27 November 1997
POLICY REVIEW BODY: REVIEW OF THE EUROPEAN UNION
TPRB'S EVALUATION Back to top
The Trade Policy Review Body of the World Trade
Organization (WTO) concluded its second review of the European Union's trade policies on
25 and 26 November 1997. The text of the Chairperson's concluding remarks is attached as a
summary of the salient points which emerged during the 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 Chairperson'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), Benin (1997), Bolivia (1993), Brazil (1992
& 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 &
1997), Colombia (1990 & 1996), Costa Rica (1995), Cte d'Ivoire (1995), the Czech
Republic (1996), Cyprus (1997), the Dominican Republic (1996), Egypt (1992), El Salvador
(1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), 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 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995),
Mexico (1993 & 1997), Morocco (1989 & 1996), New Zealand (1990 & 1996),
Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994),
the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992
& 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990
& 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994),
Turkey (1994), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay
(1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
THE EUROPEAN UNION
CONCLUDING REMARKS BY THE CHAIRPERSON Back
Over the last two days, the Trade Policy Review Body
(TPRB) has conducted the fourth review - the second under WTO provisions - of the European
Union's (EU) trade policies and practices. The review of the EU is the first to be
conducted under the "interim review" framework agreed in 1996 by the TPRB for
two-yearly reviews; as such, it has focused on developments in trade policies in the past
two years and on selected sectoral issues, rather than being fully comprehensive in
The discussion developed under five main themes: (i)
the interface between the single market and multilateral liberalization; (ii) the EU's
enlargement and network of regional or preferential agreements; (iii) systemic trade
policy issues; (iv) sectoral questions; and (v) the EU and the future of the multilateral
Participants raised a large number of questions in
writing. The representative of the European Union provided written replies in the context
of the meeting and undertook to supply further details as necessary.
Members welcomed the statements made by the EU
representative concerning its participation in, and commitment to, the WTO-based
multilateral trading system. However, many questions were raised on specific aspects of
the EU's trade policies and practices as they affect other WTO members. Any actions by the
world's largest trading entity were bound to have an important effect on the trading
system and this was a major concern of many participants.
The interface between the single market and
multilateral liberalization: institutional issues
Members noted with satisfaction that, in a growing
number of areas, the single market and external liberalization had been mutually
supportive, resulting in improved market access for external suppliers and increased
exposure of the EU economy to competition. For example, aspects of the EU's participation
in recent multilateral services negotiations drew on internal reforms.
However, Members noted that significant impediments
to trade and efficient allocation of resources remained, with potential adverse effects on
external suppliers. Members mentioned the high level of State aid and its concentration on
relatively few sectors, and limitations in the opening of public procurement. While
recognizing that WTO rules were a growing point of reference in the elaboration of EU
policies, Members urged that further efforts to ensure that all EU regulations respected
the principles of transparency, non-discrimination and were properly notified to the WTO.
Some Members posed questions concerning "Community competence" for trade
negotiations. Specific concerns were raised about recent moves to strengthen measures
regarding health, safety and environmental protection. Some members expressed concern that
the share of intra-EU trade in manufactures during the past few years may have increased
at the expense of extra-EU trade in manufactures.
In reply, the representative of the European Union
emphasised that the internal process of harmonisation could be equated with
liberalization. Third country suppliers benefitted fully from measures aimed at
eliminating obstacles to intra-Community trade. Increased intra-trade had not been at the
expense of non-EU countries; these accounted for a steady 40 per cent of total
EU imports and a rising share of domestic demand for manufactures. He provided details of
the Action Plan to remove remaining sectoral obstacles to market integration and undertook
to supply information on proposals to simplify EU legislation.
The representative stated that the new Article 133
of the Rome Treaty would clarify the question of the Community's competence. He recalled
that the Community had exclusive competence in trade in goods, and that there was no
"domaine réservé" for member States in services and TRIPS.
EU enlargement and network of preferential
Members noted the proposals for further enlargement
of the EU and the continued expansion of its network of regional and other preferential
agreements. They questioned the effects of these arrangements on third countries' trade.
