Доклад: European Union. External trade

Доклад: European Union. External trade

European Union: July 2002

The new WTO report, along with a policy statement by the European Commission,

will serve as the basis for the trade policy review of the EU which will take

place on 24 and 26 July 2002 in the Trade Policy Review Body of the WTO.

See also:

> Second press release <tp199_e.htm>

> Chairperson’s concluding remarks <tp199_e.htm>

As key trade liberalization supporter, EU keeps markets open — except for

textiles and agriculture back to top <>

Pursuing trade liberalization through multilateral, regional and bilateral

initiatives, the European Union has maintained its markets largely open —

except for textiles and agriculture — says a new WTO report on the trade

policies on the EU. The EU’s position as the world’s leading exporter of

goods and the second largest importer is testimony both to the importance of

trade to the European consumer and producer, and to the significance of the

EU as a market for most WTO Members, notably developing countries, the report

adds.

Since its last trade policy review, the EU has maintained the momentum of its

internal economic integration agenda, the report says. It has continued to

advance towards the completion of its Internal Market by pursuing product and

capital market reform, has undertaken the final step towards a single

currency in the euro area, largely maintained control of public finances

despite lower economic growth, and has actively enforced competition policy.

The report states that maintaining a supportive policy environment for economic

operators has been vital to reviving growth prospects of the European economy

in 2002. Economic growth in the EU slowed sharply in 2001 (1.7%), down

from 3.3% in 2000, mainly as a result of external shocks (higher oil prices,

burst of technology bubble, 11 September, etc.). GDP growth in 2002 is expected

to be 1.5%, followed by a rebound to 2.9% in 2003. Inflation rose to 2.3% in

2001, from 2.1% in 2000 (the medium-term target by the European Central Bank is

2%). Unemployment continued to decline in most Member States in 2001 despite

slower economic growth.

The report notes that the strategic goal for the EU for 2010, set by the

Lisbon European Council, is “to become the most competitive and dynamic

knowledge-based economy in the world capable of sustainable growth with more

and better jobs and greater social cohesion”. The 2002 Broad Economic Policy

Guidelines for the EU and the Member States emphasize safeguarding

macroeconomic stability by fulfilling pledges for budgetary balance made in

the Stability and Growth Pact and continued moderation in wage demands.

The single currency facilitates cross-country price comparisons, and thus

strengthens the Internal Market, the report notes. Non-EU countries also

benefit through lower costs for international trade transactions. The main

benefit of Economic and Monetary Union (EMU), however, is the lasting

contribution of price stability to the foundations for sustained economic

activity, the report adds.

The report states that progress in other areas of the Internal Market has

been slower. Political agreement was reached at the Barcelona European

Council in March 2002 to open non-household use of electricity and gas to

competition as of 2004, and to ensure cross-border electricity

interconnectivity of at least 10% of production capacity by 2005. On postal

services, the scope of business segments reserved to the incumbent postal

operator is to be reduced in 2003 and again in 2006, and a decisive step to

full liberalization could take place in 2009.

The EU continues to pursue trade liberalization through multilateral,

regional, and bilateral initiatives, the report says. At the multilateral

level, the EU played a leading role in building support for the launch of the

Doha Development Agenda. At the regional level, new trade agreements were

concluded and existing agreements with candidate countries were deepened.

Bilateral negotiations on prospective extra-regional agreements also

continued. In addition, a new scheme for the grant of preferences to

developing countries was adopted, including enhanced preferences for least-

developed countries.

The EU grants preferential access to most of its trading partners for some or

all imports: in 2002, nine WTO Members are subject to exclusively Most-

Favoured-Nation (MFN) treatment in all product categories: Australia; Canada;

Chinese Taipei; Hong Kong, China; Japan; Republic of Korea; New Zealand;

Singapore; and the United States. These countries accounted for 45.2% of EU’s

total merchandise imports in 2001. For other trading partners, the most

beneficial treatment is granted to Least Developed Countries (LDCs) and the

Overseas Countries and Territories, followed by the African Caribbean Pacific

(ACP) countries and countries having concluded free-trade agreements with the

EU, and then countries under the Generalized System of Preferences (GSP)

only.

The report notes that the EU market for non-agricultural products continues to

be largely open. Except for textiles and clothing products, where following its

WTO commitments, the EU has only lifted restrictions on 20% of products

restricted in 1990, leaving the elimination of the remaining 80% of restricted

imports “back-loaded” for the final stage at the end of 2004.

