WORLD TRADE WT/TPR/M/3
4October 1995
ORGANIZATION(95-2910)
Trade Policy Review Body
24-25 July1995
TRADE POLICY REVIEW
EUROPEAN UNION
MINUTES OFMEETING
Chairman: Mr.Nestor Osorio Londoño
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRMAN 2
II. OPENING STATEMENT BYREPRESENTATIVES OFTHE EUROPEAN UNION 3
III. STATEMENT BYTHE FIRST DISCUSSANT 5
IV. STATEMENT BYTHE SECOND DISCUSSANT 7
V. STATEMENTS BYMEMBERS 9
VI. REPLIES BYTHE REPRESENTATIVE OFTHE EUROPEAN UNION
AND ADDITIONAL COMMENTS 16
VII. CONCLUDING REMARKS BYTHE CHAIRMAN 22
ANNEX -Written Statement bytheRepresentative oftheEuropean Union 26WT/TPR/M/3 Trade Policy Review
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I. INTRODUCTORY REMARKS BYTHE CHAIRMAN
1. TheChairman, introducing thethirdreview oftheEuropean Union, welcomed thedelegation
oftheEuropean Union, thediscussants (Ambassador Srinivasan Narayanan, India, andAmbassador
Carmen LuzGuarda, Chile), andmembers oftheTrade Policy Review Body (TPRB). TheTPRB
wastobaseitswork ontworeports, onesubmitted bytheEuropean Communities (WT/TPR/G/3)
andtheother bytheWTO Secretariat (WT/TPR/S/3). Alarge number ofdelegations hadsubmitted
advance questions inwriting.
2. Based onanadhocarrangement applying tomeetings oftheGeneral Council, theTPRB decided
toinvite FAO, IMF, OECD, UNCTAD andtheWorld Bank asobservers tothisandthefollowing
meeting.European Union WT/TPR/M/3
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II. OPENING STATEMENT BYREPRESENTATIVES OFTHE EUROPEAN UNION
3. Ambassador Jean-Pierre Lengstressed theunique nature oftheprocess ofEuropean integration,
moving from acustoms union towards fulleconomic andmonetary union. Theunderlying policy
objectives had,however, remained unchanged; theEUwascommitted toopen markets, enhanced
transparency andstrengthened multilateral rulesanddisciplines. Heemphasized theimportance attached
bytheEUtothemultilateral trading system, asrecently evidenced byitsefforts toreach amultilateral
agreement ontheliberalization offinancial services. TheEUwasfullyaware ofthevalue ofTrade
Policy Reviews, which provided aforum forcollective policy assessment andevaluation.
4. Mr.Roderick Abbott fromtheEuropean Commission noted thattheEUwasthefirstofthe
fourmajor trading entities tobeexamined under WTO provisions, covering "new" areassuchasservices
andtrade-related aspects ofintellectual property rights (TRIPS). Inthefirstyearofitsexistence, it
wasparticularly important fortheWTO toassert itself astheforum fortrading partners todiscuss
common interests andsolve divergencies under multilateral rules.
5. Thereport bytheEuropean Communities, complementing thereport bytheWTO Secretariat,
presented policy elements which bestcharacterized therôleoftheEuropean Union asatrading entity.
Numerous developments hadtaken place since theprevious review inMay1993. TheEUhadmoved
ahead withthefullimplementation oftheSingle Market, thedevelopment oftheTreaty onEuropean
Union (the"Maastricht Treaty") andtheAgreement ontheEuropean Economic Area(EEA) withfive
EFTA countries. Economic integration bothinside theEUandwithEEA partners wentfarbeyond
thelevels achieved under traditional trading arrangements.
6. Work hadalsocontinued ontheestablishment ofanewEuropean architecture, based on
arrangements fortrade andbroader integration withcountries incentral andeastern Europe. Inthis
context, Bulgaria, theCzech Republic, Hungary, Poland, Romania andtheSlovak Republic benefitted
from aso-called "pre-accession" strategy. Freetrade agreements hadalsobeenconcluded withthe
Baltic States. Inaddition, relations withother Republics oftheformer Soviet Union hadbeenre-
examined andre-established intheformofPartnership andCo-operation Agreements, andanewform
ofpartnership wasbeing developed withMediterranean countries.
7. Other important changes were theimplementation oftheUruguay Round results, including
thefirstround oftariff cuts,andtheaccession ofAustria, Finland andSweden.
8. Three main "lignes deforce" could bedistinguished inthese developments:
First, EUharmonization equated withliberalization. Thecompletion andconsolidation ofthe
Single Market hadconfirmed theliberal thrust ofthe1992 programme across virtually all
manufacturing industries. Harmonization hadruninparallel withliberalization toattain a
uniformrégimethroughreducing,andeventuallydismantling,internalbarriers.Internalreforms
inareas suchaspharmaceuticals ortelecommunications notonlybenefitted EUsuppliers, but
opened theinternal market tothirdcountry industries.
Second, elements ofanewEuropean architecture hademerged withtheapplication oftheSingle
Market toanenlarged European Union, theEuropean Economic Area, anexpanded network
ofEurope Agreements, andtheEuro-Mediterranean Partnership. Thisnetwork oftrading
arrangements responded tofundamental issues suchasstability ofdemocracy, transition towards
market economy, migration, andsustainable development. After aslowstart, unprecedentedWT/TPR/M/3 Trade Policy Review
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trade expansion hadoccurred between central andeastern European countries andtheEUand
therestoftheworld. TheCommunity 'spreferential andregional tradearrangements constituted
anopen form ofregionalism, complementary toliberalization within theWTO. The
GATT/WTOexplicitlyallowedforsuchregionalschemes,andanincreasingnumberofcountries
inother regions oftheworld were appreciating theensuing trade effects. Anyconcern that
theworld might besplintering intotrade blocs appeared devoid ofempirical evidence; the
share ofintra-regional tradeintotaltradeofthethreemaingeographic trading zones had,with
theexception oftheJapan/Pacific zone, remained largely stable overtime. Asia'sexperience
demonstrated thatregional integration agreements werenotaprecondition forincreasing intra-
regional trade.
Third,theEuropeanUnion,astheworld'slargesttradingentity,adheredstronglytotheprinciple
ofmultilateralism. Ithadgenuinely global trade interests, reflected initsconsistent support
foranopen multilateral system. TheUnion 'srôleintheUruguay Round hadbeengeared
togenerating market opening, increasing geographical andsectoral coverage, andimproving
rule-baseddisciplines.Favouringamoreinstitutionalizedtradingsystem,theEUhadrepeatedly
rejected unilateralism. Itsnewtradedefence instrument -theTrade Barriers Regulation -was
clearly subordinated toWTO dispute settlement mechanisms. TheEUhadalsotriedtobe
more responsive thanothers toconcerns ofdeveloping countries related toissues suchasthe
useofArticle XVIII, TRIMs andcross-retaliation. Possibly duetoitsplurilateral nature, the
EUhadoften beenabletomediate between industrialized anddeveloping countries.
9. TheEUassumed thatallWTO members hadaclear interest inensuring theeffective
implementation oftheUruguay Round results. These entailed notonlytariff reductions andquota
eliminations, butawhole setofcommitments onrulesandprocedures. Asgrowth intheservices sector
wasoutpacing thatofmerchandise trade, theconclusion ofoutstanding negotiations onbasic
telecommunications andmaritime transport wasintheurgent collective interest ofallWTO members.
Obvious priorities ontheagenda fortheSingapore Ministerial Conference werethelinksbetween trade
andenvironment, andtradeandinvestment. Given themutually reinforcing nature oftradeandforeign
directinvestment,theWTOwasthebest-suitedforumtostartdiscussions,andinduecoursenegotiations,
onworld-wide investment rules.
10. TheEUhadreceived alarge number ofwritten questions, some ofwhich wereverydetailed,
before thereview meeting. Hisanswers would begeneral soasnottodisturb thereview exercise.
Certain issues could bemore appropriately pursued inother forasuchastheWorking Party onthe
enlargement oftheCommunity orintheCommittee onAgriculture.European Union WT/TPR/M/3
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III. STATEMENT BYTHE FIRST DISCUSSANT
11. Thefirstdiscussant (Ambassador S.Narayanan) pointed totheEuropean Union 'srecent
economic recovery, underpinned byincreasing exports, strong productivity growth andmore buoyant
world markets. Unemployment remained amajor concern, although widedifferences existed among
member States.
12. Trade liberalization bytheEUhadbenefitted fromcommitments intheUruguay Round and
theelimination intheSingle Market process ofrestrictions maintained byindividual member States.
Hewondered,however,whethertheUnion'srecentenlargementanditsexpandingnetworkofpreferential
arrangements could beconsidered asliberalizing trade. Abodyofopinion heldthatthese agreements
andarrangements weretradediverting rather thantradecreating. Thepresent GATT/WTO mechanism
fortheirexamination andevaluation wasnotverysatisfactory.
13. Asamajor trading entity withaninfluential rôleinthemultilateral system, theEUshould
notmaintain enclaves ofindustrial protection. Assistance to"sensitive" industries, suchastextiles,
steelandautomobiles, should bephased-out. While theEUhadanobligation toimplement the
Agreement onTextiles andClothing strictly andfully, itsfirstphase ofintegration wasnotvery
promising. Though conforming totheprescribed levelofintegration, theUnion hadincluded products
generally notunder restraint, thusmissing anopportunity forindustrial adjustment. Theburden was
accordingly shifted tosubsequent integration stages. Noting thatsuppliers incertain central andeastern
European countries would facenoquotas by1998, hesuggested thattheEUdesigned thesecond and
thirdintegration stages inawaythatmitigated adverse effects ondeveloping countries.
14. Services werebecoming anincreasingly important component ofexternal trade. Current EU
rules inareas suchasbanking, insurance andairtransport contained reciprocity provisions which,
although never invoked, might beincompatible withthebasic m.f.n. principle enshrined inGATS.
Harmonizationandmutualrecognitionofservices-relatedstandardswereparticularlyimportanttoensure
theopenness oftheEUmarket. Differences inlabour legislation among member States deserved
particular attention asconcrete andspecific commitments weredifficult toobtain incountry schedules.
Inaddition, economic needs tests, andtheirsubjective interpretation, could actasimpenetrable access
barriers.
15. TheSecretariat hadnoted, thatthenewEUregulations foranti-dumping, countervailing and
safeguard measures incorporated therelevant WTO provisions withsome additions andmodifications.
Safeguard actions remained subject toqualified majority approval bymember States. Bycontrast,
thethreshold foranti-dumping andcountervailing duties hadbeenreduced tosimple majority voting,
withpotential implications forthefrequency ofapplication. Inthelightoftheimproved WTO dispute
settlement mechanisms, hequestioned theneedfortheEUtointroduce itsTrade Barriers Regulation
outside themultilateral framework.
16. Theproliferation intheEUoftrade measures forenvironmental purposes -including eco-
labelling, packaging, production andprocessing standards -involved ahostofproblems fortrading
partners. While frequently voluntary, thesemeasures could adversely affect market access, particularly
ofdeveloping country exports suchastextiles, clothing, footwear andchemicals. Allsuchinitiatives
should bebased ontransparent, scientific, objective andequitable criteria.
17. Inconclusion, hereiterated theEU'sresponsibility forupholding thebasic principles ofthe
multilateral trading system. TheWTO Agreements, which allowed theUnion toprotect itsownWT/TPR/M/3 Trade Policy Review
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commercial rights, should bestrictly adhered to;anyadditional mechanisms werebothunnecessary
andundesirable. TheEUshould allow foranexternal assessment ofitscomplicated andoften
discriminatory network ofpreferential arrangements; further extensions orenlargements should take
intoaccount therights andinterests ofalltrading partners.
18. TheEUshould examine itssystem ofnon-tariff measures andadministrative arrangements,
including licensing requirements, withaviewtoeliminating tradebarriers andsimplifying complicated
procedures. Intheareaoftrade andenvironment, theEUwascalled upon tostrive formultilateral
disciplines andrefrain fromtrade measures which could adversely affect market access ofdeveloping
countries. While theUnion hadcontributed actively intheUruguay Round toliberalizing trade and
strengthening themultilateral system, itshould continue toplaythisrôleinpresent andfuture trade
negotiations.European Union WT/TPR/M/3
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IV. STATEMENT BYTHE SECOND DISCUSSANT
19. Thesecond discussant (Ambassador C.L.Guarda) noted thattheEUmaintained threedifferent
levels ofintegration ortradeliberalization: theSingle Market withacommon commercial policy and
freecirculation ofproduction factors, recently extended toEEAparticipants; association agreements
withcountries incentral andeastern Europe aswellasreciprocal freetrade agreements withsome
Mediterranean countries; andnon-reciprocal tradeagreements withcountries innorth Africa andAsia,
theCaribbean andthePacific (ACP).
20. TheSingle Market hadpositive effects forthirdcountry exporters nowfacing alarge market
withharmonized customs procedures andtechnical, sanitary andphytosanitary rules. Empirical studies
fortheECcustoms union showed that,intheindustrial sphere, trade creation hadoutweighed trade
diverting effects. Market forces hadcontributed tohigher growth asimproved resource allocation
hadresulted inefficiency andproductivity gains andm.f.n. tariffs hadbeenreduced asaresult of
successive multilateral trade negotiations.
21. DuetotheCommon Agricultural Policy (CAP), however, intra-Community tradeinagricultural
products hadnotbeenaccompanied bysimilar growth inexternal trade. Theexpansion ofCommunity
productionhadsubstantiallyreducedtheneedtoimport.Multilateralnegotiationstoliberalizeagriculture
hadproceeded onlyslowly.
22. AssociatedcountriesbenefittedtoalargeextentfromtheSingleMarket,althoughsomeactivities,
mostly linked toagriculture, were covered bymore restrictive sectoral agreements. While not
participating inthe"acquis communautaire ",these countries could nevertheless reach amarket of
370million people. Non-beneficiaries ofthese schemes, inparticular developing countries exporting
agricultural products andtextiles, hadtheoption toseekforms ofassociation, further integration among
themselves, orpromote multilateral trade liberalization within theWTO.
23. Shestressed theimportance ofGATT Article XXIV andGATS Article Vforverifying the
compliance ofcustoms unions andfreetrade agreements with WTO rules and,thus, minimize
discriminatory andrestrictive trade effects. Overall, theEuropean Union hadgiven valuable support
toastrengthened multilateral trading system.
24. Recent changes totheUnion 'sGSPscheme wereofgeneral concern todeveloping countries.
Thenewspecializationanddevelopmentindicescouldleadtodiscriminationbetweendevelopingcountries
competing forthesamemarket; theindices would favour producers ofrawmaterials andlow-processed
goodswhilepenalizingmoreadvancedsuppliers.Shehopedthatcriteriaforselectingcountriesdeserving
'special treatment 'would notproliferate intheWTO. Shealsofeltthataccording special incentives
onsocial andenvironmental grounds could haveambiguous effects; non-complying countries would
beunable tofinance required investment viaexport expansion. Itwasalsoimportant toensure that
theapplication ofrules oforigin didnotnullify orimpair preferences.
