RESTRICTED
WORLD TRADE WT/TPR/S/3
30June1995
ORGANIZATION(95-1753)
TRADE POLICY REVIEW
EUROPEAN UNION
Report bytheSecretariat
Thisreport, prepared forthethirdTrade Policy Review oftheEuropean Union, has
beendrawn upbytheWTO Secretariat onitsownresponsibility. TheSecretariat
has,asrequired bytheAgreement establishing theTrade Policy Review Mechanism
(Annex 3oftheMarrakesh Agreement Establishing theWorld Trade Organization),
sought clarification from theEuropean Union onitstrade policies andpractices.
Document WT/TPR/G/3 contains thepolicy statement submitted bytheEuropean
Communities.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body ontheEuropean Union.European Union WT/TPR/S/3
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS xi
(1) TheEconomic Environment xi
(2) Developments intheInstitutional Framework xi
(3) Trade Policy Features andTrends xii
(i) Type andincidence oftrade policy instruments xii
(ii) Temporary measures xiii
(iii) Sectoral policy developments xiv
(4) Trade Policies andForeign Trading Partners xv
I. THE ECONOMIC ENVIRONMENT 1
(1) Recent Economic Performance 1
(2) Trade Performance 3
(i) EUtrade patterns 3
(ii) Developments inmember States 5
(3) Outlook 7
Annex I.1 Indicators ofeconomic openness 9
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 11
(1) Overview 11
(2) Basic Institutional andLegal Structure 11
(i) Institutions 11
(ii) Changes following thecompletion oftheUruguay Round 12
(3) TheInternal Market Programme 13
(4) Accession ofNew Member States 16WT/TPR/S/3
Page ivTrade Policy Review
Page
(5) External Trading Relations 18
(i) TheEuropean Economic Area andEFTA 20
(ii) Association agreements withcentral European countries
("Europe Agreements") 20
(iii) Agreements withMediterranean countries 23
(iv) Relations withmembers oftheCommonwealth ofIndependent States 24
(v) Agreements andarrangements inAsia 25
(vi) Arrangements inother regions 26
(vii) TheLomé Convention 26
(viii) TheGeneralized System ofPreferences 28
Annex II.1 Decision-making intheEuropean Union 31
Annex II.2 TheGSPgraduation mechanism 33
III. TRADE-RELATED DEVELOPMENTS INTHE MONETARY AND FINANCIAL 36
SPHERE
(1) TheMonetary Environment 36
(2) Capital Movements andCurrent Payments 39
(3) Towards Economic andMonetary Union 40
(4) Foreign Direct Investment 43
(i) Foreign investment policy 43
(ii) Patterns offoreign direct investment 44
IV. TRADE POLICIES AND PRACTICES BYMEASURE 51
(1) Recent Developments 51
(2) Measures Directly Affecting Imports 51
(i) Tariffs, import levies andcharges 51
(ii) Quantitative restrictions, trade controls andsurveillance measures 57
(iii) Trade sanctions 60
(iv) Trade defence instruments 60
(v) Local content requirements 68
(vi) Rules oforigin 68
(vii) Recent developments inother import-related areas 69European Union WT/TPR/S/3
Page v
Page
(3) Measures Directly Affecting Exports 71
(i) Export promotion (including financing andinsurance) 71
(ii) Export controls andrestrictions 71
(4) Measures Affecting Production andTrade 72
(i) Competition policy 72
(ii) Subsidies 73
(iii) Intellectual property protection 78
V. TRADE POLICES AND PRACTICES BYSECTOR 79
(1) Developments inAgriculture, Fisheries andFood Production 79
(i) Changes inthepolicy framework 79
(ii) Policies inindividual areas 82
(iii) Fisheries 91
(2) Developments inMain Mining andManufacturing Industries 93
(i) Overview 93
(ii) Towards completing theinternal market: pharmaceuticals 94
(iii) New disciplines onnational polices: coal 97
(iv) Gradual external liberalization: textiles andclothing 99
(v) Adjustments in"sensitive" sectors: shipbuilding, motor vehicles, basemetals 103
(3) Services 107
(i) Overview 107
(ii) Financial services 114
(iii) Telecommunications 123
(iv) Airtransport 134
(v) Maritime transport 140
(vi) Audiovisual services 145
Annex V.1 ECLegislation inIndividual Service Sectors 148WT/TPR/S/3