The overall simple average MFN tariff is estimated at 6.4% for 2002. The

simple average applied tariff on non-agricultural products is 4.1%, slightly

lower than at the previous TPR, due to tariff reductions for certain

chemicals, textiles, iron and steel products, and toys. The simple average

tariff on agricultural products is, at 16.1%, about four times higher than

that on non-agricultural products, with above average tariffs on products

subject to the Common Agricultural Policy (CAP). Tariff escalation remains,

in particular on processed products.

On agriculture, according to the Organisation for Economic Co-operation and

Development (OECD), support to producers declined to € 97.9 billion in

2000 from € 107.6 billion in 1999, mainly due to world market prices

rising faster than domestic prices, as well as currency movements, rather

than significant changes in policy. The report states that opportunity to

reform the milk quota or sugar quota regimes was not seized, with extensions

adopted instead. Pressures to adapt the CAP to new requirements are arising

from enlargement, where the EC has proposed a progressive introduction of

direct payments. Decline in consumer confidence in the CAP is due to a number

of food safety crises, which the Community is addressing, notably by a new

framework for food safety law. The report notes that funding for the CAP

continues to represent the single largest expenditure; 44% of the total

budget of € 93 billion in 2000.

The report states that on trade remedies, the EU is the second most frequent

user of anti-dumping measures, behind the United States, but some 40% of the

anti-dumping investigations initiated by the EU are terminated without

measures being taken. Safeguard action was taken in March 2002 on 15 steel

products in response to the United States’ safeguard action on steel imports.

The EU continues to make frequent use of the special safeguard mechanism

under the WTO Agreement on Agriculture to impose “snap-back” tariffs.

The EU and the Member States have put in place new regulations for certain

products — notably in relation to the safety of products and the disposal of

waste — requiring economic operators, including those outside the EU, to

adapt. The report notes that certain trading partners of the EU perceive

these new product regulations as significant trade barriers, and are

concerned with preserving the viability of the international standard-setting

process. A controversy exists concerning the placement on the EU market of

genetically modified organisms (GMOs) and products that may contain GMOs or

GMO derivatives. Amendments to the legislation are under consideration to

ensure compliance with WTO rulings.

The report notes that the long-standing proposal for a European company was

adopted in October 2001, to be in place by 2004, and will simplify company

law requirements for enterprises established in at least two Member States.

Foreign companies will also have this option, under certain conditions. The

Commission has continued to vigorously enforce the rules on antitrust

activities and mergers with a Community dimension, to complement national

competition law enforcement.

The report notes that to strengthen intellectual property rights protection,

the EU adopted harmonizing directives on resale rights for the author of an

original work of art, and copyright and related rights for the digital

environment. No agreement has been reached on the EC’s proposal to create a

unitary Community patent, due to issues of translation as well as

jurisdiction.

Note to Editors

Trade Policy Reviews are an exercise, mandated in the WTO agreements, in

which member countries’ trade and related policies are examined and evaluated

at regular intervals. Significant developments which may have an impact on

the global trading system are also monitored. For each review, two documents

are prepared: a policy statement by the government of the member under

review, and a detailed report written independently by the WTO Secretariat.

These two documents are then discussed by the WTO’s full membership in the

Trade Policy Review Body (TPRB). These documents and the proceedings of the

TPRB’s meetings are published shortly afterwards. Since 1995, when the WTO

came into force, services and trade-related aspects of intellectual property

rights have also been covered.

For this review, the WTO’s Secretariat report, together with a policy

statement prepared by the European Commission, will be discussed by the Trade

Policy Review Body on 24 and 26 July 2002. The Secretariat report covers the

development of all aspects of the European Union’s trade policies, including

domestic laws and regulations, the institutional framework, trade policies

and practices by measure, and developments in selected sectors.

