote  the  productive  contribution  of  young  people  in  the 
economy.  

Jordan  is  working  on  approximation  with  the  EU  acquis.  The  Jordan  Food  and  Drug 
Administration  was  active  in  early  2017  on  undertaking  steps  for  alignment  to  technical 
regulations and SPS standards. Two missions were conducted and a further one is planned to 
determine  the  needs  and  potential  assistance  required  to  approximate  Jordan  to  the  relevant 
EU  acquis.  Trade-related  assistance  projects  to  improve  the  trade  and  investment  climate 
include  a  EUR  55  million  Private  Sector  Development  programme  comprising  a  budget 
support component, technical assistance to the Government and company-level assistance for 
the private sector. There is a further project to support entrepreneurship in the north of Jordan, 
the region most strongly affected by the influx of refugees. It aims to stimulate innovation and 
increasing the competitiveness of Jordanian exports and to deliver on the aims of the Rules of 
Origin initiative. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

There  are  no  significant  open  issues  or  follow-up  actions  relating  directly  to  the  current 
agreement.  There  is  however  a  continuing  difference  of  view  concerning  Jordan's 
commitments  on  the  import  conditions  for  alcoholic  drinks,  arising  from  the  interaction 
between  the  initial  Association  Agreement  and  the  subsequent  Agreement  on  additional 
liberalisation of trade in agricultural, processed agricultural and fisheries products.  There are 
a number of other ongoing issues which restrict trade and investment  in Jordan and prevent 
Jordan  from  taking  full  advantage  of  the  FTA.  These  include  a  lack  of  clear  trade  and 
development  policies  in  Jordan,  administrative  weaknesses  and  a  lack  of  commitment  from 
the private sector which still prefers to satisfy neighbouring markets rather than to invest in 
reaching  the  EU  (which  remains  a  highly  regulated  and  demanding  market).  In  addition, 
production  costs  are  high  due  to  water  shortages,  electricity  prices  and  transportation  costs, 
which  reduce  the competitiveness  of  goods.    The  EU  is  an open  and  extremely  competitive 
market for Jordanian companies.  

DCFTA  negotiations  have  not  yet  started,  however  the  importance  of  the  DCFTA  to 
improving  the  resilience  of  the  Jordanian  economy  was  recognised  in  the  Partnership 
Priorities.  In  the  last  Sub-Committee  on  Industry,  Trade  and  Services, Jordan  indicated  that 
they preferred to deal with further liberalization of agriculture, processed agriculture, fisheries 
and processed fisheries products under the DCFTA.  

6. 

CONCLUSIONS 

Overall  the  value  of  trade  between  the  EU  and  Jordan  has  increased  since  the  Association 
Agreement came into force. This is true in both directions. Goods continue to account for the 
majority  of  trade,  although  services  and  foreign  investment  are  also  present.  EU  exports  to 
Jordan have grown faster than Jordanian exports to the EU so the Jordanian trade deficit with 
the EU has increased in the same period, no doubt exacerbated by regional developments. The 
Syria Crisis has closed many traditional trade routes for Jordan. The Decision on relaxation of 
Rules of Origin, adopted in July 2016, was designed to boost Jordanian exports into the EU 
and  to  support  integration  of  Syrian  Refugees  into  the  Jordanian  economy.  It  has  not  yet 
delivered as hoped, however further actions are planned to raise awareness and promote the 
business opportunities it affords. 

94 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-LEBANON FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The EU and Lebanon have an Association Agreement, creating a Free Trade Area, which was 
provisionally  applied  on  1  March  2003  and  fully  entered  into  force  on  1  April  2006.  The 
Association  Agreement  liberalised  two-way  trade  in  industrial  goods  with  an  asymmetrical 
transition  period  of  12  years  in  favour  of  Lebanon.  The  phased  liberalisation  of  industrial 
products  by  Lebanon  started  in  2008  and  was  completed  in  2015.    From  the  first  day  of 
provisional  application,  it  also  granted  tariff-free  access  to  the  EU  for  most  Lebanese 
agricultural and processed agricultural products (89% enter tariff and quota free) with only 27 
agricultural products facing a specific tariff treatment, mostly Tariff Rate Quotas (TRQs). On 
the other hand, agricultural liberalisation by Lebanon has been more limited. In 2010 the EU 
and  Lebanon  signed  an  additional  protocol  on  a  Dispute  Settlement  Mechanism,  which  has 
not yet entered into force, pending the ratification by the Lebanese Parliament. 

Lebanon has signed the Regional Convention on Pan-Euro-Mediterranean preferential rules of 
origin (PEM Convention) in 2014, but the ratification procedure is still ongoing.  

2. 

EVOLUTION OF TRADE  

2.1 

Trade in Goods 

n
b
€

8

7

6

5

4

3

2

1

0

EU Exports

EU Imports

EU imports of
agricultural products

Since the Association Agreement was provisionally applied, the value of imports and exports 
between  the  EU  and  Lebanon  has  increased  in  both  directions.  In  2002,  the  year  before  the 
Association  Agreement  was  provisionally  applied,  the  value  of  trade  in  goods  was  EUR 
3.4billion and by 2016 it was EUR 7.1 billion representing an increase of 109%.  

The value of EU exports to Lebanon has risen by 109% from EUR 3.2 billion in 2002 to EUR 
6.7 billion in 2016. Exports to Lebanon reached an all-time high of EUR 6.7 billion in 2012. 
Since  then  they  have  held  steady  with  slight  year-on-year  fluctuations.  The  most  important 
groups for export by value were fuel and mining products (25.8%), machinery and transport 

95 

 
 
 
 
equipment (21.3%), agricultural products (16.0%), and chemicals (14.8%). The three largest 
exporters to Lebanon from the EU28 were Italy, Germany and Greece.  

The value of EU imports from Lebanon has risen from EUR 0.2 billion in 2002 to EUR 0.4 
billion in 2016, representing a 100% rise. The value of imports rose year-on-year up to 2009 
(financial crisis), then recovered to exceed pre-crash levels before falling again from 2012 to 
2014, in part explained by the simultaneous decrease in the price of gold. Imports have again 
improved  in  2015  and  2016.  In  2016  the  most  important  groups  for  import  by  value  were 
agricultural  products  (24.5%),  fuels  and  mining  products  (22.7%),  semi-manufactured 
products (16.6%) and chemicals (11.2%). In 2016, the three largest importers from Lebanon 
within the EU28 were Germany, France and the United Kingdom. 

It  should  be  noted  that  the  value  of  EU  exports  to  Lebanon  has  increased  more  than  in  the 
other direction. This has roughly doubled Lebanon's annual trade deficit with the EU over the 
same  period.  The  annual  trade  balance  in  the  EU's  favour  was  EUR  3.0  billion  in  2002 
compared to EUR 6.2 billion in 2016. 

Since 2012 the EU has ranked as Lebanon's first trading partner. In 2016 the EU represented 
42%  of  Lebanese  trade.  The  EU  has  become  a  less  important  export  destination  in  relative 
terms  with  its  share  of  Lebanese  exports  falling  in  the  last  couple  of  years.  The  increasing 
importance of regional export markets such as Saudi Arabia or the UAE highlights the need 
for removing regional barriers and encouraging regional trade. 

2.2 

Trade in Services and Investment 

In 2015 trade in services between the EU and Lebanon was worth EUR 2.4 billion. In the last 
5 years, there has been an overall increase in trade in service in both directions. The import of 
services from Lebanon has risen from EUR 0.9 billion in 2010 to EUR 1 billion in 2015. The 
export of services has risen from EUR 1.2 billion to EUR 1.5 billion in the same period. The 
annual trade balance on services in the EU's favour has increased from EUR 2 billion to EUR 
2.5 billion.  

According  to  the  Ministry  of  Economy  and  Trade,  in  2016  the  services  sector  represented 
around 69% of Lebanese GDP and employed more than 76% of the total labour force.  The 
most prominent service sectors included trade (retailing and wholesale), construction, tourism, 
telecommunications  and  financial  services. According  to  The  World  Bank  Doing  Business 
Index  2017  which  ranks  190  countries,  Lebanon  ranked  126nd  in  the  world  on  the  ease  of 
doing business – down four places on last year. 

2.3 

Preference Utilisation rate  

In 2016 Lebanon's preference utilisation rate was 71%. In the same year the EU's preferential 
utilisation rate was 74%. 

Regarding agricultural TRQs, Lebanon's 2016 fill rate was low. It used 41.96% of the virgin 
olive  oil  and  crude  oil  quota  and  6.22%  of  its  table  grape  quota,  but  across  the  remaining 
quotas Lebanon used less than 1% or 0%.  

ISSUES ADDRESSED IN THE ANNUAL (JOINT COMMITTEE/TRADE 

3. 
COMMITTEE) MEETING 

The EU-Lebanon Sub-Committee on Industry, Trade and Services met in October 2016. The 
key issues discussed were the need to further increase Lebanese trade integration with the EU 

96 

 
 
and international community including through Lebanon's agreement to the PEM convention, 
Agadir  Agreement,  and  WTO  membership  bid  –  which  the  EU  supports.  The  EU  and 
Lebanon  created  a  Joint  Working  Group  on  Trade  and  Investment  to  further  facilitate  trade 
and  reduce  existing  non-tariff  barriers  for  goods  (including  industrial  and  agri-food)  and 
services.  Ways  to  improve  the  competitiveness  of  the  services  sector  will  also  be  explored. 
The EU also noted the obligation not to impose trade related measures without consultation. 
The first Joint Working Group on Trade and Investment met in March 2017. 

The  EU  and  Lebanon  Sub-Committee  on  Agriculture  and  Fisheries  last  met  in  November 
2012  and  discussed  preparations  for  the  new  European  Neighbourhood  Policy  Action  Plan, 
including  the  agricultural  angle.  Lebanon  provided  the  EU  with  an  update  on  its  work  to 
promote  quality  production,  food  safety  and  to  introduce  geographical  indicators.  It  also 
provided  an  update  on  its  SPS  work.  The  EU  welcomed  Lebanon's  progress  and  offered 
further technical support. Agricultural trade levels and trade issues were also discussed.  

The  latest  EU-Lebanon  Customs  Cooperation  and  Taxation  Subcommittee  was  held  in 
December  2014.  The  main  issues  discussed  were  the  latest  developments  in  customs 
legislation and procedures, including IPR, rule of origin and risk based customs control. On 
taxation,  the  main  issues  were  related  to  modernisation  and  simplification  of  the  tax 
administration as well as the Code of Conduct for business administration. Lebanon presented 
some areas of customs where it could benefit from technical assistance. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

The  protracted  Syrian  crisis  has  had  serious  consequences  for  Lebanon.  The  conflict  has 
exacerbated the security, political and economic issues facing the country. It has resulted in a 
decline  in  tourism,  (private)  investments  and  economic  activities.  This  has  culminated  in 
economic growth falling sharply from the 7%-9% growth rates experienced between 2008 and 
2010  to  1.5%  and  less  in  the  last  years;  the  lowest  growth  performance  since  the  2006 
conflict.  The  unstable  political  environment  (even  though  some  good  news  came  with  the 
election  of  a  President  on  October  2016,  following  a  29-month  deadlock)  and  budgetary 
constraints  (exacerbated  by  the  high  debt  levels,  currently  at  144%  of  GDP)  have  made  it 
difficult  for  the  country  to  address  issues  such  as  poverty,  unemployment  and  'brain  drain'. 
Furthermore,  Lebanon  is  characterised  by  regional  socio-economic  disparities  with  almost 
30% of the population living under the poverty line and 8% under the extreme poverty line. 
The numbers of Syrian refugees has significantly increased in the period 2013-2014. Refugees 
currently constitute about one third of the population and, while spread throughout the whole 
country,  the  highest  concentrations  are  recorded  in  Northern  Lebanon  and  in  the  Beqaa. 
Lebanon is seeking further support from the EU in order to boost the Lebanese economy and 
cope with the spill-over effects of the Syrian Crisis.  

