REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Review of the scope of the Regulation No 654/2014 of the European Parliament and of the Council of 15 May 2014
Date: 2019-12-12
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: World Trade Organisation, common commercial policy, infringement of EU law, international agreement, international trade, settlement of disputes, third country, trade agreement (EU), trade dispute

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.12.2019  COM(2019) 639 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Review of the scope of the Regulation No 654/2014 of the European Parliament and of the Council of 15 May 2014  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 
AND THE COUNCIL 

Review of the scope of the Regulation No 654/2014 of the European Parliament and 
of the Council of 15 May 2014 

1. 

INTRODUCTION 

This  report  concerns  Regulation  (EU)  No  654/2014  of  the  European  Parliament  and  of 
the Council of 15 May 2014 (the Enforcement Regulation)1, which provides the rules and 
procedures  to  ensure  an  effective  and  timely  exercise  of  the  European  Union’s  rights 
under international trade agreements. The Enforcement Regulation enables the European 
Union to  suspend or withdraw obligations under the World Trade Organization (WTO) 
Agreement  and  other  international  trade  agreements,  including  regional  and  bilateral 
agreements  following  the  adjudication  of  trade  disputes  under  respective  agreement.  It 
also empowers the Commission to rebalance obligations in accordance with Article 8 of 
the  WTO  Agreement  on  Safeguards  or  with  provisions  on  safeguards  in  other 
international agreements, and to respond to modifications of concessions applied by other 
WTO members as provided for in Article XXVIII of the GATT.   

The suspension or withdrawal of obligations can lead to EU commercial policy measures 
enacted  through  an  implementing  act  following  the  examination  procedure.  These 
measures  include  (i)  the  suspension  of  tariff  concessions  and  the  imposition  of  new  or 
increased customs duties; (ii) the introduction or increase of quantitative restrictions on 
imports of goods  through quotas, import or export licences or other measures;  and (iii) 
the suspension of concessions regarding goods, services or suppliers in the area of public 
procurement.  

2.  REVIEW REQUIREMENT 

In  Article  10  of  the  Enforcement  Regulation,  the  European  Commission  was  tasked  to 
review  the  scope  of  the  Regulation,  in  particular  the  commercial  policy  measures  that 
may  be  adopted,  and  its  implementation,  and  to  report  its  findings  to  the  European 
Parliament  and  the  Council.  Following  the  initial  review  (Article  10(2)  of  the 
Regulation), which took  place in July 2017, the review pursuant to Article 10(1) of the 
Regulation was scheduled for 18 July 2019.  

At  the  time  the  review  was  conducted,  it  emerged  that  there  was  a  need  to  amend  the 
Regulation.  Accordingly,  the  report  on  the  review  is  now  presented  together  with  a 
legislative proposal for the amendment of the Regulation.   

1   Regulation  (EU)  No  654/2014  of  the  European  Parliament  and  of  the  Council  of  15  May  2014 
concerning the exercise of the Union's rights for the application and enforcement of international trade 
rules (OJ L 189 27.6.2014, p. 50). 

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3.  REVIEW  OF  THE  SCOPE,  COMMERCIAL  POLICY  MEASURES  AND  IMPLEMENTATION 

OF THE ENFORCEMENT REGULATION 

3.1.  Scope of the Regulation 

Article  3  of  the  Enforcement  Regulation  provides  for  situations  in  which  the 
Enforcement Regulation applies and the EU has the right to apply countermeasures. The 
EU can apply these only (1) following a binding adjudication of a trade dispute, in favour 
of  the  EU,  (2)  for  the  purpose  of  EU  rebalancing  measures  in  reaction  to  a  safeguard 
measure  imposed  by  another  country  as  foreseen  under  applicable  international  trade 
rules, or (3) when a WTO member modifies or withdraws its concessions under Article 
XXVIII of the GATT 1994 and no compensatory adjustment is agreed.  

3.1.1.  Following a binding adjudication of trade dispute in favour of the EU 

The first situation in which the Enforcement Regulation can be applied is when a dispute 
settlement procedure in the WTO or under other international trade agreements resulted 
in  binding  adjudication  of  the  trade  dispute,  and  gives  rise  to  an  EU  right  to  suspend 
obligations because of non-implementation by the losing party.  

In the period subject to review, no such case occurred, however, following the adoption 
of the Appellate Body report on compliance in the ongoing Boeing dispute at the WTO2 
in  April 2019, which confirmed that the United States’ subsidies to Boeing continue to 
cause significant  harm to Airbus, the Commission launched a public consultation3  on a 
preliminary  list  of  products  from  the  United  States  on  which  the  Union  may  take 
countermeasures. WTO arbitration on the level of countermeasures is currently ongoing. 
Public  consultations  are  the  first  step  towards  the  imposition  of  commercial  policy 
measures under the Enforcement Regulation.   

