EMBARGO: NOT FOR PUBLICATION
BEFORE 1300 HRS GMT 25JULY 1995
PRESS/TPRB/10
18July1995
WTO RULES CRUCIAL FOR MINIMIZING FRICTIONS AND ENSURING
OUTWARD-LOOKING FOCUS FOR FURTHER GROWTH OF
THE EUROPEAN UNION AND ITSTRADING PARTNERS
TRADE POLICY REVIEW OFTHE EUROPEAN UNION
TheEuropean Union isamong thepace-setters inthemultilateral trading system, andrecent
accessions andnewpreferential arrangements havefurther increased itsinfluence onthesystem. The
trade policies pursued bytheEUinthepasttwoyears show increasing internal policy integration,
arapidly expanding andincreasingly complex network offree-trade areaandpreferential relations
andactive participation inmultilateral tradeliberalization. Astrong, constantly active WTO framework
isnecessary toguide theUnion 'sfuture trade policies andcounterbalance thediscriminatory impact
ofexpanding preferential links.
Thefirstreport bytheWTO Secretariat onallaspects oftheEU'strade policies -including
services forthefirsttime-covers theperiod since 1993. Inthistime, theSingle Market was
accomplished, theMaastricht Treaty entered intoforceandtheUnion wasenlarged tofifteen members.
According tothereport, theEuropean Economic Area agreement, Europe Agreements withcentral
andeastern European countries, aCustoms Union Agreement withTurkey in1995 andongoing
negotiations onEuro-Mediterranean Agreements haveincreased thenetwork ofpreferential linksand
provide forainwhich tradeproblems withpreferential partners canbeaddressed outside themultilateral
system. Themajor revision oftheGSPscheme from January 1995 links preferences forindustrial
productstotheEU'sassessmentofthe"sensitivity"oftheproductsconcernedandtheexportingcountry's
levelofdevelopment anddegree ofspecialization.
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Thereport states thatacoreelement oftheInternal Market process wastheelimination of
traderestrictionsmaintainedbyindividualmemberStates.Insubstitution,unifiedquotaswereintroduced
forbananas, canned sardines andtuna, certain steelsupplies fromtherepublics oftheCommonwealth
ofIndependent States (CIS), andanumber ofconsumer products fromChina. Newstandards legislation
reflects thegrowing importance ofenvironmental objectives andconstraints onproduction andtrade.
Some progress hasbeenmade inharmonizing export-related policies andadraftdirective oncommon
rules forexport credit insurance isinpreparation.
Single Market integration inpharmaceuticals hasbeendelayed bydiverging standards, national
price regulations andreimbursement systems. Thereport states thatnewdisciplines onsupports to
thecoalsector arebeing phased inandthatarestructuring planforthesteelindustry, approved in
early 1993, wasabandoned inOctober 1994.
Trade inservices hasexpanded rapidly; however, services arestilllessimportant intrade
thaninoverall GDP oftheUnion. Integration inservices, which hasgenerally trailed behind that
forgoods, hasprogressively established acommon framework ofrequirements forinternal trade and
establishment. Robust growth hasoccurred insectors subject torecent liberalisation andderegulation
initiatives. Market access mayimprove asaresult oftheongoing GATS negotiations onfinancial
services, maritime transport andbasictelecommunications. However, thereport saystheEChasmade
noaccess commitments under theGATS onaudiovisual services. Although current EUrulesinareas
suchasbanking, insurance andairtransport contain reciprocity provisions, thesehavenotbeeninvoked.
TheEuropean Union 'sUruguay Round commitments include widespread tariffreductions for
manufactures. However, tariffs insome "sensitive" sectors willnotchange notably, andsignificant
escalation willremain intextiles andclothing. TheEUhasbegun phasing outthequantitative restrictions
under theMFA (Multi-fibre Arrangement); products reserved forlaterstages tendtobethose of
particular interest toproducers insouthern member States andMediterranean countries withpreferential
access. Under theEurope Agreements, textile andclothing imports fromsixcentral European countries
aretobefullyliberalized by1January 1998.
Market access commitments inagriculture involve thetariffication ofvariable levies andother
import barriers. High tariff peaks remain onmeat, dairy products, cereals andtobacco. Thereport
statesthattighterdisciplinesonexportsubsidiesandsubsidizedexportsmaygraduallyreducetheadverse
effects onworld markets ofEUsurplus disposal. However, thirdcountry suppliers depend ontariff
quota obligations toenter EUmarkets insensitive areas suchassugar.