25. While accounting forlessthan3percentofGDPintheEU,agriculture hadproved acontinuous
source ofdiscontent among non-member countries. Criticism hadnotonlybeenvoiced attheslow
paceofreforms but,increasingly, theadverse environmental impact oftheCAP. The1992reforms,
essentially covering cereals, oilseeds andbovine meat, marked thefirststepfromprice-based support
todirect payments toproducers.WT/TPR/M/3 Trade Policy Review
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26. Uruguay Round commitments capped subsidy payments andreduced thescope forborder
protection.Stockshadfallenconsiderablyinsectorsunderreform.Whileacknowledgingtheimportance
ofset-aside schemes, sheenquired whether therelevant areatargets hadbeenmetandwhether there
hadbeenmodifications.Pointingtorelativelysuccessfulreformsinthebovinemeatsector,shewondered
whether similar measures were planned forother meat categories tocomply withUruguay Round
commitments. Liberalization ofthedairy sector wasparticularly needed astheexisting system ofrigid
production quotas implied highcosts.
27. Sugar hadnotbeenincluded intheCAPreforms, perhaps because ofthe'self-financing 'nature
ofthemarket organization. However, thesystem implied major transfers from EUconsumers to
producers, while highm.f.n. tariffs, coupled withpreferential quotas, generated distortions inworld
markets. Thenewmarket organization forhorticultural products, applicable from 1July1995, was
based onrelatively lowm.f.n. tariffs, butsupplemented bystandardized minimum import prices.
Sheurged theEUtoensure theconsistency ofitsimport régime withWTO rules, including the
provisions forcustoms valuation incases where actual transaction values weredismissed ordoubted.
28. TheCommon Fisheries Policy would encompass Spain andPortugal from1996. Hightariffs
andtariff escalation persisted; safeguard actions andquotas oncanned sardines andtunaillustrated
thesensitivity ofthesector. Noting thattheEUwasharmonizing sanitary controls, shequeried about
thetimetable andtheenvisaged levelofstandardization. Some countries wereconcerned thattheEU's
bilateral fisheries agreements contained preferential tariff provisions inconsistent withtheWTO.
29. While competition policies werenotformally covered bytheWTO Agreements, recent trade
disputes hadhighlighted theneedtoexamine theirimpact within theWTO. IntheEuropean Union,
competition policy served toensure thattradeliberalization among member States would notbenegated
byrestrictive business practices ormergers. Provisions limiting suchabusive practices wereparticularly
important inservices areas characterised bythepresence ofdominant operators. However, the
Commission appeared totolerate restrictive arrangements insectors facing significant technological,
structural orregulatory changes. Inaddition, theCommon Agricultural Policy wasexempt fromthe
general rules.
30. Theco-existence ofCommunity rules andnational legislation incompetition policy pointed
toaneedforharmonization. Additional problems could result fromthedivision ofcompetence between
theCommission andmember States. Shefurther enquired whether thecompletion oftheCommon
Market hadstimulated industrial concentration.European Union WT/TPR/M/3
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V. STATEMENTS BYMEMBERS
31. Therepresentative ofArgentina expressed concern about thedeclining share ofextra-EU in
totaltrade. Theaccession ofAustria, Finland andSweden andtheprospect offuture enlargements
raised questions about thetreatment under WTO provisions. Intheimplementation ofUruguay Round
commitments,theEU'suseofstandardminimumimportpricesforcereals,fruitandvegetablesappeared
inconsistentwithagreedrulesandcommitmentscontainedintheCommunity'sUruguayRoundSchedule.
Hestressed thattheBlair House agreement between theEUandtheUnited States hadbeen
multilateralized; inthiscontext, Argentina could share inthetariff quota onmaize.
32. Hewondered howagricultural products could circulate freely intheSingle Market when subject
tospecific national controls, andnoted thattheEUhadnotified theCommittee onSanitary and
Phytosanitary Measures ofenquiry points tobemaintained bytheCommission andeachmember State.
Noting thatsmall farms wereexempt fromlandset-aside, heasked about theirshare intotalEUcrop
production. Additional written questions hadbeensubmitted prior tothemeeting.
33. Therepresentative oftheCzech Republic complimented theEUforitscontinuous commitment
toanopenandstable trade régime aswellastheleadership shown inthefinalphase oftheUruguay
Round andrecent negotiations onfinancial services. Healsowelcomed theEU'sprompt notification
oftheimplementation ofUruguay Round obligations andinvited theEUdelegation tocomment on
assumptionsthattheAgreementonAgriculturehadonlylimitedimpactonfutureagriculturalproduction.
34. TheEUcontinued tobeoneofthemostfrequent users ofanti-dumping procedures. Given
thattheirmere initiation could haveadverse effects ontrade, headvised amore restrictive policy
approach; anti-dumping actions initiated shortly before theexpiry ofother trade restrictions were
particularly troublesome. Heasked theEUrepresentative tocomment onallegations thatforeign
companies orgovernments hadmoderated exports ofsensitive products toensure harmonious trade
relations andavert defence actions, andwondered howanysuchpractices squared withtheprinciples
ofopenandnon-managed trade.
35. Over thepasttwoyears, theEUhadbeenamajor stabilizing factor inthereorientation and
liberalization oftradeincountries withEurope Agreements. However, theEUenjoyed atradesurplus.
Herequested more details oninitiatives toharmonize rules oforigin andallow forpan-European
cumulation, toshare know-how inexport promotion, andtoencourage theadoption ofEUnorms and
standards. Thepreparation oftheassociated countries foraccession totheEUwasfullycompatible
withthespirit oftheWTO.
36. Therepresentative ofHong Kong feltthattheEU'scurrent economic recovery would benefit
theworld atlarge. Hong Kong wasanxious toseethattheexternal tradeeffects ofdeeper andbroader
European integration -including recent accessions, theEEA andmany bilateral agreements -were
consistent withtherelevant WTO obligations. While some recent developments gavetheimpression
thattheEUwaspreoccupiedwithownproblemsandpriorities,itwasimperativethattheUnionremained
outward-looking, opentotradeandsensitive toeconomic developments inotherregions. Herecognized
itsimportant rôleintheimplementation ofUruguay Round results.
37. Despite adjustment pressures inso-called sensitive industries, including textiles, theUnion
wasrunning atrade surplus withHong Kong indomestically produced manufactures. Theproduct
listnotified bytheEUforthefirstintegration stage under theAgreement onTextiles andClothing
wasdisappointing.WT/TPR/M/3 Trade Policy Review
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38. Therepresentative ofAustralia complimented theEUforitsunambiguous contribution tothe
Uruguay Round, including recent proposals intheareaoffinancial services. Heexpressed concern,
however, about theUnion 'shandling ofthe1995 accessions andsuggested thereorganization of
negotiations under GATT Article XXIV; trade compensation issues should beaddressed inadvance
ofaccession orinterim arrangements which, inturn,should apply untilpermanent solutions werefound.
39. Inimplementing theWTO Agreement onAgriculture, theEUhadchosen nottoinclude certain
export subsidies intheinitial reductions; andnewimport arrangements onwheat andriceappeared
tobeinconsistent withitsundertakings. Thereform oftheCommon Agriculture Policy (CAP) had
sofarfallen short oftheexpected impact oncommodities ofinterest toAustralia. TheEUmight be
unable toabide byitsWTO obligations, notably toreduce export subsidies, without further changes
totheCAP, possibly including increased set-aside andreforms ofproduction arrangements inareas
suchasmeat, dairy, sugar, fruitandvegetables. Heinvited theEUtoexplain plans toreduce trade
barriers anddismantle subsidies inthecoalsector, andoutline itsobjectives fortheSingapore Ministerial
Conference. Early replies toAustralia 'sadvance questions inwriting would behighly appreciated.
40. Therepresentative ofHungary feltthatregional andmultilateral trade integration could be
mutually supportive. European integration andharmonization inmany areas hadfacilitated theEU's
participation intheUruguay Round which, inturn, hadbeenacatalyst tofurther internal reform.
Sherejected views thattheUnion 'sexpanding preferential links could havediscriminatory effects;
recent arrangements hadrather strengthened theassociated countries 'ability tocontribute tomultilateral
trade liberalization.
41. While theEurope Agreements hadbenefitted exports oftheassociated countries, EUexports
toHungary hadgrown much faster thanflows intheopposite direction. Delayed liberalization inareas
ofparticularexportinteresttoHungary,includingagriculture,hadcontributedtoincreasinghercountry's
bilateral deficit. Therelevant provisions oftheEurope Agreement thusneeded tobereviewed inthe
lightofrecent accessions andthenewagricultural régime under theWTO. Theeconomic recovery
intheEU,coupled withtheimpetus oftheSingle Market andnewmultilateral commitments, might
furtherstimulateHungary'sexports.ReferringtoindicationsthattheEUwouldencouragetheformation
ofaCentral European FreeTrade Area, shestressed thatanysuchinitiatives should notresult innew
organizational structures which might delay theaccession process; EUmembership wasapriority
forherGovernment.
42. Therepresentative ofMalaysia, speaking onbehalf oftheASEAN countries, referred tothe
completion oftheInternal Market programme, theconclusion oftheUruguay Round, therecent
EUenlargement, andtheUnion 'sexpanding network offreetrade andpreferential arrangements;
theyallhadfarreaching implications onthirdcountries andtheEU'srôleintheWTO. Themaintenance
ofcertain trade restrictions atnational level-including technical regulations discouraging theuseof
tropical timber inpublic works andhousing projects -wasamatter ofconcern. Hequestioned the
EU'sneed foranewTrade Barriers Regulation, given newWTO rules andstrengthened dispute
settlement provisions, andhoped thattheRegulation would notbeusedtopursue non-trade objectives.
Theaccession ofAustria, Finland andSweden implied higher tariffs insome cases andtheextension
oftheCAPandsome non-tariff barriers, suchastextile quotas, tothese countries. Hewasconcerned
about thewaytheEUapproached thenegotiations under GATT Article XXIV.
43. Tariff peaks andtariff escalation persisted inkeysectors fordeveloping countries, including
textiles andclothing, vegetable oils,timber, rubber products andfish. There appeared tobeasurgeEuropean Union WT/TPR/M/3
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inEUanti-dumping actions against certain ASEAN countries, insomecasesduetoinsufficient screening
ofcomplaints orquestionable investigations. Anewfoodhygiene directive contained stricter provisions
ontransport andstorage thantheexisting Code ofPractice adopted bytheCodex Alimentarius
Commission; therequired special transport arrangements forbulkfooditems, including vegetable
oils,implied additional costandinconvenience forexporters. ASEAN countries werealsoconcerned
about thenewEUimport arrangements forrice.
44. ASEAN countries recognized thattheGSPscheme wasauseful, autonomous instrument to
facilitate exports ofdeveloping countries. However, recent revisions appeared toberetrogressive and
didnotsignificantly benefit exporters. Theproposed inclusion ofnon-trade issues, viaenvironmental
andsocial clauses, would further curtail benefits under thescheme.
45. Therepresentative ofNewZealand concurred thatmajor changes hadtaken place since the
EU'sprevious review. NewZealand wasdisappointed thattheEUhadagain decided tonegotiate
under Article XXIV:6 onlyafterthemembers hadjoined; hehoped thatrecent bilateral settlements
withsome trading partners would notdisadvantage others. NewZealand didnotaccept cross-sectoral
crediting inassessing theimpact ofenlargement onmarket access. Similarly, itwould notaccept
proposals toaggregate theUnion 'sprevious export subsidy commitments andthoseofthenewmembers.
46. Hewelcomed efforts tointegrate reforming central andeastern economies intothemainstream
ofinternational relations; theEurope Agreements werecentral tothese efforts. Trade liberalization
should continue onanopenandnon-discriminatory basis. Suggestions thattheEUwould count imports
fromEurope Agreement countries under itsnewm.f.n. minimum access quotas, raised anumber of
questions. NewZealand wasprepared tocompete onequal terms withothers anddidnotwanttrade
opportunities tobefurther eroded bypreferential arrangements.
47. HeappreciatedthefirststeptowardsagriculturalreformintheEUtowhichtheWTOAgreement
added certainty. Grey-area measures were transformed intoWTO-consistent arrangements andthe
tariffication ofvariable levies represented, inprinciple, asignificant improvement. However, high
tariffs andtariffescalation remained inagriculture andfisheries, andthenewminimum access quotas
were generally small. Attempts bytheCommunity andothers tocircumvent subsidy commitments
bynotcounting products approved prior totheimplementation ofUruguay Round butshipped later,
were inconsistent withthespirit oftheWTO andcontrary toexpectations. NewZealand expected
theactual quantities shipped bytheEUin1995/96 toaccord withthescheduled levels.
48. ThecompletionoftheSingleMarkethadonthewholeprovedbeneficial,andmovestoharmonize
andsimplifysanitaryandphytosanitarymeasureswerewelcome.However,variousrecentEUdirectives
hadintroduced substantially stricter standards andverification requirements. Thenecessary clearance
ofNewZealand establishments fortrade inmeat andfishhaddelayed trade. NewZealand was
monitoring theEU'senvironmental initiatives toensure non-discriminatory implementation bymember
States. Theharmonization objective underlying theEUdirective onpackaging andpackaging waste
wasappreciated.
49. Therepresentative oftheRepublic ofKorea welcomed thattheEU'strade policies overthe
pasttwoyears hadgenerally demonstrated acommitment tomultilateral trade liberalization; theEU
hadsought toharmonize internal measures onthebasis ofm.f.n. obligations. However, there was
widespread concern about thegrowing complexity oftheUnion 'snetwork ofregional arrangements
andtheirrelation totheWTO. Inparticular, hesought assurances thatduties andother restrictive
regulations would beeliminated withrespect tosubstantially alltrade, asstipulated under GATTWT/TPR/M/3 Trade Policy Review
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ArticleXXIV:8,includingsensitivesectorssuchasagriculture.HealsoenquiredabouttheEU'spending
customs union withTurkey, under which Turkey would beallowed toretain higher third-country tariffs
onvarious manufactures, including cars, footwear andbags.
50. Acknowledging thattheEUdidnotintend totakecommercial defence actions inamanner
inconsistent withtheWTO, hewondered about theUnion 'sstance inareas notcovered byWTO
provisions andinvolving non-WTO members. Korea wasconcerned about various problems caused
bytheEU'sfrequent reliance onanti-dumping measures, including thetrade effects already incurred
attheinitiation stage, agrowing tendency formeasures toextend wellbeyond theinitial term, and
calculation methods biased towards increasing thedumping margin. While welcoming thewidespread
tariff reductions tobeimplemented inthewake oftheUruguay Round, hehoped thattheEUwould
include sectors suchasclothing, passenger carsandelectronics infuture tariff cuts.
51. Therepresentative ofPoland noted thathiscountry 'sbilateral tradewiththeEUwasexpanding
atanunprecedented pace, however, thebalance hadswung intodeficit. Poland 'sexports could have
grown faster intheabsence ofEUanti-dumping measures andrestrictions onagricultural imports.
Forexample, arecent anti-dumping investigation oncement, launched byproducers involved incartel
arrangements, didnotcontribute toensuring astable andpredictable trade environment. Heasked
forconfirmation thattheEUwould maintain current access conditions forlivesheep, andsought
information onsubsidies accorded toshipyards intheformer GDR.