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Page
VI. TRADE DISPUTES AND CONSULTATIONS 168
(1) Dispute Settlement Under theGeneral Agreement 168
(i) Disputes concerning EUpolicies 168
(ii) Initiatives bytheEU 171
(2) Issues Raised under Tokyo Round Agreements 172
(i) Subsidies code 172
(ii) Anti-dumping code 173
(iii) Government procurement code 175
(3) Dispute Settlement intheContext ofPreferential Trade Agreements 175
(4) Other Initiatives toAddress Trade Frictions 176
(i) Initiatives affecting theEU 176
(ii) EUactions under the"New Commercial Policy Instrument" 176
(iii) Dialogue withm.f.n. trading partners 177
REFERENCES 179
APPENDIX TABLES 185European Union WT/TPR/S/3
Page vii
CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Growth ofrealGDP bymember State, 1992-94 2
I.2 External merchandise trade byregion (EU12), 1993 4
I.3 External trade bysector (EU12), 1992 and1993 6
AI.1 Indicators ofEUexternal trade, 1980-93 9
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 TheEUpreferential trade system, early 1995 19
II.2 Trade withEurope Agreement countries, 1985-93 22
II.3 Trade withACP countries, 1985-9328 28
AII.1 GSP graduation mechanism 34
III. TRADE-RELATED DEVELOPMENTS INTHE MONETARY AND FINANCIAL
SPHERE
III.1 Nominal EUexchange ratemovements, January 1993 -March 1995 38
III.2 Exchange rates ofnon-EU currencies vis-à-vis theECU, January 1993 -April 1995 39
III.3 Performance against criteria forEMU membership, 1993-95 42
III.4 Cumulative FDIflows, 1985-92 46
III.5 Annual FDIflows forselected member States, 1985-92 47
III.6 Cumulative FDIinflows inselected member States, 1985-92 49
III.7 Cumulative FDIoutflows from selected member States, 1985-92 50
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1 Tariffs onagricultural products (EU12), 1995 53
IV.2 Tariffs onmanufactured products (EU12), 1995 and2000 54
IV.3 Tariff escalation, 1995 and2000 56
IV.4 Allocation ofStructural Funds bymember State (EU12), 1994-99 77
IV.5 Community R&D under theFourth Framework Programme, 1994-98 78
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Production andsubsidization byfarm sector, 1992 and1993 82
V.2 Drug prices inindividual member States, 1998 and1993 96
V.3 Production andsubsidization inthecoalindustry, 1993 98
V.4 EUimports oftextiles andclothing (EU12), 1983-93 100
V.5 Market share ofpassenger carsimported from Japan inEUmember States, 1993 105
V.6 TheEUservices sector, 1992 109
V.7 Potential impact oftheInternal Market programme andtechnological
change onservices sectors 112
V.8 TheEUinformation industry, 1993 123
V.9 Average telecommunication tariffs foramultinational company inEuropean capitals,
June 1994 124WT/TPR/S/3
Page viiiTrade Policy Review
TABLES
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Performance oftheEUeconomy, 1990-94 2
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1a Tariff quotas onsteel imports from theCzech Republic andtheSlovak Republic,
1993-95 59
IV.1b Quantitative restrictions onsteel imports from CISrepublics, 1993-96 59
IV.2 Anti-dumping actions, 1990-94 63
IV.3 Procedures under theTrade Barriers Instrument 66
IV.4 Current status ofselected privatization plans inmember States 74
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Agricultural support inmain product areas, 1979-93 84
V.2 Suppliers oftextiles andclothing products withbilateral agreements or
arrangements withtheEuropean Union, 1January 1995 102
V.3 ECtrade inindividual services sectors, 1983 and1992 111
V.4 Taxonomy ofECpolicies inmain services sectors, early 1995 114
V.5 Theorganization ofmember States 'telecommunications sector, 1994 127
V.6 Listofm.f.n. exemptions foraudiovisual services 146
VI. TRADE DISPUTES AND CONSULTATIONS
VI.1 Cases under Article XXII andXXIII oftheGeneral Agreement,
January 1993 -March 1995 169
