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POLICY REVIEWS: SECOND PRESS RELEASE AND
European Union: July 1995
Members stressed the European Union's rôle as the largest entity in world trade and its ensuing responsibility within the multilateral system. The Union's contribution in the Uruguay Round to liberalizing trade in manufactures and services and to developing new rules was widely appreciated.
26 July 1995
POLICY REVIEW BODY: REVIEW OF THE EUROPEAN UNION
The Trade Policy Review Body of the World Trade Organization (WTO) conducted its review of the European Union's trade policies on 24 and 25 July 1995. The text of the Chairman's concluding remarks is attached as a summary of the salient points which emerged during the two-day discussion.
The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.
The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.
A record of the discussions and the Chairman's summing-up, together with these two reports, will be published in due course as the complete trade policy review of the European Union and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: 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), Côte d'Ivoire (1995), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mexico (1993), Morocco (1989), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992), South Africa (1993), Sweden (1990 & 1994), Switzerland (1991), Thailand (1991), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uruguay (1992) and Zimbabwe (1994).
Over the past two days, the Trade Policy Review Body has conducted the third review of the European Union's trade policies and practices. These remarks, made on my own responsibility, are intended to summarize the salient points; they do not substitute for the Body's collective evaluation and appreciation which will be reflected in the minutes of the meeting.
The discussion developed under five main themes: the European Union's overall contribution to the WTO system; the impact on third countries of EU integration, new accessions and preferential agreements; sectoral policies and market access; the use of trade policy instruments and other policy issues.
In addition to the discussion, participants raised a large number of questions in writing. The representative of the European Union provided written replies and undertook to give further details after the meeting.
Overall contribution to the WTO system
Members stressed the European Union's rôle as the largest entity in world trade and its ensuing responsibility within the multilateral system. The Union's contribution in the Uruguay Round to liberalizing trade in manufactures and services and to developing new rules was widely appreciated. In the same vein, many participants expressed their appreciation for the EU's current negotiating initiative in financial services. Questions were raised, however, concerning the implementation of commitments in main agricultural sectors, where many members expected tangible improvements in access conditions. Concern was also expressed at the timing of the negotiations, and the EU's interpretation of GATT Article XXIV:6 and GATS Article V:2 on the effects of the recent enlargement of the Union. Underlining the importance for many countries involved, several participants emphasised that, in future enlargements, such negotiations should be undertaken in advance. The automatic extension of anti-dumping measures to the new member States was also questioned.
In reply, the representative of the European Union stressed the importance of a rule-based trading system. The EU was doing its utmost to reach a meaningful agreement in financial services. Agricultural reforms were proceeding as scheduled; new reforms included tobacco, wine and sugar. An evaluation of the reformed Common Agricultural Policy and Uruguay Round commitments was premature.
As in previous enlargements, the Union had followed the relevant GATT procedures; the WTO understanding provided that the procedures of Article XXVIII must be "commenced" before tariff concessions were modified. The proper functioning of the common commercial policy required the application of existing measures, such as anti-dumping actions, to the enlarged territory of the Union. In his view, this was consistent with the Anti-Dumping Code.
Impact on third countries of EU integration, new accessions and preferential agreements
Members noted the rapid pace of change in the institutional structure and external relations of the EU. Over the past two years, the Union had completed the Single Market; enacted the Maastricht Treaty; admitted three new member States; established the European Economic Area; implemented six Europe Agreements; signed several free trade and co-operation agreements; and launched a new Euro-Mediterranean policy.
Several members stressed the beneficial effects of the Single Market for both internal and external suppliers and the need to protect its integrity. In this context, information was sought on the European Commission's ability to prevent individual member States from pursuing potentially restrictive standardization and labelling initiatives.
While a number of associated countries highlighted the beneficial effects of their preferential trade arrangements with the Union, other participants questioned how far the increasing network of preferential arrangements was compatible with the multilateral system. Several members requested the EU to ensure that any further developments took into account the interests and rights of all WTO members.
A number of participants expressed concern about aspects of the EU's new GSP scheme; they called attention to its apparent bias against the most dynamic beneficiaries through the various graduation mechanisms and the inclusion of non-trade considerations for GSP benefits, related to areas such as the environment and labour.
The representative of the European Union, noting that the EC Single Market process constituted open regionalism, replied that regional integration was moving beyond free trade, encompassing economic co-operation, financial assistance, approximation of legislation, competition policy and political dialogue. This might require a new look at certain aspects of Article XXIV of GATT, which should reflect political realities and not be a straitjacket. Intra-regional trade in the EU had remained stable for some time; fears of trading partners being "left out" by the EU were thus unjustified. Agreements included "sensitive" areas such as agriculture, where further liberalization was envisaged, and textiles, where timetables were fixed for full liberalization.
The objective of the new GSP scheme was to respond more efficiently to economic changes in developing countries and to assist the less developed among them. The special incentive régime, linking trade to environmental protection and social conditions, would not apply until 1998. Concession could only be withdrawn by the Council of Ministers after an examination procedure. Overall, the Union expected the new scheme to be neutral on the volume of trade. The decision making process regarding product sensitivity and country graduation would not be altered before 1998.
Participants reiterated that the provisions of Article XXIV, while not a straitjacket, contained clear multilateral disciplines within which all free-trade areas must be viewed; these procedures were for the benefit of all. In particular, preferential agreements must be comprehensive and consistent, with reduction of trade barriers to the rest of the world. They also stressed that the GSP scheme should not, through conditions, disadvantage developing countries with the capacity to use it.