Attached to this press release are the Summary Observations of the Secretariat

report and parts of the government policy statement. The Secretariat and the

government reports are available under the country name in the full list of

trade policy reviews <tp_rep_e.htm>. These two documents and the

minutes of the TPRB’s discussion and the Chairman’s summing up, will be

published in hardback in due course and will be available from the Secretariat,

Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina

(1992 and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain

(2000) Bangladesh (1992 and 2000), Barbados (2002), Benin (1997), Bolivia (1993

and 1999), Botswana (1998), Brazil (1992, 1996 and 2000), Brunei Darussalam

(2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992,

1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996),

Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the

Czech Republic (1996 and 2001), the Dominican Republic (1996), Egypt (1992 and

1999), El Salvador (1996), the European Communities (1991, 1993, 1995, 1997,

2000 and 2002), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and

2001), Guatemala (2002), Guinea (1999), Haiti (2002), Hong Kong (1990, 1994 and

1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993, 1998 and

2002), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998),

Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of

(1992, 1996 and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar

(2001), Malaysia (1993, 1997 and 2001), Malawi (2002), Mali (1998), Mauritius

(1995 and 2001), Mexico (1993, 1997 and 2002), Morocco (1989 and 1996),

Mozambique (2001), New Zealand (1990 and 1996), Namibia (1998), Nicaragua

(1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS (2001),

Pakistan (1995 and 2002), Papua New Guinea (1999), Paraguay (1997), Peru (1994

and 2000), the Philippines (1993 and 1999), Poland (1993 and 2000), Romania

(1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak

Republic (1995 and 2001), Slovenia (2002), the Solomon Islands (1998), South

Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and

1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)), Tanzania

(2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago

(1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992,

1994, 1996, 1999 and 2001), Uganda (1995 and 2001), Uruguay (1992 and 1998),

Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

The Secretariat’s report: summary back to top <>

TRADE POLICY REVIEW BODY: EUROPEAN UNION

Report by the Secretariat - Summary Observations

The European Union (EU) plays a vital role in the WTO and its support for the

rules-based multilateral trading system is crucial to the ability of the

system to deliver the benefits from trade to all its Members. The EU’s

position as the world’s leading exporter of goods and the second-largest

importer is testimony both to the importance of trade to the European

consumer and producer, and to the significance of the EU as a market for most

WTO Members, notably developing countries. This interdependence is the result

of a longstanding commitment to the multilateral trading system, in addition

to an extensive network of regional trade agreements and preferential trade

arrangements.

The EU was very important in building support for the launch of the Doha

Development Agenda (DDA) in November 2001. The EU, together with its trading

partners, worked to rebuild confidence and cooperation within the WTO. It has

also sought to improve public understanding of the WTO through greater

transparency and interaction with parliamentarians and civil society

representatives. The continued commitment of the EU to the WTO and the

multilateral trading system will be critical to the success of the DDA.

Recent Economic Developments

Since its last Trade Policy Review in mid 2000, the EU has maintained the

momentum of its internal economic integration agenda. It has continued to

advance towards the completion of its Internal Market by pursuing product and

capital market reform, has undertaken the final step towards a single

currency in the euro area, largely maintained control of public finances

despite lower economic growth, and has actively enforced competition policy,

to complement Member State domestic reform. Trade policy developments have

been supportive of this agenda, by maintaining largely open markets for non-

agricultural products (except for textiles and clothing), proceeding on WTO

liberalization commitments, and supporting further deepening of multilateral

commitments, while further expanding the extensive system of regional trade

agreements.

Maintaining a supportive policy environment for economic operators has been

vital to reviving growth prospects of the European economy in 2002. Economic

growth in the EU slowed sharply in 2001, with a slight contraction in GDP in

the final quarter of the year. Growth was 1.7% in 2001 down from 3.3% in

2000. The slowdown is attributed by the Commission mainly to a sequence of

external shocks — higher oil prices, the burst technology bubble, weak

external demand, exacerbated by the shock to confidence of the events of 11

September. The Commission’s Spring 2002 forecasts are for a recovery to

develop in the course of the year, due in part to the strengthened economic

prospects of the United States, the EU’s main external trade partner. A

weaker first half, however, is expected to lead to a decline in the growth

rate recorded for 2002 as a whole, to 1.5%, followed by a rebound to 2.9% in

2003.

Inflation in the EU rose to 2.3% in 2001, from 2.1% in 2000 and 1.2% in 1999.

Contributing factors in 2000 were higher energy prices and the decline of the

euro and, in early 2001, rising food prices. Price pressures eased in mid

2001, but higher food prices and indirect tax increases lifted inflation in

early 2002. Although euro area inflation in 2001 was above 2%, the medium-

term target set by the European Central Bank (ECB), the Commission expects

the target to be met in Q2 2002.

Unemployment rates continued to decline in most Member States in 2001 despite

slower economic growth. The Commission expects a slight rise in unemployment

in the EU as a whole in 2002, even as the recovery proceeds, due to the

lagged nature of employment adjustment to cyclical upturns. A decline to 7.5%

is forecast for 2003.

