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IV. TRADE POLICIES AND PRACTICES BYMEASURE
(1) Recent Developments
1. Since thelastTrade Policy Review in1993, theratification bytheEuropean Communities
andmember States oftheWTO Agreements hasbeenthemostimportant source ofchange inindividual
tradepolicies. Commitments under theWTO willimprove terms ofmarket access through significant
tariff cuts; astrengthened framework foruseoftrade defence instruments, suchasanti-dumping and
countervailing measures, safeguards andgrey-area arrangements; gradual liberalization oftrade in
textiles andclothing; andthephasing-in ofeffective tradeandsubsidy rulesforagriculture. Acceptance
bytheEuropean Union oftheUruguay Round results in"new" areas suchasservices andtrade-related
aspects ofintellectual property rights (TRIPS) andthecontinuation ofservices negotiations haveadded
anewdimension tothesystem ofinternational trade rules, previously embodied intheGATT, with
significant consequences forallparticipants.
2. TheMarrakesh Agreement alsorequires technical modifications across awide range of
trade-related legislation, including customs valuation andrulesoforigin.1Commitments concerning
preshipment inspection aretobeimplemented bythemember States, guided byaCouncil Directive.
Bycontrast, theCommission seesnoneed forlegislative changes intheareaofstandardization,
considering thattheapproach emerging from theInternal Market process isbroadly inlinewiththe
Agreement onTechnical Barriers toTrade. Similarly, existing legislation isconsidered tocomply
withtheAgreements onImport Licensing Procedures andonTrade-Related Investment Measures
(TRIMs). However, inthelatter case, member States areadvised totakenoteoftheterms ofthe
Agreement.
3. TheEuropean Union 'simplementation oftheUruguay Round results hascoincided withthe
entry ofthree newmember States, thephasing-in ofwide-ranging association agreements (Europe
Agreements), andstepstostreamline traderégimes withnon-WTO members suchastheCISrepublics
andChina (Chapter II).TheEChasmodified theinvocation procedures foritsanti-dumping and
countervailing mechanism, replacing qualified- bysimple-majority voting intheCouncil. Anew"Trade
BarriersRegulation"hasreplacedthe1984"NewCommercialPolicyInstrument",specifyingCommunity
procedures intheevent ofindustries ormember States seeking remedies against perceived infringements
ofinternational trade rules bythirdcountries.2
(2) Measures Directly Affecting Imports
(i) Tariffs, import levies andcharges
(a) Average tariffs
4. TheUruguay Round Final Agreement entails wide-ranging reductions inm.f.n. tariffs tobe
effectedbetween1July1995and1July2000.Inagriculture,allnon-developingcountriesarecommitted
1Scheduled amendments totheCommunity rules oncustoms valuation (Commission Regulation 2454/93)
willrequire customs tospecify inwriting doubts about thedeclared value, andoffer importers aright ofreply.
Procedural changes concerning declarations ofproduct origin aretobeadopted inthenearfuture, while more
basicchangestothenon-preferentialrulesdependoninternationalharmonizationtobenegotiatedundertheauspices
oftheWTO.
2Council Regulation 3286/94.WT/TPR/S/3
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totariff cutsof36percentonaverage. Inmanufacturing, thecutsagreed tobytheCommunities
average nearly 40percent, andinclude theelimination oftariffs on,among others, construction
equipment, agricultural equipment, medical equipment, pharmaceuticals, moststeelcategories, paper
products, furniture, selected toysandsoaps anddetergents. Across allproducts, theCommunities '
simple average tariff asof1July1995isestimated at9.6percent. Anapparent increase onprevious
calculations isduetothetariffication ofvariable levies andother measures onagricultural imports
and,thus, doesnotsignal ahigher levelofborder protection.3
5. Thenewtariffprofile foragriculture shows peaks formeatandmeatproducts, dairy products,
sugar andderivatives, andtobacco products (Chart IV.1). Bycontrast, tariffs willremain loworzero
onoilseeds, fruitandvegetables, andplants. Inthetwolatter cases, however, theestimated averages
ofabout 10percentmasks seasonal peaks thatafford higher effective protection toEUproducers.