Following the commitments undertaken by the EU and Lebanon in the Partnership Priorities 
and Compact to address the factors hindering trade towards the EU, a Joint Working Group 
(JWG) on Trade and Investment was set up with the aim to address the factors hindering trade 
towards the EU and to help Lebanon to upgrade its local production standards (see under 3). 
In  particular,  the  two  meetings  of  the  working  group  that  have  been  held  so  far  (the  last  in 
July 2017) focused  on sanitary and phyto-sanitary standards (SPS) and pharmaceutical issues, 
in  view  of  upgrading  quality  standards  and  good  manufacturing  practices  (GMPs)  of  the 
sector.  Lebanon  will  receive  assistance  under  TAIEX.  There  are  a  number  of  trade  related 
assistance projects to improve the trade and investment climate. In 2009, the EU launched its 

97 

 
 
EUR 14 million ‘Reinforcement of  Private Sector Competitiveness’ Programme (PSD14) to 
address private sector's constraints. The programme had three main objectives: (i) to improve 
the  business  environment,  (ii)  to  promote  the  capacity  of  the  private  sector  to  grow  and 
develop  and  (iii)  to  facilitate  the  conformity  of  Lebanese  products  with  international 
standards.  The EU is  currently financing a EUR 15  million programme  on improving value 
chains  in  agriculture  and  wood  processing,  with  the  aim  to  improve  quality  of  Lebanese 
products  and  boost  the  competitiveness  of  the  targeted  sectors.  Trade  barriers  were  also 
discussed, the most important being a planned additional tax on Lebanese imports of wines, 
spirits  and  tobacco;  eventually,  in  September  2017,  the  Lebanese  Constitutional  Council 
declared it as not constitutional and the corresponding measure has been dropped. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The EU and Lebanon are committed to increase the dialogue on trade, with the view to find 
pragmatic  solutions  and  help  Lebanon  to  take  advantage  of  trade  opportunities  provided  by 
the Association Agreement. The JWG on Trade and Investment will meet at a technical level 
at  least  three  times  a  year.  It  will  have  an  important  role  in  shaping  future  assistance  and 
advocates  for  strategic  trade  reforms  (horizontal  reforms,  sector  reforms,  business  climate, 
quality  standards  etc.).  Specific  issues  to  be  addressed  cover,  but  are  not  limited  to: 
facilitating  exports  of  Lebanese  agri-food  and  industrial  goods  to  the  EU,  improving 
competitiveness  and  productivity  of  the  agri-food  sector  as  well  as  services,  statistics,  SPS, 
SMEs, business and investment climate. Under this JWG the EU and Lebanon have already 
agreed  to  set  up  an  Action  Plan  with  defined  milestones  for  establishing  a  Lebanese  food 
safety  system  that  complies  with  basic  principles  and  international  standards.  In  the  long-
term, the EU might consider designing a comprehensive SPS programme built around 5 key 
components:  food  legislation;  food  control  management;  official  controls  and  inspections; 
laboratory systems and training. 

Lebanon is still in the process of applying to the WTO. The EU will continue to support and 
encourage Lebanon towards WTO membership and membership of the Agadir Agreement.  

6. 

CONCLUSIONS 

Overall the value of trade between the EU and Lebanon has increased since the Association 
Agreement came into force. This is true in both directions. Goods continue to account for the 
majority  of  trade,  although  services  and  foreign  investment  are  also  present.  Despite  the 
overall increase in the value of trade, it must be recognised that the trade balance has favoured 
the  EU.  The  total  increase  in  EU  exports  to  Lebanon  has  overshadowed  trade  in  the  other 
direction.  To  this  extent  the  Lebanese  trade  deficit  with  the  EU  has  increased  in  the  same 
period.  

Services  are  the  main  driver  of  Lebanon's  economy.  Enhancing  the  competitiveness  of  the 
Lebanese  service  sector  could  lead  to  economic  growth  in  selected  sectors  of  strategic 
importance for the country. Trade in services is gaining more importance in the global trade, 
especially  in  terms  of  value  added,  investment  and  employment  in  developing  countries. 
There is therefore untapped potential on services whose growth could have positive spill-over 
effects  into  other  areas  of  the  economy.  At  the  same  time,  there  are  a  number  of  ongoing 
issues  which  restrict  trade  and  investment  in  Lebanon  and  prevent  Lebanon  taking  full 
advantage  of  the  FTA.  The  private  sector,  in  particular  SMEs,  forms  the  cornerstone  of  the 
Lebanese economy and is the main source of job creation in Lebanon. Despite its dynamism 

98 

 
 
and  high  resilience,  the  businesses  suffer  from  an  inadequate  business  environment  (an 
example being the unreliable provision of energy, whose system is in need of a reform), weak 
infrastructure and lack of structural reforms. 

Lebanon  also  remains  constrained  by  the  spill-over  of  the  Syrian  conflict.  The  Syrian  crisis 
has  closed  traditional  trade routes  for both  Lebanese imports and exports and it is  therefore 
not surprising that exports to the EU have stagnated; imports from the EU are on the rise.  As 
a result of the refugee crisis, a high number of Syrian migrants are now present in Lebanon. 
The  EU  and  Lebanon  continue  to  consider  further  collaboration  to  ease  the  strain  of  the 
refugee  crisis  in  Lebanon.  There  will  be  further  work  on  helping  Lebanon  reach  the  EU 
acquis, for example on SPS and Pharma. There will also be efforts to consider further areas of 
co-operation and support. 

99 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-MOROCCO FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The  EU  and  Morocco  established  a  free  trade  area  as  part  of  the  EU-Morocco  Association 
Agreement, signed in 1996 and entered into force on 1 March 2000. The Agreement provides 
for  a  reciprocal  liberalisation  of  trade  in  goods,  with  elements  of  asymmetry  in  favour  of 
Morocco: since the day of entry into force of the Agreement, all industrial products covered 
by  the  Agreement  could  be  exported  by  Morocco  to  the  EU  tariff-free,  while  Morocco 
benefited from a transitional period of 12 years. Since March 2012, the transitional period for 
Morocco  to  reduce  its  tariffs  on  industrial  products  to  zero  was  completed.  The  EU  and 
Morocco  also  signed  an  agreement  on  additional  liberalisation  of  trade  in  agricultural  and 
fisheries  products,  which  came  into  force  in  2012.  Trade  for  industrial  products  is  now 
entirely  liberalised,  while  market  opening  for  agricultural  products  is  also  substantial  with 
only a few products subject to Tariff Rate Quotas (TRQs) on each side.  

A  protocol  establishing  a  Dispute  Settlement  Mechanism  was  agreed  upon  by  the  EU  and 
Morocco, and came into force in 2012. Morocco also signed the Regional Convention on pan-
Euro-Mediterranean preferential rules of origin on 18 April 2012. The ratification process is 
still  pending.  Negotiations  for  a  Deep  and  Comprehensive  Free  Trade  Area  (DCFTA)  have 
started in 2013. 

2. 

EVOLUTION OF TRADE 

2.1 

Trade in Goods 

25

n
b
€

20

15

10

5

0

EU Exports

EU Imports

EU Imports of agricultural
products

EU imports of other products
(non-fuel industrial products,
textiles, fisheries, etc.)

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

Trade in goods between the EU and Morocco has increased significantly over the period since 
the FTA entered into force: trade flows have consistently grown since the entry into force of 
the agreement and more than doubled over the past 15 years, from EUR 14.3 billion in 2002 
to EUR 34.6 billion in 2016 (+142%).  

100 

 
 
 
 
EU  exports  rose  by  113%  between  2002  and  2016.  In  2016,  EU  exports  to  Morocco  were 
mainly  made  of  machinery  and  transport  equipment  (40.4%),  fuels  and  mineral  products 
(12.4%), and agricultural products (10.0%). The three biggest EU exporters in Morocco were: 
Spain, France, and Germany. 

EU  imports  increased  by  165%  between  2002  and  2016.  This  tendency  is  particularly 
reflected for industrial products and manufactured goods (+121%), while important progress 
has  been  made  in  terms  of  EU  imports  of  Moroccan  agricultural  products  (+118%  between 
2002  and  2016).  In  2016,  EU  imports  were  made  of  machinery  and  transport  equipment 
(40.4%), agricultural products (23.0%), and textiles and clothing (20.3%). The three biggest 
EU importers were: Spain, France, and Italy. 

The agreement has proven mutually beneficial. While the first years of implementation of the 
EU-Morocco FTA led to an increasing trade surplus for the EU, this trend has now stabilized. 
From  2010  onwards  the  EU-Morocco  trade  balance  remained  steady.  In  2016,  the  EU  was 
Morocco's first partner for trade in goods, accounting for almost 60% of Morocco's total trade. 
Other trading partners fell far behind the EU, such as China (8%), the United States (7%), and 
Russia (4%). 

2.2 

Trade in Services and Investment 

The total trade in services between the EU and Morocco has positively evolved between 2010 
and 2015, from EUR 7.5 billion in 2010 to EUR 8.6 billion in 2015. The EU is Morocco's first 
partner  for  trade  in  services  and  investment.  Moroccan  exports  of  services  to  the  EU  have 
progressed  by  11%  between  2010  and  2015  and  EU  exports  of  services  to  Morocco  have 
increased by 19% over the same period. In 2015, the EU exported EUR 3.6 billion in services 
to Morocco and Morocco exported EUR 4.9 billion in services to the EU.  

EU-Morocco  FDI  flows  remained  relatively  steady  between  2013  and  2015,  despite  some 
volatility, resulting in the total EU FDI stock of EUR 15.2 billion in Morocco at the end of 
2015. More than 50% of FDI in Morocco comes from the EU, thanks to strong cooperation 
efforts between EU Member States and the Moroccan Government, quality of local facilities 
and  infrastructure,  and  above  all  attractive  conditions  made  available  for  EU  investors, 
especially in the automotive, aeronautics and the electronics sectors. Morocco now ranks 68th 
out of 190 in the World Bank ranking "Doing Business 2017",  up seven ranks compared to 
2016. These positive developments efficiently mitigated more contrasted results in traditional 
sectors (textiles, clothing, and tourism). 

2.3 

Preference Utilisation rate  

Morocco had an average utilisation rate of preferences of 95% in 2016. For EU exporters to 
Morocco, the preference utilisation rate was 52% in 2016. 

Regarding  the  6  agricultural  TRQs  applied  by  the  EU  under  the  Association  Agreement, 
Morocco's 2016 fill rate was high for a limited number of products such as tomatoes (100%) 
and courgettes (89%), intermediate for other products such as clementines (50%), cucumbers 
(45%)  or  strawberries  (30%),  but  remained  low  for  garlic  (7%).  An  additional  TRQ  (non-
agricultural) on fructose remained unused by Morocco in 2016 (fill rate of 0%). Morocco is 
the largest exporter of vegetables to the EU. The total trade in agricultural products between 
the EU and Morocco amounted to EUR 3.6 billion in 2016. 

3. 

ISSUES ADDRESSED IN THE JOINT COMMITTEE MEETINGS 

101 

 
 
The last  Sub-Committee  on Industry, Trade, and Services was held in December 2013. The 
discussion  touched  upon  the  ongoing  preparations  of  the  negotiations  of  the  ACAA 
(agreement  on  conformity  assessment  and  acceptance  of  industrial  products).  Significant 
progress  has  been  made  by  Morocco,  notably  as  regards  approximation  to  the  EU  acquis, 
standardisation, and accreditation. The future EU-Morocco DCFTA (ALECA in French) was 
briefly  mentioned,  with  a  reference  to  ongoing  round  of  negotiations.  Several  trade  barriers 
were  addressed,  such  as  tariff  dismantling  for  used  products,  export  restrictions  on  algae, 
registration scheme of cosmetic products, tax on imported wood.  