TheEUremains oneofthemostfrequent users ofanti-dumping remedies intheGATT system.
Newanti-dumping, countervailing andsafeguard regulations incorporate therelevant WTO provisions
withsome EU-specific extensions. ThenewTrade Barriers Regulation specifies internal procedures
foractions against illicit trade practices abroad, including certain areas ofservices andintellectual
property;allsuchactionsmustbeauthorizedunderinternationaldisputesettlementprovisions.According
tothereport, nogeneral emergency trade legislation isforeseen inservices sectors.
Thereport notes thataprominent feature ofpastCommunity trade policies, bilateral export
restraints towards theEUmarkets, havedisappeared inrecent years. Thebilateral "consensus" for
monitoring Japanese carexports istoexpire attheendof1999asprovided forunder WTO provisions.
ThenewWTO Agreements define themultilateral framework bothforthedevelopment of
theEU'sexternal policies andfortheprocess offurther European integration andco-operation. In
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thisconnection, them.f.n.-based commitments made bytheEUintheUruguay Round willmitigate
theeffects onthird parties ofthespread ofitsregional andpreferential relationships. Thereport
concludes thatacomprehensive, credible setofmultilateral rules anddisciplines under theWTO, if
respected byallMembers, willbecrucial inminimizing frictions andensuring anoutward-looking
focus thatboththeUnion anditspartners needtogrow andprosper.
Notes toEditors
1. TheWTO Secretariat 'sreport, together withareport prepared bytheEuropean Communities
willbediscussed bytheWTO Trade Policy Review Body (TPRB) on24and25July1995.
2. TheWTO Trade Policy Review Body conducts acollective evaluation ofthefullrange oftrade
policies andpractices ofeachWTO member atregular periodic intervals andmonitors significant trends
anddevelopments which mayhaveanimpact ontheglobal trading system.
3. Thetworeports,togetherwitharecordoftheTPRB'sdiscussionandoftheChairman'ssumming
up,willbepublished induecourse asthecomplete trade policy review oftheEuropean Union and
willbeavailable from theWTO Secretariat, Centre William, Rappard, 154ruedeLausanne, 1211
Geneva 21.
4. Thereports cover developments ofallaspects oftheEuropean Union 'stradepolicies, including
domestic lawsandregulations, theinstitutional framework, trade-related developments inthemonetary
andfinancial sphere, tradepractices bymeasure andtradepolicies bysector. Attached arethesummary
observations fromtheSecretariat andgovernment report. Fullreports willbeavailable forjournalists
from theWTO Secretariat onrequest.
5. Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992&1994), Chile (1991), Colombia (1990), Costa Rica(1995), Côted'Ivoire (1995),
Egypt (1992), theEuropean Communities (1991 &1993), Finland (1992), Ghana (1992), Hong Kong
(1990 &1994), Hungary (1991), Iceland (1994), India(1993), Indonesia (1991 and1994), Israel (1994),
Japan (1990, 1992and1995), Kenya (1993), Korea, Rep.of(1992), Macau (1994), Malaysia (1993),
Mexico(1993),Morocco(1989),NewZealand(1990),Nigeria(1991),Norway(1991),Pakistan(1995),
Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992),
South Africa (1993), Sweden (1990 &1994), Switzerland (1991), Thailand (1991), Tunisia (1994),
Turkey (1994), theUnited States (1989, 1992 &1994), Uruguay (1992) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
THE EUROPEAN UNION
Report bytheSecretariat -Summary Observations
TheEuropean Union isamong thepace-setters inthemultilateral system owing toitseconomic
weight andreliance onexternal trade. Recent accessions andnewpreferential arrangements havefurther
increased itsinfluence onthesystem. Thetrade policies pursued bytheEUinthepasttwoyears
illustrate threemaintendencies: internal policy integration andharmonization across sectors and,more
strongly, among member States; arapidly expanding andincreasingly complex network offree-trade
areaandpreferential relations; andactive participation inmultilateral trade liberalization. The
co-existence of,andinteraction among, thesetendencies highlights thenecessity forastrong, constantly
active WTO framework toguide future trade policies andcounterbalance thediscriminatory impact
ofexpanding preferential links.
TheEconomic Environment
In1994, theeconomy oftheEuropean Union grewbyover2.5percent. While mostmember
States were recovering from the1993 recession, Denmark, theNetherlands, Ireland andtheUnited
Kingdom showed sustained growth. Therecovery hasnotyetledtoasignificant fallinrecorded
unemployment, which stood atanaverage levelofsome 11percentin1994, withwidedifferences
among member States.