As is well known, the WTO Appellate Body is in a crisis situation. The Regulation has 
been  designed,  as  far  as  the  WTO  is  concerned,  on  the  premise  of  a  fully  functioning 
dispute settlement mechanism, including WTO Appellate Body review, which leads to a 
final  and  binding  adjudication.  Over  the  last  two  years,  this  certainty  has  come  under 
increasing threat  by the  blockage of the appointment of new Appellate  Body  members. 
The WTO Appellate Body cannot work on appeals with fewer than three members. As of 
11 December 2019, the number of Appellate Body members is down to one. Upcoming 
panel reports can then be appealed “into the void”, which would deprive the parties of a 
definitive, binding and enforceable decision.  

While the EU developed contingency measures in the form of an “interim arrangement”, 
which  aims  at  replicating  the  WTO  appellate  mechanism  through  the  arbitration 
proceedings  provided  under  Article  25  of  the  WTO  Dispute  Settlement  Understanding, 
this arrangement is not automatic and the EU has no guarantee that the other party will 
agree to it.  

The  review  of  the  scope  of  the  Enforcement  Regulation  concerning  other  international 
trade  agreements  identified  another  challenge.  A  similar  situation  of  a  blocked  dispute 
settlement may arise also under other trade agreements, including regional and bilateral  

2   United States — Measures Affecting Trade in Large Civil Aircraft — Second Complaint (DS353). 
3   WTO  Boeing  dispute:  EU  issues  preliminary  list  of  U.S.  products  considered  for  countermeasures; 

https://ec.europa.eu/commission/presscorner/detail/fi/ip_19_2162 

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ones,  when  a  third  country  does  not  cooperate,  as  necessary,  for  binding  dispute 
settlement mechanism to function. For instance, when the other party does not appoint an 
arbitrator and no fall-back mechanism remedies that situation, the EU would not be able 
to obtain a binding ruling that can be enforced.  

As  the  Enforcement  Regulation  can  only  be  used  following  binding  adjudication,  the 
objective of the Regulation, which is to equip the EU with the instruments necessary to 
react effectively and swiftly to illegal measures of third countries and to protect the EU’s 
economic  interests,  cannot  be  achieved.  This  gap  needs  to  be  addressed  and  the 
Regulation updated so as to face these challenges. 

3.1.2.  Rebalancing measures in response to a third country’s safeguard  

The  second  situation  in  which  the  Enforcement  Regulation  can  be  applied  covers 
rebalancing  measures  when  a  third  country  imposes  a  safeguard  measure  without 
agreeing with the EU on compensation.  

So  far,  the  Regulation  has  been  used  once  for  this  purpose,  namely  in  response  to  the 
import  duties  on  steel  and  aluminium  imposed  by  the  United  States  in  2018.  The  EU 
introduced rebalancing measures in the form of additional tariffs on a number of products 
imported  from  the  US4.  Procedurally,  the  adoption  of  the  implementing  act  imposing 
rebalancing measures took in total two months, which was the deadline imposed by  the 
WTO  Agreement.  Owing  to  the  Enforcement  Regulation,  the  EU  was  able  to  swiftly 
respond  to  the  US  safeguard  measures  and  defend  the  EU’s  economic  interests.  It  can 
therefore be concluded that the Enforcement Regulation proved to be of great utility and 
a crucial part of the EU’s reaction to the US steel and aluminium measures.  

3.1.3.  Modification of concessions under Article XXVIII of the GATT 1994 

The  third  situation  for  the  application  of  the  Enforcement  Regulation  is  another  WTO 
member’s modification of concessions under Article XXVIII of the GATT 1994 without 
having  agreed  on  compensation  with  the  EU.  In  the  reviewing  period,  no  such  case 
occurred.  The  regulation  may  nevertheless  have  played  a  role  in  this  area  because  the 
mere existence of the Regulation signals to other WTO members that the EU is capable 
of  availing  itself  of  its  rebalancing  rights  under  Article  XXVIII  if  no  compensation  is 
agreed, for which a strict deadline applies as well.  

3.2.  Commercial Policy measures and implementation so far 

Article  5  of  the  Enforcement  Regulation  provides  a  list  of  countermeasures,  so  called 
commercial  policy  measures,  which  can  be  used  when  the  EU  has  the  right  to  react  to 
trade barriers of the other party. The list provides for three types of EU measures, namely 
(a) the suspension of tariff concessions and the imposition of new or increased customs 
duties; (b) the introduction or increase of quantities restrictions on imports or exports of 
goods; and (c) the suspension of concessions in the area of public procurement.  