VI.2 Agreement onInterpretation andApplication ofArticles VI,XVIandXXIII
oftheGeneral Agreement (Subsidies Code), January 1993-March 1995 172
VI.3 Agreement onImplementation ofArticle VIoftheGeneral Agreement
(Anti-Dumping Code), January 1993-March 1995 174European Union WT/TPR/S/3
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APPENDIX TABLES
Page
AI.1 Major features oftheEUeconomy bymember State, 1992 and1993 187
AI.2 Main economic indicators bymember State, 1992-94 188
AI.3 Merchandise exports bycountry andregion, January 1992 -August 1994 189
AI.4 Merchandise imports bycountry andregion, January 1992 -August 1994 190
AI.5 Leading merchandise exports bySITC category, January 1992 -August 1994 191
AI.6 Leading merchandise imports bySITC category, January 1992 -August 1994 192
AI.7 Services trade bysector, 1986 and1992 193
AI.8 Regional distribution ofmember States 'external trade, 1993 194
AI.9 Product distribution ofmember States 'external trade, 1993 195
AV.1 Export-related commitments under theCommunities 'Uruguay Round schedule 196
AV.2 Employment, production andtrade bysector, 1993 197
AV.3 EUtariffs byISIC categories, 1995 and2000 198
AV.4 Suppliers affected bythefirstliberalization stage under theWTO Agreement
onTextiles andClothing, 1995 202European Union WT/TPR/S/3
Page xi
SUMMARY OBSERVATIONS
1. TheEuropean Union isamong the
pace-setters inthemultilateral system owing to
itseconomic weight andreliance onexternal
trade. Recent accessions andnewpreferential
arrangements have further increased its
influence onthesystem. Thetrade policies
pursued bytheEUinthepast twoyears
illustrate threemaintendencies: internal policy
integration andharmonization across sectors
and,more strongly, among member States; a
rapidly expanding andincreasingly complex
network offree-trade area andpreferential
relations; and active participation in
multilateral trade liberalization. The
co-existence of,andinteraction among, these
tendencies highlights thenecessity forastrong,
constantlyactiveWTOframeworktoguidefuture
trade policies and counterbalance the
discriminatory impact ofexpanding preferential
links.
(1) TheEconomic Environment
2. In1994, theeconomy ofthe
European Union grew byover2.5percent.
While mostmember States wererecovering from
the1993recession, Denmark, theNetherlands,
Ireland andtheUnited Kingdom showed
sustained growth. Therecovery hasnotyetled
toasignificant fallinrecorded unemployment,
which stood atanaverage level ofsome
11percent in1994, with wide differences
among member States.
3. Underlying the growth were
increasing exports andinvestment, stimulated
bybuoyant world markets, lower interest rates,
and greater profitability and business
confidence. Aided bywage moderation, strong
productivity growth anddepreciation ofsome
member States 'currencies, thevalue of
merchandise exports inJanuary-August 1994
grew by12percentoverthesame period of
1993. Preliminary datapoint toanimproving
merchandise trade balance afterasmall deficit
inthefirsteight months of1994.4. Trade inservices hasexpanded
rapidly, benefiting from ageneral pattern of
sectoral change, deregulation, internal market
integration andtechnical progress. TheEU's
services balance hasbeeninsurplus formany
years, reflecting astrong competitive position
inmajor sectors. Despite robust growth,
services currently represent about onequarter
oftheUnion 'stotaltrade, contrasting witha
share ofclose totwothirds initsGDP.
5. Transition toEconomic and
Monetary Union remains apolicy priority. In
thiscontext, priceinflation hasdeclined inmost
member States and, although stillfragile,
budgetary positions have improved after a
marked deterioration in1993. These factors,
combined, until recently, with relative
tranquillity inforeign exchange markets, have
contributed tolower, converging interest rates.