Underlying thegrowth wereincreasing exports andinvestment, stimulated bybuoyant world
markets, lower interest rates, andgreater profitability andbusiness confidence. Aided bywage
moderation, strong productivity growth anddepreciation ofsome member States 'currencies, thevalue
ofmerchandise exports inJanuary-August 1994 grew by12percentoverthesame period of1993.
Preliminary datapoint toanimproving merchandise tradebalance afterasmall deficit inthefirsteight
months of1994.
Trade inservices hasexpanded rapidly, benefiting fromageneral pattern ofsectoral change,
deregulation, internal market integration andtechnical progress. TheEU'sservices balance hasbeen
insurplus formany years, reflecting astrong competitive position inmajor sectors. Despite robust
growth, services currently represent about onequarter oftheUnion 'stotaltrade, contrasting witha
share ofclose totwothirds initsGDP.
Transition toEconomic andMonetary Union remains apolicy priority. Inthiscontext, price
inflation hasdeclined inmost member States and,although stillfragile, budgetary positions have
improved afteramarked deterioration in1993. These factors, combined, untilrecently, withrelative
tranquillity inforeign exchange markets, havecontributed tolower, converging interest rates.
Developments intheInstitutional Framework
Theentry intoforce oftheTreaty onEuropean Union -theMaastricht Treaty -on
1November 1993added anewdimension toexisting Community policies. Keyobjectives oftheTreaty
arethephasing-in ofeconomic andmonetary union, theestablishment ofacommon foreign andsecurity
policy, thedevelopment ofcommon citizenship, andclose co-operation onjustice andhome affairs.
TherôleoftheEuropean Parliament intheUnion 'sdecision-making process wasenhanced. The
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European Monetary Institute started work in1994, preparing theground fortheEuropean System of
Central Banks and,intime,aEuropean Central Bank. TheMaastricht Treaty didnotaffect thesubstance
oftraditional Community policies inareas suchasagriculture, transport, commerce andcompetition.
Theaccession ofAustria, Finland andSweden on1January 1995 added some 7percentto
theUnion 'sGDP and6percenttoitspopulation. Itresulted innosignificant institutional changes,
although Parliament, Council, Commission andCourt ofJustice wereenlarged andcertain decision-
makingprocedures,includingthoseforqualifiedmajorityvotingintheCouncil,modified.Whileseveral
countrieshavelodgedapplicationsforEUmembership,nofurtherenlargementnegotiationsareenvisaged
before the1996 Intergovernmental Conference provided forintheMaastricht Treaty.
Asked toclarify theallocation ofcompetence within theUnion toconclude theUruguay Round
agreements, theEuropean Court ofJustice confirmed inNovember 1994 theCommunity 'sexclusive
competence withrespect tomultilateral agreements relating togoods. However, competence toconclude
agreements related tocertain types ofservices andintellectual property wasshared between the
Community andthemember States. Consequently, theWTO Agreements weresigned bytheCouncil,
CommissionandthememberStatesandratifiedbytheCouncil,withtheEuropeanParliament'sapproval,
aswellasbynational parliaments.
Trade Policy Features andTrends
Thegeneral achievement oftheSingle Market, from1January 1993, consolidated animportant
stageofintegration,substitutingcommonfornationalpoliciesinmanyareas.Thecoincidenceofinternal
reform withexternal negotiations enhanced theCommunity 'sparticipation intheUruguay Round.
Newnegotiating interests inmodern sectors were coupled withagrowing realization thatstructural
changes intraditional industries wereinevitable. Harmonization hascontinued insectors suchascoal,
pharmaceuticals, financial services, telecommunications andaviation aswellasinexport-related policy
areas; andnewstandardization initiatives havebeenlaunched withastrong environmental background.
Negotiations areunderway intheWTO toachieve international acceptance ofchanges inthecommon
import régime resulting from theaccession ofthenewmember States.
Type andincidence oftrade policy instruments
TheEuropean Union 'sUruguay Round commitments include widespread tariffreductions for
manufactures, bringing theaverage ratedown by38percentto3.7percentin2000 andeliminating
tariffs onproducts suchaspharmaceuticals, moststeelitems, paper, furniture, some toys, soaps and
detergents. However, tariffs insome "sensitive" sectors, including clothing andpassenger cars,will
notchange notably, andsignificant escalation willremain intextiles andclothing.