Slower economic growth had a marked impact on external trade developments in

2001. The value of merchandise exports rose by 4% in 2001, compared with 23%

in 2000, while imports were 1% lower in value. Merchandise exports were

estimated at € 1,051 billion and imports at € 1,020 billion in

2001, reducing the EU’s merchandise trade deficit to € 45 billion in

2001, from € 91 billion in 2000.

Policy Developments

The strategic goal for the EU for 2010, set by the Lisbon European Council,

is “to become the most competitive and dynamic knowledge-based economy in the

world capable of sustainable growth with more and better jobs and greater

social cohesion”. The 2002 Broad Economic Policy Guidelines (BEPG) for the EU

and the Member States emphasize safeguarding macroeconomic stability by

fulfilling pledges for budgetary balance made in the Stability and Growth

Pact (SGP), and continued moderation in wage demands. Other objectives

include raising productivity through product market reform, fostering

entrepreneurship and the knowledge-based economy, and financial market

integration. Member States are to reduce labour costs, strengthen incentives

for people to take up work and participate in the labour force, and remove

barriers to labour mobility. Sustainable development is to be promoted.

The 11 Member States that launched the euro area on 1 January 1999 were

joined by Greece on 1 January 2001. Euro banknotes and coins were put into

circulation on 1 January 2002, to be used in all transactions. The single

currency facilitates cross-country price comparisons, and thus strengthens

the Internal Market. Non-EU countries also benefit through lower costs for

international trade transactions. The main benefit of Economic and Monetary

Union (EMU), however, is the lasting contribution of price stability to the

foundations for sustained economic activity.

The ECB conducts monetary policy for the euro area with the core objective of

price stability. After progressively tightening monetary policy throughout

2000 in the face of persistent inflationary pressures, the ECB shifted to a

more accommodating stance in May 2001 as price pressures eased. After the

euro fell below a level that the ECB considered posed a risk to price

stability, the ECB intervened to support the euro in September 2000 in a

concerted G-7 action, and on its own in November 2000. The euro has since

recovered to about US$0.90, 25% below its level of 1 January 1999.

Following the progress made in 2000 by all Member States, towards the goal of

budgetary balance or surplus, slippage occurred in 2001 due to the onset of

slower economic growth. Most governments still in deficit position

anticipated even greater difficulty in meeting their deficit targets in 2002.

To maintain the credibility of the SGP, activation of the early warning

system was considered for certain Member States whose deficits were forecast

to be close to the 3% “excessive deficit” level, but activation was set aside

following pledges to meet agreed balanced budget targets by 2004. Pressures

on deficits should ease in 2003 as a result of the anticipated recovery.

Other public finance concerns are the relatively high levels of government

debt in certain Member States, as well as the substantial pressure of ageing

populations on social welfare systems.

Under EMU, structural reforms have assumed a greater importance in fostering

the conditions for growth, due to the combination of a strict anti-

inflationary monetary policy stance and fiscal policy constraints under the

SGP. Since the last Review of the EU in mid 2000, good progress has been made

on achieving the goal of fully integrated securities markets by 2003 and

financial markets by 2005 under the Financial Services Action Plan (FSAP),

and on fostering the “information society” through more competitive markets

for telecommunications services and a new framework for e-commerce.

Progress in other areas of the Internal Market has been slower. Political

agreement was reached at the Barcelona European Council in March 2002 to open

non-household use of electricity and gas to competition as of 2004, and to

ensure cross-border electricity interconnectivity of at least 10% of

production capacity by 2005. On postal services, the scope of business

segments reserved to the incumbent postal operator is to be reduced in 2003

and again in 2006, and a decisive step to full liberalization could take

place in 2009.

Institutional Developments

The Treaty of Nice was agreed in December 2000, to prepare EU institutions

for enlargement in the light of the objective of the candidates’

participation in the 2004 elections to the European Parliament. Of particular

significance to the WTO is the exclusive Community competence that would

apply to negotiations of agreements that concern services (with certain

exceptions), and the commercial aspects of intellectual property rights upon

ratification by all Member States of the Treaty of Nice (ten had done so by

May 2002). To prepare for the next phase of work on the EU treaties in 2004,

the Convention on the future of Europe, launched in March 2002, is engaged in

a deeper and wider debate about the future of the European Union.