(2) Developments intheInstitutional
Framework
6. Theentry intoforce oftheTreaty
onEuropean Union -theMaastricht Treaty -
on1November 1993 added anewdimension
toexisting Community policies. Keyobjectives
oftheTreaty arethephasing-in ofeconomic and
monetary union, theestablishment ofacommon
foreign andsecurity policy, thedevelopment of
common citizenship, andcloseco-operation on
justice andhome affairs. Therôleofthe
European Parliament inthe Union 's
decision-making process wasenhanced. The
European Monetary Institute started work in
1994, preparing theground fortheEuropean
System ofCentral Banks and, intime, a
European Central Bank. TheMaastricht Treaty
didnotaffect thesubstance oftraditional
Communitypoliciesinareassuchasagriculture,
transport, commerce andcompetition.
7. Theaccession ofAustria, Finland
andSweden on1January 1995 added some
7percenttotheUnion 'sGDP and6percent
toitspopulation. Itresulted innosignificantWT/TPR/S/3
Page xiiTrade Policy Review
institutional changes, although Parliament,
Council, Commission andCourt ofJustice were
enlargedandcertaindecision-making
procedures, including those forqualified
majority voting intheCouncil, modified. While
several countries havelodged applications for
EUmembership, nofurther enlargement
negotiations areenvisaged before the1996
Intergovernmental Conference provided forin
theMaastricht Treaty.
8. Asked toclarify theallocation of
competence within theUnion toconclude the
UruguayRoundagreements,theEuropeanCourt
ofJustice confirmed inNovember 1994 the
Community 'sexclusive competence withrespect
tomultilateral agreements relating togoods.
However, competence toconclude agreements
related tocertain types ofservices and
intellectual property wasshared between the
CommunityandthememberStates.
Consequently,theWTOAgreementsweresigned
bytheCouncil, Commission andthemember
States andratified bytheCouncil, withthe
European Parliament 'sapproval, aswellasby
national parliaments.
(3) Trade Policy Features andTrends
9. Thegeneral achievement ofthe
Single Market, from 1January 1993,
consolidated animportant stage ofintegration,
substituting common fornational policies in
many areas. Thecoincidence ofinternal reform
with external negotiations enhanced the
Community 'sparticipation intheUruguay
Round. Newnegotiating interests inmodern
sectors werecoupled withagrowing realization
thatstructural changes intraditional industries
wereinevitable. Harmonization hascontinued
insectors such ascoal, pharmaceuticals,
financial services, telecommunications and
aviation aswellasinexport-related policy
areas; andnewstandardization initiatives have
been launched withastrong environmental
background. Negotiations areunderway inthe
WTO toachieve international acceptance ofchanges inthecommon import régime resulting
fromtheaccession ofthenewmember States.
(i) Typeandincidence oftrade policy
instruments
10. TheEuropean Union 'sUruguay
Round commitments include widespread tariff
reductions formanufactures, bringing the
average rate down by38percent to
3.7percentin2000andeliminating tariffs on
products suchaspharmaceuticals, most steel
items, paper, furniture, some toys, soaps and
detergents. However, tariffs insome"sensitive"
sectors, including clothing andpassenger cars,
will notchange notably, and significant
escalation willremain intextiles andclothing.
11. Market access commitments under
theWTO Agreement onAgriculture involve the
conversion ofvariable levies andother import
barriersintotariffequivalents,andthereduction
ofalltariffs by36percentonaverage by1July
2001. Forvirtually alltariffied items, theEU
hasintroduced specific duties, whose levels
reflect thedifferences between external and
internal prices inthebaseperiod of1986-88
and,thus, therestrictiveness oftheprevious
régime. Although advalorem equivalents are
notavailable inallcases, estimates indicate
peaks onmeat, dairy products, cereals and
tobacco.