The last Sub-Committee on Agricultural and Fisheries Products (June 2015) was the occasion 
for both parties to mutually acknowledge the progress made in terms of bilateral exchanges of 
agricultural and fisheries goods since the entry into force of the agreement on 1 October 2012. 
A  state-of-play  of  the  utilisation  rate  of  TRQs  by  Morocco  and  by  the  EU  was  also  given. 
Both parties expressed their satisfaction regarding the successful completion of negotiations 
for  the  EU-Morocco  Agreement  for  the  Protection  of  Geographical  Indications  (GIs),  and 
greenlighted the opening of the signature and ratification process.  

The  last  Sub-Committee  on  Customs  Cooperation  took  place  in  November  2015.  Among 
others, the Parties discussed mutual recognition of Authorised Economic Operators (AEOs), 
fight  against  corruption,  exchange  of  data  and  origin  matters  (post-release  verifications,  the 
revision of the PEM Convention on rules of origin). 

4. 

SPECIFIC AREAS OF IMPORTANCE 

After  a  relative  slowdown  in  2016,  Morocco's  economic  indicators  are  rather  positive  for 
2017, driven by growing exports and a strong agricultural season, chiefly as regards crops, for 
which the national production is expected to increase by 200% this year. The IMF expects a 
4.4% growth for the Moroccan economy in 2017, notably thanks to the recovery of Morocco's 
main  trade  partners,  including  the  EU.  Morocco  also  benefited  from  the  good  economic 
performance of new industrial sectors (automobile, aeronautics, and electronics). Such sectors 
have  enjoyed  a  fast-paced  development  in  recent  years,  driven  by  the  investment-friendly 
industrial  policy  adopted  by  the  Moroccan  government,  which  resulted  in  the  country 
considerably improving its business climate.  

The  EU  is  providing  support  to  Morocco  through  several  programmes.  The  programme 
'Réussir  le  statut  avancé'  (RSA  I  and  II)  supports  Morocco's  efforts  in  terms  of  legislative 
convergence  with  the  EU  acquis,  in  particular  in  areas  which  will  be  targeted  by  the  future 
DCFTA and ACAA (e.g. electrical appliances, toys, machinery, construction products, etc.). 
In November 2016, the EU and Morocco launched  a cooperation programme on sustainable 
growth,  in  cooperation  with  several  other  actors  (e.g.  EIB,  ERDB).  The  programme  will 
provide important  financial support, distributed according  to three  objectives:  (1) enhancing 
the  competitiveness  of  Moroccan  companies  in  accordance  with  the  industrial  strategy  set 
forth by Moroccan authorities for 2014-2020, (2) strengthening Moroccan export capacities to 
ensure a better access to the European market for Moroccan companies, and (3) fostering the 
transition towards a low-carbon economy by supporting the implementation of the Moroccan 
strategy  for  sustainable  development  (SNDD).  The  ultimate  goal  is  to  prepare  Morocco's 
economy for the future DCFTA. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

102 

 
 
In recent years, Moroccan authorities have adopted some more restrictive trade measures. The 
new  Foreign  Trade  Law  dedicates  12  articles  out  of  34  to  the  protection  of  national 
production.  Public  procurement  procedures  have  been  modified  so  as  to  increase  the 
percentage  of  local  component  required  to  apply  for  tender  (notably  as  regards  renewable 
energies).  Since  July  2016,  EU  companies  and  Moroccan  importers  reported  an  increasing 
number of administrative procedures limiting effective market access in Morocco, notably in 
the  sector  of  car  parts.  The  EU  is  currently  addressing  this  issue  through  informal  bilateral 
dialogue with Moroccan authorities, waiting for regular bilateral trade-related work to resume. 

Building  on  the  EU-Morocco  Association  Agreement,  the  EU  and  Morocco  launched 
negotiations  for  a  Deep  and  Comprehensive  Free  Trade  Area  (DCFTA)  on  1  March  2013. 
Four negotiating rounds have taken place so far. The DCFTA will both expand the existing 
free  trade  area  into  new  areas  as  well  as  deepening  it  in  a  number  of  areas  that  are  already 
included but in a relatively superficial way. Negotiations cover areas such as access to public 
procurement, disciplines on non-tariff  measures,  harmonization of standards and regulations 
towards  the  EU  acquis,  sanitary  and  phytosanitary  measures,  intellectual  property  rights, 
consumer protection, competition, investment, trade in services and sustainable development.  

Negotiations for the DCFTA have been on hold since 2014, following Morocco's request for a 
pause aimed at enabling Moroccan authorities to carry out impact assessment studies as well 
as further internal consultations with stake holders before a future round. The results of these 
studies  have  not  yet  been  made  public  by  Morocco.  More  recently,  Morocco  has  put  all 
contacts with the EU on hold following the ruling of the General Court and subsequent appeal 
ruling  by  the  European  Court  of  Justice  (ECJ)  on  the  territorial  scope  of  the  EU-Morocco 
Association  Agreement  and  its  protocols  on  additional  liberalisation  of  trade  in  agricultural 
and fisheries products. This has also affected the work of the Trade Sub-Committee and other 
bodies established under the Association Agreement. The ratification of the Agreement for the 
Protection of Geographical Indications (GIs) is still pending.  

6. 

CONCLUSIONS 

The  overall impact  of  the  FTA  on  EU-Morocco  trade  has  been  very  positive,  bringing  both 
economies closer and rapidly intensifying exchanges in goods, services, and investments. As a 
result, the EU is the leading trade partner of Morocco, with over 50% of the total Moroccan 
trade (56% of imports and 44% of exports) being made with the EU. EU-Morocco bilateral 
talks  now  focus  on  finding  a  mutually  acceptable  solution  to  the  consequences  of  the  ECJ 
ruling  of  21  December  2016,  before  the  regular  work  of  Sub-Committees  established  under 
the Association Agreement or any negotiations for the DCFTA can resume. 

103 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE INTERIM EU-PALESTINE FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The EU and Palestine56 have an Interim Association Agreement, creating a Free Trade Area, 
which  was  signed  in  1997  and  entered  into  force  on  1  July  1997.  The  Interim  Association 
Agreement  liberalized  two-way  trade  in  industrial  goods  by  providing  duty-free  and  quota-
free  access  for  industrial  goods  traded  in  both  directions.  There  was  also  some  limited 
liberalization of agricultural products by both parties. This was an asymmetrical liberalisation 
to the extent that the EU dismantled its tariffs on the first day of the agreement while Palestine 
had  a  phased  reduction  of  tariffs.  There  was  an  update  to  the  agreement  in  2005  before  a 
significant update the Agreement was signed in 2011 to further liberalize trade in agricultural, 
processed  agricultural,  fish  and  fishery  products.  The  EU  removed  all  tariffs  and  quotas  on 
agricultural products and PAPs imported into the Community for a period of ten years, which 
is  renewable.  Palestine  continues  to  maintain  a  number  of  tariffs  and  quotas  on  selected 
agricultural and PAP products. The updated agreement is in place for a period of ten years.   

Products  from  Israeli  settlements  in  Palestinian  territory  however  do  not  benefit  from  the 
preferential tariff agreement under the EU-Israeli or EU-Palestine Association Agreement. 

Palestine  is  a  member  of  the  Regional  Convention  on  pan-Euro-Mediterranean  preferential 
rules  of  origin  (PEM  Convention)  which  it  signed  in  2013  and  notified  the  EU  of  its 
ratification in 2014.  

2. 

EVOLUTION OF TRADE 

2.1 

Trade in Goods 

The  value  of  trade  between  the  EU  and  Palestine  has  increased  since  the  Association 
Agreement came into force. Since 2002, the first  year  for which data is available, there has 
been  an  overall  growth  in  trade  in  goods  in  both  directions.  In  2002  the  value  of  trade  in 
goods was EUR 41 million and in 2016 it was EUR 271 million - a growth of 561%. 

n
o
i
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l
i

m
€

300

250

200

150

100

50

0

EU Exports

EU Imports

EU imports of
agricultural products

56 This designation shall not be construed as recognition of a State of Palestine and is without prejudice to the 

individual positions of EU Member States on this issue 

104 

 
 
                                                 
 
The value of EU exports to Palestine has risen by 670% from EUR 33 million in 2002 to EUR 
254  million in  2016. Between 2002 and 2009 EU exports  to  Palestine showed year on year 
variations  but  have  grown  steadily  year  on  year  since  2010.  In  2016  the  value  of  exports 
reached  an  all-time-high  of  EUR  254  million.  The  main  export  markets  are  machinery  and 
transport equipment (53.9%), agricultural products (23.4%) and chemicals (11.9%). In 2016 
the three largest exporters to Palestine from the EU28 were Germany, Italy and Spain.  

The  value  of  EU  imports  from  Palestine  has  risen  from  EUR  8  million  in  2002  to  EUR  17 
million in 2016 – an increase of EUR 9 million or 113%. Within the lifespan of the agreement 
however the value of imports has fluctuated. In 2009 it reached an equal all-time low of EUR 
6 million before demonstrating remarkable recovery in 2010 to reach an all-time high of EUR 
35 million. It has since fallen and fluctuated year on year. In 2016 the most important import 
sectors  were  agricultural  products  (77.2%)  and  chemicals  (9.9%).  In  2016  the  three  largest 
importers of products from Palestine among the EU 28 were the United Kingdom, Italy and 
France. 

Agricultural  products  represent  the  majority  of  EU  imports  from  Palestine,  accounting  for 
EUR 13 million or 76.5% of the total EUR 17 million imported in 2016. Palestine exports a 
limited number of agricultural products including: tropical fruit, nuts and spices, bulbs, roots, 
live plants, vegetables and olive oil. Overall the level of agricultural export has grown since 
the EU-PA Agricultural Agreement of 2012, rising from EUR 8 million in 2012 to its current 
value.  The  biggest  increase  has  been  in  olive  oil  which  has  risen  from  400%  from  EUR  1 
million to EUR 4 million in the same period, with an all-time high of EUR 5 million in 2015. 
Export levels of vegetables, bulbs, roots and live plants have remained relatively static over 
the same period and even fell slightly in the last year.  

It  should  be  noted  that  the  value  of  EU  exports  to  Palestine  has  increased  more  than  in  the 
other direction. This has increased Palestine's trade deficit with the EU over the same period. 
Palestinian exports remained largely at that same level despite full preferential market access 
to the EU market. This is largely due to trade restrictions linked to the Israeli occupation, as 
well  as  competition  issues  and the  need  to  meet  EU  standards,  including  SPS  and  technical 
standards.   

In 2016 the EU was Palestine's second largest trade partner behind Israel, representing 12% of 
its total trade. The EU was the second largest importer into Palestine behind Israel with a 13% 
market  share.  It  was  Palestine's  third  largest  export  market  behind  Israel  and  Jordan, 
representing 2% of Palestine's exports. 

2.2 

Trade in Services and Investment 

In  2015  trade  in  services  between the  EU  and Palestine  was  worth  EUR  110  million  which 
represents an increase on EUR 92 million in 2010. There have been year-on-year fluctuations 
in the value of services imported from Palestine which have declined slightly overall. In 2011 
imports  reached  a  high  of  EUR  64  million  and  in  2015  stood  at  EUR  40  million.  With  the 
exception  of  2012,  there  has  been  a  year-on-year  increase  in  services  exported  to  Palestine 
which in 2015 stood at EUR 70 million. No data is available on foreign direct investment by 
country of origin.  

According to the World Bank 2017 ease of doing business index which ranks 190 countries, 
Palestine ranked 140th in the World for overall ease of doing business – down two places on 
last year.  

105 

 
 
 
 
2.3 

Preference Utilisation rate  

In 2016 Palestine's preference utilisation rate was 81%. The EU's preferential utilisation rate 
for the same year is not available.  