Transparency in the functioning of the EU has been further enhanced during

the period under review by a new policy adopted in 2001 to give all persons,

regardless of their nationality, access to documents of Community

institutions, subject to limits for the protection of public and private

interests. The Commission has made increasing use of public consultations to

provide input into proposals for Community action, in keeping with the White

Paper on European Governance.

External Trade Relations

The overall objectives of the EU’s trade policies have remained largely the

same during the period under review. The EU continues to pursue trade

liberalization through multilateral, regional, and bilateral initiatives. At

the multilateral level, the EU played a leading role in building support for

the launch of the DDA in November 2001. At the regional level, new trade

agreements were concluded and existing agreements with candidate countries

were deepened. Bilateral negotiations on prospective extra-regional

agreements also continued. In addition, a new scheme for the grant of

preferences to developing countries was adopted, including enhanced

preferences for least-developed countries.

Notable actions undertaken by the EU to build support for the launch of the

DDA include: the “Everything-but-arms” (EBA) initiative, adopted in March

2001, to expand market access for least-developed countries (LDCs);

supporting the resolution of implementation-related concerns; and providing

resources for enhanced levels of trade-related technical assistance, for

which the EU and Member States are major donors.

In addition, the EU continues to be an active participant in all the regular

activities of the WTO and periodically notifies its trade policy developments

to the WTO. The EU is among the leading users of the dispute settlement

procedures to enforce the multilateral trade obligations of its trading

partners, and is frequently involved as a respondent. Disputes with the

United States continue to be the leading category.

Preferential trade agreements and arrangements

The EU grants preferential access to most of its trading partners for some or

all imports: in 2002, nine WTO Members are subject to exclusively MFN

treatment in all product categories: Australia; Canada; Chinese Taipei; Hong

Kong, China; Japan; Republic of Korea; New Zealand; Singapore; and the United

States. These countries accounted for 45.2% of EU’s total merchandise imports

in 2001. For other trading partners, the most beneficial treatment is granted

to LDCs and the Overseas Countries and Territories (OCT), followed by the ACP

and countries having concluded free-trade agreements with the EU, and then

GSP-only countries.

The EU expanded its free-trade agreement with Switzerland through the

completion of seven bilateral agreements, on land-based transport, air

transport, free movement of people, agriculture, research, procurement, and

technical barriers to trade, which should enter into force in 2002. With the

ten candidates from Central and Eastern Europe (CEEC), protocols on

reciprocal tariff concessions on agricultural products raised the share of

CEEC duty-free agricultural exports to the EU to 75%, and the share of EU

duty-free exports of agricultural products to the CEEC to 61%.

Free-trade agreements are also being used as an instrument to integrate the

Western Balkans. Stabilisation and Association (SAA) agreements were

concluded with the Former Yugoslav Republic of Macedonia (FYROM) and Croatia.

Albania and certain countries and territories of the former Yugoslavia —

Bosnia-Herzegovina, the Federal Republic of Yugoslavia, including Kosovo —

remain under the regime of Autonomous Trade Measures (ATM), which runs until

the end of 2005.

Further progress was also made on the “Euro-Med” agreements to replace non-

reciprocal agreements, and advance the goal of a Euro-Med free-trade area by

2010.

A new Council Decision on the OCT association arrangements was adopted in

November 2001 to continue the regime without major modification until the end

of 2011. A revised GSP scheme applies for 2002-04, with GSP-plus treatment

available to LDCs under the EBA, as well as to countries that combat drug

production and trafficking, and to encourage adherence to core labour

standards or to environmental standards.

Trade Policy Measures

The EU market for non-agricultural products (except for textiles and clothing

products) continues to be largely open. In addition to tariffs, imported

products are subject to value-added tax (VAT) and excise duties in the Member

State of destination. The EU has bound 100% of its tariff lines in the WTO,

and tariffs applied on products are closely aligned to bound levels.

The overall simple average MFN tariff is estimated at 6.4% for 2002. The

simple average applied tariff on non-agricultural products is 4.1%, slightly

lower than at the time of the previous Review in mid 2000, due to tariff

reductions for certain chemicals, textiles, iron and steel products, and

toys. The simple average tariff on agricultural products is, at 16.1%, about

four times higher than that on non-agricultural products, with above average

tariffs on products subject to the Common Agricultural Policy (CAP). Evidence

of tariff escalation remains, in particular on processed products.

Tariffs well above the average also apply to textiles and clothing products.

The EU has long maintained restrictions on imports of textile and clothing

products from a number of developing countries and transition economies.