4   These measures were introduced through Commission Implementing Regulation (EU) 2018/724 of 16 
May  2018  on  certain  commercial  policy  measures  concerning  certain  products  originating  in  the 
United States of America (OJ L 122, 17.5.2018, p. 14–28) and Commission Implementing Regulation 
(EU) 2018/886 of 20 June 2018 on certain commercial policy  measures concerning certain products 
originating  in  the  United  States  of  America  and  amending  Implementing  Regulation  (EU)  2018/724 
(OJ L 158, 21.6.2018, p. 5–18). 

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The  review  of  this  part  of  the  Regulation  took  particular  account  of  the  use  of  the 
Enforcement  Regulation so far.  In the case of  US additional import duties on steel  and 
aluminium, the EU replied to the US measures in the form of increased imports tariffs on 
a number of products imported from the US. The Regulation proved to be very effective 
both  in  terms  of  timing,  namely  by  responding  quickly  to  the  US  measure  as  well  as 
meeting the tight WTO deadlines for the adoption of the implementing act and in respect 
of  the  range  of  measures  that  were  at  the  EU’s  disposal.  The  EU  imposed 
countermeasures  in  the  amount  of  the  total  value  of  the  US  measures  subject  to 
rebalancing,  with  however  the  application  of  a  significant  part  of  the  EU  rebalancing 
measures postponed to three years after the introduction of the US duties, as required by 
Article  8.3  of  the  WTO  Agreement  on  Safeguards.  This  re-established,  to  the  extent 
permitted by the WTO Agreement, the balance of reciprocal concessions and benefits in 
the  trade  relations  between  the  US  and  the  EU.  This  also  confirmed  the  effectiveness, 
suitability  and  importance  of  the  Enforcement  Regulation  for  the  EU’s  ability  to  react 
and defend its economic interests in a prompt and efficient manner. 

The  other  two  types  of  measures  allowed  by  the  Enforcement  Regulation  –  the 
introduction  or  increase  of  quantitative  restrictions  on  imports  or  exports  of  goods  and 
the suspension of concessions in the area of public procurement, have not yet been tested 
but remain available for future use.  

Further to that, while the Regulation does not cover other possible measures, especially 
in  the  area  of  services  or  intellectual  property,  the  Commission  considers  that  its 
evaluation  in  its  early  assessment  in  2017  pursuant  to  Article  10(2)  of  the  Regulation 
remains  valid  at  this  stage.  This  review  concerned  specifically  commercial  policy 
measures  that  can  be  adopted  under  the  Regulation.  At  this  moment  the  Commission 
does not see the need and utility of an expansion of the Regulation in this respect. That is 
in particular the case because the review has shown that, for the time being, and based on 
the use of the Regulation to date, there is a sufficient range of effective measures at the 
disposal of the EU to protect the EU’s interests also in future cases of application of the 
Regulation.  It  also  needs  to  be  recalled  that  two  other  types  of  measures  are  possible 
under the Regulation and so far have not been used, but remain available in the future. 
The Commission considers it important to continue monitoring and reviewing the range 
of measures available and their utility. Such review should be based on both future cases 
of application, and other developments that may have implications on the effectiveness of 
the Enforcement Regulation in the wider context. 

4.  CONCLUSION 

In conclusion, while so far used only once, the Enforcement Regulation proved to be an 
essential  instrument  for  protecting  the  EU’s  economic  interests  in  reaction  to  trade 
barriers imposed by third countries. Although limited, the practice has shown that the EU 
can  react  swiftly  and  effectively,  thanks  to  the  existence  of  the  Regulation.  The 
Commission  considers  that,  beyond  the  Regulation's  application  so  far,  the  mere 
existence  of  the  Regulation  is  having  an  important  impact,  as  it  is  sending  a  strong 
message of the EU’s ability to defend its rights. The limited use of the Regulation in the 
review period could, in part, be attributed to the procedural stage at which trade disputes 
were. The enforcement stage is a very advanced phase in a trade dispute, which only few 
disputes reach given that most are satisfactorily resolved much earlier.  

The  emerging  challenges  surrounding  the  institutional  crisis  at  the  WTO  in  relation  to 
dispute  settlement  as  well  as  possible  weaknesses  of  dispute  resolution  under  other 

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international trade agreements raise concerns as to the effectiveness of the Regulation as 
currently set up. The Commission therefore considers it necessary to amend the scope of 
the situations in which the Enforcement Regulation can be used, so as to ensure that the 
EU  can  effectively  defend  its  economic  interests  also  in  the  future.  In  line  with  the 
proposal  for  amendment,  the  Commission  will  continue  to  monitor  the  overall  use  and 
utility of the Regulation.  

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