ISSUES ADDRESSED IN THE ANNUAL (JOINT COMMITTEE/TRADE 

3. 
COMMITTEE) MEETING 

The  most  recent  EU-Palestinian  Sub-committee  on  Trade  and  Internal  Market,  Industry, 
Agriculture and Fisheries, and Customs last met in May 2017. On trade, it was recognised that 
the Association Agreement had not reached its full potential due to external issues. On wider 
trade matters the EU reiterated its support for Palestine to have observer status at the WTO – 
and  inquired  about  concrete  steps  for  Palestine's  accession  to  the  Agadir  Agreement  to 
materialise  in  practice.  A  possible  negotiation  in  view  of  an  Agreement  on  Conformity 
Assessment  and  Acceptance  (ACAA)  was  also  discussed  where  Palestine  is  focused  on 
construction  material  and  pharmaceuticals.  Agriculture  and  SPS  were  raised,  with  the  EU 
encouraging  Palestine  to  diversify  exports.  Customs  issues  were  discussed  with  Palestine 
providing updates on customs procedures and ongoing reforms.  

4. 

SPECIFIC AREAS OF IMPORTANCE 

The expansion of Palestinian trade is largely restricted by its relationship with Israel. Several  
reports  have  identified  a  number  of  key  trade  barriers  including  Israeli  control  over 
Palestinian  trade  routes  which  gives  Israel  control  over  import  duties  and  VAT,  internal 
restrictions on the movement of people and goods by physical barriers (such as checkpoints) 
and  the  cost  of  bureaucratic  process  –  including  transaction  costs  imposed  at  Israeli 
checkpoints.  Such  restrictions  contribute  to  the  increased  dependency  of  the  Palestinian 
economy  on  Israel  which  in  2015  accounted  for  55%  of  Palestinian  imports  and  absorbed 
86%  of  Palestinian  exports.  The  reactivation  of  the  Joint  Economy  Committee  in  charge  of 
follow-up  of  the  Paris  Protocol  that  has  not  met  since  2009  would  be  an  important  step  in 
achieving progress.  

While  discussion  on  approximation  to  the  EU  acquis  is  ongoing,  better  analysis  is  needed. 
The  sectors of  interest  are  pharmaceuticals  and construction,  but  in  the latter  Palestine  only 
wants  to  focus  on  some  products.  A  gap  analysis  in  the  two  sectors  would  help  understand 
whether an ACAA in the sectors is desirable and if further support to improve the quality of 
infrastructure is needed. 

Trade-related  support  to  Palestine  includes  the  "EU  support  to  trade  policy  formulation  and 
WTO  accession"  programme  which  foresees  the  delivery  of  a  National  Trade  Policy 
Document and supports the application for observer status at the WTO. Furthermore, the EU 
financed the National Export Strategy, formulated by the PA and Paltrade, which identified 12 
potential export growth sectors. An action plan was rolled out mapping the specific activities 
needed for its implementation. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

There  are  preliminary  discussions  between  the  EU  and  Palestine  to  upgrade  the  interim 
Association Agreement to a full Association Agreement. There are also discussions ongoing 
on approximation to the acquis including through ACAAs.  

106 

 
 
The  ongoing  situation  with  Israel  remains  a  key  barrier  in  EU-Palestinian  trade.  The  EU 
continues to promote the usefulness of trilateral discussions on trade to facilitate progress and 
is trying to set up another trilateral meeting. The Union for Mediterranean Trade Ministerial 
in 2010 adopted a package of measures to facilitate trade of Palestinian products with other 
Euro-Mediterranean  partners  on  a  bilateral  and  regional  basis  and  was  followed  by  an 
informal Trade Trilateral Working Group (European Commission, Israel and Palestine). It is 
planned to continue this work to facilitate trade of Palestinian products. 

6. 

CONCLUSIONS 

Overall the value of trade between the EU and Palestine has increased during the Association 
Agreement.  Trade  flows  are  however  uneven.  The  trade  balance  continues  to  increase  in 
favour  of  the  EU  as  the  value  of  Palestinian  exports  to  the  EU  remains  negligible.  The  on-
going situation with Israel remains a key issue in EU-Palestinian trade relations and continues 
to be addressed in the trade discussions with both parties. 

107 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-TUNISIA FREE TRADE AGREEMENT 

1. 

INTRODUCTION 

The  EU  and  Tunisia  established  a  free  trade  area  as  part  of  the  EU-Tunisia  Association 
Agreement  (AA),  signed  on  17  July  1995  and  entered  into  force  on  1  March  1998.  The 
Agreement  provided  for  a  reciprocal  liberalisation  of  trade  in  goods,  with  elements  of 
asymmetry  in  favour  of  Tunisia:  since  the  day  of  entry  into  force  of  the  Agreement,  all 
industrial products covered by the Agreement could be exported by Tunisia to the EU tariff-
free,  while  Tunisia  benefited  from  a  transitional  period  of  12  years.  Since  Tunisia  started 
implementing the agreement in 1996, i.e. 2 years before its official entry into force, all tariffs 
and non-tariff measures mentioned in the EU-Tunisia AA were entirely dismantled by 2008, 
and the EU-Tunisia free trade area was fully implemented two years ahead of schedule. Trade 
of industrial products is entirely liberalised, while market opening of agricultural products has 
been more limited. As regards fisheries products, the EU has opened its market (with only one 
product subject to Tariff Rate Quotas) while the Tunisian market remains closed. The EU and 
Tunisia  signed  a  protocol  establishing  a  Dispute  Settlement  Mechanism,  which  came  into 
force in 2011.  

The Regional Convention on Pan-Euro-Mediterranean preferential rules of origin was signed 
by Tunisia on 16 January 2013 and notified on 1 January 2015.  

Negotiations for a Deep and Comprehensive Free Trade Area (DCFTA) have started in 2015. 

2. 

EVOLUTION OF TRADE 

2.1 

Trade in Goods 

Trade in goods between the EU and Tunisia has increased significantly over the period since 
the Agreement entered into force: between 2002 and 2016, the total trade in goods increased 
by 43%, from EUR 13.9 billion in 2002 to EUR 19.8 billion in 2016. 

108 

 
 
n
b
€

12

10

8

6

4

2

0

EU Exports

EU Imports

EU imports of agricultural
products

EU imports of other products
(non-fuel industrial products,
textiles, fisheries etc.)

EU  exports  rose  by  36%  between  2002  and  2016.  In  2016,  EU  exported  machinery  and 
transport  equipment  (37.0%),  textiles  and  clothing  (12.0%),  chemicals  (11.9%),  and  fuels 
(7.5%). The three biggest EU exporters were: France, Italy, and German. 

EU imports rose by 51% between 2002 and 2016. A closer look at EU-Tunisia trade trends 
shows that Tunisia's exports of non-fuel industrial products (machinery, transport equipment, 
textiles  and  clothing)  increased  steadily  over  the  period,  while  agricultural  products  have 
remained  at  a  rather  low  level  and  slightly  decreased  in  recent  years.  In  2016,  EU  imports 
were made of machinery and transport equipment (41.9%), textiles and clothing (24.3%), and 
agricultural  products  (6.6%).  The  three  biggest  EU  importers  were:  France,  Italy,  and 
Germany. The EU is Tunisia’s main trading partner. In 2016, the EU accounted for 73.7% of 
Tunisian total exports of goods, and 53.1% of its total imports57.  

Overall, the agreement has proven mutually beneficial. Tunisia's trade deficit with the EU is 
comparable to the one Tunisia has with Russia or Turkey – which make up for  a far smaller 
share of Tunisia's total trade. Tunisia has even reduced its trade deficit with the EU in recent 
years.  

Following a dip in 2008 due to the financial crisis, trade flows between the EU and Tunisia 
appear  to  have  reached  a  plateau  since  2011.  Negatively  impacted  by  growing  economic 
difficulties faced by Tunisia, the total trade even decreased by 1.3% between 2014 and 2015 
and  by  2.3%  between  2015  and  2016,  mainly  driven  by  decreasing  EU  exports  due  to  the 
economic  crisis  while  Tunisian  export  to  the  EU  remained  stable.  Ongoing  negotiations  for 
the DCFTA therefore aim at making room for further progress in trade between the EU and 
Tunisia, including further liberalising agricultural trade that is only covered in a limited way 
by the current Agreement.  

2.2 

Trade in Services and Investment 

The  total  trade  in  services  between  the  EU  and  Tunisia  decreased  between  2010  and  2015, 
from  EUR  5.9  billion  in  2010  to  EUR  4.8  billion  in  2015,  mainly  owing  to  the  weak 
performance  of  the  tourism  sector,  mostly  due  to  security  issues.  Both  Tunisia  and  the  EU 

57 Institut National de Statistiques Tunisien, 2017 

109 

 
 
                                                 
 
suffered  from  this  decrease,  with  Tunisian  exports  of  services  to  the  EU  falling  by  15% 
between 2010 and 2015 and EU exports of services to Tunisia falling by 33% over the same 
period. In 2015, the EU exported EUR 1.1 billion in services to Tunisia and Tunisia exported 
EUR 3.6 billion in services to the EU. 

FDI  flows  remained  relatively  steady  between  2013  and  2015,  despite  a  slowdown  of  EU 
foreign  investment  in  Tunisia,  resulting  in  the  total  EU  FDI  stock  of  EUR  3.1  billion  in 
Tunisia at the end of 2015. The EU remains the first foreign investor in Tunisia, accounting 
for  over  85%  of  FDIs  entering  the  country.  In  2015,  3,100  EU  companies  were  present  in 
Tunisia, employing around 327,000 persons.58 

The  business  environment  was  affected  by  the  instability  prevailing  after  the  2011  Arab 
Spring Revolution. Tunisia dropped 2 positions in the Doing Business 2017 ranking (77th out 
of 190), while improving its average score after the reform of the access to loans. 

2.3 

Preference Utilisation rate  

Tunisia  had  an  average  utilisation  rate  of  preferences  of  96%  in  2016.  For  EU  exporters  to 
Tunisia, the preference utilisation rate was 23.5% in 2011 (latest available year). 

Regarding agricultural TRQs, Tunisia's 2016 fill rate was complete for certain products such 
as olive oil (100% for the original quota of 56,700t, but only 14% for the additional quota of 
35,000t  granted  by  the  EU  for  2016  and  2017  upon  Tunisia's  request  –  see  below), 
intermediate for other products such as sweet oranges (43%,) but remained low for prepared 
tomatoes (15%), wine (7%), or cut flowers (2%).    

3. 

ISSUES ADDRESSED IN THE JOINT COMMITTEE MEETINGS 

At  the  last  Sub-Committee  on  Industry,  Trade,  and  Services  was  held  in  December  2016, 
specific  trade  issues  were  raised.  Tunisia  informed  of  the  difficulties  faced  by  Tunisian 
operators  to  export  certain  agricultural  goods  to  the  EU  as  Tunisia  is  no  longer  a  GSP 
beneficiary since January 2014. Tunisia also expressed the wish to improve the diversification 
of its exports  to  the EU, both  geographically  (75% of its exports are destined to  only  3 EU 
Member States) and in terms of product range. Tunisia adopted a new Law on Investment in 
September  2016  so  as  to  provide  legal  certainty  for  investors.  Tunisia  is  still  to  publish  a 
negative  list  of  sectors  where  restrictions  will  continue.  The  EU  also  mentioned  some  self-
contained  market  access 
issues  regarding  specific  products:  agricultural  products, 
pharmaceuticals, tires, textiles, and ceramic tiles, for the most part.   