52. Poland hadapplied forEUmembership andexpected thenegotiations tostartshortly afterthe
1996Intergovernmental Conference. Work ontheapproximation oflegislation andeconomic adaptation
hadbegun, inmany areas Poland already metrequirements oftheacquis communautaire.
53. Therepresentative ofJapan appreciated theEU'snon-confrontational approach ininternational
trade relations. Theprocess ofEuropean integration, aslongasitremained opentothirdcountries
andconsistent withGATT/WTO rules, could contribute toworld stability andprosperity. However,
GATT Article XXIV andArticle VoftheGATS hadtobeapplied. Some aspects oftheaccession
ofAustria, Finland andSweden hadnotbeenconsistent withtherelevant rules. Negotiations with
Japan under Article XXIV:6 should havestarted before theimplementation ofthecommon tariff, and
theEUshould havesupplied information intime. TheEUhadalsoviolated theGATT/WTO Agreement
onAnti-dumping byautomatically extending anti-dumping measures tothenewmembers without proper
investigation. Japan hadaddressed specific questions inwriting totheEU.
54. Japan could notaccept anincrease inexport subsidies resulting fromtheEUenlargement, and
theEUshould refrain fromsubsidizing farmexports tonewmarkets. Further areasofconcern included
Poland 'sincrease, inthecontext ofitsEurope Agreement, ofm.f.n. tariffs oncertain goods while
applying lower ratesorzero-duty tariffquotas toimports fromtheEU.Thecustoms union withTurkey
resulted intheabolition oftariffs onbilateral tradefromitsentry intoforce, while Turkey wasaccorded
atransitional period toaligntothecommon external tariffoncertain products, insome cases resulting
inasubstantial tariff gap. Heinvited theEUtoreconsider these arrangements tothebenefit ofthe
multilateral system.
55. Discriminatory access barriers suchasthelocalcontent provisions inthe'television without
frontiers directive 'should berevoked inthelightoftherelevant GATS principles. Local content
requirements alsoexisted intheprocurement directive forthewater, energy, transport and
telecommunication sectors, andhenoted anextremely lowshare ofnon-EU supplies inthese areas.
Trade descriptions introduced inFrance forscallops alsodiscriminated against foreign suppliers. HeEuropean Union WT/TPR/M/3
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called forincreased procedural transparency andopportunities fornon-European producers toexpress
theiropinion when EUstandards weredrawn up.EUanti-dumping measures were usedarbitrarily
andforprotectionist purposes; asymmetries inthecalculation ofdumping margins hadbeenhighlighted
bythePanel examining theEUmeasures onaudio tapesandcassettes. Japan wasalsoconcerned about
theprovisions oncircumvention andregistration ofimports incorporated inthenewEUanti-dumping
regulation. Finally, hestressed that,contrary tocertain indications intheSecretariat report, Japan
applied novoluntary measures other thanthemonitoring agreement oncarexports.
56. Therepresentative ofCanada, referring topastTrade Policy Reviews oftheEU,identified
certain persisting problem areas. IntheEU'scomplex hierarchy ofpreferential arrangements, only
fiveWTO members, including Canada, faced thefullm.f.n. tariff. Given theexpansion ofpreferential
agreements since theprevious review, disparities inaccess conditions would bemaintained despite
reductions inm.f.n. tariffs. Tariff escalation remained significant inseveral sectors -fishandnon-
ferrous metals wereofparticular interest toCanada -andhightariffs persisted onmany value-added
forestry products, including plywood. Tariff escalation inagriculture wasdifficult toassess dueto
thecontinued restrictiveness ofthesystem.
57. TheEU'simplementation ofmarket access commitments inagriculture wasofgreatconcern;
Canada hadalready initiated consultations regarding theimport régime forgrain. Thelevelofprotection
forpassenger carswasdifficult tounderstand, andtheautomobile arrangement withJapan setabad
example ofmanaged trade. Healsoquestioned theintegrity oftheSingle Market andtheCommission 's
ability topersuade member States toamend restrictive practices suchasregulations onscallop labelling
inFrance, technical standards forbovine semen inItaly, andmarketing restrictions onwindscreen
washer anti-freeze inFinland. Inflexibilities intheEU'sdecision making system, onceacommon
position hadbeenreached, continued tobeaserious problem.
58. Canada believed theEUhadanobligation toconclude itsnegotiations withthirdcountries
under Article XXIV:6 prior totheaccessions. Such negotiations should form partofthestrategy to
prepare future members foraccession. Theproliferation ofpreferential arrangements withcountries
acceding totheWTO could alsoinfluence these countries 'approach innegotiations withother WTO
members. Given improvements inEUprocurement legislation, including theexpansion incoverage,
heconsidered thelevelofpurchases fromthirdcountries asextremely lowandrecommended stronger
enforcement bytheCommission. Bycontrast, theCommission 'spersistence indisciplining member
States 'subsidy practices wascommendable; hementioned inparticular coalandsteel, textiles,
shipbuilding, motor vehicles, transportation, research anddevelopment, andtheenvironment. Attempts
tointegrate theEU'scoalsector intotheworld market, including thetermination ofGermany 'simport
restrictions andstricter subsidy disciplines, would bewelcomed. Thecollapse oftherestructuring
planfortheEU'ssteelindustry wasdisappointing. While theCommission appeared tofavour a
multilateral approach inareas related totrade andenvironment, legislation banning furimports from
countriesnotprohibitingcertainlegholdtrapswasinconsistentwiththeEU'sinternationalcommitments.
59. Since multilateral negotiations could facilitate theprocess ofpolicy reform, itwasdisappointing
thattheEUhadnotusedtheUruguay Round toaddress more problem areas. Hehoped that,asthe
world 'slargest trading entity, theEUwould feelobliged tosetanexample andre-evaluate some of
these areas.
60. Therepresentative ofCosta Ricaasked fordetails regarding theEU'snewGSPscheme, notably
thecriteria applying toagricultural imports, theuseofspecial incentives andthegraduation of
economically advanced countries. Healsoenquired whether thepreferential arrangements applyingWT/TPR/M/3 Trade Policy Review
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tocentral American countries in1995would bealigned inproduct coverage tothose maintained vis-à-vis
theAndean Pact. Costa Ricahadalsoraised anumber ofadvance questions inwriting.
61. Therepresentative ofRomania stressed theEU'sinfluence onworld trade, pointing inparticular
totheentry intoforce oftheMaastricht Treaty, therecent enlargement andthenetwork ofpreferential
agreements withthirdcountries. TheEUhadbecome Romania 'sprincipal trading partner; closer
economic andcommercial tieswereanimportant factor inRomania 'stransition toamarket economy
anditsintegration intheworld economy. TheEUhadnotonlyhelped todevise amore transparent,
stable andbetter functioning trading system intheUruguay Round, butplayed akeyrôleinthe
implementation process. Itwasreassuring thattheEUremained firmly committed toaliberal and
coherent trade policy, evenifcertain elements hadyettobedefined.
62. Therepresentative ofUruguay failed toseeacleardirection intheCommon Agricultural Policy
intheaftermath ofthe1992 reforms andtheUruguay Round. Tariffs were high, withpeaks inthe
meatanddairy sectors, andinsulated EUproducers from therealities oftheworld market. Certain
sectors received disproportionately hightransfers, forexample bovine meat accounted foralmost
20percentoftotalsubsidies. Theintegration ofcountries incentral andeastern Europe intheEU
would beanimportant newpolicy factor. Given theCAP'snegative impact onthird countries, he
enquired about future policy changes; Article 20oftheWTO Agreement onAgriculture called for
negotiations oncontinuing thereform process.
63. Thenewimport system forricewasofparticular relevance, pastexports from Uruguay had
beennegligible duetotheoperation ofvariable levies. While import liberalization forcitrus fruitwould
beofconsiderable interest, hefeltthatthenewminimum import prices forfruitandvegetables
perpetuated traditional levels ofprotection. Among othernegative aspects, exporters would beunaware,
atthetimeofshipment, ofthedutylevels applied bytheEU.TheEUenlargement caused additional
concern; hementioned inparticular theextension tothethree newmember States oftheCAP and
oftheUruguay Round commitments onexport subsidies andinternal support.
64. Therepresentative ofSwitzerland waspleased tonotethattheEU'sregional integration efforts
were aninstrument oftrade creation, generally meeting therequirements ofGATT Article XXIV.
Access conditions forthird countries hadimproved after theconclusion oftheUruguay Round.
Nevertheless, itwasnecessary tomonitor anytemporary discrimination oftrading partners atdifferent
levels ofeconomic integration. Heenquired about theEU'sworkprogress inexpanding thecumulation
oforigin status across preferential agreements withEuropean partners.
65. TheEU'sconstant efforts toapply theprinciples oftheSingle Market andliberalize trade in
services werewelcomed. However, theruling oftheCourt ofJustice onthedivision ofnegotiating
competence between Community andmember States raised questions inrelation toindividual sectors
under theGATS. Moreover, hewondered whether thenewcommercial defence instruments alsoapplied
toservices and,ifso,whatmeasures andprocedures were envisaged.
66. Therepresentative oftheUnited States recognized thegeneral openness oftheEUmarket and
theUnion 'sleadership inconcluding theUruguay Round andcreating theWTO. Remaining concerns
related toatendency toconclude regional trade arrangements thatfailed tofullyreflect therelevant
WTO obligations; persistent problems inagriculture; failure toprovide national treatment intheareas
ofinvestment andintellectual property; andnumerous specific barriers.European Union WT/TPR/M/3
Page 15
67. While theUnited States supported regional integration, conscious ofitsimportant political
component, itinsisted onthecompatibility withagreed multilateral rules. TheEUhadalongtradition
ofdiscriminatory regionalism andmostarrangements, customs unions orpartial freetradeagreements,
werefarfromfullyliberalizing agriculture. Inaddition toignoring multilateral rules, thearrangements
deprived theEU'spartners ofimportant commercial advantages andpromoted agenerally laxattitude
towards freetrade agreements. Hehoped thattheEUwould develop anewapproach toensure that
itsagreements complemented themultilateral system.
68. Despite itsgeneral commitment toopenmarkets, theEUhadoccasionally resorted totrade
distorting measures. Examples included restrictions onautomobile imports from Japan, attempts to
manage trade inbananas andtoimpose ownvalue judgements ontrading partners intheregulation
oflegholdtraps. Problems withreciprocity requirements anddenial ofnational treatment wereevident
intheinvestmentrégimesandintellectualpropertylegislation,especiallyoncopyrights,ofsomemember
States. Questions alsosurrounded theEU'sinterpretation ofsome commitments inagriculture.
69. Therepresentative ofIndiashared concern expressed about theUnion 'snewcommercial defence
regulations. Restraint should beexercised intheuseofthese instruments since theprocedures,
irrespective ofthefinaloutcome, involved tradeharassment andcaused significant coststoexporters.
While thefirstphase oftheEU'sintegration programme fortextiles andclothing metthetechnical
requirements ofArticle 2.6oftheWTO Agreement, itwasfarfrom meaningful andincluded only
products notunder restraint. Theprocess ofstructural adjustment oftheEU'stextiles industry had
beenpostponedandwouldbemorepainfulatsubsequentstages.Hesuggestedtheeliminationofresidual
restrictions onsome textiles andclothing products and,pointing tofullliberalization under theEurope
Agreements in1998, urged speedy integration ofthesector toguarantee equality ofaccess andnon-
discrimination.
70. Eco-labelling wasapotential source ofprotectionism, andtheEUcriteria relating totextiles
hadnotalways beenobjective, scientific, transparent orequitable. Significant barriers existed for
services suppliers relying ontemporary relocation ofnatural persons; theyweresubject todiffering
national legislation andarbitrary andsubjective decisions under economic needs tests. These problems
affected inparticular developing countries which, duetoapoorcapital base, could notestablish a
commercial presence abroad.
71. Linking benefits toenvironmental andlabour standards, theEUhadintroduced elements of
discrimination andreciprocity initsGSPscheme; theywere alientotheGSPconcept asenvisaged
intheGATT. Despite theoverhaul oftheCAP, there hadbeen little change intheintensity of
agricultural protection, ifatall.Significant distortions remained anddeprived efficient producers of
trading opportunities. Amajor proportion ofEUimports entered under contractual orunilateral
preferences, subject toemergency safeguards andzero-duty quotas. Suchfeatures, however, fuelled
apprehensions about EU-led regionalism being inward looking. Thecomplex network oftrade
preferences created anareaapart from m.f.n. principles, andrecent Europe Agreements contained
noreferences toobligations under international agreements suchastheWTO. Satisfactory examination
ofregional tradearrangements under WTO provisions wasanimportant institutional issue. Hehoped
thattheEU,asamajor trading entity, would fullyrespect theletter andspirit ofallWTO Agreements.
72. Therepresentative ofZimbabwe drew attention totheimportance oftheLomé Convention
fordeveloping countries. While appreciating themid-term review ofLomé IV,which addressed
structural deficiencies inbeneficiary countries andtheirlossofmarket share, hequestioned theinclusion
ofhuman rights issues. Hesought more information ontheUnion 'sco-operation agreement withSouth
Africa.WT/TPR/M/3 Trade Policy Review
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VI. REPLIESBYTHEREPRESENTATIVEOFTHEEUROPEANUNIONANDADDITIONAL
COMMENTS
73. Therepresentative oftheEuropean Union (Mr. Roderick Abbott), referring toawritten
statement which hadbeendistributed toparticipants, saidhewould concentrate onfocalpoints toinspire
thedebate.1More detailed replies towritten questions would beprovided induecourse.
(i) Overall contribution totheWTO system
74. TherepresentativeoftheEuropeanUnionnotedthegeneralappreciationoftheEU'scontribution
totheUruguay Round. Inmanufactures, theEUhadundertaken toreduce itstariffs by37percent
toanaverage tariff of3.6percentin2000, andclose to40percentofimports would enter freeof
duty. TheEU'srule-based approach wasreflected inmany results oftheUruguay Round, inparticular
thestrengthened dispute settlement mechanism. TheEUwascurrently striving tosecure ameaningful
agreement infinancial services, infullsupport ofthemultilateral system.
75. TheEUhadnoparticular plans forfurther negotiations onmarket access. Itstariffs insectors
suchastextiles andmotor vehicles compared favourably withthoseofotherWTO members. Moreover,
EUrateswerebound. Theongoing reform oftheCAP, thepossible inclusion ofadditional sectors,
theeffectivenessofset-aside,andtheimplementationofUruguayRoundcommitmentscouldbeexamined
ingreater depth intheAgriculture Committee. Developments thusfarwere encouraging, andnew
measures wereunder discussion inthetobacco, wineandsugar sectors. Anyclearassessment ofthe
reform impact waspremature asseveral newfactors hadcome intoplay, including Uruguay Round
commitments, enlargement, andthepre-accession strategy forcountries incentral andeastern Europe.
TheEUhadtaken thenecessary decisions toimplement theUruguay Round results, forexample for
grain, andthesewould besubject tofurther review. Thenewsystem forfruitandvegetables, including
minimum entry prices, wasdesigned toavoid disturbances inlocalmarkets.