12. UndertheAgreementonTextilesand
Clothing, theEUhasbegun phasing outthe
quantitativerestrictionsunderitstwentybilateral
MFA Agreements. While allsuchrestrictions
must beeliminated by1January 2005,
participantshavescopetodeterminetheproduct
mixineachstage ofintegration. Theproducts
reserved forlaterstages tendtobeofparticular
interesttoproducersinsouthernmemberStates,
especially Portugal, and Mediterranean
countries withpreferential access. Under the
EuropeAgreements,textileandclothingimports
fromsixcentral European countries aretobe
fullyliberalized by1January 1998.European Union WT/TPR/S/3
Page xiii
13. Acore element oftheInternal
Market process wastheelimination oftrade
restrictionsmaintainedbyindividual
member States. Insubstitution, unified quotas
wereintroduced forbananas, canned sardines
andtuna, certain steel supplies from the
republics oftheCommonwealth ofIndependent
States (CIS), andanumber ofconsumer
products fromChina. Certain textile items from
theCISrepublics aresubject either tobilateral
quotas ordouble checking surveillance, while
supplies from other non-WTO members,
including Chinese Taipei, aregoverned by
autonomous restrictions .
14. Reciprocity provisions inadirective
harmonizing procurement conditions inthe
"excluded sectors" ofwater, energy, transport
andtelecommunicationsgeneratedfrictionswith
theUnited States, which in1993 imposed
sanctions initsownFederal procurement onEU
suppliers inanumber ofsectors. InApril 1994,
theparties reached anagreement extending
national treatment inspecified areas (excluding
telecommunications) onthebasis ofsectoral
reciprocity. Theagreement, ratified inlate-
May, isintended tobeincorporated, toalarge
extent, intotheWTO Agreement onGovernment
Procurement.
15. Newstandards legislation reflects
thegrowing importance ofenvironmental
objectives andconstraints onproduction and
trade. Core elements ofa1994 directive on
packaging andpackaging waste, covering
production, content, re-use andrecycling of
packaging, willbeimplemented through new
technical regulations. Criteria have been
established fortheaward of"eco-labels" under
avoluntary scheme which covers fiveconsumer
products todate.
16. Some progress hasbeen made in
recent years inharmonizing export-related
policies. From 1July1995, exports ofdual-use
(military andcivilian) goods arecovered bya
comprehensiverégimeofstandardsandcontrols,
based onprovisions oftheMaastricht andECTreaties. Adraftdirective oncommon rulesfor
export credit insurance isinpreparation.
17. Prior totheInternal Market
programme, integration inservices had
generally trailed behind developments inthe
areaofgoods. However, itmayhavebenefited
fromexperience gained indismantling barriers
totrade ingoods through common regulation
andmutual recognition. Legislation incore
services areas hasprogressively established a
common framework ofminimum requirements
forinternal trade andestablishment; insome
cases, member States haveledtheprocess of
liberalization, while inothers Commission
initiatives havesetthepace. Thepossibilities
forexternal suppliers tobenefit frominternal
liberalization varyamong sectors, andmarket
access mayimprove asaresult oftheongoing
GATS negotiations onfinancial services,
maritimetransportandbasic
telecommunications.
18. Current EUrules inareas suchas
banking, insurance andairtransport contain
reciprocity provisions which canbeusedinthe
absence ofbilateral access commitments or
multilateral obligations, although theyhavenot
beeninvoked. Subject tospecific horizontal and
sector-specific limitations, theCommunity has
offered under theGATS tobind national
treatment forestablishment andconditions of
operation forallfinancial services. Inairand
maritime transport, benefits suchascabotage
rights arereserved forcompanies wholly or
majority owned bymember States ortheir
nationals. Atthisstage, internal liberalization
ofairtransport co-exists withasegmented
external régime based onmember States '
bilateral aviation agreements withthirdparties;
theCommission isattempting tointroduce a
unified framework.
(ii) Temporary measures
19. TheEU'ssystem of"commercial
defence" wasreorganized inDecember 1994.