During  the  last  Sub-Committee  on  Agricultural  and  Fisheries  Products  (February  2016), 
Tunisia  and  the  EU  expressed  satisfaction  for  the  increase  in  bilateral  trade  flows  of 
agricultural products (+120% since 2002, +140% for Tunisian exports to the EU and +104% 
for  EU  exports  to  Tunisia),  despite  a  significant  volatility  in  the  latest  years.  Tunisia 
expressed  the  wish  for  more  cooperation  between  the  EU  and  Tunisia  on  quality  policies, 
notably regarding organic agriculture and geographical indications (GIs). A request to further 
increase  Tunisian  quotas  for  key  products  such  as  olive  oil  and  sardines  was  discussed,  but 
these are treated as part of the DCFTA negotiations. The EU raised several self-contained SPS 
issues, notably regarding the exports of apples, poultry, and poultry products from the EU to 
Tunisia. The EU also mentioned that EU agricultural exports have considerably gone down in 

58 Tunisian Foreign Investment Promotion Agency, 2017 

110 

 
 
 
                                                 
recent years (14% since 2013 overall) and raised concerns about potential restrictions on the 
imports of red meat and powder milk.   

During  the  last  Sub-Committee  on  Customs  Cooperation  and  Taxation  (February  2017), 
several  issues  were  discussed,  among  which  the  modernisation  of  the  Tunisian  customs 
administration,  the  evolution  of  the  legislation  of  both  parties  since  the  previous  meeting, 
border  management  (especially  the  challenge  met  by  Tunisian  customs  at  the  border  with 
Libya),  preferential  origin  including  a  state  of  play  of  the  revision  of  the  pan-euro-
Mediterranean preferential rules of origin and the reform of the taxation rules. In general, both 
Parties  agreed  on  the  need  to  support  Tunisian  customs  in  preparing  projects  relating  to 
customs legislation and operational questions.  

4. 

SPECIFIC AREAS OF IMPORTANCE 

The economic situation of Tunisia is fragile. Multiple shocks, including the fall in EU demand 
for  Tunisian  products  because  of  the  economic  crisis  and  the  2011  Revolution  and  the 
political  transition  that  ensued,  have  resulted  in  a  sharp  drop  in  growth,  increasing 
unemployment and poverty, and a growing informal sector. To ensure this fragility does not 
compromise the democratic transition unfolding in Tunisia, the EU provides sizable support 
to  Tunisian  authorities,  and  has  stepped  up  its  political  and  financial  support  considerably 
since  2011.  Also  following  the  terrorist  attacks  in  2015,  the  EU  under  an  emergency 
autonomous  trade  measure  has  granted  additional  olive  oil  quotas  of  35,000t  for  2016  and 
2017, adding to the existing quota of 56,700t.  

Tunisia benefits from a 'special relationship' with the EU, which since 2012 takes the shape of  
a  ‘Privileged  Partnership'  detailed  in  an  ambitious  ENP  Action  Plan.  In  2016,  the  EU 
reaffirmed its support to Tunisia through a joint communication, "Strengthening EU support 
for Tunisia", detailing the areas in which EU support is to be provided, including a number of 
trade-related  measures  as  well  as  the  launch  of  a  “Partnership  for  growth”  initiative.  These 
include a possible early entry into force of the EU's trade concessions on market access of a 
future DCFTA on a temporary basis, the possible advanced implementation of the new PEM 
rules of origin as well as temporary flexibility for certain products (Tunisia's main interest is 
in  textiles),  the  setting  up  of  a  structured  regulatory  dialogue  to  facilitate  and  speed  up  the 
negotiation  of  an  Agreement  on  Conformity  Assessment  and  Acceptance  (ACAA)  of 
industrial  products  that  still  needs  key  legislation  to  be  adopted  (i.e.  laws  on  security  of 
industrial  and  food  products).  All  these  measures  have  been  proposed  in  the  context  of  the 
DCFTA negotiations and are linked to progress being made therein. 

Following a preparatory process ahead of the launch of DCFTA negotiations, which included 
an  analysis  of  the  Tunisian  regulatory  framework  in  the  economic  field,  the  Commission 
concluded that Tunisia has achieved considerable progress in terms of regulatory alignment in 
the areas which will be covered by the future DCFTA. Nevertheless, some challenges remain 
in terms of implementation of some key regulation (e.g. public procurement decree adopted in 
2014) and of institutional capacity.  

The EU has provided substantial trade-related assistance to Tunisia, particularly following the 
signature  of  the  EU-Tunisia  AA,  through  a  number  of  private  sector  development  projects 
with the objective to allow Tunisia to take advantage of the agreement and adapt to the new 
conditions  of  competition.  In  preparation  of  DCFTA  negotiations,  the EU  began  supporting 
sectors  that  are  not  yet  liberalised,  such  as  services  (the  Programme  d’Appui  à  la 
Compétitivité des Services (PACS) was launched in 2016 with a budget of EUR 20 million). 

111 

 
 
The EU also supported Tunisia in upgrading its horizontal quality infrastructure and prepare 
for  an  ACAA  in  sectors  identified  as  key  by  Tunisian  authorities,  primarily  electrical  and 
mechanical 
the 
competitiveness of Tunisian exports of industrial and agricultural sectors will be approved in 
2017. Finally, the EU and Tunisia will launch a sectorial dialogue on the textile industry, with 
participation from the private sector.  

industries  and  construction  products.  A  new  project 

to  support 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

There  is  no  major  contentious  trade  issue  between  the  EU  and  Tunisia,  although  some 
protectionist  tendencies  have  appeared  in  recent  years.  Several  open  issues  nonetheless 
include:  technical  and  administrative  difficulties  met  by  EU  exporters  of  pharmaceutical 
products, of tyres, of ceramic tiles, and difficulties faced by EU operators to invest in Tunisia. 
Longstanding  SPS  issues  related  to  exports  of  apples  have  been  recently  supplemented  by 
bans on red meat and plant products from the EU. The EU is pursuing a resolution of these 
issues  through  regular  dialogue,  in  the  framework  of  the  Sub-Committee  Meetings,  and  in 
view  of  the  negotiations  of  the  DCFTA.  As  of  spring  2017,  the  Tunisian  authorities  were 
under extreme public pressure to adopt import restrictive measures to stop or slow down the 
deterioration of the trade and current account deficit that is associated with increasing imports 
mainly from non EU partners, stagnating exports, and weak flows of remittances and tourism. 
The EU is following the issue closely. 

6. 

CONCLUSIONS 

The overall impact of the FTA on EU-Tunisia trade has been positive. Both Tunisia and the 
EU  benefitted  from  the  dismantling  of  bilateral  tariffs  and  non-tariff  barriers.  It  seems 
however that the EU-Tunisia Association Agreement, the first signed by the EU in the region, 
has reached its limits, and needs to be upgraded in order to continue to deliver positive results. 
This means both extending the scope and deepening the provisions of the FTA in the future 
DCFTA for which negotiations started in October 2015.  

The DCFTA aims to expand liberalization in agriculture and fisheries and also cover services 
and  investment.  With  a  view  to  support  ongoing  economic  reforms  in  Tunisia  and  better 
integrate the country into EU and world markets, it will include a wide range of trade related 
regulatory  areas  of  mutual  interest,  such  as  trade  facilitation,  technical  barriers  to  trade, 
sanitary and phytosanitary measures, investment protection, public procurement, competition 
policy  and  trade  and  sustainable  development.  Negotiations  are  guided  by  the  principles  of 
progressivity and asymmetry in favour of Tunisia. One full round of negotiations was held in 
April 2016, followed by a technical meeting in February 2017. The next full round is planned 
later in 2017. 

112 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-CARIFORUM ECONOMIC PARTNERSHIP AGREEMENT (EPA)  

1. 

INTRODUCTION 

The CARIFORUM (CF) – EU EPA is a regional agreement between the EU and its Member 
States and 15 Caribbean countries. The negotiations were concluded in December 2007,  the 
agreement was signed in October 2008 and it entered into provisional application between the 
Parties on 29 December 200859, pending ratification by all countries involved. By 2016 this 
agreement was provisionally applied by the EU and by Caribbean States (with the exception 
of Haiti, which needs first to ratify the agreement before applying it).  

By the end of 2016, 21 EU Member States and 8 Caribbean States had ratified the EPA.  

The CF-EU EPA is ‘comprehensive’ both in the geographic and thematic sense, covering the 
region as a whole and including not only trade in goods, but also trade in services and trade-
related  issues  (competition,  innovation  and  intellectual  property,  transparency  in  public 
procurement etc.).  

2. 

EVOLUTION OF TRADE 

2.1 Trade in goods  

The  trade  in  goods  chapter  provides  for  reciprocal  but  asymmetric  market  opening  by  the 
Parties.  The  EU  has  opened  all  tariff  lines  (except  arms  and  ammunition).  This  largely 
represents a continuation of the trade preferences granted under Cotonou, except  for certain 
agricultural products. CF will open about 92% of its trade over a 25-year period (83% over 15 
years),  and  will  exclude  about  8%  from  liberalisation  altogether.  The  process  of  market 
opening on the CF side is therefore gradual, and takes place over a long period of time. The 
EPA  also  includes  bilateral  and  multilateral  safeguard  clauses.  The  first  tariff  cuts  were 
scheduled for 1 January 2011, 2013, 2015 and 2017. A common reciprocal regime governing 
the rules of origin is part of the agreement. 

In  November  2016,  CF  informed  the  EU  that  the  bigger  Caribbean  countries  (Dominican 
Republic,  Jamaica  and  Trinidad  &  Tobago)  were  implementing  the  tariff  liberalization 
schedule  as  planned,  and  some  progress  was  still  required  in  smaller  countries  such  as 
Antigua and Barbuda, Dominica and St. Vincent and the Grenadines. 

In terms of volume, trade with the Caribbean shows fluctuations over the last decade.  

The balance of trade was positive for the EU in 2016. The table shows the combined figures 
for  the  whole  Caribbean  region  (fourteen  countries)  and  it  also  shows  the  four  biggest 
countries per category (imports, exports, and balance of trade). 

59 The objective for the EU-CARIFORUM EPA was a comprehensive and regional agreement with 15 countries 
in the Caribbean Region: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Republic, 
Grenada, Guyana, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and 
Trinidad and Tobago. 

113 

 
 
                                                 
The EU is the 2nd most important trading partner of the Caribbean (11% of the total Caribbean 
imports come from the EU and 12% of the total Caribbean exports go to the EU), only behind 
the USA. 

The total Caribbean exports to the EU decreased by 23% in 2016 (almost EUR 900 million). 
However, this is largely explained by reduced exports of machinery and transport equipment 
from  Bahamas  (decline  of  more  than  EUR  400  million),  and  fuel,  iron  and  steel  and 
chemicals  from  Trinidad  and  Tobago  (decline  of  EUR  550  million  linked  to  commodity 
prices). 