76. The EUdidnotshare other participants 'interpretation oftherequirements under
GATT Article XXIV. Inprevious enlargements, applying thesame procedures, theEUhadnever
beentoldthatthese wereincorrect. Article XXIV required eachmember ofacustoms union toapply
acommon external tariff anddidnotcallforthetariff negotiations tobecompleted before theduty
changes weremade. TheWTO Understanding onArticle XXIV implied nonewaspects; procedures
weretobecommenced before tariff concessions weremodified. Anyfurther obligations would have
beenopposed bytheEUonlegalandpractical grounds.
77. TheEUaimed atnegotiating agreements under Article XXIV:6 within areasonable period
oftime; ifnotpossible, theUnions 'stariffconcessions would benotified andpartners might retaliate.
Aclearconflict existed between thesubstantive requirement ofArticle XXIV -acommon tariff -and
theprocedures indicated inArticle XXVIII which hadoriginally been designed formore limited
negotiations.AlthoughtheUnderstandingdidnotobligetheCommunitytoconcludeinterimagreements,
temporary arrangements, ergaomnes intheireffect, hadbeenaccepted toavoid aserious dispute over
GATT interpretation withapotentially damaging impact ontheWTO. Overall, theEUexpected the
dutychanges following theenlargement toresult inapositive neteffect forWTO members intheorder
ofECU 230million.
1Arevised version ofthestatement isannexed.European Union WT/TPR/M/3
Page 17
78. Thenature andfunctioning ofacustoms union entailed theuniform application ofanti-dumping
measures attheexternal border. Itcould accordingly beargued thattheEUhadnotadopted measures
forthree newmembers, butwasextending existing measures toitsenlarged territory.
79. Thefirstdiscussant enquired about theimplications oftheCommunities 'remark, initsTPR
report, thatUruguay Round agreements would beimplemented 'totheextent possible '.Hewasalso
concerned about theco-existence ofdispute settlement procedures under bilateral arrangements and
theWTO mechanism. Hewondered whether theEUwould beprepared toreduce itshightariffs on
textiles ifother major traders alsoagreed todoso.Intheenlargement context, theEUhadconcluded
aninterim agreement withonetrading partner, which wasnotavailable toothers. Calculations of
global benefits resulting fromenlargement werenotveryinformative, sinceitwasthespecific situation
ofeachindividual exporter thatmattered. While review procedures could beinvoked ifanti-dumping
measures wereextended tothenewmembers, hefeltthatthese procedures shifted theburden ofproof
toexporters.
80. Thesecond discussant argued thattherecent enlargement wasdifferent from pastaccessions
duetothesimultaneous conclusion oftheUruguay Round. Therefore, compensation should havebeen
negotiated prior totheaccessions orinterim arrangements beenoffered onabroader basis.
81. Therepresentative ofArgentina agreed thatconcerns about theEU'sagricultural policies could
bediscussed indetail intheCommittee onAgriculture. Hestressed, however, therôleoftheTPRB
asaforum toaddress weaknesses inthemethodology usedandinthedecision-making procedures related
totheimplementation ofWTO commitments. Certain measures affecting imports ofgrains, fruitand
vegetables were contrary totheEU'swritten undertakings intheUruguay Round. Some countries
hadbeenmore successful thanothers inavoiding theadverse consequences oftherecent enlargement.
82. Therepresentative oftheUnited States emphasized theneedtoimplement faithfully theWTO
Agreement onAgriculture. TheUnited States feltthattherequirements under GATT Article XXIV:6
were quite clear, however, differences ofopinion tended tosurface witheachEUenlargement.
83. Therepresentative ofHong Kong agreed withthefirstdiscussant 'scomments ontheextension
ofEUanti-dumping measures tothenewmembers. Hecould notseethattheEU'sapproach was
covered byArticles 4.2and4.3oftheAnti-dumping Code; duties should havebeenre-assessed on
thebasis ofaredefined domestic industry prior totheirapplication totheacceding members. The
extension ofsafeguard measures wasalsoquestionable.
84. Therepresentative ofAustralia recalled thattheUruguay Round hadnotonlyresulted inspecific
concessions onmarket access andexport subsidies foragriculture, butdefined anewapproach for
domestic policies. The1992CAPreform wasanimportant firststep,further measures should follow
thepathoftheAgreementonAgricultureandmoveawayfromproduction-linkedpaymentstoproducers.
TheUruguayRoundnegotiationswiththecountriesaccedingtotheEUhadbeenbasedontheassumption
thattheresults would befullyavailable fromthebeginning oftheimplementation phase. Inconcluding
some interim arrangements, theEUitselfhadrecognized theneedtoavoid anincrease intradebarriers
attheoutset. Broader recognition ofthisprinciple would make Article XXIV arrangements more
acceptable andeasier todefend under WTO rules andobjectives.
85. Therepresentative oftheEuropean Union appreciated theremarks made. Heemphasized that
theEUhadnegotiated theWTO Agreements ingood faithandwould implement them inthesameWT/TPR/M/3 Trade Policy Review
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spirit. Regarding theEUenlargement, hereiterated thattheoverall picture waspositive andprovided
agood negotiating basis.
(ii) Impact onthirdcountries ofEUintegration, newaccessions andpreferential agreements
86. Therepresentative oftheEuropean Union stressed thattheSingle Market wasanexample of
openregionalism; theshare ofextra-EU trade intotaltrade hadrisen from 37percentin1980 to
41percentin1993. Discussion ofregional tradearrangements, aregular topicinTrade Policy Reviews
oftheEU,wasbecoming more andmore relevant, given theexpansion ofNAFTA, evolving trade
rules inthecontext ofAPEC, andtheredefinition ofrelations between North andSouth America.
87. ATrade Policy Review wasnotaforum toexamine theconsistency ofpreferential agreements
withWTO provisions, butgaveanopportunity toreflect ontheinterpretation ofArticle XXIV. He
wondered whether WTO members wanted toaccept neweconomic andpolitical realities orapply
Article XXIV asastraitjacket toanypartnership orco-operation agreement withabasic freetrade
objective. Adistinction hadtobedrawn between traditional freetradeareas-focusing ontariffs, quotas,
origin rulesandnowalsoontrade inservices -andthemore general concept ofregional integration,
which included wider economic co-operation, financial assistance insome cases, approximation of
legislation intheeconomic area, competition policies, evenco-operation inmatters suchaspolitical
dialogue andmigration.
88. Partnership ofthiskindfrequently involved developed anddeveloping countries, andthishad
implications forthetiming andobjectives ofeachpartner. While retaining thebasic objective of
Article XXIV, namely tocreate rather thandivert trade, itmight benecessary tore-examine the
requirement tocover substantially allthetrade andother provisions pertaining tothesubmission of
aplanandschedule, which ledtoafreetrade areawithin areasonable length oftime.
89. Fears ofsome trading partners ofbeing leftoutbytheEUwere defied bytrade statistics.
Anycategorization ofEUpartners according totheirpreferential status should becarefully interpreted.
Whilethevastmajorityofcountriesqualifiedforpreferentialtreatment,almost70percentofEUimports
entered onanon-discriminatory basis, either because ofthetrade weight ofthesuppliers concerned,
zerotariffs alsoform.f.n. imports, ordiscrepancies between GSPentitlements andactual import
registrations. Referring toalleged limitations incoverage oftheEU'sregional trade arrangements
inEurope, hestressed thateachagreement settimetables forfurther liberalization orfreetrade in
sensitive areassuchastextiles orsteel, andsignificant market opening wasforeseen inagriculture over
thelifeoftheagreements.
90. TheEUautonomously differentiated among GSPsuppliers onlyinthesense thatittriedto
direct benefits tothecountries needing them most. Thespecial incentive régime which would grant
additional preferences tobeneficiary countries wasnotyetinoperation. Itwould befirstapplied from
1January 1998. TheCommission would present areport in1997 oninternational studies onthe
relationshipbetweentradeandlabourrightsandtradeandtheenvironment.TheCounciloftheEuropean
Union would thendecide ontheintensity ofthespecial incentive régime under theGSPscheme. In
principle, allGSPbeneficiaries were eligible. Internal consultations onanywithdrawal ofGSP
concessions would takeplace intheCommittee fortheManagement ofGeneralized Preferences, while
theultimate decision would betaken bytheCouncil.
91. Thefirstdiscussant reiterated thattheexisting WTO mechanism forthereview ofregional
arrangements washighly unsatisfactory, andpointed todifficulties indistinguishing between openandEuropean Union WT/TPR/M/3
Page 19
discriminatory regionalism. Herecognized theimportant geo-political aspects ofregional arrangements
andacknowledged thatintegration wasevolving wellbeyond tradeissues, buttheproliferation ofsuch
agreements made itimperative toassess theirimpact onthemultilateral system.
92. Thesecond discussant stressed theimportance oftrade liberalization negotiated inanm.f.n.
context; itcould besupplemented byunilateral liberalization. Referring tothequestion ofwhether
GATT Article XXIV wasastraitjacket orshould beapplied flexibly, shefeltthattheexamination of
regional arrangements intheWTO, without being restrictive, naturally should focus ontrade issues.
However, more precision wasrequired intheimplementation ofGATT Article XXIV andGATS
Article V.Concerns about theEU'snewGSP scheme were legitimate, given itspotential for
discrimination among developing countries. Transparency wasimportant inthisrespect, andexisting
benefits needed tobemaintained.
93. Therepresentative ofArgentina alsosawtheneedtoadapt themultilateral trading system to
newchallenges. However, established rules anddisciplines hadtoberespected. While under the
GATT/WTO system theGSPwasadmitted through theEnabling Clause, asaunilateral concession
byindustrialized countries, theintroduction ofenvironmental andsocial standards created conditions
ofreciprocity. Thegraduation principle wasequally alien totheoriginal intentions underlying the
GSPconcept.
94. Therepresentative oftheUnited States saidthatindiscussing freetrade arrangements with
other partners, theUnited States hadinsisted thatdisciplines under GATT Article XXIV were tight
andneeded toberespected. They provided protection forothers. Thiswasparticularly important
inarrangements between countries atdifferent stages ofdevelopment inorder tocounterbalance any
disproportionate influence oflarge participants.
95. Therepresentative ofNewZealand repudiated theideathatArticle XXIV, which provided
aderogation from general GATT rules, could operate asastraitjacket. Freetrade agreements and
anyfurther expansion ofpreferential relations should becomprehensive incoverage andinclude sectors
suchasagriculture.
96. Therepresentative ofAustralia agreed thatregional trading arrangements provided apositive
contribution toglobal freetrade, iftheywerecomprehensive anddidnotcreate barriers vis-à-vis the
restoftheworld.
97. Therepresentative ofJapan argued thattheprovisions ofGATT Article XXIV should be
interpreted strictly astheywereimportant criteria forensuring anon-discriminatory multilateral trading
system.
98. Therepresentative ofCanada noted thatthedebate sofarhadnotaddressed thequestion if
andhowfarregional arrangements affected theposition ofcountries seeking accession totheWTO.
99. While acknowledging thatregional tradearrangements could havebroader political orsecurity
objectives, therepresentative ofHong kong emphasized theneedtocomply withexisting WTO rules
andprotect thirdcountry interests. Whether theseruleswereadequate, required moreindepth analysis.
Hewasnotconvinced thattheEU'sspecial incentives under thenewGSPscheme were based on
appropriate criteria. Studies ontheeffects ofsectoral orcountry graduation hadnotconfirmed that
thealleged benefits accrued infacttothetargeted countries.WT/TPR/M/3 Trade Policy Review
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100. Therepresentative ofIndia stated thatthenewGSPscheme ignored thefactor-intensity of
production indeveloping countries; certain labour-intensive chemical andtextile products hadbeen
removed from theScheme. Heinvited theEUtoexamine thisaspect.
101. TherepresentativeoftheEuropeanUnionnotedthattheGATThistoricallyhadbeenapragmatic
institution. Therefore, asfuture freetrade arrangements could encompass highly diverse economies,
some thought should begiven tothequestion howmultilateral disciplines could beapplied inthese
cases.
(iii) Sectoral policies andmarket access
102. Therepresentative oftheEuropean Union saidthatitwasbothlegitimate andappropriate to
integratethetextilessectorstage-by-stageintotheGATT.LiberalizationundertheAgreementonTextiles
andClothing wasofvalue forallcountries involved, anyacceleration oftheprogramme might impair
import andexport interests.
103. TheEUhadapplied anequivalence scheme tothemarketing ofseeds andplant propagating
material since 1966; ithadworked satisfactorily withatleast25countries. Consistent withthe
provisions oftheAgreement ontheApplication ofSanitary andPhytosanitary Measures, theUnion
wasnegotiating agreements withanumber ofcountries. Theywould provide forenhanced co-operation
onsanitary andphytosanitary questions.
104. Concerning individual policy aspects intheareas ofservices, fish,coalandsubsidization, he
referred tothewritten submission (Annex). Further replies would beprovided atalaterstage.
105. Thefirstdiscussant stressed thatthedebate hadnotfocused ontheUnion 'scompliance with
provisionsoftheAgreementonTextilesandClothing,butonthepoliticalandeconomicquestionwhether
delaying theintegration of'sensitive 'products might compound adjustment pressures andfuel
protectionist resistance atthefinalstage. Asfarascoalwasconcerned, hehadgottheimpression
thattheEUhadnoconcrete plans todismantle subsidies.
106. Therepresentative ofHong Kong agreed thatspreading adjustments overtimecould helpto
contain protectionist pressures.
107. Therepresentative ofBrazil wasprepared toacknowledge thatfastliberalization could cause
adjustment problems. However, fromaglobal perspective, thisneeded tobesetagainst theefficiency
gains resulting from sound economic competition.
108. Thesecond discussant saidshepreferred sanitary andphytosanitary requirements tobesetin
accordance withinternationally agreed standards. Unfortunately, theEUhadnotindicated whether
itsharmonized rules would equate, orbestricter than, international norms.
(iv) Useoftrade policy instruments
109. According totherepresentative oftheEuropean Union, changes intheEU'ssafeguard rules
weredesigned toimplement theWTO agreement. ThenewTrade Barriers Regulation didnotdiffer
fromitspredecessor concerning theadoption ofmeasures. Incases under WTO rules, theRegulation
required theinitiation ofadispute settlement procedure, aresulting decision infavour oftheUnion,
andauthorization bytheDispute Settlement Body. TheRegulation could beseenpartly asasafetyEuropean Union WT/TPR/M/3
Page 21
valveallowingtradersandindustryassociationstoaddresstheirconcernstoEUinstitutions.Theultimate
aimwastheelimination oftradebarriers, nottheadoption ofretaliatory measures against thirdcountries.
110. Nocorrelation existed between thechange invoting rules foranti-dumping cases andthe
frequency ofanti-dumping actions.
111. Thefirstdiscussant expressed thehopethatincreased efficiency ofanti-dumping procedures
would notleadtofaster action against aneverlarge number ofcountries.
(v) Other policy issues
112. Therepresentative oftheEuropean Union tookuptheissue oflegholdtraps. TheEUhad
opened adialogue withseveral countries anditwasnotcertain thatabanonfurimports would actually
enter intoforce. Heemphasized thatCommunity rules onpackaging andpackaging waste required
thatreturn, collection andrecovery systems didnotdiscriminate against imports orcreate distortions
ofcompetition.