Market access commitments under theWTO Agreement onAgriculture involve theconversion
ofvariable levies andother import barriers intotariff equivalents, andthereduction ofalltariffs by
36percentonaverage by1July2001. Forvirtually alltariffied items, theEUhasintroduced specific
duties, whose levels reflect thedifferences between external andinternal prices inthebaseperiod of
1986-88 and,thus, therestrictiveness oftheprevious régime. Although advalorem equivalents are
notavailable inallcases, estimates indicate peaks onmeat, dairy products, cereals andtobacco.
Under theAgreement onTextiles andClothing, theEUhasbegun phasing outthequantitative
restrictions under itstwenty bilateral MFA Agreements. While allsuchrestrictions mustbeeliminated
by1January 2005, participants havescope todetermine theproduct mixineachstage ofintegration.
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Theproducts reserved forlaterstages tendtobeofparticular interest toproducers insouthern member
States, especially Portugal, andMediterranean countries withpreferential access. Under theEurope
Agreements, textile andclothing imports fromsixcentral European countries aretobefullyliberalized
by1January 1998.
AcoreelementoftheInternalMarketprocesswastheeliminationoftraderestrictionsmaintained
byindividualmemberStates.Insubstitution,unifiedquotaswereintroducedforbananas,cannedsardines
andtuna, certain steelsupplies fromtherepublics oftheCommonwealth ofIndependent States (CIS),
andanumber ofconsumer products fromChina. Certain textile items fromtheCISrepublics aresubject
either tobilateral quotas ordouble checking surveillance, while supplies fromothernon-WTO members,
including Chinese Taipei, aregoverned byautonomous restrictions .
Reciprocity provisions inadirective harmonizing procurement conditions inthe"excluded
sectors" ofwater, energy, transport andtelecommunications generated frictions withtheUnited States,
which in1993imposed sanctions initsownFederal procurement onEUsuppliers inanumber ofsectors.
InApril1994,thepartiesreachedanagreementextendingnationaltreatmentinspecifiedareas(excluding
telecommunications)onthebasisofsectoralreciprocity.Theagreement,ratifiedinlate-May,isintended
tobeincorporated, toalarge extent, intotheWTO Agreement onGovernment Procurement.
Newstandards legislation reflects thegrowing importance ofenvironmental objectives and
constraints onproduction andtrade. Core elements ofa1994 directive onpackaging andpackaging
waste, covering production, content, re-use andrecycling ofpackaging, willbeimplemented through
newtechnical regulations. Criteria havebeenestablished fortheaward of"eco-labels" under avoluntary
scheme which covers fiveconsumer products todate.
Some progress hasbeenmade inrecent years inharmonizing export-related policies. From
1July1995, exports ofdual-use (military andcivilian) goods arecovered byacomprehensive régime
ofstandards andcontrols, based onprovisions oftheMaastricht andECTreaties. Adraftdirective
oncommon rules forexport credit insurance isinpreparation.
Prior totheInternal Market programme, integration inservices hadgenerally trailed behind
developments intheareaofgoods. However, itmayhave benefited from experience gained in
dismantling barriers totradeingoods through common regulation andmutual recognition. Legislation
incoreservices areas hasprogressively established acommon framework ofminimum requirements
forinternal tradeandestablishment; insomecases, member States haveledtheprocess ofliberalization,
while inothers Commission initiatives havesetthepace. Thepossibilities forexternal suppliers to
benefit from internal liberalization varyamong sectors, andmarket access mayimprove asaresult
oftheongoingGATSnegotiationsonfinancialservices,maritimetransportandbasictelecommunications.
Current EUrules inareas suchasbanking, insurance andairtransport contain reciprocity
provisions which canbeusedintheabsence ofbilateral access commitments ormultilateral obligations,
although theyhavenotbeeninvoked. Subject tospecific horizontal andsector-specific limitations,
theCommunity hasoffered under theGATS tobindnational treatment forestablishment andconditions
ofoperation forallfinancial services. Inairandmaritime transport, benefits suchascabotage rights
arereserved forcompanies wholly ormajority owned bymember States ortheirnationals. Atthis
stage, internal liberalization ofairtransport co-exists withasegmented external régime based onmember
States 'bilateral aviation agreements withthird parties; theCommission isattempting tointroduce
aunified framework.