EU and the Caribbean 

Imports 

Exports 

Flows in 1000 
euros 
Dominican 
Republic 
Trinidad and 
Tobago 
Bahamas 
Suriname 
CARIFORUM 
(all 14) 
Dominican 
Republic 
Bahamas 
Trinidad and 
Tobago 
Jamaica 
CARIFORUM 
(all 14) 
Bahamas 
Dominican 
Republic 
Jamaica 
Suriname 
Trinidad and 
Tobago 
CARIFORUM 
(all 14) 
Source: Eurostat 

Balance 
of Trade 

2012 

2013 

2014 

2015 

2016 

773,541 

837,751 

778,975 

874,371 

968,319 

1,577,344 
277,356 
266,508 

2,101,147  1,580,320  1,243,182 
769,269 
564,169 
315,030 
266,473 

357,410 
245,041 

686,719 
326,899 
226,092 

3,611,150 

4,381,138  4,027,116  4,019,998  3,122,825 

1,388,710 
681,270 

1,089,047  1,142,436  1,623,968  1,822,266 
823,731 
777,583  1,279,399 

608,381 

609,097 
224,569 

669,360 
238,564 

561,347 
253,766 

657,896 
321,901 

591,962 
353,416 

4,078,997 
403,914 

4,055,058  3,927,825  5,050,655  4,713,557 
496,832 

213,414 

250,971 

510,131 

615,169 
7,227 
110,543 

251,296 
-34,010 
285,466 

-968,246 

-1,431,787 

363,460 
-6,060 
54,292 
-
1,018,973 

749,598 
99,441 
67,101 

853,947 
164,944 
19,801 

-585,286 

-94,757 

467,846 

-326,080 

-99,291  1,030,657  1,590,733 

114 

 
 
  
  
  
  
  
 
 
Evolution of EU imports 

2013

2014

2015

2016

Dominican Republic

Trinidad and Tobago

Bahamas

Surinam

CARIFORUM (all 14)

Evolution of EU exports 

2013

2014

2015

2016

Dominican Republic

Bahamas

Trinidad and Tobago

Jamaica

CARIFORUM (all 14)

Evolution of EU balance of trade 

s
o
r
u
e
0
0
0
1
n

i

e
m
u
o
V

l

s
o
r
u
e
0
0
0
1
n

i

e
m
u
o
V

l

5.000.000

4.000.000

3.000.000

2.000.000

1.000.000

0
2012

6.000.000

5.000.000

4.000.000

3.000.000

2.000.000

1.000.000

0
2012

s
o
r
u
e
0
0
0
1
n

i

e
m
u
o
V

l

2.000.000
1.500.000
1.000.000
500.000
0
-500.000
-1.000.000
-1.500.000
-2.000.000

2012

2013

2014

2015

2016

Bahamas

Jamaica

CARIFORUM (all 14)

Dominican Republic

Trinidad and Tobago

115 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.2 Trade in services 

Trade in services shows a favourable balance for the top four Caribbean exporters of services 
to  the  EU.  Individual  data  related  to  the  Bahamas,  Dominican  Republic,  Barbados  and 
Jamaica is included below (Source: Eurostat). Bearing in mind services data limitations, it can 
be noted that all four main Caribbean services exporters had a trade surplus with the EU and 
that for three out of four, services exports are increasing. 

Trade in Services EU-28 with Bahamas (million euro) 

Services 

Debits (imports) 
Credits (exports) 
Net (balance) 

2010 
491 
652 
161 

2011 
581 
584 
3 

2012 
588 
602 
14 

2013 
698 
672 
-26 

2014 
10,598 
638 
-9,959 

2015 

18,123 
583 
-17,540 

Trade in Services EU-28 with Dominican Republic (million euro) 

Services 

Debits (imports) 
Credits (exports) 
Net (balance) 

2010 

2011 

2012 

2013 

2014 

2015 

1,202 
727 
-475 

1,131 
732 
-400 

1,111 
696 
-415 

898 
426 
-472 

1,021 
393 
-628 

991 
479 
-512 

116 

201020112012201320142015Debits (imports)49158158869810,59818,123Credits (exports)652584602672638583Net (balance)161314-26-9,959-17,540-20,000-15,000-10,000-5,00005,00010,00015,00020,000201020112012201320142015Trade in Services EU-28 with Bahamas (million euro)Debits (imports)Credits (exports)Net (balance) 
 
 
 
 
 
 
Trade in Services EU-28 with Barbados (million euro) 

Services 

Debits (imports) 
Credits (exports) 
Net (balance) 

2010 

2011 

2012 

2013 

2014 

2015 

529 
377 
-151 

797 
176 
-621 

682 
603 
-79 

377 
388 
12 

529 
458 
-71 

632 
437 
-195 

Trade in Services EU-28 with Jamaica (million euro) 

Services 

Debits (imports) 
Credits (exports) 
Net (balance) 

2010 

2011 

2012 

2013 

2014 

2015 

508 
349 
-159 

389 
351 
-37 

480 
230 
-250 

365 
236 
-129 

416 
255 
-161 

540 
358 
-182 

117 

201020112012201320142015Debits (imports)1,2021,1311,1118981,021991Credits (exports)727732696426393479Net (balance)-475-400-415-472-628-512-1,000-50005001,0001,500201020112012201320142015Trade in Services EU-28 with Dominican Republic (million euro)Debits (imports)Credits (exports)Net (balance)201020112012201320142015Debits (imports)529797682377529632Credits (exports)377176603388458437Net (balance)-151-621-7912-71-195-800-600-400-20002004006008001,000201020112012201320142015Trade in Services EU-28 with Barbados (million euro)Debits (imports)Credits (exports)Net (balance) 
 
 
 
 
 
 
2.3 Foreign Direct Investment 

The European investment stock in the Caribbean remained constant over the last three years, 
while the Caribbean investment stock in the EU substantially increased. However, this does 
not seem to reveal any clear trend in productive investment flows. 

FDI between European Union (28 countries) and Caribbean ACP states 

)
o
r
u
e
n
o

i
l
l
i

m

(
s
k
c
o
t
s
I

D
F

Entities: Total 

90.000

80.000

70.000

60.000

50.000

40.000

30.000

20.000

10.000

0

15.000

10.000

5.000

0

-5.000

-10.000

-15.000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Stocks Inward

Stocks Outward

Flows Inward

Flows Outward

118 

F
D

I

f
l
o
w
s
(

m

i
l
l
i

o
n
e
u
r
o
)

201020112012201320142015Debits (imports)508389480365416540Credits (exports)349351230236255358Net (balance)-159-37-250-129-161-182-300-200-1000100200300400500600201020112012201320142015Trade in Services EU-28 with Jamaica (million euro)Debits (imports)Credits (exports)Net (balance) 
 
 
 
  
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
  
 Source:Eurostat 

3. 

ISSUES ADDRESSED IN THE ANNUAL EPA COMMITTEE MEETINGS 

The  EPA  establishes  a  full  institutional  structure  to  manage  the  implementation  of  the 
agreement,  including  the  Joint  Council  (JC)  (Ministerial  level),  the  Trade  and  Development 
Committee  (TDC)  (senior  officials),  the  Parliamentary  Committee,  the  Consultative 
Committee (civil society), and Special Committees which meet on an ad hoc basis.  

The TDC meeting is the annual senior official meeting where the main issues concerning the 
implementation of the Economic Partnership Agreement (EPA) are discussed. The last TDC 
meeting took place in Kingston (Jamaica) in 2016. In addition to administrative matters and 
recurring  issues,  discussions  took  place  about  CARIFORUM's  tariff  liberalisation  schedule; 
trade  in  services,  technology  transfer,  Intellectual  Property,  Cultural  Cooperation,  EPA 
Monitoring and Development Cooperation. 
The 2nd meeting of the Consultative Committee (CC) took place in April and its conclusions 
were  presented  at  the  TDC  meeting  in  Kingston  in  November.  The  CC  brings  together 
representatives  of  civil  society  from  the  Caribbean  and  the  EU  in  order  to  promote  mutual 
dialogue, monitoring and cooperation concerning the implementation of the agreement. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

In 2016 specific areas of importance were: 

  Agriculture: Negotiations on Geographical Indications advanced. The Council of the 
EU approved the Decision concerning the establishment of the Special Committee on 
Agriculture and Fisheries.  

  Services:  The  services  Title,  and  in  particular  the  Mode  4  chapter  (movement  of 
natural  persons  for  business  purposes),  is  considered  one  of  the  key  elements  of  the 
EPA.  On  the  implementation  side,  tangible  steps  have  been  very  limited  so  far  but 
both  Parties  agreed  to  continue  working  in  order  to  achieve  specific  deliverables  in 
this area. 

  Development Cooperation: The EPA is a genuinely pro-development agreement and 
directly linked to the European Development Fund (EDF) funds. Issues related to the 
implementation  of  the  10th  EDF  and  11th  EDF  concerning  CARIFORUM  regional 
integration and EPA implementation were  discussed  in  2016. In  this regard, specific 
programmes  supporting  the  private  sector  in  the  Caribbean  and  technical  capacity 
were also adopted. Overall, more than  EUR 100 million was allocated in the regional 
programme for CARIFORUM under the 11th EDF to strengthen regional co-operation 
and  integration  processes,  by  supporting  private  sector  development,  investment  and 
external trade capacities, and specific EPA implementation needs. 

  Monitoring:  Both  Parties  continued  working  on  the  establishment  of  a  monitoring 
mechanism  for  the  EPA,  exchanging  documents  and  suggestions  about  the  type  of 
monitoring mechanism to be put in place. 

119 

 
 
  
  
  
  
  
  
  
  
 
5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

Discussions  are  ongoing  on  the  monitoring  system  that  needs  to  be  established,  on 
negotiations  related  to  Geographical  Indications  and  also  on  achieving  progress  on  the 
services chapter.  

6. 

CONCLUSION 

In 2016 progress was achieved in the implementation of the agreement, including notably on 
agriculture  issues.  Constructive  meetings  of  the  TDC  and  the  Consultative  Committee 
prepared the ground for a Joint Council meeting in 2017. 

Trade in goods fell, especially Caribbean exports, without necessarily indicating a downward 
trend  in  exporting  activity.  The  four  main  Caribbean  services  exporters  maintained  a  trade 
surplus with the EU. 

120 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF  
THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) EU-CAMEROON  

1. 

INTRODUCTION 

Cameroon agreed an EPA with the EU on 17 December 200760. This agreement was signed 
by Cameroon and the EU on 15 January 2009. It was approved by the EP on 13 June 2013 
and  ratified  by  the  Parliament  of  Cameroon  on  22  July  2014.  On  4  August  2014,  the 
agreement entered into provisional application. This agreement is a regional agreement open 
to other Central African countries.  

2. 

EVOLUTION OF TRADE 

2.1 Trade in products 

Trade with Cameroon is relatively stable over the last decade. Balance of trade is negative for 
the EU, but slowly decreasing. 

The  EU  is  by  far  the  most  important  trade  partner  of  Cameroon  for  imports  (30%  of 
Cameroon's imports) and exports (55% of Cameroon's exports). 

All  exports  from  Cameroon  enter  the  EU  duty  free  and  quota  free  and  without  time  limit. 
Main  products  imported  from  Cameroon  are  oil  (36%),  cocoa  beans  (15%),  wood  (13%), 
bananas (13%), and aluminium (6%) (EUROSTAT, 2015). 

Taking into account the share of raw materials in these exports, MFN preferences are used for 
75% of Cameroon's exports to the EU.  The remainder, and particularly bananas, are imported 
under EPA preferences. 

The Economic Partnership Agreement foresees that Cameroon will liberalize 80% of imports 
from  the  EU  over  15  years.  Effective  liberalization  of  1st  category  products  started  on  4 
August 2016.  

A  common  reciprocal  regime  governing  the  rules  of  origin  is  still  being  negotiated,  to  be 
annexed to the agreement. In the meantime, Cameroon benefits from the general EPA rules of 
origin  included  in  EU  Regulation  2016/1076.  Before  starting  liberalization,  Cameroon 
published  a  decree  on  rules  of  origin  applicable  to  products  imported  from  the  EU  (Decree 
2016/367, 3 August 2016).  

60 The full name of the agreement, "…stepping-stone agreement…" reflects the fact that the initial and ultimate 
objective for economic partnership in Central Africa was a comprehensive, regional agreement. However, by 
2016 negotiations for a comprehensive regional EPA with Cameroon, Central Africa Republic, Chad, Congo, 
Democratic Republic of Congo (DRC), Equatorial Guinea, Gabon and Sao Tome y Principe had ground to a 
halt,  and  the  Commission  focused  its  efforts  on  the  "stepping  stone"  agreement  already  implemented  by 
Cameroon. 