(Cutflowers andmany fruitandvegetable categories aresubject toseasonal tariffs).4Theprice (and
demand) effects oflowtariffs oncoffee, tea,mateandspices (HSChapter 09)maybeoffset insome
member States byhighexcise taxes; forexample, theadvalorem equivalent oftheGerman coffee
taxwasestimated at110percentin1991.5
6. Nominal tariffs onindustrial products aregenerally low(Chart IV.2), except forarange of
"sensitive" products. Suchproducts, currently carrying ratesof10percentandabove, areconcentrated
inthetextiles andclothing area,butalsoinclude particular types ofmotor vehicles, microprocessors,
radio andtelevision sets,basemetal articles, glassware, footwear andpaper products.6With the
exception ofpaper products (covered byzero-for-zero tariffcuts), reductions intheseareasaregenerally
lessdeep thaninothers. Nevertheless, asaresult ofthetariff eliminations referred toabove,
complemented bysubstantial tariff cutsformachinery, technical instruments, many textile fibres and
other manufactured articles, theCommunities 'unweighted average tariff onindustrial products isto
decline from 6percentin1995 to3.7percentin2000.
3In1988, thesimple average tariff oftheCommunity was7.3percentoverall and6.4percentforindustrial
products.
With variable levies converted intotariffs, thenewrates onmost agricultural products areexpressed
predominantly inspecific ecuamounts rather thanadvalorem terms. Advalorem equivalents ofmost ofthe
specific rateshavebeencalculated bytheCommission, based onaverage import prices forEU(12) overtheperiod
1991 to1993. These estimates havebeenusedincomputing theaverage tariffs referred tointhisSection. The
results, however, must beregarded asindicative andtreated withcaution astheactual protection afforded by
specific tariffs varies withfluctuations inborder prices. These, inturn, reflect changing world market conditions
and,notably inagriculture, quality characteristics ofindividual consignments.
4Forexample,thebaseratefororangesvariesbetweenECU89pertonneplus13percent(from1to30April)
andanadvalorem rateof4percent(1Juneto15October); theyaretobereduced toECU 71pertonne plus
10.4percentand3.2percent,respectively,by2000.Similarly,thebaseratefortomatoesissetateitherECU372
pertonne plus18percent(1November to14May) orECU 372pertonne plus11percent(restoftheyear);
thecorresponding rates from 2000 areECU 298pertonne pluseither 14.4 or8.8percent.
5Coffee, cocoa andteahavebeenexcluded from taxharmonization intheInternal Market context. Fordetails
seeGATT (1993).
6Thehightariffs noted inChart IV.2onproducts falling within HSChapter 35(Chart IV.2) result mainly
fromadvalorem estimates ofthespecific ratesapplied oncasein andalbumins, classified asagricultural products
intheUruguay Round.European Union WT/TPR/S/3
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7. With theimplementation oftheUruguay Round Agreement, allECtariffs willbebound.
Previously, while virtually alltariffs onindustrial items werebound, thelevelofbindings inagriculture
wasintheorder oftwothirds.
8. Under Article 28oftheTreaty ofRome, theCouncil maygranttariffsuspensions byaqualified
majority vote. There aresome 650suchcases peryear,representing arevenue lossofabout 5percent
oftotalduties collected. Requests maybelodged by,oronbehalf of,anyEU-based processing and
manufacturing company. Suspensions aregenerally granted foroneyear,insome casesforsixmonths,
withthepossibility ofextension. Suspensions havebeenrelatively frequent formicroelectronics and
chemicals, accounting forECU 470and285million, respectively, inrevenue forgone in1993.