Newregulationsforanti-dumping,
countervailing and safeguard measuresWT/TPR/S/3
Page xivTrade Policy Review
incorporate therelevant WTO provisions, with
some additions ormodifications. While
safeguard actions remain subject tomember
States 'qualified majority approval inthe
Council, thethreshold fordefinitive anti-
dumping andcountervailing duties wasreduced
toasimple majority vote,easing access tothese
instruments.ThenewTradeBarriersRegulation
(TBR), which replaces the 1984 New
CommercialPolicyInstrument(NCPI),specifies
internal procedures foractions against
objectionable orillicit trade practices abroad,
including certain areas ofservices and
intellectual property. Theactions must be
authorizedunderinternationaldisputesettlement
provisions. Onlyafewinvestigations hadbeen
carried outunder theNCPI since itsinception
in1984; twocases remain active, nowunder
theTBR.
20. TheEuropean Union remains one
ofthemost frequent users ofanti-dumping
remedies intheGATT system, maintaining
156measures attheendof1994. Thiscontrasts
with twocountervailing actions andthree
safeguardmeasuresunderArticleXIX,including
restrictions byGermany oncoalimports since
1958. Under WTO provisions, thesafeguard
actions aretobeterminated by1January 1999.
Pursuant toanagreement oncompetitive
conditions intheshipbuilding industry,
concluded intheOECD framework, theEUis
tointroduce aspecific trade remedy mechanism
forship transactions with effect from
1January 1996.
21. TheWTOAgreement onSafeguards
prohibits "grey areameasures" andrequires all
existing measures tobeabolished by1January
1999. Theoneexception fortheEUwillbethe
bilateral "consensus" formonitoring Japanese
carexports, which isduetoexpire attheend
of1999. Available evidence suggests thatmost
other bilateral export restraints byJapan and
otherAsiansuppliershavealreadydisappeared.
22. Nogeneral emergency trade
legislation exists, orisforeseen, inservices
sectors. Community procedures, usedoncetodate, maybeinvoked intheevent of"unfair
pricing practices" ininternational cargo liner
shipping.
(iii) Sectoral policy developments
23. The1992reformpackage
represented thesingle mostimportant change
totheCommon Agricultural Policy since its
inception. Internal producer prices havesince
beenreducedsignificantlyinsomesectors,while
farmers 'incomes havebeenmaintained through
direct payments. Because ofthe1992 CAP
reform, theCommunity does notatpresent
envisage major new adjustments asa
consequence oftheWTO Agreement on
Agriculture.
24. TheEUremains amajor supplier
inworld markets fortemperate-zone farm
products such asmeat, dairy products and
cereals. Inthese areas, tighter disciplines on
export subsidies andsubsidized export volumes
under theWTO Agreement may gradually
narrow theextent ofsurplus disposal andthe
adverse effects onworld markets. However,
given thegenerally high level ofcontinued
import protection, third country suppliers are
likely todepend ontariff quota obligations to
enter EUmarkets insensitive areas. Arecent
revision oftheEUsugar régime maintains the
existingmulti-layeredsystemofinternaldelivery
quotas behind hightrade barriers; tariffquota
obligations will benefit only traditional
preferential suppliers, predominantly ACP
countries.
25. TheCommunity 'sagri-monetary
system wasreformed under Internal Market
requirements from1993. Thesystem, usedfor
many years tosupport producer incomes in
"hard-currency" member States, wasstripped
ofitsprotective elements andreduced tomainly
technical functions. However, thenewrulesare
currently being tested inaturbulent monetary
environment.
26. Inmost manufacturing areas, the
Single Market programme wascompleted onEuropean Union WT/TPR/S/3
Page xv
schedule by1January 1993. However,
integrationinpharmaceuticalshasbeendelayed
bydiverging standards, national price
regulations andreimbursement systems. The
introduction ofcommon approval procedures
from1995 onwards mayovercome standards-
related problems. Inthecoalsector, different
policy approaches remain among themain
producing member States, Germany (which
contributes some40percentofEUoutput, but
accounts forclose to90percentofsubsidies
granted), theUnited Kingdom andSpain. New
Community rules introduced inJanuary 1994,
scheduled toapply untiltheexpiry oftheECSC
Treaty in2002, provide forincreased
transparencyandstricterdisciplinesonnational
support.
27. Traditionalmanufacturingindustries
-textiles and clothing, motor vehicles,
shipbuilding, steel andother base metals -
remain particularly vulnerable toexternal
competition andchanges indemand patterns.