121 

1000 euros200820092010201120122013201420152016Import2,450,3731,741,1582,006,9582,161,8132,111,2702,362,6142,149,6661,798,0151,768,006Export1,139,4931,083,1541,204,6381,411,3631,523,1561,679,7841,550,9791,534,9771,506,498Balance of trade-1,310,881-658,004-802,321-750,449-588,114-682,830-598,687-263,038-261,508Source: EUROSTATEU trade with Cameroon 
 
 
                                                 
On 4 August 2016, Cameroon started liberalization of 1621 products imported from the EU. 
According to the schedule in the agreement, a 25% reduction in duties has been applied since 
then.  The  first  category  consists  mainly  of  basic  necessities  (e.g.  medicines),  industrial  and 
agricultural inputs and machines (27%), chemicals (19%), consumer products for households 
(30%). 

From August 2016 to January 2017, 733 declarations on imports from the EU benefited from 
tariff  preferences.  Chapters  most  concerned  were  chapters  84  (machinery  and  mechanical 
appliances) (46%), 85 (electrical machinery and equipment) (16%), 90 (medical instruments) 
(9%)  and  38  (Miscellaneous  chemical  products)  (7%).  Over  the  same  period,  the  total  tax 
differential  is  estimated  at  EUR  556.000,  mainly  registered  at  Douala  Port  (87%).  The  tax 
differential  mainly  concerns  chapter  84  (20%),  48  (20%),  28  (13%).  (Source:  Cameroon 
Customs) 

2.2 Trade in services 

Trade  in  services  between  the  EU  and  Cameroon  has  shown  some  variation  over  the  last 
years. The EPA does not cover trade in services. 

122 

Trade in Services EU-28 with Cameroon (million euro)Services201020112012201320142015Debits (imports)318344348458405414Credits (exports)747781756673910728Net (balance)430437408214506313201020112012201320142015Debits (imports)318344348458405414Credits (exports)747781756673910728Net (balance)430437408214506313Source: Eurostat (bop_its6_det/tot)13-Jan-17Prepared by DG Trade - Chief Economist Unit - Statistics sector01002003004005006007008009001,000201020112012201320142015Trade in Services EU-28 with Cameroon (million euro)Debits (imports)Credits (exports)Net (balance) 
 
                 
 
 
 
2.3 Foreign Direct Investment 

The  investment  stock  (mainly  originating  in  France)  remains  constant  over  the  last  three 
years. 

3. 

ISSUES ADDRESSED IN THE ANNUAL EPA COMMITTEE MEETING 

The second EPA Committee between Cameroon and the EU took place in December 2016 in 
Yaoundé. It discussed the state of play of implementation and related issues (rules of origin, 
liberalization, accompanying measures, etc.). The Parties signed the first Decision of the EPA 
Committee adopting its Rules of procedure. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

Given  the  important  link  between  the  EPA  and  development  cooperation  (part  of  the 
"development  dimension"  of  the  partnership),  work  has  been  ongoing  to  identify  the 
accompanying measures foreseen in the agreement as follows: 

  "Identification" of a programme of accompanying measures for the implementation of 
the Agreement, making use of the European Development Fund; Cameroon has been 
assessing  how  to  use  funds  made  available  under  the  EUR  211  million  regional 
envelope for regional integration in Central Africa. 

  Exploring a monitoring mechanism for liberalization. Such monitoring should include 

the tax implications of the liberalization process. 

In this context, it is important to note that civil society representatives have been involved in 
the meetings of the EPA Committee. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

Discussions  are  ongoing  on  updating  the  liberalization  nomenclature  (SH2002  to  SH2017). 
Negotiations are also ongoing on a common protocol of rules of origin. The main open issue 

123 

-60-40-2002040608010012002004006008001,0001,2001,4001,600200420052006200720082009201020112012201320142015FDI flows (million euro)FDI stocks (million euro)FDI between European Union (28 countries) and CameroonStocks InwardStocks OutwardFlows InwardFlows OutwardEntities: TotalSource: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013 
 
                              
 
is  the  implementation  of  the  liberalization  timetable  (2008-2023).  Contacts  are  ongoing 
between the region and the EU on accession to this EPA by other Central African States. 

6. 

CONCLUSIONS 

In  2016  Cameroon  took  important  steps  in  implementing  its  commitments,  culminating  in 
significant tariff cuts. However, given that the application period is still very short, it is too 
early to discern any impact on trade and investment flows in 2016. Implementation will also 
be  impacted  by  the  implementation  of  domestic  reforms  and  accompanying  measures. 
Uncertainty remained at the regional level as to the real intentions of the other countries of the 
region towards joining the EPA. 

124 

 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE EU-ESA EPA 

1. 

INTRODUCTION 

The agreement was signed by four ESA61 countries (Madagascar, Mauritius, Seychelles and 
Zimbabwe) and is provisionally applied since 14 May 2012. An established, functioning EPA 
Committee at ministerial or senior official level serves as a platform for dialogue in a spirit of 
partnership to overview and monitor the agreement's implementation and to take appropriate 
decisions.  

EVOLUTION OF TRADE (YEAR-TO-YEAR AND SINCE THE START OF 

2. 
PROVISIONAL APPLICATION)  

2.1 Trade in Goods  

EU trade with the four ESA EPA countries (ESA4) has overall increased by 21% during the 
last decade. The trade balance has been always positive in favour of the ESA4.  

More specifically, Madagascar shows clear benefits from EPA implementation, as its exports 
increased by 65% in the period 2012-2016. Seychelles' exports followed the same trend and 
increased  by  almost  one  third  in  the  same  period.  For  Mauritius  and  Zimbabwe,  a  slight 
decrease is registered for the same period due to reasons that should be attributed to the global 
economic conditions (their overall exports declined by 18.7% and 16.2% respectively) rather 
than to EPA implementation. Mauritius' exports to the EU remain concentrated on three main 
products,  i.e.  sugar,  textiles  and  fisheries  making  up  90%  of  the  total.  However,  a  slight 
diversification started appearing to include other products such as pharmaceutical and beauty 
make-up  products,  watches  and  medical  devices.  Zimbabwe's  main  exports  to  the  EU  are 
tobacco,  sugarcane,  fruit,  hides  and  leather,  tea,  flowers,  metals  and  granite.  Higher  value 
agricultural  products  have  been  added  (berries,  stone  fruit,  peppers  and  peas)  as  renewed 
diversification that may boost its export values in the future. 

61  Eastern  and  Southern  Africa  (ESA)  is  a  diverse  EPA  group  including  Indian  Ocean  islands  (Comoros, 
Madagascar, Mauritius and Seychelles), countries of the Horn of Africa (Djibouti, Ethiopia, Eritrea and Sudan) 
and some countries of Southern Africa (Malawi, Zambia and Zimbabwe). 

125 

Eu trade with ESA4200820092010201120122013201420152016Imports1.996.7021.692.0481.765.0212.088.9812.235.9052.449.3342.549.9212.482.8572.410.519Exports1.503.8221.275.7461.392.7921.547.2651.766.9981.825.1181.730.9511.816.1211.827.913trade balance-492.880-416.302-372.229-541.715-468.907-624.216-818.970-666.736-582.607 
 
 
                                                 
s
o
r
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0
0
0
1
n

i

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m
u
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V

l

Evolution of EU imports 

3000000,00
2500000,00
2000000,00
1500000,00
1000000,00
500000,00
0,00

2008

2009

2010

2011

2012

2013

2014

2015

2016

Zimbabwe

Madagascar

Seychelles

Mauritius

ESA4

On the import side, Zimbabwe's slightly declining figures are the sole exception to an overall 
positive trend by ESA4. Zimbabwe's imports trend may be partly explained by the difficulties 
encountered in applying their market access schedule during the first years of implementation.  

Evolution of EU exports 

2000000,00

1500000,00

1000000,00

500000,00

s
o
r
u
e
0
0
0
1
n

i

e
m
u
o
V

l

0,00

2008

2009

2010

2011

2012

2013

2014

2015

2016

Zimbabwe

Madagascar

Seychelles

Mauritius

ESA4

Comparison of ESA trade partners (EU and world-wide) 

The  EU  is,  the  largest  trade  partner  of  Seychelles,  Mauritius  and  Madagascar  for  both  their 
exports and imports. For Zimbabwe, the EU is the second largest partner for its exports and 
the fourth largest for its imports; Zimbabwe imports mainly from South Africa.   

2.2 Trade in Services and Investment  

Trade  in  services  between  the  EU  and  ESA4  has  shown  a  lot  of  variation  amongst  each 
country and over the last years [NB table will be limited to 2010-2015]. The EPA does not 
cover trade in services. 

In the last years, the EU had a negative net balance with all ESA4 but Zimbabwe. However, 
this trend is variable amongst them showing that there are different patterns of trade.  

Prepared by DG Trade - Chief Economist Unit - Statistics 
600
sector 

Trade in Services EU-28 with 
Madagascar (million euro) 

2.000

Trade in Services EU-28 with 
Mauritius (million euro) 

1.500

126 

1.000

2010

2011

2012

2013

2014

2015

500

0

-500

-1.000

2010

2011

2012

2013

2014

2015

Debits (imports)

Credits (exports)

Debits (imports)

Credits (exports)

Net (balance)

Net (balance)

400

200

0

-200

-400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
600

400

200

0

-200

-400

Trade in Services EU-28 with 
Seychelles (million euro) 

2010

2011

2012

2013

2014

2015

Debits (imports)

Credits (exports)

Net (balance)

2.3 Foreign Direct Investment  

300

250

200

150

100

50

0

Trade in Services EU-28 with 
Zimbabwe (million euro) 

Debits (imports)

Credits (exports)

2010

Net (balance)
2011

2012

2013

2014

2015

As the charts below show, outward investment stocks have increased for all but for 
Seychelles. 

FDI between European Union (28 countries) and 
Madagascar 

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

30

20

10

0

-10

-20

-30

-40

350

300

250

200

150

100

50

0

-50

)
o
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u
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n
o

i
l
l
i

m

(
s
k
c
o
t
s
I

D
F

F
D

I

f
l
o
w
s
(

m

i
l
l
i

o
n
e
u
r
o
)

Stocks Inward

Stocks Outward

Flows Inward

Flows Outward

Source: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 

128 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
20.000

18.000

16.000

14.000

12.000

10.000

8.000

6.000

4.000

2.000

0

FDI between European Union (28 countries) and Mauritius 

2.500

2.000

1.500

1.000

500

0

-500

-1.000

)
o
r
u
e
n
o

i
l
l
i

m

(
s
k
c
o
t
s
I

D
F

F
D

I

f
l
o
w
s
(

m

i
l
l
i

o
n
e
u
r
o
)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013 

Stocks Inward

Stocks Outward

Flows Inward

Flows Outward

FDI between European Union (28 countries) and Seychelles 

)
o
r
u
e
n
o

i
l
l
i

m

(
s
k
c
o
t
s
I

D
F

900

800

700

600

500

400

300

200

100

0

0

-20

-40

-60

-80

-100

-120

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Stocks Inward

Stocks Outward

Flows Inward

Flows Outward

Source: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013 

F
D

I

f
l
o
w
s
(

m

i
l
l
i

o
n
e
u
r
o
)

)
o
r
u
e
n
o

i
l
l
i

m

(
s
k
c
o
t
s
I

D
F

300

250

200

150

100

50

0

FDI between European Union (28 countries) and Zimbabwe 
50

F
D

I

f
l
o
w
s
(

m

i
l
l
i

o
n
e
u
r
o
)

40

30

20

10

0

-10

-20

2011

2012

2013

2014

2015

Flows Inward

Flows Outward

2004

2005

2006

Stocks Inward

2007

2008

2009
Stocks Outward

129 

2010

Source: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013 

 
 
 
 
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
2.3 Preference Utilisation rate  

For all four ESA countries, the preference utilisation rate is very high (two third or more) of 
their total exports to the EU, the remaining exports are MFN zero duty with the exception of 
1-2% exports with MFN non-zero duty but low enough to offset the compliance costs for the 
preferential rate. 