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Temporary measures
TheEU'ssystemof"commercialdefence"wasreorganizedinDecember1994.Newregulations
foranti-dumping, countervailing andsafeguard measures incorporate therelevant WTO provisions,
withsomeadditionsormodifications.WhilesafeguardactionsremainsubjecttomemberStates'qualified
majority approval intheCouncil, thethreshold fordefinitive anti-dumping andcountervailing duties
wasreduced toasimple majority vote, easing access tothese instruments. ThenewTrade Barriers
Regulation(TBR),whichreplacesthe1984NewCommercialPolicyInstrument(NCPI),specifiesinternal
procedures foractions against objectionable orillicit trade practices abroad, including certain areas
ofservices andintellectual property. Theactions must beauthorized under international dispute
settlement provisions. Onlyafewinvestigations hadbeencarried outunder theNCPI sinceitsinception
in1984; twocases remain active, nowunder theTBR.
TheEuropean Union remains oneofthemostfrequent users ofanti-dumping remedies inthe
GATT system, maintaining 156measures attheendof1994. Thiscontrasts withtwocountervailing
actions andthree safeguard measures under Article XIX, including restrictions byGermany oncoal
imports since 1958. Under WTO provisions, thesafeguard actions aretobeterminated by
1January 1999. Pursuant toanagreement oncompetitive conditions intheshipbuilding industry,
concluded intheOECD framework, theEUistointroduce aspecific trade remedy mechanism for
shiptransactions witheffect from 1January 1996.
TheWTO Agreement onSafeguards prohibits "grey areameasures" andrequires allexisting
measures tobeabolished by1January 1999. Theoneexception fortheEUwillbethebilateral
"consensus" formonitoring Japanese carexports, which isduetoexpire attheendof1999. Available
evidence suggests thatmostother bilateral export restraints byJapan andother Asian suppliers have
already disappeared.
Nogeneral emergency tradelegislation exists, orisforeseen, inservices sectors. Community
procedures, usedoncetodate,maybeinvoked intheevent of"unfair pricing practices" ininternational
cargo linershipping.
Sectoral policy developments
The1992 reform package represented thesingle most important change totheCommon
Agricultural Policy since itsinception. Internal producer prices havesince beenreduced significantly
insome sectors, while farmers 'incomes havebeenmaintained through direct payments. Because of
the1992 CAP reform, theCommunity doesnotatpresent envisage major newadjustments asa
consequence oftheWTO Agreement onAgriculture.
TheEUremains amajor supplier inworld markets fortemperate-zone farmproducts such
asmeat, dairyproducts andcereals. Intheseareas, tighter disciplines onexport subsidies andsubsidized
export volumes under theWTO Agreement maygradually narrow theextent ofsurplus disposal and
theadverse effects onworld markets. However, given thegenerally highlevelofcontinued import
protection, thirdcountry suppliers arelikely todepend ontariffquota obligations toenterEUmarkets
insensitive areas. Arecent revision oftheEUsugar régime maintains theexisting multi-layered system
ofinternal delivery quotas behind hightradebarriers; tariffquota obligations willbenefit onlytraditional
preferential suppliers, predominantly ACP countries.
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TheCommunity 'sagri-monetary system wasreformed under Internal Market requirements
from1993. Thesystem, usedformany years tosupport producer incomes in"hard-currency" member
States, wasstripped ofitsprotective elements andreduced tomainly technical functions. However,
thenewrules arecurrently being tested inaturbulent monetary environment.
Inmost manufacturing areas, theSingle Market programme wascompleted onschedule by
1January 1993. However, integration inpharmaceuticals hasbeendelayed bydiverging standards,
nationalpriceregulationsandreimbursementsystems.Theintroductionofcommonapprovalprocedures
from 1995 onwards mayovercome standards-related problems. Inthecoalsector, different policy
approaches remain among themain producing member States, Germany (which contributes some
40percentofEUoutput,butaccountsforcloseto90percentofsubsidiesgranted),theUnitedKingdom
andSpain. NewCommunity rules introduced inJanuary 1994, scheduled toapply untiltheexpiry
oftheECSC Treaty in2002, provide forincreased transparency andstricter disciplines onnational
support.
Traditional manufacturing industries -textiles andclothing, motor vehicles, shipbuilding, steel
andother basemetals -remain particularly vulnerable toexternal competition andchanges indemand
patterns. Toprevent theextension ofuncoordinated national support from exacerbating economic
distortions andthreatening theSingle Market, common guidelines clarify ortighten thegeneral rules
forStateaidinthese industries. Themarket share ofdomestically produced automobiles hasrecently
increased, aided inpartbytheappreciation oftheyen.