Concerns were expressed in relation to potential trade diversion; in this respect, members
mentioned tariff and non-tariff barriers with respect to sectors such as textiles,
agriculture and automobiles. Members stressed that regional integration should remain
consistent with relevant WTO rules. In this connection, one discussant raised the need to
ensure that WTO rules are adequate to deal with the growth and new structure of
preferential and regional agreements. Members took note of the recent call by EU Ministers
for more careful consideration of the WTO conformity of preferential agreements, as well
as clarification of WTO rules on regional trading arrangements. Questions were also posed
concerning the harmonization of, and cumulation provisions in, the EU's preferential rules
While some Members reported that they had
satisfactorily concluded Article XXIV:6 negotiations with the EU on compensation following
the accession of Austria, Finland and Sweden to the Community, other Members said that
negotiations had not yet been completed and called for a rapid conclusion. One Member
emphasized that, in future enlargement, negotiations should be undertaken in advance.
A number of participants expressed systemic concerns
about certain new aspects of the EU's GSP scheme, in particular eligibility criteria
relating benefits to environmental protection or labour conditions, concern about linkage
with the fight against drugs was also raised. These aspects went against the fundamental
principles of the GSP. Clarification was also sought on the criteria for sector or country
The representative of the European Union replied
that there was no contradiction between the WTO objective of progressive multilateral
liberalization, and preferential agreements. He stressed that free trade was only one
component of the EU's agreements which covered such aspects as democracy, economic
cooperation, political and security relations, approximation of laws, migration, financial
assistance for structural reforms, etc. The EU had been careful to ensure the consistency
of its agreements with the WTO. He gave details of recent and current negotiations on
preferential agreements, as well as partnership and cooperation agreements. He also gave
some details of Article XXIV:6 negotiations, and noted that these did not have to be
completed prior to enlargement.
The EU recognized that varying rules of origin could
create problems for traders and customs authorities. Uniform origin rules, including
"diagonal cumulation", had therefore been introduced in the Europe Agreements
and the same rules were proposed for the "new generation" of Mediterranean
Agreements. The EU's rules of origin were seen as consistent with WTO Agreements.
The EU GSP scheme, although autonomous and not
creating absolute rights, was the most comprehensive in the world. It encouraged the
introduction of policies for the protection of workers' rights and the environment. The
special incentive scheme was a voluntary scheme to support the efforts of countries to
combat the drugs trade, or to introduce forward-looking environmental or social policies.
Systemic trade policy issues
In general, Members acknowledged the EU's steady
progress towards a more liberal trade régime in the last two years, in particular through
the implementation of WTO tariff commitments and the phasing out of quotas and voluntary
export restraints. They recognized that the EU had played a key role in the negotiations
on basic telecommunications and information technology products and was a driving force
behind current negotiations in financial services.
However, Members noted that import protection,
various forms of assistance and the use of contingency measures remained of importance in
sensitive sectors, some of particular interest to developing countries. While average
industrial tariffs were now below 5 per cent and should be under 3 per cent in 2000,
significant peaks remained in textiles and clothing, automobiles, and certain consumer
electronics. In agriculture, very high rates still affected important products such as
cereals, meat, dairy products, poultry, sugar and tobacco. In addition, the EU's tariff
structure continued to display some degree of escalation. The trade-restricting impact of
tariff reclassification was also raised.
A number of participants regretted the high
incidence of anti-dumping, the concentration of recent actions on textile products and the
use of anti-circumvention provisions; the combination of high tariff protection and quota
limitations for textiles with intensive use of anti-dumping actions added further
uncertainty in access to an already protected market. Questions were posed as to the
compatibility of certain provisions of the EU anti-dumping legislation with the relevant
Members stressed the growing impact of
"internal" measures, such as State aid, on external trade and stressed the need
for stricter subsidy disciplines on the Member States. Concerns were expressed about the
low level of opening of public procurement markets and compliance with the Government
Procurement Agreements. Members also emphasized that EU health, safety and environmental
directives should not constitute unnecessary obstacles to trade. In this respect, some
participants raised systemic concerns about the "zero risk" approach apparently
contained in certain trade prohibitions, affecting both EU and non-EU Members, including
those concerning meat and related animal products deemed to carry BSE agents, and new
measures on "specified risk materials" to be introduced on
1 January 1998. Other Members sought greater transparency in the management of
the EU Eco-Label scheme.