ISSUES ADDRESSED IN THE ANNUAL (JOINT COMMITTEE/TRADE 

3. 
COMMITTEE) MEETING  

All parties implement the agreement. The two main issues addressed by the last EPA 
Committee were: 

  continuous support to EPA implementation under both the 10th and the 11th European 

Development Fund (EDF) and, 

  agreement on modernisation of rules of origin 

4. 

SPECIFIC AREAS OF IMPORTANCE  

EPA implementation is a top priority, with all ESA4 States now having made tariff cuts and 
seeking to use EPA export opportunities. 

Development  cooperation  is  essential  for  EPA  implementation.  In  this  context  it  was  an 
important achievement when envelopes of EUR 10 million was allocated to each of the four 
EPA countries under the SADC regional programme, with Mauritius developing a project on 
ease-of-doing business and investment regulatory framework, Zimbabwe focusing on exports, 
SMEs  development  and  trade  facilitation  in  selected  value-chains,  and  Madagascar  and 
Seychelles developing proposals on value-chains and SMEs. 

The EU is supportive of accession of other ESA States to the current Agreement with a view 
to extending EPA benefits to them. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

The  ESA  States  expressed  its  interest  in  "deepening"  (new  issues)  and  "widening"  (new 
members) the existing EPA.62 Both sides agreed to jointly define the scope and objectives of 
the  deepening  before  launching  the  process.  As  for  widening,  Comoros  and  Zambia  can,  at 
any time, sign the agreement that both initialled in 2007, while the other ESA States will first 
need to submit market access offers before eventually joining the agreement.   

The market access schedules of the four ESA countries need to be transposed to HS2017 tariff 
codes. The EU has offered assistance to the ESA States. There are challenges raised by non-
tariff  measures  that  need  to  be  tackled  by  constructive  dialogue  between  the  competent 
services  and  by  appropriate  EU  support.  The  prospects  of  an  ESA4  Business  Forum,  an 

62  The  full  name  of  the  agreement,  "…interim  Economic  Partnership  Agreement…"  reflects  the  fact  that  the 
objective for economic partnership in Eastern and Southern Africa was a comprehensive, regional agreement. 
However,  by  2016  negotiations  for  a  comprehensive  regional  EPA  with  the  ESA4  and  seven  other  ESA 
countries had ground to a halt, and the Commission focused its efforts on the agreement already implemented 
by the ESA4. 

130 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                                                 
awareness-raising  EPA  seminar  in  Zimbabwe  and  specific  training  on  geographical 
indications has been raised.  

6. 

CONCLUSIONS 

In  2016  the  four  ESA  countries  continued  (Madagascar,  Mauritius,  Seychelles)  or  took 
important  steps  (Zimbabwe)  in  implementing  their  commitments,  culminating  in  significant 
tariff  cuts.  The  trade  balance  remained  positive  in  favour  of  the  ESA4,  and  there  was 
sustained  export  growth  from  Madagascar  in  particular.  This  could  develop  further  by  the 
implementation of domestic reforms and accompanying measures. Uncertainty is remained as 
to the real intentions of Comoros and Zambia to sign the EPA; Comoros was expected to sign 
the agreement by the end of 2016. 

131 

 
 
 
 
 
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF 
THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) EU-PACIFIC (FIJI, PNG)  

1. 

INTRODUCTION 

Negotiations for an EU-Pacific EPA were concluded on 23 November 2007 with Papua New 
Guinea (PNG) and Fiji – 2 of the 14 Pacific States1, representing the vast majority of regional 
exports to the EU. The EU-Pacific EPA covers trade in goods. 

The  EU  and  PNG  signed  the  EPA  on  30  July  2009  and  Fiji  on  11  December  2009.  The 
European Parliament approved the Agreement on 19 January 2011 and the PNG Parliament 
ratified it on 25 May 2011. Fiji is still to ratify the Agreement but has notified the Council of 
its provisional application as of 28 July 2014. 

The Agreement is open for accession to all Pacific Island States on the basis of the submission 
of a GATT 1994 Article XXIV compliant market access offer. 

2. 

EVOLUTION OF TRADE 

2.1 Trade in products 

Overall, the EU is the Pacific countries’ fifth largest trading partner, but trade remains very 
small in absolute and relative terms. Exports to the EU account for about 11% of the region’s 
total  exports  while  3%  of  the  region’s  imports  come  from  the  EU.  PNG  and  Fiji,  together 
represent  83%  of  all  EU  -  Pacific  trade.  As  Table  1  shows,  EU  trade  balance  with  the  two 
countries (taken together) has been largely negative over the last decade. 

Table 1: EU Trade in goods with Pacific (PNG and Fiji) 

Flows in 1000 euros 

2013 

2014 

2015 

2016 

752.042 
84.742 
836.784 
161.253 
326.704 
487.957 
-590.789 
241.962 
-348.827 

789.085 
98.686 
887.771 
129.289 
49.166 
178.454 
-659.796 
-49.521 
-709.317 

745.919 
86.313 
832.232 
118.136 
173.016 
291.152 
-627.782 
86.703 
-541.079 

676.950 
60.738 
737.688 
149.004 
60.02 
209.029 
-527.946 
-713 
-528.659 

Import 

Export 

Balance of 
trade 

PNG 
Fiji 
Pacific 
PNG 
Fiji 
Pacific 
PNG 
Fiji 
Pacific 

Source: Eurostat 

The  EU  is  an  important  trading  partner  of  PNG  and  Fiji,  ranking  behind  countries  in  the 
region (notably Australia, China and Singapore). 

While  Fiji  and  PNG's  main  exports  to  the  EU  are  commodities:  palm  oil,  copper,  sugar, 
coconut  and  fish,  their  main  imports  from  the  EU  are  mechanical  machinery,  electrical 
machinery,  vehicles  and  oil.  Exports  to  the  EU  of  processed  tuna  are  important  and  have 
potential  to  increase  in  the  future  as  a  result  of  EPA  implementation.  The  EPA  includes  a 
special derogation to the standard Rules of Origin – the so-called "global sourcing" provision 

132 

 
 
 
 
 
for processed fish that allows Pacific EPA countries to source raw material from any vessel 
(regardless  of  who  caught  the  fish,  or  where  it  is  caught).  This  exclusive  exemption 
recognises  the  importance  of  fisheries  especially  of  canned  tuna  (HS  1604)  for  long-term 
income.  It  supports  sustainable  fisheries  management  and  promotes  the  development  of 
onshore  processing  capacity  to  create  local  employment,  skills  transfer  and  income  for  the 
Pacific States. 

PNG has  enjoyed  duty-free  quota-free  access  and has  seen its exports  increase substantially 
since  2008  –  the  year  when  improved  preferences  to  the  EU  market  for  its  processed  fish 
exports  began  under  the  Agreement.  As  Chart  1  shows,  PNG  has  substantially increased  its 
processed non-originating tuna (HS 1604) exports to the EU, which accounted for 16.5% of 
PNG's total exports to the EU in 2015. 

Chart 1 

2.2 Trade in services 

At present, the EU-Pacific EPA does not cover trade in services. 

Generally,  Pacific  exports  have  not  diversified  into  other  non-traditional  exports  or  higher-
value goods. However, services (including tourism from Europe) are a major economic sector 
in many Pacific countries, with potential to expand in Fiji and PNG. 

In  the  last  years  for  which  data  were  available,  there  was  a  positive  net  balance  for  EU  as 
regards Fiji (since 2015) and PNG (since 2010). 

133 

 
 
 
 
 
Chart 2 

Chart 3 

2.3 Foreign Direct Investment 

As  Charts  4  and  5  below  show,  EU  Outward  investment  stocks  in  both  countries  have 
increased over the last three years, with no Inward investment stocks in the EU. 

134 

Trade in Services EU-28 with Fiji (million euro)Services201020112012201320142015Debits (imports)816063759656Credits (exports)5339377141197Net (balance)-28-21-26-4-56141201020112012201320142015Debits (imports)816063759656Credits (exports)5339377141197Net (balance)-28-21-26-4-56141Source: Eurostat (bop_its6_det/tot)13-Jan-17Prepared by DG Trade - Chief Economist Unit - Statistics sector-100-50050100150200250201020112012201320142015Trade in Services EU-28 with Fiji (million euro)Debits (imports)Credits (exports)Net (balance)Trade in Services EU-28 with Papua New Guinea (million euro)Services201020112012201320142015Debits (imports)1337260394873Credits (exports)217209113535186901Net (balance)8413753496137829201020112012201320142015Debits (imports)1337260394873Credits (exports)217209113535186901Net (balance)8413753496137829Source: Eurostat (bop_its6_det/tot)13-Jan-17Prepared by DG Trade - Chief Economist Unit - Statistics sector01002003004005006007008009001.000201020112012201320142015Trade in Services EU-28 with Papua New Guinea (million euro)Debits (imports)Credits (exports)Net (balance) 
 
 
 
 
 
Chart 4 

Chart 5 

3. 

ISSUES ADDRESSED IN THE ANNUAL EPA COMMITTEE MEETINGS 

Four meetings of the Trade Committee established under the EPA have taken place between 
the  Parties  to  the  Agreement.  The  last  Committee  (2015)  discussed  the  state  of  play  of  the 
implementation  (tariff  schedules)  and  ratification,  its  rules  of  procedure,  issues  of 
environmental  protection  and  effective  fisheries  conservation,  agricultural  issues,  possible 
areas for deepening cooperation under the EPA and accession issues. 

4. 

SPECIFIC AREAS OF IMPORTANCE 

135 

-20-1001020304050020406080100120140160200420052006200720082009201020112012201320142015FDI flows (million euro)FDI stocks (million euro)FDI between European Union (28 countries) and FijiStocks InwardStocks OutwardFlows InwardFlows OutwardEntities: TotalSource: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013-150-100-5005010015020025030002004006008001.0001.200200420052006200720082009201020112012201320142015FDI flows (million euro)FDI stocks (million euro)FDI between European Union (28 countries) and Papua New GuineaStocks InwardStocks OutwardFlows InwardFlows OutwardEntities: TotalSource: Eurostat (bop_fdi_main, 16/7/2015; bop_fdi6_flow and bop_fdi6_pos, 15/12/2016). (b) Break in series in 2013 
 
 
 
EPA implementation is a top priority, with PNG having made all its tariff cuts but seeking to 
extend export diversification beyond the fisheries sector. 

Development cooperation is essential for EPA implementation, although it is not part of the 
Pacific-EU  EPA  or  its  accession  process.  Regional  trade,  business  environment  and  private 
sector  involvement  also  ranked  as  priorities  in  the  regional  envelope  of  EUR  50  million 
earmarked for the Pacific region. 

The  EU  is  supportive  of  accession  of  other  Pacific  States  to  the  current  Agreement  with  a 
view to extending EPA benefits to them. 

5. 

MAIN OPEN ISSUES AND FOLLOW-UP ACTIONS 

No Trade Committee could be held in 2016. Nevertheless, it is important to convene another 
meeting  with  PNG  and  Fiji  (the  second  one  with  both  of  them)  to  follow  up  on  the  above 
implementation issues as well as technical matters (tariff classification update etc.). 

In the meantime, Solomon Islands and Samoa have officially declared their interest to join the 
current EPA. 

6. 

CONCLUSIONS 

Although  the  overall  volume  of  trade  in  goods  with  the  EU  is  small,  it  is  important  for  the 
Pacific States as they develop non-traditional exports. In particular they have strong interest in 
safeguarding  their  rights  to  sell  processed  fisheries  to  the  EU  market  by  exploiting  the 
improved  rules  of  origin,  subject  to  compliance  with  sustainable  fisheries  management, 
technical standards and food safety requirements. 

Effective implementation, coupled with corresponding domestic reforms especially in areas of 
trade facilitation and improvement of business climate would enable the Pacific States to take 
full advantage of the Agreement including developing further investment stocks towards trade 
in goods and services with the EU. 

136