Arestructuring planforthesteelindustry, approved inearly1993, wasbased notonlyonState
aidforconversion andclosures butadditional border measures, mainly affecting central andeastern
European supplier. Theplanwasabandoned, however, inOctober 1994 duetoinsufficient industry
proposals forcapacity reductions.
Adjustments intraditional manufacturing industries havebeenaccompanied byrobust growth
inmany services sectors, including finance, insurance, communications andtransport, inwhich internal
liberalisation andderegulation haveoccurred. Withinternal barriers coming down, individual service
operators havebecome more vulnerable topolicy distortions created elsewhere intheUnion. Not
surprisingly, recent national aidpackages forairlines andbanks haveproved controversial. Given
therisksfortheintegration process, efforts areunderway tointensify Community monitoring, increase
transparency andreduce member States 'discretion tosupport national champions.
Significant headway hasbeenmade inliberalizing telecommunications equipment andservices
markets. Allvalue-added services, dataservices andterminal equipment categories, throughout the
EUarenowopentoexternal competition while some member States havegonefurther. Uncertainties
remain, however, duetonational carriers 'scope forinternal cross subsidization, theirpossible abuse
ofmarket power, andthelackofstringent accounting requirements atEUlevel. With liberalization
approaching themostsensitive stages -opening public voice transmission andthebasicnetwork -new
regulations areinpreparation.
Contrasting withitsgenerally active rôleinother services areas, theEChasmade noaccess
commitments under theGATS onaudiovisual services. Ithasscheduled "cultural" exceptions from
m.f.n. treatment tocover preferential arrangements forEuropean works, including European-content
requirements under the"Television without Frontiers" Directive. Therequirements arenotcurrently
binding onmember States.
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Trade Policies andForeign Trading Partners
Thecontinuing process ofintegration among member States, theEuropean Union 'scomplex
system offree-trade andpreferential relations anditsrôleinconcluding theUruguay Round haveall
hadasignificant impact onthemultilateral system. Agradual shiftininternal policies fromdeveloping
newlegislation towards enforcing existing lawmayhave contributed tomaintaining the"acquis
communautaire" through therecession andthusfacilitating recent accessions.
TheEuropean Economic Areaagreement, building onprevious free-trade agreements, enables
participants (Norway, Iceland andLiechtenstein), toshare fullyinthecommon framework fortrade
ingoods andservices. Countries incentral Europe areapproaching closer integration through staged
reciprocal liberalization under Europe Agreements. Anewimpetus hasbeendirected toMediterranean
policywiththeconclusionofaCustomsUnionAgreementwithTurkeyin1995andongoingnegotiations
onEuro-MediterraneanAgreementswithseveralothercountries.Allsuchagreements,however,provide
forainwhich tradeproblems withpreferential partners canbeaddressed outside themultilateral system.
Themajor revision oftheGSPscheme from January 1995 links preferences forindustrial
productstotheEU'sassessmentofthe"sensitivity"oftheproductsconcernedandtheexportingcountry's
levelofdevelopment anddegree ofspecialization. While intended topromote wider usebybeneficiaries
andimprove transparency andstability ofaccess, thenewsystem appears more obviously tiltedagainst
large anddynamic suppliers.
ThenewWTO Agreements define themultilateral framework bothforthedevelopment of
theEU'sexternal policies andfortheprocess offurther European integration andco-operation. In
thisconnection, them.f.n.-based commitments made bytheEUintheUruguay Round willmitigate
theeffects onthirdparties ofthespread ofitsregional andpreferential relationships. Acomprehensive,
credible setofmultilateral rules anddisciplines under theWTO, ifrespected byallMembers, will
becrucial inminimizing frictions andensuring anoutward-looking focus thatboththeUnion andits
partners needtogrow andprosper.
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TRADE POLICY REVIEW BODY
THE EUROPEAN UNION
Report bytheEuropean Communities -Summary Extracts
ThisisthethirdTrade Policy Review report presented bytheEECCommission onbehalf of
theEuropean Community, andforthefirsttime, itincludes Services andTRIPS, partsoftheUruguay
Round Agreements which areofshared competence1between theCommunity anditsMember States.