The representative of the European Union provided
details on its tariff nomenclature as well as tariff and customs administration and
associated national and Community judicial processes. He also gave extensive replies to
questions on the EU's anti-dumping rules and procedures. These, he said, were intended to
restore fair trade and were in conformity with the WTO; the number of initiations was,
moreover, diminishing. He asserted that procedures were open and transparent, and that
there was no specific "targeting" of sectors or exporters. While special regard
was given to developing countries, the Commission could only accept constructive solutions
which remedied injurious dumping. On intra-Community trade, anti-dumping actions were
excluded in the integrated market; instead, competition rules were enforced to deal with
such issues as predatory pricing. The "anti-absorption" clause allowed the
re-assessment of export prices or "normal values" in cases where price movements
to remove injury had not taken place. The "lesser duty" rule was used
systematically and had often moderated anti-dumping duty levels. The WTO recognized the
need to counter deliberate circumvention of anti-dumping measures.
The representative emphasised that the EU had
notified its state aids to the WTO. He appreciated the recognition of its efforts to
provide transparency at Community, national and sub-national levels, and provided details
on the operation of structural funds, including in specific sectors. State aids should be
used with restraint and be transparent. Surveys had shown a long-term reduction in their
use in the EU, and the EU believed this trend must continue.
The representative also provided information on the
operation of EU competition policy, its Market Access Strategy Database, the application
of its Trade Barriers Regulation to Brazilian "conhaque", and the EU's export
promotion programme. Responses were also given on environmental standards and
eco-labelling; the latter scheme was non-discriminatory and steps were being taken to take
account of the interests of all producers. Metric-only labelling was in keeping with ISO
standards and was intended to simplify procedures. He clarified that the MRA between the
EU and the United States contained no rule-of-origin provisions. The intention was to
extend the scope of MRAs to other suppliers.
The representative emphasized the EU's reliance on
strong and secure intellectual and industrial property rights. He gave examples of
legislation in force or under consideration and replied to specific questions in such
fields as electronic commerce, protection of data bases and national treatment. The
Government Procurement Agreement (GPA) had the full effect of Community law. By July 1996
140 out of 155 national measures implementing EU directives had been notified to the EC.
The absence of harmonization did not necessarily imply divergence from EU rules or GPA
requirements, for example where they were already compatible. Contracts below EC and GPA
thresholds did not need to be published. Further details on GPA implementation were
provided; notification to the WTO would be made by 31 December 1997.
In agriculture, the implementation of the CAP reform
and of WTO commitments, while largely aided by favourable market trends, was seen as a
step in the right direction. Average tariffs had been reduced but high out-of-quota rates
continued to protect sensitive products; producer subsidy equivalents had increased.
Import arrangements for meat, dairy products, rice, fruit and vegetables continued to be a
matter for concern. Members called for continued policy reforms in the sector, with
further shifts towards direct payments and reduced reliance on price support and export
subsidies. In this respect, the recent Commission's Agenda 2000 proposal was welcomed,
although some Members wondered whether it went far enough in terms of improved resource
allocation as well as market access; information was sought about EU Member States'
initial reactions to the proposal.
Members acknowledged improved market access in
manufacturing under the combination of single market provisions, the reduction of tariff
and non-tariff measures, and new commitments under the Information Technology Agreement.
However, several participants expressed disappointment about the slow liberalization of
textiles and clothing imports and backloading of restrictive items to the last stages of
integration under the ATC. In addition, Members noted that sectors such as automobiles
faced difficulties in adjusting to new market trends and cost conditions, also benefitted
from high tariff protection and significant financial assistance. Some participants
underlined the EU industry's high specialization in medium-technology products.
Most Members appreciated the EU's efforts to
liberalize trade in services both internally and externally, in particular in
telecommunications and financial services. Some Members asked the EU whether, as services
liberalization generated substantial benefits for developed countries, it would support
the linkage of services negotiations with other areas of interest to developing countries
in the next phase of WTO negotiations.