113. Thefirstdiscussant reiterated thatenvironmental standards should bemultilaterally agreed and
based ontransparent, scientific, objective andequitable criteria. They should notbebiased against
imports, especially from developing countries.
114. Thesecond discussant noted thatCommunity rules oncompetition co-existed withnational
legislation, andthere wasnoobligation toharmonize. Shereiterated herinterest ininformation on
theeffects oftheSingle Market onindustrial concentration intheEU.WT/TPR/M/3 Trade Policy Review
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VII. CONCLUDING REMARKS BYTHE CHAIRMAN
115. Over thepasttwodays, theTrade Policy Review Body hasconducted thethirdreview ofthe
European Union 'strade policies andpractices. These remarks, made onmyownresponsibility, are
intended tosummarize thesalient points; theydonotsubstitute fortheBody'scollective evaluation
andappreciation which willbereflected intheminutes ofthemeeting.
116. Thediscussiondevelopedunderfivemainthemes:(i)theEuropeanUnion'soverallcontribution
totheWTO system; (ii)theimpact onthirdcountries ofEUintegration, newaccessions andpreferential
agreements; (iii)sectoral policies andmarket access; (iv)useoftradepolicy instruments; and(v)other
policy issues.
117. Inaddition tothediscussion, participants raised alarge number ofquestions inwriting. The
representative oftheEuropean Union provided written replies andundertook togivefurther details
afterthemeeting.
(i) Overall contribution totheWTO system
118. Members stressed theEuropean Union 'srôleasthelargest entity inworld tradeanditsensuing
responsibility within themultilateral system. TheUnion 'scontribution intheUruguay Round to
liberalizing trade inmanufactures andservices andtodeveloping newrules waswidely appreciated.
Inthesamevein,manyparticipantsexpressedtheirappreciationfortheEU'scurrentnegotiatinginitiative
infinancial services. Questions wereraised, however, concerning theimplementation ofcommitments
inmainagricultural sectors, where many members expected tangible improvements inaccess conditions.
Concern wasalsoexpressed atthetiming ofthenegotiations, andtheEU'sinterpretation ofGATT
Article XXIV:6 andGATS Article V:2ontheeffects oftherecent enlargement oftheUnion.
Underlining theimportance formany countries involved, several participants emphasised that,infuture
enlargements, such negotiations should beundertaken inadvance. Theautomatic extension of
anti-dumping measures tothenewmember States wasalsoquestioned.
119. Inreply,therepresentativeoftheEuropeanUnionstressedtheimportanceofarule-basedtrading
system.TheEUwasdoingitsutmosttoreachameaningfulagreementinfinancialservices.Agricultural
reforms wereproceeding asscheduled; newreforms included tobacco, wineandsugar. Anevaluation
ofthereformed Common Agricultural Policy andUruguay Round commitments waspremature.
120. Asinprevious enlargements, theUnion hadfollowed therelevant GATT procedures; theWTO
understanding provided thattheprocedures ofArticle XXVIII must be"commenced" before tariff
concessions weremodified. Theproper functioning ofthecommon commercial policy required the
application ofexisting measures, suchasanti-dumping actions, totheenlarged territory oftheUnion.
Inhisview, thiswasconsistent withtheAnti-Dumping Code.
(ii) Impact onthirdcountries ofEUintegration, newaccessions andpreferential agreements
121. Members noted therapid paceofchange intheinstitutional structure andexternal relations
oftheEU.Overthepasttwoyears, theUnion hadcompleted theSingle Market; enacted theMaastricht
Treaty; admitted three newmember States; established theEuropean Economic Area; implemented
sixEurope Agreements; signed several freetrade andco-operation agreements; andlaunched anew
Euro-Mediterranean policy.European Union WT/TPR/M/3
Page 23
122. SeveralmembersstressedthebeneficialeffectsoftheSingleMarketforbothinternalandexternal
suppliers andtheneedtoprotect itsintegrity. Inthiscontext, information wassought ontheEuropean
Commission 'sability toprevent individual member States from pursuing potentially restrictive
standardization andlabelling initiatives.
123. While anumber ofassociated countries highlighted thebeneficial effects oftheirpreferential
trade arrangements withtheUnion, other participants questioned howfartheincreasing network of
preferential arrangements wascompatible withthemultilateral system. Several members requested
theEUtoensure thatanyfurther developments tookintoaccount theinterests andrights ofallWTO
members.
124. Anumber ofparticipants expressed concern about aspects oftheEU'snewGSPscheme; they
called attention toitsapparent biasagainst themostdynamic beneficiaries through thevarious graduation
mechanisms andtheinclusion ofnon-trade considerations forGSPbenefits, related toareas suchas
theenvironment andlabour.
125. Therepresentative oftheEuropean Union, noting thattheECSingle Market process constituted
openregionalism,repliedthatregionalintegrationwasmovingbeyondfreetrade,encompassingeconomic
co-operation,financialassistance,approximationoflegislation,competitionpolicyandpoliticaldialogue.
Thismight require anewlookatcertain aspects ofArticle XXIV ofGATT, which should reflect political
realities andnotbeastraitjacket. Intra-regional trade intheEUhadremained stable forsome time;
fears oftrading partners being "leftout"bytheEUwere thusunjustified. Agreements included
"sensitive" areas suchasagriculture, where further liberalization wasenvisaged, andtextiles, where
timetables were fixed forfullliberalization.
126. Theobjective ofthenewGSPscheme wastorespond more efficiently toeconomic changes
indeveloping countries andtoassist thelessdeveloped among them. Thespecial incentive régime,
linking tradetoenvironmental protection andsocial conditions, would notapply until1998. Concession
could onlybewithdrawn bytheCouncil ofMinisters afteranexamination procedure. Overall, the
Union expected thenewscheme tobeneutral onthevolume oftrade. Thedecision making process
regarding product sensitivity andcountry graduation would notbealtered before 1998.
127. Participants reiterated thattheprovisions ofArticle XXIV, while notastraitjacket, contained
clearmultilateral disciplines within which allfree-trade areas mustbeviewed; these procedures were
forthebenefit ofall.Inparticular, preferential agreements must becomprehensive andconsistent,
withreduction oftradebarriers totherestoftheworld. They alsostressed thattheGSPscheme should
not,through conditions, disadvantage developing countries withthecapacity touseit.
(iii) Sectoral policies andmarket access
128. While appreciating thebreadth anddepth oftariff cutsmade inmany manufacturing areas,
participants expressed disappointment atthemoderate reductions in"sensitive" EUsectors suchas
textilesandclothing,motorvehicles,andelectronics.Hightariffswouldremainforvalue-addedforestry
products, andsignificant tariff escalation persisted insectors suchasnon-ferrous metals. Concern
wasexpressed thatliberalization ofthetextiles andclothing régime wasproceeding slowly, andthat
thefirstintegration stage under theWTO Agreement contained noneoftherestricted categories under
theMultifibre Arrangement; more evenly spread integration across thestages should benefit the
adjustment process while assisting exporting countries. Participants underlined theneedforstricter
subsidy disciplines onmember States inthecoalsector andlooked forward tothetermination ofWT/TPR/M/3 Trade Policy Review
Page 24
Germany 'ssafeguard action. Onemember noted thataidgranted toshipyards intheformer German
Democratic Republic hadapparently ledtocapacity increases.
129. Tariffication ofvariable levies andother import measures hadbrought about veryhightariffs
onagricultural products. Participants sought information regarding theimplementation ofminimum
andcurrent access quotas, andwondered whether theEUcould meetitsreduction commitments under
theWTO Agreement, notably concerning export subsidies, without further policy reform. Newimport
arrangements forcereals (wheat andrice)andfruitandvegetables wereamatter ofconcern. Thesugar
régime,onlymarginallychanged,remainedcostlytodomesticconsumersandrestrictivefornon-preferred
exporters. NewEUsanitary regulations introduced more onerous requirements forsome foodand
agricultural products.
130. Members noted thathightariffs andescalation persisted inthefisheries sector, whose sensitivity
wasunderlined byrecent safeguard actions. Onemember wasconcerned about theEUlinking trade
preferences toaccess tofishresources. Information wassought onongoing internal harmonization
ofsanitary controls.
131. ParticipantsreferredtothedivisionofnationalandCommunitycompetencefortradeinservices.
Questions wereasked regarding reciprocity provisions inEUregulations andtheapplication ofEuropean
transmission quotas intheaudiovisual sector. Some members referred toaccess problems forservices
providers whorelied onthemovement ofnatural persons; therelevant provisions varied significantly
among member States.
132. Therepresentative oftheEuropean Union replied thatEUtariffcutsweresubstantial, therates
formotor vehicles andonmade-up textiles andclothing items wererelatively lowcompared toother
trading partners. Moreover, EUrateswereallbound. TheEUhadnodefined plans forfurther tariff
negotiations atthisstage.
133. TheCommunity adhered fullytotheprovisions oftheAgreement onTextiles andClothing.
TheCouncil ofMinisters would decide onthefurther integration ofproducts; accelerated liberalization
could prove disruptive forbothimporters andexporters. Inagriculture, sanitary requirements applicable
bymember States weresubject toongoing harmonization; theEUhadthenecessary powers toensure
theproper respect ofitsobligations under theSPSAgreement. Thewritten replies contained answers
concerningfisheries,coalandservices.Infinancialservices,henotedthatinformationonthenegotiating
positions ofindividual participants wasstillawaited.
(iv) Useoftrade policy instruments
134. Theorganic linkbetween thenewTrade Barriers Regulation andtheUnion 'sinternational
obligations waswelcomed. Some members sought confirmation thattheRegulation could notbeused
intheabsence ofWTO authorization; others questioned theneedforitinthesecircumstances. Concern
wasvoiced attheUnion 'sfrequent recourse toanti-dumping measures anduncertainties surrounding
theirapplication.
135. Acknowledging thattherewasacommon bodyofprocurement legislation intheSingle Market,
members expressed disappointment atthepersistently lowshare offoreign supplies; theUnion was
invitedtoprovidedetaileddataonrecentdevelopments.Concernwasexpressedatreciprocityprovisions
inaprocurement directive inthewater, energy, transport andtelecommunications sector.European Union WT/TPR/M/3
Page 25
136. Some participants feltthattherulesoforigin under theUnion 'spreferential trade agreements
lacked consistency andwereunnecessarily complex. Thecumulation oforigin status across agreements
should beimproved.
137. Therepresentative oftheEuropean Union stated thattheNewTrade Barriers Regulation had
updated procedures established under itspredecessor regulation, butnottheessential requirements.
Asbefore, action could betaken onlyifauthorized under WTO provisions. Changes inanti-dumping
legislation were confined toimplementing theWTO Agreement; virtually allcurrent measures had
beentaken under the"old" rules.
138. TheEUhadratified theGovernment Procurement Agreement andwould apply itsprovisions
fullyby1January 1996. TheUnion would support theprinciple ofnon-discrimination inthisarea,
ifthatwere recognized andapplied byallWTO members.
139. Thecumulation oforigin across agreements wasunder discussion withpreferential trading
partners. However, suchasystem would notencompass allcountries asitrequired theEU'spartners
toapply afullyintegrated origin system among themselves.
(v) Other policy issues
140. Several statements referred tothegrowing importance oftrade-related regulations for
environmental andhealth reasons, including recent eco-labelling schemes. Participants called for
objective andtransparent criteria toprevent thecreation ofnewtrade barriers.
141. Attentionwasalsocalledtotheinteractionbetweentradeandcompetitionpolicyandthenecessity
toensure aconsistent approach inbothareas. Onemember enquired about thedivision between national
andCommunity competence incompetition policy.
142. Therepresentative oftheEuropean Union gaveinformation onthecriteria underlying the
impending trade bansrelated toleghold trapsandanimal testing ofcosmetics aswellastherulesfor
packaging andpackaging waste andeco-labelling.
143. Precise dataonindustrial concentration following theSingle Market could notbeprovided,
however, therewasacleartrend togreater industrial integration. Further comments ontheinteraction
ofEUandnational competition policy were made inwriting.
144. Itismyimpression thattheTPRB hasconducted anintensive andproductive review ofthe
European Union 'stradepolicies andpractices andtheireffects onthemultilateral system. Ithascovered
traditional themes, suchaspolicies inagriculture, "sensitive" industries andtheuseoftrade defence
instruments, andincluded reforms resulting fromtheUruguay Round aswellasanimportant discussion
ofissues relating toArticle XXIV. Ifthediscussion of"new issues" suchasservices wasnotasdeep
asmight havebeenexpected, thiswasnodoubt explained bythestateofthecontinuing negotiations.
145. Thepaceofongoing changes highlights theusefulness ofregular, comprehensive tradepolicy
reviews. Consolidation andfurther development oftheUruguay Round results willhelptominimize
tensions between internal, regional andmultilateral approaches, andassist theEUtomaintain an
international, outward-looking perspective. However, adherence to,anduseof,WTO provisions in
allrespects iscrucial.WT/TPR/M/3 Trade Policy Review
Page 26
ANNEX
Written Statement bytheRepresentative oftheEuropean Union
CONTENT
Page
I. OVERALL EUCONTRIBUTION TOURUGUAY ROUND 28
1. Positive elements 28
2. Agriculture 28
3. Enlargement 29
3.1 Systemic issues forArticle XXIV:6 negotiations 29
3.2 Anti-dumping andEnlargement 30
4. Problems ofimplementation: Standards andCertification 31
.Harmonised areacovered byEUlegislation 31
.Non-harmonised areacovered bynational legislation 31
II. IMPACT ONTRADING SYSTEM/EU TRADE RELATIONS
WITH THIRD-COUNTRIES 32
1. Single Market 32
2. Importance ofpreferential relations oftheEU 32
2.1 Share ofpreferential trade 33
2.2 Europe andMediterranean Agreements 33
3. Revision ofGSP 34
III. SECTORAL POLICIES 35
1. Industry (Textiles) 35
2. Agriculture/SPS 36
3. Fisheries 37
4. Coal 37
5. Services 38
IV. TRADE POLICY INSTRUMENTS AND "RULES" ISSUES 39
1. Trade Defence Instruments: safeguards 39
2. Trade Barriers Regulation 40
3. Rules ofOrigin 40
4. Public procurement 41European Union WT/TPR/M/3
Page 27
V. OTHER ISSUES 41
1. Trade andEnvironment 41
1.1 Leghold trap 41
1.2 Cosmetics 42
1.3 Packaging andpackaging waste 42
1.4 Ecolabelling 42
2. Trade andcompetition 43WT/TPR/M/3 Trade Policy Review
Page 28
I. OVERALL EUCONTRIBUTION TOURUGUAY ROUND
1. Positive elements
Itsmypleasure toopen thisstatement, devoted toreplying tothemain questions asked yesterday
morning, byrecalling thegeneral acknowledgment ofthepositive contribution oftheEUtotheUR,
thatclearly emerged from ourpartners comments andinterventions. Thisistrueinterms offinal
obligations wesubscribed to:(a)Formanufactures, thereduction intariff ratesis37percentand
ouraverage dutyrateattheendoftheimplementation period willbe3.6percent. Considering all
"0for0"concessions, close to40percentofallCommunity industrial products willafter full
implementation, befreeofduty. (b)Inservices, wearestilldeploying ourmost careful efforts to
make itpossible toreach ameaningful agreement infinancial services, infullsupport ofthemultilateral
system. (c)Therule-based approach; which hasalways beenours, isreflected inmany results of
theURnegotiations, inparticular inthestrengthened dispute settlement mechanism.