Following its WTO commitments, the EU integrated a further 18.08% of textiles

and clothing products on 1 January 2002, bringing to 51.39% the imports

integrated into GATT 1994 since 1995. It involved the lifting of restrictions

on 11 product categories, accounting for 15% of products restricted in 1990.

To date, the EU has lifted restrictions on 20% of products restricted in

1990, leaving the elimination of the remaining 80% of restricted imports

“back-loaded” for the final stage at the end of 2004.

As of 1 January 2002, the EU had in place definitive anti-dumping measures

(duties and/or undertakings) on 175 product categories, down from 192 in

1999. The EU is the second most frequent user of these measures, behind the

United States, but some 40% of the anti-dumping investigations initiated by

the EU are terminated without measures being taken. Products imported from

China are the most frequently affected. The EU also had 16 definitive

countervailing measures in place, up from 6 in 1999, with products from India

the most frequently affected.

Safeguard action was taken in March 2002 on 15 steel products in response to

the United States’ safeguard action on steel imports. Supplementary duties

are to be triggered by volumes rising above 2001 levels to prevent diversion

of trade from the U.S. market onto the EU market. The Commission also

proposed the Council agree additional duties of between 8% and 100% on

imported products from the United States as “re-balancing” measures, given

the failure of the two parties to agree compensation for the Article XIX

measure on steel imposed by the United States. The EU continues to make

frequent use of the special safeguard (SSG) mechanism under the WTO Agreement

on Agriculture to impose “snap-back” tariffs.

During the period since the last Review in mid 2000, the EU and the Member

States have put in place new regulations for certain products — notably in

relation to the safety of products and the disposal of waste — requiring

economic operators, including those outside the EU, to adapt. Although

international standards may be used as the basis for regulations, to

facilitate trade, the Commission has stated that “standards cannot replace

governmental responsibility to safeguard a high level of protection

concerning health, safety and the environment”. Certain trading partners of

the EU perceive these new product regulations as significant trade barriers,

and are concerned with preserving the viability of the international

standard-setting process. Another concern is ensuring that the multilateral

processes for consultation on proposed regulations are effective. While

proposed regulations are subject to WTO notification requirements to allow

concerned Members to comment, participation in the consultations phase,

before the Commission issues the proposal, is also desirable should resources

permit.

To build consumer confidence in food safety after a number of food scares on

the Community market, the EU adopted a new framework for national food law

and food safety procedures. Scientific evidence is to underpin food safety

policy, with the precautionary principle to be used where appropriate. A new

European Food Safety Authority (EFSA) was also established to provide

scientific advice to the Commission on food policy matters, as well as to

Member States should they so request. A number of Member States have

established authorities with mandates at national level to ensure independent

scientific advice. New regulatory requirements have also been put into place

with respect to labelling of food products of all origins to ensure

traceability.

One area of reported controversy concerns the placement on the EU market of

genetically modified organisms (GMOs) and products that may contain GMOs or

GMO derivatives. Although the new legislative framework for authorizations is

tighter in a number of respects, certain Member States remain opposed to

placement on the market without comprehensive labelling requirements on

traceability, currently under consideration. Another area of controversy

concerns the ban on the use of hormones as growth promoters, on which the

Commission has conducted a risk assessment in recent years. Amendments to the

legislation are under consideration to ensure compliance with WTO rulings.

A key objective of the EU is to manage waste more effectively, as a result of

which new requirements on producers have been imposed or are under

consideration. The EU directive on end-of-life vehicles and the proposed

directive on waste electronic and electrical equipment (WEEE) depart from the

previous practice of delegating waste management to public authorities by

introducing “producer responsibility” for the treatment, recovery, and

disposal of products. This is intended as a financial incentive for producers

to design their products to facilitate waste management, particularly

recycling. Other requirements could also result from the Integrated Product

Policy currently under elaboration.

The burden of conformity assessment procedures is reduced for certain non-EU

third countries through Mutual Recognition Agreements (MRAs). New MRAs were

recently concluded with Japan and Switzerland, and are already in force with

Australia, Canada, Israel, New Zealand, and the United States. A similar

outcome is secured for the CEEC under concluded Protocols to the Europe

Agreements on Conformity Assessment and Acceptance of Industrial Products

(PECAs). Although a number of developing countries would also benefit from a

reduced burden of conformity assessment as a result of MRAs, the EU has

established its own criteria for such agreements to be concluded.