The representative of the European Union noted that
the textiles and clothing sectors were in the process of re-integration into the GATT. The
EU's schedule was wholly consistent with its liberalization obligations. However, the EU
would review its Stage 1 integration in line with the recommendations of the TMB. He
explained the provisions for access under the Europe Agreements, noted that applied
tariffs were not above bound rates and that the highest rates could not be described as
"peaks". The EU had not yet drawn up plans for Stage 3 of integration under the
The representative provided some initial responses
to a range of questions on agriculture and fisheries, promising written answers at a later
stage. These referred principally to SPS measures, measures taken in response to the BSE
crisis, further CAP reform, and the fruit and vegetable regime. In some cases Members were
referred to information provided to other WTO Committees, e.g., regarding tariff quota
administration. The EU was complying with its WTO obligations, including those of internal
support. The EU did not consider its intervention agencies as State-Trading Enterprises.
Reform of the wine sector was under consideration.
The representative noted that some questions on the
ongoing reform in the services sector went beyond WTO obligations, and internal reforms
did not necessarily have an impact on external obligations. The EU was seeking
liberalization by its trading partners commensurate with what it was offering, but it also
recognized the beneficial effect of international commitments on the internal agenda.
Details were provided on aspects of the single market programme and external market
opening in financial services and transport, the VAT Directive for non-EU service
providers in telecommunications and media ownership and the "Television Without
Frontiers" Directive in audio-visual services. The rules on electronic commerce were
currently being examined.
The EU and the future of the multilateral
Members emphasized that the review was taking place
in a period of major policy developments in the EU. Much attention was devoted to the
possible consequences of the move towards economic and monetary union and of new
enlargements on the EU and third countries. Some Members stressed the potentially
beneficial effects of the single currency on transparency and on the security and
predictability of trade flows into the euro area. However, further analysis was requested
from the EU on the consequences of EMU for European countries which were not in the euro
Members generally recognized that the deepening of
European integration, with single market completion, preparations for the introduction of
a single currency and the reform of Community institutions, had not reduced the EU's
involvement in the multilateral system. On the contrary, it was recognized that the EU had
contributed to the success of post-Uruguay Round negotiations, promoted the use of dispute
settlement procedures, including by acceptance of Panel reports going against the EU, and
supported the development of new issues on the WTO agenda. Some members welcomed the
statements made by the EU representative concerning the need for comprehensive, rather
than sectoral, negotiations in any future WTO round.
The representative of the European Union recalled
his opening statement confirming the EU's attachment to the multilateral system. He
outlined the programmes that had been or would be established under "Agenda
2000" for domestic reform and the initiation of accession negotiations with applicant
governments. The EU would observe its obligations under the relevant provisions of the
GATT 1994 and GATS. Enlargement of the EU would also imply a broader Single Market. As in
the past, internal integration and external liberalization would continue in parallel.
It was too soon to judge the precise trade effects
of the creation of the euro. The clear aim was to have a stable currency. A large number
of technical questions would have to be solved.
Conclusion Back to top
This review has illustrated that the EU's influence
on the multilateral trading system and its evolution is clearly recognized by Members.
This has two consequences: that Members greatly value the positive effects of such
liberalizing activities as the Single Market, and that Members are strongly sensitive to
any trade policies or measures of the EU that are seen as potentially trade-distorting.
Members have also shown their concerns about the systemic effects of the expansion of the
EU, the development of a new generation of trade agreements with neighbouring and other
countries, and a wide range of specific and sectoral issues. Certainly the trade policies
and actions of the EU do not leave any WTO Member indifferent; this has been clearly seen
in the large number of advance questions covering a multitude of issues, and the level of
the debate in the meeting.
Although this is an "interim" review, it
comes at an important time for the development of EU trade policies. Many new developments
are underway, not least the move to economic and monetary union (leading to further
integration and liberalization of the single market), the revision of the Lomé
Convention, and steps toward further EU enlargement. We hope that the comments made in the
past two days will be taken into account by the competent organs of the European Union -
the Commission and the Member States - in developing their external relations within the
multilateral trading system and in formulating the EU's internal policies which have
direct or indirect implications for the multilateral trading system.