United States "Regarding sectors where negotiators were notabletoachieve liberalization bythe
endoftheUR,what plans does theEUhave forfurther orfaster market access
liberalization inspecific sectors?"
Bothourreport andthatoftheWTO secretariat underline theEU'scontribution totheURmarket
access negotiations. Similarly totheUnited States whoregrets thelackofprogress incertain sectors
ofinterest forthem, therewerealsosectors liketextiles andglasswhere theEUwasnotabletoobtain
liberalisation from itspartners. Itwould behelpful inanyplanning wemaydotoknow whatothers
willdo.Sofar,wehavenoplans.
Hong Kong "TakingintoaccounttheEU'sUruguayRoundcommitmentswhichincludewidespread
tariff reductions formanufactures, whydoestheEUstillmaintain therelatively high
tariffs rates insome "sensitive" sectors, including clothing andpassenger cars?"
Ourreply tosuchanirrealistic accusation willbethatourpost-UR commitments reflect theoutcome
ofthenegotiations, which werehardandpainful forsome EUsectors. However, a10percentrate
onpassenger carsandamaximum URfinalrateof12percentontextiles isnot"relatively high".
Indeed, itisquite lowcompared toratescharged byothers inthisroom, andourratesarebound.
With regard toTextiles, theECtariffs areat0percentforrawmaterials, 2percentforslightly
processed goods, 4-5percentforyarns andmanmade fibres, 8percentforfabrics and12percent
formade-up articles. Thisinnowaycanbequalified ashigh. These levels reflect ourharmonisation
approach andrather reduce tariff escalation. Wecanonlyhopethatothers withmuch higher tariffs
canreduce theirs toEClevels.
2. Agriculture
Asregards thissector twobroad types ofquestions havebeenputforward:
- first,comments ontheprogress oftheCAPreforms decided in1992, including theextension
ofreforms tosectors notalready tackled andtheeffectiveness ofset-aside measures;
- second, comments ontheimplementation ofourUruguay Round commitments, e.g.insectors
suchasgrains, rice,fruitandvegetables.European Union WT/TPR/M/3
Page 29
These areissues which should bepursued ingreater depth andindetail intheAgriculture Committee.
However, asalayman, Iwilloffer some provisional thoughts:
- webelieve that,thisfar,theresults ofourreforms havebeenencouraging. These willofcourse
onlybefullyimplemented inthecurrent marketing year,1995-96, anditistherefore somewhat
early tobedrawing definite conclusions astotheirimpact onproduction;
- reforms innewsectors arecontinuing, forexample ourreport refers tomeasures being discussed
andadopted inthesectors oftobacco, wineandsugar;
- asregards amore in-depth assessment oftheeffects ofthereforms being undertaken, thiswill
Ithink havetowaituntil1996-97 atleast. Ineffect, wearehaving todealwithafluidsituation,
inwhich several newfactors havealready intervened inrecent years: theUruguay Round
commitments, enlargement andtheneedtoprepare apre-accession strategy inCEECs, toname
onlythree. Inthemeantime, some adjustments arealready having tobemade totheEurope
Agreements totakeaccount oftheimpact ofenlargement andofURcommitments onCEEC
trade, andthisclearly isbound tohaveaneffect offeed-back uponourpolicy anditsprobable
development;
- asfortheURimplementation, wehavetoremember thatthisisnowallof25daysold.It
hasincertain casesnotbeeneasytoreconcile conflicting tendencies, wehavetaken thedecisions
thatwere necessary and,asyouwillbeaware, these aresubject tofurther review e.g.for
cereals.
3. Enlargement
3.1 Systemic issues forArticle XXIV:6 negotiations
Anumber ofdelegations havestated thatwehavenotfollowed thecorrect procedure; thatnotification
andinparticular tariffnegotiation should havebeeninitiated much earlier, thatsuchnegotiations should
have been completed before anyduty increases were introduced, orthat(failing that) interim
arrangements should havebeenmade tomeettheconcerns ofallWTO members.
Wedonotshare theirinterpretations ofArticle XXIV anditsrequirements -andsince thisisso,I
amsureyouwillappreciate adirect androbust reply:
1. TheCommunity isnottheparty thatisinnovating interms ofprocedure. Wehavefollowed
thesame process asin1973, 1981 and1986, andwewerenever toldonprevious occasions
thattheprocedure wasincorrect.
2. Article XXIV doesnotrequire thattariff negotiations becompleted before dutychanges are
made. OntheContrary Art.XXIV requires acustoms union toapply "substantially thesame
duties" byeachofitsmembers, inother words acommon external tariff.
3. TheWTO Understanding onArt.XXIV hasmade nochange inthisrespect. Paragraph 4
provides thattheprocedure ofArt.XXVIII mustbe"commenced" before tariff concessions
aremodified.WT/TPR/M/3 Trade Policy Review
Page 30
4. Itwould havebeenextremely simple tohavechanged thiswording tomake itanobligation
tobegin substantive negotiations, ortocomplete them, before anydutychanges: butthiswas
notnegotiated, andwewould haveopposed itonbothlegalandpractical grounds.
5. Where theUnderstanding quotes Art.XXVIII (inparagraph 5)itcertainly implies that
negotiations should aimtoreach agreement within areasonable period oftime; ifthisisnot
possible, thecustoms union isfreetomodify tariffconcessions, anditspartners mayretaliate.
Thisisprecisely theobjective ofourcurrent XXIV.6 negotiations.
6. There isaclear conflict between thesubstantive requirement ofArticle XXIV -acommon
tariff-andtheprocedures indicated inArticle XXVIII which wereoriginally designed formuch
more limited negotiations.
7. Lastly interim arrangements arealsonotinanywayanobligation fortheCommunity under
theUnderstanding. Weaccepted, priorto31December, tomake some temporary arrangements
which wereergaomnes intheireffects, inorder toavoid aserious dispute onamatter ofGATT
interpretation which would havehadadamaging impact onWTO attheprecise moment when
itwasbeing established.
Mr.Chairman, weshould establish alsoaperspective onthisquestion. Taking theimpact ofallduty
changes, bothreductions andincreases induties, theneteffect forallWTO members issubstantially
apositive one,bothnowonthebasis ofdutyratesapplied in1995, andattheendoftheUruguay
Round when alltariff cutsareimplemented. Weareconfident thattheWorking Party settoexamine
thismatter willendorse conclusion.
3.2 Anti-dumping andEnlargement
Itisnecessary, firstofall,toemphasise thatthenature andfunctioning oftheCommunity asacustoms
union legitimately entails theuniform application ofanti-dumping measures attheexternal border
which hasnowbeenextended toinclude thenewMember States.
Theeffect ofthisistwofold. First, anti-dumping measures imposed bythethree newMember States
arerepealed asof1January 1995 andsecond, anti-dumping measures inforce intheCommunity on
thatdate, which have allbeen adopted following aninvestigation carried outinconformity with
Article VIoftheGATT andCommunity implementing legislation, areapplicable tothose newMember
States. From theGATT- lawpoint ofview, thissituation issuigeneris. Itcould, however beargued
thattheCommunity hasnotadopted measures inrespect ofthethree newMember States butrather
applies existing measures totheenlarged territory oftheEC.Inthisrespect, thesituation could be
assimilated toothersituations warranting areview, suchasthatofnewproducers joining theCommunity
industry ornewexporters engaging inbusiness intheCommunity market aftertheadoption ofmeasures.
Insuchcases, theGATT Anti-dumping Code (Article 11.2) andtheCommunity 'sconsequent legislation
(Article 11(3)ofRegulation (EC)No.3283/94) havemade provision forreviewing measures incase
ofsuchchanged circumstances.
Onthisbasis, theCommunity considers thatanyinterested party abletodemonstrate thatthefindings
(andthemeasures) adopted would havebeensignificantly different hadtheybeenbased oninformation
including thenewMember States, should beentitled toareview andhasdecided, inaddition, that
thetimerestriction (1yearofminimum existence ofameasure forbeing reviewed) setoutinArticle 11
ofthebasic Regulation willnotapply inthiscase. Tothateffect, theCommission haspublished inEuropean Union WT/TPR/M/3
Page 31
theOfficial Journal oftheEuropean Communities, anotice inorder toinform allparties concerned
andgivethemafairchance tohavetheircasere-examined, ifwarranted. Inaddition, theCommunity
mayexamine whether retroactive reimbursement (from 1January 1995) ofduties would beappropriate.
Thisapproach ensures consistency ofthecommon commercial policy intheenlarged Community, while
fullycomplying withtheEU'sGATT obligation. Since theEUhasachieved ahighlevelofintegration
andbecause ofitsconstitutional structure (seeArticle 4.2and4.3oftheAnti-dumping Code) itwas
entitled toapply theduties tothethree newMember States.
4. Problems ofimplementation :Standards andCertification
Weheard criticism about insufficient integration/harmonisation within theEuropean market orthenon-
availability ofmutual recognition incertain areas. Thisiseither because weareinareas outside
Community competence, ortheprocess isstillincomplete. Atpresent, thegeneral framework applying
totheinternal market isasfollows:
Adistinction hastobemade between regulatory provisions adopted bypublic authorities which are
binding, andvoluntary instruments, suchasstandards adopted byindependent standards organisations,
which remain voluntary.
Asregards mandatory technical rules, whether theycover technical specifications, orrelate totesting
andcertification, including administrative procedures, thereareseveral instruments toavoid technical
barriers totrade:
Harmonised areacovered byEUlegislation
. Inthisarea,twodifferent legislative techniques arebeing followed. Thetechnical harmonisation
directives ofthe"oldapproach" fixtheprotection requirements withregard tosafety, public
health, consumer protection orother legitimate objectives oftheCommunity inaverydetailed
manner. Thedirectives based onthe"new approach" andthe"global approach" onlyestablish
theessential requirements withregard toproducts aswellastheappropriate conformity
assessmentprocedures.Theprotectionlevelsetupusingbothtechniquesrepresentstheminimum
thatmanufacturers mustfulfil inorder tobeabletoplace theirproducts ontheCommunity
market andatthesame timethemaximum thatcanberequired bythemarket surveillance
authorities oftheMember States.
Non-harmonised areacovered bynational legislation
. Directive 83/189 obliges Member States tonotify draftregulations totheCommission andother
Member States, allowing them toidentify potential trade barriers andtoadopt thenecessary
steps inorder toavoid thecreation ofnewtrade barriers.
. Asregards existing regulations, which maydiffer according toMember States, theprinciple
mutual recognition hasbeendeveloped andestablished onthebasis ofArticles 30to36of
theEECTreaty. Thismeans that,products legally manufactured ormarketed inonecountry
caninprinciple freely circulate throughout thewhole European market. Products imported
from athird country andlegally putonamarket inaMember State, areassimilated to
Community products and,therefore, caninthesame manner freely circulate.WT/TPR/M/3 Trade Policy Review
Page 32
Asregards voluntary instruments, theCommunity hasadopted aseries ofpolicies withaview
tocreating aEuropean standardisation infrastructure, capable ofdealing withrequests for
European standards. European standards havetobetransposed intonational standards and
conflicting national standards have tobewithdrawn, thusbringing about aneffective
harmonisation. Inaddition, Directive 83/189 obliges national standards organisations tonotify
toeachother newwork items. Onthatbasis national bodies mayaskforEuropean standards
tobedeveloped instead ofthenational standard, oraskforactive orpassive participation in
thenational activities.
European standards organisations haveastrong record inimplementing international standards
andhaveconcluded cooperation agreements withtheirinternational counterparts.
Asregards testing andcertification inthevoluntary field, theCommission andtheEuropean
standards organisations havesetuptheEuropean Organisation forTesting andCertification
(EOTC). Thisisanumbrella organisation under which interested parties canconclude mutual
recognition agreements. Participation inthesevoluntary agreements isopenalsotocompanies
inthirdcountries.
II. IMPACTONTRADINGSYSTEM/EUTRADERELATIONSWITHTHIRD-COUNTRIES
1. Single Market
Ihavestressed yesterday thattheECharmonisation process equates withliberalisation. Iwould like
toaddthattheECsingle market process infactconstitutes aform ofopen regionalism, asis
demonstrated bytheincreasing share ofextraEUtrade(imports plusexports) intotaltrade. Thisshare
hasevolved from 37percent in1980 to41percentin1993.
2. Importance ofpreferential relations oftheEU
Itisbecoming atradition tohaveageneral discussion ontheissue ofregional trade arrangements on
theoccasion ofourTPRs andthismakes sense because ofthewide network ofagreements thatthe
EChasinplace orunder consideration. Infuture, however, itwillalsobecome more andmore relevant
inother TPRs too,aswemove intoaperiod ofexpanding NAFTA, establishing themodalities of
APEC 'sevolving trade arrangements anddefining therelations between North andSouth America.
Indeed, asyouwillbeaware, evenmore significant (involume oftrade terms) freetrade possibilities
aremore andmore being evoked, especially inpolitical circles.
Inmyopening remarks yesterday, Ireferred tothegeopolitical aspects ofourownnetwork of
agreements, withCentral andEastern Europe, theBaltic States andtheMediterranean countries in
mind. Thisisnottheforum forlooking atthequestion ofWTO consistency ofanysuchagreement,
thatwillbedoneelsewhere. Butitgives anopportunity forabroader reflection onthewayinwhich
Article XXIV should beinterpreted. Inblunt terms: willtheWTO members want toadapt tothe
economic andpolitical realities which arelikely toemerge? OrwillArt.XXIV beastraitjacket to
beimposed onanypartnership orco-operation agreement inwhich freetrade isabasic objective?
Iposethequestion nottojustify anyparticular approach buttounderline amore general point. There
isclearly awidedistinction tobemade between thetraditional freetradearea,focused ontariffs, quotas,
origin rules andsoforth, andnowalsoencompassing theareaoftrade inservices, ontheonehand,European Union WT/TPR/M/3
Page 33
andthemore general concept ofregional integration, anideawhich includes alsowider economic
co-operation,financialassistanceinsomecases,approximationoflawsintheeconomicarea,competition
policies, evenco-operation inmatters suchaspolitical dialogue andmigration. Insuchacasefreetrade
isonlyonecomponent together withfreemovement ofcapital andofpersons.
Furthermore, when partnerships ofthiskindarebeing envisaged, itisoften between developed and
developing economies andsome account hastobetaken ofwhatthismayimply interms ofthetimescale
andtradeobjectives ofeachpartner. WeinEurope arewrestling withthese issues inCentral andEast
Europe andintheMediterranean; others willsoonconfront thesame issues inLatin America andin
theAsian Pacific region. Wemust ofcourse retain thebasics ofArt.XXIV, thattrade creation not
trade diversion, istheobjective andtheoutcome; andthatpreferential trade ispermitted onlywhere
thiscontributes tothecollective (multilateral) good. Butbeyond thatouroldfriends "substantially all
thetrade", "plan andschedule" and"reasonable length oftime" mayneedtoberevisited.