Toprevent theextension ofuncoordinated
national support fromexacerbating economic
distortions andthreatening theSingle Market,
commonguidelinesclarifyortightenthegeneral
rules forState aidinthese industries. The
market share ofdomestically produced
automobiles hasrecently increased, aided in
partbytheappreciation oftheyen.
28. Arestructuring planforthesteel
industry, approved inearly1993, wasbased not
onlyonState aidforconversion andclosures
butadditionalbordermeasures,mainlyaffecting
central andeastern European supplier. The
planwasabandoned, however, inOctober 1994
duetoinsufficient industry proposals for
capacity reductions.
29. Adjustmentsintraditional
manufacturingindustrieshavebeenaccompanied
byrobust growth inmany services sectors,
including finance, insurance, communications
andtransport, inwhich internal liberalisation
andderegulation haveoccurred. Withinternal
barriers coming down, individual service
operators have become more vulnerable topolicy distortions created elsewhere inthe
Union. Notsurprisingly, recent national aid
packages forairlines andbanks haveproved
controversial.Giventherisksfortheintegration
process, efforts areunderway tointensify
Community monitoring, increase transparency
andreduce member States 'discretion tosupport
national champions.
30. Significant headway hasbeenmade
inliberalizing telecommunications equipment
andservices markets. Allvalue-added services,
dataservicesandterminalequipmentcategories,
throughout theEUarenowopen toexternal
competition while some member States have
gonefurther. Uncertainties remain, however,
duetonationalcarriers'scopeforinternalcross
subsidization, their possible abuse ofmarket
power, andthelackofstringent accounting
requirements atEUlevel. Withliberalization
approaching themostsensitive stages -opening
public voicetransmission andthebasic network
-newregulations areinpreparation.
31. Contrastingwithitsgenerallyactive
rôleinother services areas, theEChasmade
noaccess commitments under theGATS on
audiovisualservices.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 on
member States.
(4) Trade Policies andForeign Trading
Partners
32. Thecontinuingprocessofintegration
among member States, theEuropean Union 's
complex system offree-trade andpreferential
relations anditsrôleinconcluding theUruguay
Round haveallhadasignificant impact onthe
multilateral system. Agradual shiftininternal
policiesfromdevelopingnewlegislationtowards
enforcing existing lawmayhavecontributed to
maintaining the"acquis communautaire"
throughtherecessionandthusfacilitatingrecent
accessions.WT/TPR/S/3
Page xviTrade Policy Review
33. The European Economic Area
agreement, building onprevious free-trade
agreements, enables participants (Norway,
Iceland andLiechtenstein), toshare fullyinthe
common framework fortrade ingoods and
services. Countries incentral Europe are
approaching closer integration through staged
reciprocal liberalization under Europe
Agreements. Anewimpetus hasbeendirected
toMediterranean policy withtheconclusion of
aCustoms Union Agreement withTurkey in
1995andongoingnegotiationson
Euro-Mediterranean Agreements withseveral
other countries. Allsuchagreements, however,
provide forainwhich trade problems with
preferential partners canbeaddressed outside
themultilateral system.
34. Themajor revision oftheGSP
scheme fromJanuary 1995linkspreferences for
industrial products totheEU'sassessment of
the"sensitivity" oftheproducts concerned and
theexporting country 'slevelofdevelopment and
degree ofspecialization. While intended to
promote wider usebybeneficiaries andimprove
transparency andstability ofaccess, thenew
system appears more obviously tilted against
large anddynamic suppliers.35. ThenewWTOAgreementsdefinethe
multilateralframeworkbothforthedevelopment
oftheEU'sexternal policies andfortheprocess
offurther European integration and
co-operation. Inthisconnection, them.f.n.-
based commitments made bytheEUinthe
Uruguay Round willmitigate theeffects onthird
parties ofthespread ofitsregional and
preferential relationships. Acomprehensive,
credible setofmultilateral rulesanddisciplines
under theWTO, ifrespected byallMembers,
willbecrucial inminimizing frictions and
ensuring anoutward-looking focusthatboththe
Union anditspartners need togrow and
prosper.