Inthetwoyears elapsed since thesecond report (April 1993), chronological developments inthefield
oftheEuropean Community 'sexternal relations andtradehavebeennumerous, andforsome ofthem
historical:
Firstly, thebeginning of1993sawtheendofthetransition period towards afullSingle Market,
andanewerawithtotalfreemovement ofgoods, services, capital andpeople andbetter access to
public contracts started on1January. Theconsolidation oftheSingle Market hassince beenessential
foreconomic recovery inEurope, andremained central totheCommunity 'sefforts tomaintain industrial
competitiveness, creating jobsandtostimulate economic growth;
Secondly, theentry intoforce oftheTreaty oftheEuropean Union (the"Maastricht Treaty")
on1November 1993 marked thebeginning ofanewstage where theUnion iscarrying further its
development withfundamental newcommitments inthefieldofeconomic andmonetary integration
(which willhavemajor tradeimplications inthelonger term), aneconomic foreign andsecurity policy,
andclosecooperation onjustice andhome affairs. Building ontheEC'sexisting legalandinstitutional
framework, however, theMaastricht treaty didnotalterthesubstance oftheTreaty ofRome inareas
suchasagriculture, transport, commercial2andcompetition policy;
Thirdly, theAgreement ontheEuropean Economic Area(EEA) between theECandfiveEFTA
Countries (Austria, Finland, Ireland, Norway andSweden) came intoforce on1January 1994;
Throughout theperiod, theEuropean Union continued itsefforts withcountries ofCentral and
Eastern Europe toprogressively pavethewayforanewEuropean Architecture, bypressing ahead
withanetwork ofEurope agreements representing adegree ofeconomic andpolitical integration which
goeswellbeyond thenotion offreetrade agreement:
AssociationAgreementswereinitiallysignedin1991withPoland,HungaryandCzechoslovakia
withtheaimofestablishing progressively fullfreedom ofmovement ofgoods, services, andcapital
1According totherecent European Court ofJustice 'sruling (opinion 1/94, 15November 1994).
Thisisincontrast withtradeagreements relating togoods, which fallunder theCommunity 'sexclusive
competence.
Consequently, thesections ofthisreport related toServices &Trips arepresented onbehalf ofthe
European Communities anditsMember States. Apresentation ofcurrent evolution oftheinstitutional
framework istobefound intheWTO Secretariat report (Box II.1).
2Thisiswhy, itisappropriate inthisreport torefertoeither the"European Community", orto
the"European Union", depending onthecontext.
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induecourse. Similar agreements werelaterconcluded in1993 withBulgaria, Romania, aswellas
thenecessary amendments asregards thenewCzech andSlovak republics. Pending ratification by
theinvolved Parliaments, Interim Agreements applied (with respective datesofentryintoforcevarying
between1992and1993)whichcontainedthetradeandtrade-relatedaspectsoftheseEuropeAgreements.
Finally, theEurope Agreement ofHungary andPoland entered intoforce on1February 1994, and
those forBulgaria, theCzech Republic, Romania andSlovakia on1February 1995;
AtitsEssen Council inDecember 1994, theEuropean Council decided toboost theprocess
ofpreparing thesixassociated countries forEUmembership, anda"pre-accession" strategy isnow
inplace forbringing them gradually intotheEUinternal market andestablishing structured political
relations.
OntheBaltic side,FreeTrade Agreements weresigned inJuly1994withEstonia, Latvia and
Lithuania, which havebeenrecently renegotiated intofull-ledged Europe Agreements; these three
Baltic countries willtherefore beincluded inthepre-accession strategy mentioned above.
Asof1January1995,theimplementationinCommunitylegislationoftheresultsoftheUruguay
Round hasbeenthemostacross-the-board source ofchange fortheCommunity atthelevelofindividual
trade policy measures;
TheCommunity'simplementationoftheUruguayRoundresultscoincidedwithpolicyadjustments
toaccommodate theaccession ofthree newMember States, Austria, Finland andSweden on
1January 1995. Representing anewstepinthehistory ofEuropean integration, theEUenlargement
isaprocess which willbring anoverall netreduction inthetariffprotection oftheacceding Members.
Article XXIV negotiations areunderway andcertain exporting countries haveputforward claims in
cases where theenlargement results inanincrease indutyperception;
Finally, inparallel toitsnewsteps towards eventual integration ofthesixassociated Central
andEuropean countries, theEuropean Union hasalsodeveloped anewgeneration ofPartnership and
Cooperation Agreement (PCA) withtheIndependent States oftheformer Soviet Union, andonthe
Southern Front itisdeveloping aEuro Mediterranean Partnership.
These developments, aswellastheeconomic andtradecontext inwhich theyhavetaken place,
areexamined inthefirstpartofthereport, section I.While 1993 started fortheCommunity under
thecloud ofasevere economic recession, signs ofeconomic recovery, bolstered bysubstantial growth
inexports andinvestment, andanupturn inprivate consumption, havebeen, asof1994, greater than
expected.