2.1 Share ofpreferential trade
Inanswer tothefearsexpressed bysome ofbeing “leftout”bytheEU,Imustpoint outagain that
itisonlytooeasytoexaggerate theimportance ofpreferential arrangements andtoworry unnecessarily
attheperceived spread ofregional trading blocs.
Onthelatter point, Icirculated inannex tomyopening statement atableshowing quite clearly that
theshare ofintra-regional trade(exports plusimports) intotaltradeofthethreemaingeographic trading
zones (EU, United States, Japan) hasremained largely stable overtime(roughly 63percentforboth
theEUandUnited States zone), withtheexception oftheJapan/Pacific Zone. Asia’sexperience
demonstrates thatregional integration agreements arenotapre-condition forarising share ofintra-
regional trade. Fears about thedevelopment ofregional trading arrangements, andtheirimpact on
theWTO trading system should beseenagainst thisbackground.
Secondly, theimportance andeffects ofpreferential trade canbeexaggeratedly amplified. While the
chart produced bytheWTO Secretariat (WT/TPR/S/S Page19)gives abroad overview ofthesituation
onpreferences, itmust becarefully interpreted inusing theaccompanying paragraph 23,soasnot
tounderstate thepercentage ofMFN trade. Thechart gives tounderstand thatonlyaround 40to45
percentofECtrade enters atMFN rates. Therealsituation isthatnotfarshort from 70percent
ofEUimports enters theEUonanentirely non-discriminatory basis, because oftheeconomic weight
ofthesuppliers concerned, andbecause ofthedifference between entitlements andactual facts.
Ourtradedatashow thataround 42-43 percentofimports areentered under MFN rate. Tothisshould
beadded, especially inviewoftherecent concessions on"zero forzero" sectors, theshare ofduty-free
preferential trade forwhich theMFN rateisalready atzero, i.e.another 17percentofimports.
Andthenthere isthedifference between GSPentitlements andactual GSPimport registrations,
representing uptonowaround 8-9percentofimports. Intotal, almost 70percentofEUimports
aredealt onaMFN basis, evenif,liketheWTO Secretariat said, thevastmajority oftheUnion ’s
trading partners qualify forfreetrade areaorother preferential treatment.
2.2 Europe andMediterranean Agreements
Questions havebeenraised about thealleged “limited coverage ”ofsome oftheEU’sregional trade
arrangements, withreference totheEurope Agreements, andagreements involving ourEuropean
neighbours. Itwassaidthatsensitive import areas suchastextiles orsteelwere excluded from theWT/TPR/M/3 Trade Policy Review
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agreements. Aswasalready pointed outtwoyears ago,thisissimply notcorrect: eachoftheagreements
mentioned veryclearly dosetoutthetimetable formoving towards freetrade orfurther liberalisation
intheseareas. Inallcases, thereistotalliberalisation ofcustoms duties andrestrictions ontradebetween
ourpartners andtheEUwithin aspecified period. Foragriculture, significant market opening isforeseen
overthelifeoftheagreement, withbothmajor dutycutsandincreased access.
3. Revision ofGSP
TheCommunity 'snewscheme attracted alotofattention, which isnormal since wereally innovated,
withtheobjective ofcreating amore efficient system intheneweconomic panorama ofthedeveloping
world.
Questions wereasked about theconditions forspecial incentives andthecriterion todetermine which
countries areeligible, aswellasonthefunctioning ofthenewly introduced clause related tolabour
andenvironment standards.
Theanswers tothefirst2questions arecontained inArticles 7and8ofCouncil Regulation (EC)
No.3281/94.Thespecialincentiverégimewhichwillgrantadditionalpreferencestobeneficiarycountries
isnotyetoperative. Itistobeputintooperation asfrom 1.1.1998. In1997, theCommission will
establish areport, ontheonehand, ontheresults ofthestudies carried outininternational fora(ILO,
WTO, OECD) ontherelationship between trade andlabour rights ("social clause ")and,ontheother
hand, ontherelationship between trade andtheenvironment ("environmental clause ",itwillapply
onlytotropical timber andproducts processed from it).TheCouncil willcarry areview based on
thatreport andtheCommission willsubmit aproposal foraCouncil decision ontheintensity ofthe
special incentive régime andthemodalities forimplementing them, inparticular theconcrete control
procedures. Allbeneficiaries willinprinciple beeligible tothenewincentive régime iftheywish
toapply forit.Forthatpurpose, thecountries should request inwriting thebenefit oftherégime and
provide theproof, thattheyhaveadopted andactually apply domestic legalprovisions incorporating
thesubstance of,inthecaseofthe"social clause", thestandards laiddown inILOConventions Nos
87,98(freedom ofassociation, protection oftheright toorganize, collective bargain) andNo138
(minimumageforadmissiontoemployment)andinthecaseofthe"environmental clause ",thestandards
laiddown byITTO relating tothesustainable management oftropical forests.
Asforthepossibility ofwithdrawal oftheGSPconcessions, theRegulation setforth aprocedure,
whereby internal consultations willtakeplace intheCommittee fortheManagement ofGeneralized
Preferences (consisting ofrepresentatives from theMember States andchaired bytheCommission).
IftheCommission finds, following theconsultations, thatthere issufficient evidence concerning the
alleged circumstances, anin-depth investigation (theduration ofwhich being normally oneyear) will
beheldincooperation andconsultation withtheCommittee fortheManagement ofGeneralized
Preferences. Theopening oftheinvestigation willbepublished intheOfficial Journal oftheEuropean
Communities. Theinformation willbeverified byhearings ofallparties concerned including the
complainants andthecompetent authorities ofthebeneficiary country concerned. Forthatpurpose
theCommission maydispatch itsownexperts toestablish thetruth oftheallegations. Competent
authorities ofthebeneficiary country concerned willbegiven every opportunity tocooperate inthe
conduct ofthese enquiries. When theinvestigation iscomplete theCommission willdecide either to
close theinvestigation without anyother consequences ortopropose totheCouncil towithdraw
preferences tothecountry concerned inwhole orinpartaccording totheconclusion oftheinvestigation.
TheCouncil willfinally decide thewithdrawal ornotofpreferences onthatbasis. Written questions
werealsopresented byCanada ontheeconomic impact ofthenewscheme andthevolume oftradeEuropean Union WT/TPR/M/3
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involved; aswellasthepossibility foracountry toreturn toeligibility conditions andother detailed
issues ofthefunctioning oftheGSPscheme.
TheCommission considers thatitisimpossible tomake serious calculation oftheimpact oftherevised
GSPbycomparison withtheformer, taking intoaccount thequalitative differences between them.
Onthebasisofempirical estimates, theCommission thinks thatthescheme should beglobally neutral.
Onthebasis ofanannual report from theCommission, theCommittee fortheManagement of
Generalized Preferences willexamine theextent towhich theobjective ofneutrality oftheeffects of
thescheme isachieved andanysteps thattheCommission willconsider appropriate toensure the
observance ofthatprinciple.
Inoverall terms, theEuropean Union doesnotexpect significant changes inthevolume oftradefrom
beneficiary countries eligible under theprevious scheme duetotheimplementation ofthenewscheme
taking intoaccount itsobjective ofglobal neutrality, bearing inmind thatoneoftheobjectives ofthe
newscheme istherebalancing ofitsadvantages from themostadvanced countries tothose countries
most needing it.
Thegraduation mechanism isfixed fortheduration ofthescheme, i.e.fouryears. Arevision will
takeplace aftertheperiod ofapplicability ofthescheme (over theten-year period ofextension, the
scheme isintended toapply during three pluri-annual periods, fouryears, three years, three years).
Thereview ofthegraduation willtakeplaceattheoccasion oftheterms oftheabove mentioned periods.
Thecriteria usedfordetermining categories ofsensitivity forproducts covered byGSParebasically
thesame thanthose usedforestablishing theEuropean Union tariff offer intheUruguay Round.
Adjustments weremade insome cases tocorrect theeffects ofthespecificity ofthenegotiating context
oftheUruguay Round. Inanycase, thecriteria usedtakeintoaccount allqualitative andquantitative
elements relating totheimpact ofimports onthesituation oftheEUdomestic industry andtheEU
market ingeneral.
Annex IIpart1oftheRegulation 3281/94 identifies anddefines eachsector forwhich countries
(identified byafootnote 1)havebeenfound asexceeding the25percenttrigger level.
Asstated above, therewillnotbeanyproduct/country graduation newdecision making process before
1998. Allbeneficiary countries views will,atthattime, bewelcomed during thisprocess, asinthe
past,bearing inmind theautonomous andnonnegotiable nature oftheGSP.
III. SECTORAL POLICIES
1. Industry (Textiles)
Textile policy hasjustbeentheobject ofamajor improvement world-wide: thesector isnowunder
themultilateral framework. TheCommunity isimplementing theengagement itundertook withatotal
adherence totheprovisions oftheURagreement. Thecriticism andsuspicions Ihear, Mr.Chairman,
areoblivious oftwoelements, oneoflegalnature andoneofeconomic nature.
First, there arethree stages ofliberalisation intheagreement anditislegitimate toproceed stage by
stage. TheEUwillnotify itsintegration programme forstages IIandIIIoftheATC inconformity
withthetimetable setoutinArticle 2(11)oftheATC(i.e.before 1.1.97 forstageIIandbefore 1.1.2000
forstage III).According totheEUdecision-making procedures, theCouncil willestablish productWT/TPR/M/3 Trade Policy Review
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listsforintegration under stages IIandIIIonaproposal from theCommission, which isconsidered
premature atthismoment.
Second, thegradual orprogressive integration ofthetextile sector inthemultilateral system and-within
thesector -ofthevarious categories ofproducts isofvalue forallconcerned partners; fortheimporters,
whocanplanahead fortheirrestructuring process andfortheexporters, whomight otherwise see
more efficient producers occupy theirpartsoftheCommunity market. More rapid acceleration ofthis
programme islikely more disruptive forbothimport andexport interests, andthere isnoreason to
make particular experiments inthisarearather thaninanyother.
2. Agriculture/SPS
Seeds
Inaccordance withthesocalled equivalence régime implemented bytheEuropean Community on
thebasisofthevarious Council Directives onthemarketing ofseeds andpropagating material ofplants
(which establish quality conditions forthefreemarketing ofsuchmaterial within theEU), seeds and
propagatingmaterialharvestedinthirdcountriesmaybeimportedintotheCommunity.Suchimportation
isconditional uponsatisfaction ofquality conditions relating tothematerial, suchconsiderations being
considered "equivalent" tothose ofsimilar material harvested intheCommunity. Generally speaking
seedandpropagating material harvested inthirdcountries isacceptable ifitmeets international standards
(i.e.OECD, UNECE orISTA).
Thisapproach, introduced in1966, hasworked satisfactorily withatleast25countries andbeing
consistent withtheAgreement onTechnical Barriers toTrade therewould notappear tobeanyreason
toremove thisseedequivalence régime.
"Insome cases, member countries seem tobeapplying more stringent measures attheborder thanthose
thatwould berequired toachieve theappropriate level ofprotection setbytheEU.Based ontheWTO
SPSAgreement, howcantheEUensure thattheMember States areapplying measures attheirborders
inamanner consistent withthepolicies andregulations setbytheEU?"
TheEUisintheprocess offinalising theharmonisation ofitsthirdcountry import policy, fullyin
linewiththeprovisions oftheSPSAgreement. Pending thecompletion ofthisprocess, certain products
andanimals aresubject toindividual Member Statefrontier provisions. Theprocess ofharmonisation
should becompleted shortly, andtherelevant draftmeasures willbenotified totheWTO asappropriate
inconformity withAnnex BtotheSPSAgreement. TheEUhasallthenecessary powers toensure
theproper respect ofitsobligations under theSPSAgreement.
"How willtheEUproceed withspecifying equivalency requirements foragricultural products covered
bytheSPSagreement butnotincluded intheveterinarian agreement?"
TheEUhasdeveloped legislation andmeasures forawide variety ofproducts andanimals. The
assessment ofequivalency willineachcase,whether within negotiations onanequivalency agreement
orotherwise, beapproached inaconsistent manner following theprinciples oftheSPSAgreement.
"How doestheEUplantoaddress theissue ofadaptation ofmeasures toregional conditions asrequired
bytheSPSagreement?"European Union WT/TPR/M/3
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TheEUwasoneofthefirsttodevelop sanitary andphytosanitary measures adapted toregional
conditions, andthispolicy isapplied within theEU.TheEUcanrecognise theadaptation toregional
conditions bythirdcountries where thirdcountries haveapplied measures providing equivalent health
guarantees.
"Can theEUprovide more information onthe"veterinary agreements" concerning thecriteria for
equivalence forsanitary andphytosanitary measures? How willthese agreements work? What willbe
theeffects onthetrade ofthird countries? Inwhich areas orproducts iswork underway toreach such
agreements?"
"Does theEUintend tousethistypeofmethod forcountries other thanthose withwhich itisalready
innegotiation?"
TheEuropean Community isnegotiating withanumber ofcountries withaviewtoreaching agreements
consistent withtheprovisions oftheSPSAgreement andproviding forenhanced cooperation of
communication onsanitary andphytosanitary questions. Thescope oftheagreements being negotiated
covers veterinary measures onanimals andanimal products andincertain cases alsophytosanitary
measures forplants andplantproducts. Thenegotiations arenotyetconcluded andtherefore itisnot
possible todetail thewayinwhich suchagreements would function. Thescope forextending thenumber
ofcountries withwhich negotiations aretaking place willbedetermined bytheprogress achieved in
theexisting negotiations.
3. Fisheries
Concerning quantitative restrictions onfishery products, namely preserved tunaandsardines, the
Community isintheprocess ofdismantling these restrictions, which willnolonger exist after
31December 1996. Under Regulation (EC) No.3267/94 of20December 1994, theCommission
increased theannual quantities forpreserved sardines from 2,385 to4,425 tonnes andforpreserved
tunaandbonito from 113,990 to151,035 tonnes. These increases tookaccount oftheCommunity 's
commitment toincrease thequotas aswellastheaccession ofthethree newMember States.
Regarding question 8onfisheries fromtheUnited States, theanswer toallthreequestions isno.United
States fishing vessels havenofishing possibilities inCommunity waters (andvice-versa) -thisfact
hasabsolutely nolinkwiththeaccession.
OnthequestionnairefromJapan,underquestion2(ii),wewouldrefertheJapanesetoGATTNotification
L/7413 dated 23February 1994, which explains thereasoning usedbytheCommunity intaking its
safeguard measures. Thetypeof"further measures" isalready described intheSecretariat Report
(footnote 44).
Themarketing controls referred tobyJapan inquestion 2(iii)aredescribed inArticle 3ofRegulation
(EC) No.1093/94 of6May1994.
4. Coal
Thenewrules onState aidtothecoalindustry areperfectly transparent. They havebeenpublished
intheOfficial Journal L329 of30December 1993 (Decision 3932/93/ECSC of28.12.93) and
transparency isoneofthemain principles guiding those newrules.WT/TPR/M/3 Trade Policy Review
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"How cantheEUpermit anaidFramework which notonlyimplies Significant economic distortions,
butrunscounter totheveryideaofanintegrated market?"