(b) Tariff escalation
9. TheCommunities 'customs tariff hastraditionally displayed significant escalation, affording
downstream activities higher effective protection thanthenominal ratessuggest. Thisapplies especially
insectors suchasfish,tobacco, leather, rubber, textiles andmetals.7TheUruguay Round results,
based onaformula approach generally implying proportionally larger cutsonhightariffs (with the
exception of"successive" sectors), address many ofthese imbalances. Forexample, while thesimple
average ofadvalorem duties onrawmaterials issettodecline from 6.4percentinthebaseperiod
(1986-88) to4.5percentin2000, thecorresponding averages formanufactures aretocome down
from7.6to4.8percent. Significant escalation remains intextiles andclothing, where atariffaverage
ofabout 10percentonfullyprocessed items in2000 compares withlessthan1percentonraw
materials. Bycontrast, tariff escalation willvirtually disappear forironandsteelandpaper products
asmost tariffs areeliminated (Chart IV.3).
10. While previous tariffcalculations forfoodproducts normally excluded items subject toimport
levies, tariffication ofthese levies makes itpossible toestimate tariff escalation onabroader basis.
However, theresults obtained for1995 -tariff averages increasing from some 15percentonraw
materials toover30percentonfullyprocessed fooditems -arerather hypothetical, given thecontinued
restrictiveness ofthesystem.
(c) EUenlargement
11. M.f.n. duties onimports intoAustria, Finland andSweden increased markedly onanumber
ofproducts asthese countries began applying thecommon customs tariff on1January 1995. Among
thecountries affected wastheUnited States, withwhich aninterim arrangement wasreached in1995.
Under thearrangement, theECopened zeroorlow-duty quotas, value forthefirsthalfof1995, for
products suchasmicrochips, semiconductors, computers, integrated circuits, various chemicals and
plastics. Thequotas were based onaverage imports ofthenewmembers during 1992-93, adjusted
incertain cases forexpected growth intrade. Agricultural products werenotincluded, awaiting the
outcome ofnegotiations under GATT Articles XXIV andXXVIII, tobecompleted byJune1995.8
7GATT (1993). Theestimates presented inprevious TPRreports, aswellasthose contained inChart IV.3,
arebased onm.f.n. tariffs and,thus, donotreflect theoperation oftheCommunities 'various preferential
arrangements. Since benefits under sucharrangements, inparticular GSP, tendtofocus onrawmaterial inputs
rather thanonprocessed products, inparticular in"sensitive" areas, theymayreinforce escalation effects. The
same applies fortariff suspensions.
8Higher tariffs affected, forexample, orange juice, nuts, fruits andrice.WT/TPR/S/3
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12. Norway, animportant supplier ofcertain foodproducts, inparticular fish,alsorequested
compensation forhigher tariffs asitsbilateral agreements withtheECarelesscomprehensive than
those withitsformer EFTA partners. Anagreement including tariff quotas wasapparently reached
inApril 1995 but,pending ratification bythetwoparties, hasnotyetbeenmade public.
(ii) Quantitative restrictions, trade controls andsurveillance measures
13. QuantitativerestrictionsarepossiblytheareawheretheSingleMarkethasmostdirectlyimproved
accessconditionsacrossawidevarietyof"sensitive"productcategories.Alltraderestrictionspreviously
maintained bymember States havedisappeared without substitutes. Major cases of"communitization"
arethenewCommon Market Organization forBananas and,temporarily, thecar"consensus" with
Japan (Chapter V(2)(v)(b)) andaquota régime forcanned sardines andtuna. Inaddition, Community
measures havereplaced national restrictions onspecified consumer products fromChina, andironand
certainsteelcategoriesfromMongolia,VietnamandsomemembersoftheCommonwealthofIndependent
States (CIS).
14. According totheCommission, apart from measures specifically justified onhealth, security
orenvironmental grounds, thereareatpresent noECrestrictions, controls orsurveillance actions other
thanthose referred tobelow.9Aprohibition ontheuseofleghold trapsintheEUandtheimportation
ofpeltsandmanufactured goods ofcertain wildanimals originating incountries thatemploy leghold
traps ortrapping methods thatdonotmeet international humane trapping standards, isexpected to
enter intoforce on1January 1996 (Council Regulation 3254/91).