Sectoral policies and market access
While appreciating the breadth and depth of tariff cuts made in many manufacturing areas, participants expressed disappointment at the moderate reductions in "sensitive" EU sectors such as textiles and clothing, motor vehicles, and electronics. High tariffs would remain for value-added forestry products, and significant tariff escalation persisted in sectors such as non-ferrous metals. Concern was expressed that liberalization of the textiles and clothing régime was proceeding slowly, and that the first integration stage under the WTO Agreement contained no restricted categories; more evenly spread integration across the stages should benefit the adjustment process while assisting exporting countries. Participants underlined the need for stricter subsidy disciplines on member States in the coal sector and looked forward to the termination of Germany's safeguard action. One member noted that aid granted to shipyards in the former German Democratic Republic had apparently led to capacity increases.
Tariffication of variable levies and other import measures had brought about very high tariffs on agricultural products. Participants sought information regarding the implementation of minimum and current access quotas, and wondered whether the EU could meet its reduction commitments under the WTO Agreement, notably concerning export subsidies, without further policy reform. New import arrangements for cereals (wheat and rice) and fruit and vegetables were a matter of concern. The sugar régime, only marginally changed, remained costly to domestic consumers and restrictive for non-preferred exporters. New EU sanitary regulations introduced more onerous requirements for some food and agricultural products.
Members noted that high tariffs and escalation persisted in the fisheries sector, whose sensitivity was underlined by recent safeguard actions. One member was concerned about the EU linking trade preferences to access to fish resources. Information was sought on ongoing internal harmonization of sanitary controls.
Participants referred to the division of national and Community competence for trade in services. Questions were asked regarding reciprocity provisions in EU regulations and the application of European transmission quotas in the audiovisual sector. Some members referred to access problems for services providers who relied on the movement of natural persons; the relevant provisions varied significantly among member States.
The representative of the European Union replied that EU tariff cuts were substantial, the rates for motor vehicles and on made-up textiles and clothing items were relatively low compared to other trading partners. Moreover, EU rates were all bound. The EU had no defined plans for further tariff negotiations at this stage.
The Community adhered fully to the provisions of the Agreement on Textiles and Clothing. The Council of Ministers would decide on the further integration of products; accelerated liberalization could prove disruptive for both importers and exporters. In agriculture, sanitary requirements applicable by member States were subject to ongoing harmonization; the EU had the necessary powers to ensure the proper respect of its obligations under the SPS Agreement. The written replies contained answers concerning fisheries, coal and services. In financial services, he noted that information on the negotiating positions of individual participants was still awaited.
Use of trade policy instruments
The organic link between the new Trade Barriers Regulation and the Union's international obligations was welcomed. Some members sought confirmation that the Regulation could not be used in the absence of WTO authorization; others questioned the need for it in these circumstances. Concern was voiced at the Union's frequent recourse to anti-dumping measures and uncertainties surrounding their application.
Acknowledging that there was a common body of procurement legislation in the Single Market, members expressed disappointment at the persistently low share of foreign supplies; the Union was invited to provide detailed data on recent developments. Concern was expressed at reciprocity provisions in a procurement directive in the water, energy, transport and telecommunications sector.
Some participants felt that the rules of origin under the Union's preferential trade agreements lacked consistency and were unnecessarily complex. The cumulation of origin status across agreements should be improved.
The representative of the European Union stated that the New Trade Barriers Regulation had updated procedures established under its predecessor regulation, but not the essential requirements. As before, action could be taken only if authorized under WTO provisions. Changes in anti-dumping legislation were confined to implementing the WTO Agreement; virtually all current measures had been taken under the "old" rules.
The EU had ratified the Government Procurement Agreement and would apply its provisions fully by 1 January 1996. The Union would support the principle of non-discrimination in this area, if that were recognized and applied by all WTO members.
The cumulation of origin across agreements was under discussion with preferential trading partners. However, such a system would not encompass all countries as it required the EU's partners to apply a fully integrated origin system among themselves.
Other policy issues
Several statements referred to the growing importance of trade-related regulations for environmental and health reasons, including recent eco-labelling schemes. Participants called for objective and transparent criteria to prevent the creation of new trade barriers.
Attention was also called to the interaction between trade and competition policy and the necessity to ensure a consistent approach in both areas. One member enquired about the division between national and Community competence in competition policy.
The representative of the European Union gave information on the criteria underlying the impending trade bans related to leghold traps and animal testing of cosmetics as well as the rules for packaging and packaging waste and eco-labelling.
Precise data on industrial concentration following the Single Market could not be provided, however, there was a clear trend to greater industrial integration. Further comments on the interaction of EU and national competition policy were made in writing.
It is my impression that the TPRB has conducted an intensive and productive review of the European Union's trade policies and practices and their effects on the multilateral system. It has covered traditional themes, such as policies in agriculture, "sensitive" industries and the use of trade defence instruments, and included reforms resulting from the Uruguay Round as well as an important discussion of issues relating to Article XXIV. If the discussion of "new issues" such as services was not as deep as might have been expected, this was no doubt explained by the state of the continuing negotiations.
pace of ongoing changes highlights the usefulness of
regular, comprehensive trade policy reviews.
Consolidation and further development of the Uruguay
Round results will help to minimize tensions between
internal, regional and multilateral approaches, and
assist the EU to maintain an international,
outward-looking perspective. However, adherence to, and
use of, WTO provisions in all respects is crucial.