ThequestionisnotpertinentbecausetheaidFrameworkdoesn'timply"Significanteconomicdistortions".
TheEUismaking asubstantial effort toreduce thelesscompetitive capacities.
Coalisoneofthescarce energy resources oftheEUandthemeasures havebeentaken partly toensure
adiversification ofenergy supply andsupplies, including national energy resources.
Additionally, coalproduction contributes tosolving social andregional problems.
"Can theEUprovide information onthecriteria thatwould allow forcontinued assistance tothese areas
beyond the2002 target setbythenewrules onstate aid?"
Nosignificant problem isforeseen inanynewaidframework decision being legally based onArticles
92and93oftheECTreaty.
"What progress hasbeenmade bytheEUtowards reaching its1995 target forGermany thatsubsidized
domestic coalinput belimited to20percentofgross electricity consumption?"
Theruleof20percenthasbeenapplied inthe"Jahrhundertvertrag" caseandintheprivatisation of
theelectricity sector inUK,butitisnolonger ageneral rulefortheEU.
InGermany allthenecessary efforts havebeenmade torespect theruleof20percent. TheGerman
governmenthassubmittedarestructuringplantotheEuropeanCommission,providingforthedegression
ofaidsandthereduction ofproduction costs.
"Future plans fortherevision ofpolicies toensure areduction ofbarriers totrade?"
Thebarriers arepresently minimal. Ofthe15Member States, only2(Germany andSpain) havesome
barriers. These 2countries arecontinuously increasing coalimports, asthisisalsothetrend inthe
EUasawhole.
"Policy towards dismantling coalsubsidy régimes?"
TheEUdoesnothavetheintention ofdismantling coalsubsidy régimes.
Theprinciple ofadegression ofaidsandthereduction ofproduction costs, aswellastransparency
(viabudgetisation) aresufficient toensure thepermanent restructuring oftheindustry.
5. Services
Anumber ofissues andquestions havebeenraised inrelation toservices. Itshould benoted thatmany
oftheseareultimately conditioned byongoing negotiations within thevarious groups established either
byMinisterial Decisions atMarrakesh oraspartofongoing work oftheCouncil forTrade inServices.
Thisisparticularly thecaseinrespect ofFinancial Services andMovement ofNatural Persons (referred
tobyAmbassador Narayanan, inhiscapacity asDiscussant). While ithadbeenhoped thatnegotiations
would havebeensuccessfully completed bynowwearestillawaiting information from some majorEuropean Union WT/TPR/M/3
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partners astotheirfinalposition onFinancial Services. Members willrecall thattheadditional offer
made bytheECanditsMember States inrespect ofmovement ofpersons wasconditional upon the
outcome ofnegotiations onFinancial Services.
Theimportance ofmeasures relating toqualification requirements andprocedures, technical standards
andlicensing requirements isacknowledged within thetextoftheGATS agreement itselfandthematter
hasalready beendiscussed ininformal consultations heldbytheChairman oftheCouncil forTrade
inServices.
Replies tothedetailed questions raised byMembers willbeissued induecourse.
IV. TRADE POLICY INSTRUMENTS AND "RULES" ISSUES
1. Trade Defence Instruments :safeguards
InCommunity law,themain legal basis fortaking safeguard measures isCouncil Regulation (EC)
No3285/94 of22December 1994. ThisRegulation hasimplemented intheCommunity lawtherules
oftheAgreement onSafeguards.
Itsmain provisions areasfollows:
- safeguard measures areimport reliefs applied when aproduct isimported intotheCommunity
insuchgreatlyincreasedquantitiesandonsuchconditions(prices,etc.)thatitcausesorthreatens
serious injury toCommunity producers.
- theterms "threat ofserious injury", "serious injury" and"Community producers" areprecisely
defined; thiswillbenefit allparties concerned;
- therighttoreply tootherparties 'arguments fortheinterested parties isensured; thisunderlines
thecontradictory nature oftheinvestigation ("due process").
- aprovision ontheprovisional safeguard measures tobeapplied incritical circumstances
(conditions, duration andnature); thisprovision allows thetaking ofameasure without
investigation inemergency situations, butunder theformofacustoms duty(sothatitcanbe
reimbursed, should theprovisional measure notbeconfirmed afterwards);
- withrespect tothequotas, anexplicit provision setting theirlevels normally attheaverage
imports ofthelast3representative years (thisisinfactaconsolidation oftheECpractice)
andanother about theirallocation among suppliers countries (where thecountries whose imports
haveincreased disproportionately maybesingled out);
- provisions onthelimited duration ofthesafeguard measures (normally fouryears, maximum
huityears), theirprogressive liberalisation andtheirmid-term review, andtheprohibition of
repetitive measures, thisconfirms thetemporary nature ofsafeguard measures, designed to
givetimetothedomestic industry foradjustments.WT/TPR/M/3 Trade Policy Review
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2. Trade Barriers Regulation
Regulation (EEC) No.2641/84 (usually known asthe"New Commercial Policy Instrument" -NCPI)
wasadopted on17September 1984toprovide theCommunity withprocedures enabling ittorespond
toanyillicit commercial practice from athird country. TheNCPI wasdesigned asanadditional
instrument separate from themore "traditional" commercial policy instruments (i.e.anti-dumping,
countervailing duties andsafeguards instruments). Fiveproceedings havebeeninitiated under theNCPI,
themostrecent cases, which arestillpending, being aproceeding against Thailand concerning piracy
ofECsound recordings (initiated inJuly1991) andaproceeding against Turkey concerning the
imposition byTurkey ofanimport levyandhigher customs duties onEUexports ofpolyester fibres
(initiated inJanuary 1993). Asfrom 1January 1995 theNCPI hasbeenrepealed andreplaced by
Regulation (EC) No.3286/94 (usually known asthe"Trade Barriers Regulation" -TBR).
Bothofthese regulations essentially establish internal Community procedures bywhich industries and
enterprises canrequest theEuropean Community institutions toactinternationally. Their purpose is
nottoaffect inanysense theexistence orthescope oftheCommunity 'srights under international trade
rules.
Most ofthedifferences between theNCPI andtheTBRrelate totheconditions which arerequested
forthelodging ofcomplaints. Numerous improvements havebeenintroduced inorder toensure greater
efficiency intheimplementation oftheTBR. Twotypes ofobstacles totradearenowforeseen (those
having aneffect ontheCommunity market andthose having aneffect onthemarket ofathirdcountry),
withvaryingconditionsasregardsthestandingtolodgeacomplaint("Communityindustry"forobstacles
having aneffect ontheCommunity market, oneormore Community enterprises forobstacles having
aneffect onthemarket ofathirdcountry) andthenegative effects tobeshown ("material injury" for
obstacles having aneffect onthemarket ofathirdcountry). TheTBR'sscope ofapplication isalso
broader (further togoods itcovers tosome extent services andintellectual property rights). Allthese
show ashiftofemphasis towards theexport barriers andtheopening ofthirdcountry markets.
Inaddition, theconcept of"illicit practices", which hadbeenusedintheNCPI, hasbeenreplaced
bytheterm"obstacles totrade" ("any tradepractice adopted ormaintained byathirdcountry inrespect
ofwhich international trade rules, which areessentially theWTO rules, establish arightofaction for
theCommunity") which ismoreclearly linked tointernational traderulesandcantherefore more easily
beapplied within thatframework. Newprovisions havealsobeenintroduced tofacilitate amicable
solutions: thus,aproceeding canbesuspended inorder either tomonitor theconcrete implementation
ofsatisfactory measures taken bythethirdcountry, ortoallow thenegotiation ofanagreement with
thethirdcountry.
Finally, thecommercial policy measures which canbeadopted havenotchanged. Itshould, however,
berecalled thatinWTO cases suchmeasures cannot betaken unless thedispute settlement procedure
hasbeeninitiated, results inadecision infavour oftheCommunity andthemeasures areauthorised
bytheDispute Settlement Body. Furthermore, itshould alsobestressed thattheultimate aimofthe
TBRistheelimination ofthetrade barriers andnottheadoption ofretaliatory measures against third
countries.
3. Rules ofOrigin
TheEUisintheprocess ofnegotiating newrulesoforigin intheCEECs inorder toencourage trade
integration throughout theregion andtostrengthen theeffectiveness oftheEurope Agreements. OneEuropean Union WT/TPR/M/3
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aspect ofthisinitiative istoextend thecumulation possibilities toallassociated countries andpossibility
EFTA countries aswell.
Itisnotenvisaged thatsuchacumulation system would encompass alltheEU'spreferential trading
partners. Aprecondition forcumulation isthatallcontracting parties toasystem haveagreements
between themselves, based uponidentical rulesoforigin. Itistherefore notrealistic toimagine atotally
integrated system covering alltheEU'spartners. However, astrategy similar tothatproposed forthe
EU'sEuropean partners isbeing developed fortheMediterranean region anditisenvisaged thatas
faraspossible, alltheEU'spreferential rules oforigin willbesimilar ifnotquite identical.
4. Public procurement
Hong Kong "Reciprocity andsectoral non-application were introduced inthefinal hours ofUR
negotiations totheAgreement onGovernment Procurement which represent serious
derogations from thefundamental GATT principles ofMFN andnational treatment.
Itisimportant forthemajor trading nations tosetanexample incherishing freeand
open trade. Will EUconsider toremove these derogations andreturn tothebasic
principle ofnondiscrimination inthisimportant sector oftrade?"
TheEUcannotmake afirmcommitment today onitsfuture position onthisquestion.
However, ifinthefuture theprinciple ofnon-discrimination were toberecognised andapplied by
allWTO contracting Parties withrespect togovernment procurement theEUwould beclearly supportive
andwilling toassume itsowncommitments onabalanced basis inthisrespect.
United States "What isthestatus ofimplementation oftheGovernment Procurement commitments
agreed toinMarrakesh?"
TheEUhasalready completed ratification oftheGPA. By1January 1996, theEUwillbeinaposition
toimplement itscommitments infull.
Japan "We understand thattheEUhasnotpublished statistics onitsprocurement since it
lastpublished fortheyear1992. When willthelatest statistics bepublished?"
TheCommission willcontinue providing statistics onitsprocurement assoonasthese areavailable
hopefully inthenextfewmonths; italsoconsiders essential thatprogress bemade withthework led
bytheWorking Group onStatistical Reporting withrespect tothenewstatistical obligations under
thenewagreement sothatthecollection andinterpretation ofstatistics onprocurement canbefacilitated.
TheEUhasbeenparticularly active incontributing tosuchwork despite whatseems tobealackof
interest from theother members ofthenewagreement.
V. OTHER ISSUES
1. Trade Environment
1.1 Leghold trap
Anevaluation ofthetrade impact oftheimpending banonimports offursfrom thirdcountries is,
atthisstage, difficult.WT/TPR/M/3 Trade Policy Review
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Dataavailable totheEUandtotrading partners show discrepancies intheassessment ofcurrent trade
infurswhich might beaffected bythemeasure. Furthermore, theCommission willdraw upalistof
countries meeting therequirements oftheRegulation onlyinSeptember 1995. Theexamination of
information provided byourtrading partners isstillongoing atthispoint intime.
1.2 Cosmetics
Wearenotinaposition toassess theimpact ontrade, bothoncurrent transactions andonfuture ones,
since theDirective 93/35/EEC asamending Directive 76/768/EEC willinnocaseentail arestriction
ontrade before 1January 1998.
Furthermore, ifsufficient progress indeveloping satisfactory methods toreplace animal testing has
notbeenachieved, theCommission willpostpone theentry intoeffect ofthemeasure "forasufficient
period" andbyatleasttwoyears.
1.3 Packaging andpackaging waste (Costa Rica-Question)
TheCommunity rulesonpackaging andpackaging waste aretobefound intheDirective 94/62/EC.
There isnoother regulation onthespecific subject.
Directive 94/62 entered intoforceon31/12/94. Member States implementation musttakeplace"before
30June1996" (Art. 22.1).
Theeffects onthirdcountries willbenondiscriminatory. TheDirective, initsArt.7setsthecriteria
fornational legislation tocomply with. Inparticular therulesforreturn, collection andrecovery system
"shall alsoapply toimported products under non-discriminatory conditions, including thedetailed
arrangements andanytariff imposed foraccess forthesystems, andshallbedesigned soastoavoid
barriers totradeordistortion ofcompetition". TheCommunity institutions willcontrol thecompliance
tothese principles through anotification procedure, setforth inArt.16,intervening already atthe
stage ofdraftnational regulations. TheDirective willapply forthefuture onlyandtheexisting stocks
ofproducts willnotbeaffected, asexpressly granted byArt.22.5, foraperiod offiveyears.
1.4 Ecolabelling (United States -Question)
ECRegulation oneco-labelling
. Council Regulation 880/92EEC of23March 1992, onaCommunity eco-label award scheme;
. Commission Decision 93/430/EEC of28June1993, establishing theecological criteria for
theaward oftheCommunity eco-label towashing machines;
. Commission Decision 93/431/EEC of28June1993, establishing theecological criteria for
theaward oftheCommunity eco-label todishwashers;
. Commission Decision 94/923/EC of14November 1994, establishing theecological criteria
fortheaward oftheCommunity eco-label tosoilimprovers;
. Commission Decision 94/924/EC of14November 1994, establishing theecological criteria
fortheaward oftheCommunity eco-label totoilet paper;European Union WT/TPR/M/3
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. Commission Decision 94/925/EC of14November 1994, establishing theecological criteria
fortheaward oftheCommunity eco-label tokitchen rolls.
AlltheseDecisions haveaperiod ofvalidity ofthreeyears fromthedateonwhich thedecision
takes effect i.e.respectively 20June1996 and14November 1997. Thistimelimit isthe
consequence ofthetimelimitofthevalidity ofthecriteria setintheCouncil Reg.880/92/EEC.
2. Trade andcompetition
a) There isnorequirement thattheconcept ofMember States 'competition lawsshould bethe
same asthose oftheEU. However, there hasbeenastrong trend towards convergence of
thebasicconcepts between national competition lawconcepts andEUcompetition lawconcepts
andthistrend iscontinuing.
Inanyevent, withtheintegrated EUmarket there arefewmatters which donotaffect trade
between Member States. Ifthiscondition isfulfilled, undertakings fromwithin andfromoutside
theEUcannotify theiragreements totheEUCommission. IftheEUCommission finds a
violation butexempts itunder Article 85par.3,suchdecision haspriority overanycontrary
national decision. Thesameapplies toallagreements covered byblock exemption Regulation.
Innowayisthere anydiscrimination between undertakings fromwithin orfrom outside the
EUinthisrespect.
b) Article 222oftheEUTreaty stipulates thattheEUTreaty shallinnowayprejudice therules
inMember States governing thesystem ofproperty ownership. Thus, theEUdoesnotintervene
inthequestion ofprivate v.public ownership.
However, inthecourse ofprivatisation, EUcompetition rules maycome toplaybywayof
control ofstate aids, acquisition ofownership (mergers) orbywayofapplication of
Art.85/86/90 totheprivatised companies. Inaddition, Art.221oftheTreaty provides for
anobligation ofnon-discrimination asregards participation inthecapital ofcompanies inrespect
ofnationals ofother Member States oftheEU.