Measures Affecting Production and Trade

The EU has continued to pursue the objective of a more integrated environment

for company activity in the EU, currently segmented into 15 Member State

regimes, although harmonized in a number of respects under Community law. The

long-standing proposal for a European company was adopted in October 2001, to

be in place by 2004, and will simplify company law requirements for

enterprises established in at least two Member States. Foreign companies will

also have this option, under certain conditions. The Commission plans to

propose the consolidation of the tax base for European companies to

facilitate their operation. Another significant proposal concerns the use of

International Accounting Standards (IAS) by 2005, which will enhance the

transparency and comparability of financial statements, currently subject to

national reporting standards.

Competition policy

The Commission has continued to vigorously enforce the rules on antitrust

activities and mergers with a Community dimension, to complement national

competition law enforcement. To focus its efforts on fighting cartels and

other serious infringements of antitrust rules, the Commission has proposed a

major simplification of the notification requirements for individual

agreements. In 2001, a record number of cartel cases were closed, with fines

reaching € 1.8 billion.

Merger activity continued to be high. For mergers of a transnational

character, the Commission has cooperated actively with the competition policy

authorities of EEA members and, on the basis of bilateral agreements, with

those in Canada, the United States, and the CEEC, to promote convergence of

decisions and remedies; an agreement with Japan is also expected. To promote

convergence on a wider basis, the Commission played a leading role in the

launch of the “International Competition Network (ICN)” in late 2001. The EU

has long been an advocate of a multilateral agreement on competition.

A development of major significance to consumers in the EU, where car price

differentials remain high, is the Commission’s proposed new draft block-

exemption regulation for motor-vehicle distribution and servicing agreements

between carmakers and dealers, to enter into force on 1 October 2002. Foreign

carmakers that have not established a distribution system in the EU will also

benefit, as most restrictions on multi-brand sales are to be lifted.

Subsidies

At EU level, funding for the CAP continues to represent the single largest

expenditure; 44% of the total budget of € 93 billion in 2000. Structural

operations account for 35% of the budget, with research and technological

development a distant third.

At Member State level, latest available figures show that State aid was €

80 billion in 1999, amounting to 1% of the EU’s GNP. Member States have pledged

to reduce levels of state aid by 2003, and to shift the emphasis of subsidies

from supporting individual companies or sectors towards tackling horizontal

objectives of Community interest, such as employment, regional development,

environment and training or research. More generally, Member States are

encouraged to increase public and private investment in R&D to promote a

knowledge-based European economy.

The Commission has played a supportive role in efforts to advance domestic

reform by vigorously enforcing rules on state aid to individual enterprises,

in particular for non-notified aid. In July 2001, the Commission launched a

large-scale state aid investigation into business taxation schemes, which are

said to be less transparent than other forms of assistance, and raise the

potential for harmful tax competition.

Also significant is the Commission’s decision to firmly abide by state aid

rules on airline carriers in the aftermath of the events of 11 September,

with the exception of assistance for supplementary insurance. To ensure a

more level playing field with non-EU carriers and fill a void in the GATS

Agreement, the Commission proposed a new instrument to react against unfair

competition from subsidized third-country airlines.

In certain sectors, the Commission has faced greater difficulty. Aid to

shipbuilding was to be discontinued but its prolongation has been proposed on

a “defensive” basis to pursue a WTO dispute settlement proceeding. Aid to the

coal mining industry will continue until 2010. Although most EU mines cannot

compete with imported coal, the industry that remains in four Member States

has long been assisted on social and regional grounds.

Intellectual property rights

To strengthen intellectual property rights protection, the EU adopted

harmonizing directives on resale rights for the author of an original work of

art, and copyright and related rights for the digital environment. A new

unitary right on a Community design was created, in addition to the Community

trade mark and Community plant variety. No agreement has been reached on the

Commission’s proposal to create a unitary Community patent (including a

centralized court for its enforcement), due to issues of translation as well

as jurisdiction. Also outstanding is the proposal to harmonize legislation

for patents on software (computer-implemented inventions).

On enforcement, customs authorities reported an increase of one third in

seizures from 1999 to 2000 under legislation implementing the TRIPS Agreement

at the border. The trend continued in 2001 with a further increase of 27% in

the number of cases. The Commission has attributed the rising trend to (a) an

increased focus of customs authorities, better targeting and sharing of

information; and (b) an increase in and expanded range of counterfeit and

pirated goods that are traded. In 2002, the Commission intends to propose a

harmonizing directive on enforcement of IPRs, which is said to be stricter

than the minimum standards required by the TRIPS Agreement.