Trade datarelevant totheperiod demonstrate thattheEChasremained oneofthemostopen
ofallmajor economies: onthebasisofthepercentage ofGDPcontributed bytradeingoods andservices,
theEC(with afairly consistent 22to25%ofitsGDPderived fromsuchtradethrough thelast15years)
ismore open thantheUSA (whose figure rosetojustabove 20%in1980, andisstillat21-22% a
decade later) or,above all,Japan (whose figure hassharply declined since theearly eighties toalow
of16%). (Seegraph 1inannex.)
Thegrowing merchandise tradedeficit experienced bytheECsince 1987levelled outin1991.
Since thentheCommunity 'stradebalance hasimproved considerably, totheextent ofbeing inbalance
(orevenslightly positive) in1994(seegraph 4).Thegeographic breakdown ofbilateral tradebalances,
however, hasremained approximately thesame astwoyears ago.
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Among thetoptenexporters totheECmarket, therearethose thathavebenefited fromregional
economic integration (fiveindividual EFTA countries), butalsomajor tradepartners suchastheUSA,
Japan, andChina. Aprecisely similar pattern exists asregards themajor ECexport markets. (See
graphs 6and7.)
Section IIofthereport presents adetailed picture oftheevolution oftheCommunity 'strade
policy asregards trade ingoods:
Firstly, themain consequences oftheUruguay Round fortheCommon Commercial policy,
bothonthetarifffront(where increased market access willresult fromanaverage reduction ofaround
37%, withafinalaverage rateforindustrial products atamere3.6% andthebulkofdutyratesbetween
3and10%), andregarding revised rulesintheuseoftradedefence instruments (especially anti-dumping,
countervailing, andsafeguards), where adirect transposition hasbeencarried outgiven thecoincidence
oftheCommunity 'sprevious practice withtherules oftheNewCodes.
Then, theelements oftheSingle market programme thathavethegreatest impact ontrade:
theunilateral removal ofmostnational residual restrictions (including alarge number ofrestrictions
visavisChina) linked withtheintroduction ofanewcommon import regime; thecoordination of
procedures fortheaward ofpublic works contracts andtheextension ofthebenefits ofECpublic
procurement legislation tosuppliers ofcountries signatories oftheGATT Government Procurement
Agreement; finally, therecent stepstaken inthefieldofharmonisation ofstandards, theCommunity 's
"Global approach" totesting andcertification, anditswillingness tonegotiate Mutual Recognition
Agreements withthird-countries.
Section IIpresents alsoapicture ofthetrade developments inimportant Community sectors.
Agriculture (with decisions onreform oftheCAP, andthephasing-in ofU.R. disciplines), Textiles
andClothing (with itsorderly expansion oftrade enabling continued structural adjustment), Motor
Vehicles, IronandSteel (with efforts towards restructuring) arecovered indetails.
Thisreview confirms thatdoing business intheCommunity market hasbecome easier and
more global. With thedisappearance ofphysical internal borders, Mutual Recognition mechanisms,
andgreater harmonisation, merchandise doindeed circulate freely. With theimplementation ofthe
Uruguay Round intheabove sectors, theCommunity hasdemonstrated thataglobal multilateral
agreement yields global benefits foralltraders, bethem from theECorfrom thirdcountries.
SectionsIIIandIVdealwith"newareas"suchasservicesandtrade-relatedaspectsofintellectual
property rights (TRIPS). Trade inservices, likethetrade ingoods, hasbeensubstantially facilitated
bythecompletion oftheInternal market, beitonacross-border basisorthrough commercial presence,
thanks tosingle licensing, theprinciple ofhome-country authority, andthat ofmutual
recognition/harmonisation ofsupervisory rules. Hereagain, theCommunity pursues aliberal policy
initsrelation tothirdcountries 'services companies: thesimple factthataforeign service supplier,
onceestablished under thelawsofoneoftheECMember States, thenreceives thesame treatment
asdomestic ECservice supplier, offers anEC-wide trading opportunity. Thissection alsoreviews
themodifications ofrelevant Community legislation pursuant totheWTO Agreement.
Finally, section Vhighlights theviews oftheCommunity intwoareas where, interalia,it
isbelieved, progress isneeded inthenewly established World Trade Organisation: Trade and
Environment (where work isalready underway), andTrade &Investment.
END