Developments in Selected Sectors

Agriculture

Since its last Review in mid 2000, the EU has implemented the Agenda 2000

reforms to the CAP agreed in Berlin in March 1999; the opportunity to reform

the milk quota or sugar quota regimes was not seized, with extensions adopted

instead. Pressures to adapt the CAP to new requirements are arising from

enlargement, where the Commission has proposed a progressive introduction of

direct payments. Other pressures to adapt the CAP are arising in the context

of the ongoing WTO negotiations on agriculture, where the EU has submitted a

proposal. Also of potential significance is the decline in consumer

confidence in the CAP due to a number of food safety crises, which the

Community is addressing, notably by a new framework for food safety law, as

noted above.

According to the latest publicly available OECD figures, support to producers

declined to € 97.9 billion in 2000 from € 107.6 billion in 1999,

mainly due to world market prices rising faster than domestic prices, as well

as currency movements, rather than significant changes in policy.

Fisheries

Since its last Review in mid-2000, the EU has been moving towards

consideration of possible revisions to the Common Fisheries Policy (CFP), to

apply as from 2003, although no concrete proposals had been made as of 1 May

2002. Negotiations on subsidies to fisheries are on the DDA.

The Commission’s Green Paper issued in 2001 on the operation of the CFP to

date notes the difficulty of reconciling objectives in the sector —

supporting fishing activity in regions and areas of the Community where it is

of social and economic importance, while attempting to protect increasingly

fragile fishery resources. A number of measures were taken by the Community

in 2000 and 2001 to address fishery conservation concerns, including lower

catches for 2002 to prevent further deterioration of certain stocks. Reaching

political agreement on a new fleet management policy has been more difficult,

although Commission estimates point to significant excess capacity as one of

the causes of resource depletion.

Financial services

Completion of the FSAP occupies a central role in the Lisbon strategy to

lower costs of capital and foster a more entrepreneurial culture. Financial

market integration is among the key potential benefits of the euro. Between

2000 and March 2002, the EU adopted 15 legislative measures, including to

complete the regulatory frameworks for the banking and insurance sectors

through provisions on reorganization and bankruptcy, money laundering, and

reducing the cost of cross-border payments in euros. A new “Lamfalussy”

approach to securities-market legislation was agreed with the Council and

European Parliament to focus legislation on core principles and delegate

implementing powers to the European Securities Committee (ESC), chaired by

the Commission, and advised by a Committee of European Securities Regulators

(CESR).

A large number of legislative proposals are under consideration for adoption.

The Barcelona European Council agreed in March 2002 that priority attention

should be given in 2002 by the Council and the European Parliament to

adoption of the proposed Directives on collateral, market abuse, insurance

intermediaries, the distance marketing of financial services, financial

conglomerates, prospectuses, occupational pension funds, and the IAS

Regulation. The Commission also intends to issue a revised proposal for a

Takeover Bids Directive (rejected by the European Parliament in mid 2001).

Telecommunications and information society

Fostering the “information society” is a central plank of the Lisbon

strategy. Under the eEurope Action Plan, the local loop unbundling (LLU)

regulation was in place as from January 2001, a revised legislative package

for electronic communications was adopted in February 2002, to be transposed

by May 2003, and the legislative framework for e-commerce was substantially

advanced to build trust and confidence in the Internet.

For the future, the Commission sees substantial benefits for the European

economy from extensive use by consumers of high-speed Internet connections

and wireless 3G technologies. Although the EU is among the world leaders in

mobile communications, household use of the Internet lags that of other OECD

countries, although business use is comparable. A new eEurope Action Plan for

2005 is to be adopted at the Sevilla European Council in June 2002.

As from January 2000, all Member States were required to have initiated the

process of LLU to foster infrastructure-based competition on the local access

network and thereby accelerate the supply of broadband connections. Incumbent

telecom operators were required to provide competitors with physical access

to local loops, but progress is conceded to have been slow. The new

electronic communications package contains changes intended to bring about

more competitive licensing conditions and fee structures orientated to cover

administrative costs. In addition, a progressive alignment with competition

policy is to be achieved in market segments where effective competition has

been achieved.

A proposed privacy directive is under consideration. It would require

providers of public telecommunication services and networks to guarantee the

security of their networks, to ensure the confidentiality of communications

and to delete traffic data. Under current legislation, transfers of personal

data to a non-EU third country are only permitted when “adequate” protection

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