(a) Agricultural andfishery products
15. Imports ofcertain canned sardine andtunavarieties aresubject toCommunity quotas, scheduled
tolapse attheendof1996.10Thequotas havegiven risetoconsultations withthePhilippines under
GATT Article XXII:1 (Chapter VI(1)(i)(b)); theyhavebeennotified as"grey area" measures tobe
eliminated inaccordance withtheWTO Agreement onSafeguards (section (iv)(c) below).
16. Thelastnationalrestrictionsonimportsofbananaswerereplacedon1July1993bytheCommon
Market Organization forBananas (Chapter V(1)(ii)(h)). Since thatdate,therehavebeennocasesunder
Article 115oftheECTreaty, under which member States maybeauthorized bytheCommission to
restrict intra-EU trade inthird-country products.11
17. Asurveillance system onapple imports, introduced inFebruary 1993, prompted Chile toinvoke
GATTdisputesettlementprovisions(ChapterVI(1)(i)(a)).Thecasewassubsequentlysolvedbybilateral
9Thefollowingoverviewdoesnot,however,includeprice-relatedmeasuressuchastheCommunities'variable
import levies onmajor farmproducts. Therestrictiveness ofthese levies, aswellasofthetariffs initially resulting
from tariffication, maycurrently becompared withstringent import quotas or,insome cases, evenprohibitions.
10Themeasure,introducedunderCouncilRegulation3759/92,replacednationalquotasmaintainedbyFrance,
Italy andSpain.
11Such authorizations maybegranted onlytosupport national ("regional") restrictions when disparities exist
among thecommercial policy measures applied bymember States. However, withtheabolition ofinternal border
controls, theconditions toapply Article 115nolonger exist.WT/TPR/S/3
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agreement, leading toamodification oftheCommunities 'system ofminimum entry prices forapples,
pears andquinces, anditsUruguay Round Schedule.12
(b) Consumer products
18. Under theWTO Agreement onTextiles andClothing, on1January 1995theEuropean Union
started phasing outthequantitative restrictions previously maintained under bilateral MFA Agreements.
Likeother WTO Members, theEUiscommitted toterminating allsuchrestrictions by1January 2005
(Chapter V(2)(iv)). Protocols ontextile andclothing products under theEurope Agreements with
Bulgaria, Hungary, Poland, Romania, theCzech Republic andtheSlovak Republic provide forfull
liberalizationby1January1998.During1993,theEUsubstitutedbilateralquotasforpreviousunilateral
restrictions onimports from Mongolia, Vietnam, Belarus, Russia, Ukraine andUzbekistan. While
textile agreements withtheBaltic States (Estonia, Latvia andLituania) andother successor States of
theSoviet Union donotcontain quantitative restrictions, certain product categories aresubject todouble
checking surveillance. Anoverview ofthetextiles agreements andarrangements ispresented in
Table V.2.
19. All6,318 quantitative restrictions applied bythemember States against imports ofnon-textile
products from thirdcountries, including some 4,700 restrictions vis-à-vis China, wereabolished by
Council Regulation 519/94 of7March 1994.13However, theRegulation alsointroduced Community-
widequotas (invalue orvolume) onvarious product categories originating inChina: working gloves,
sixtypes offootwear, tableware ofporcelain orceramic, glassware, car-radios andthreetypes oftoys.
Council Regulation 538/95 of6March 1995 expanded thequotas inview oftheaccession ofthree
newmember States andtheexperience gained in1993. Italsoliberalized imports ofcertain sportshoes
andextended thescope ofaquota exemption forspecial technology footwear.14
20. Licensing procedures aredefined byCouncil Regulation 520/94 of7March 1994. Until now,
quotamanagementhasbeenbasedonpastperformance,distinguishingbetween"traditional"Community
importers, generally accounting forfourfifths ofaquota, andothers.
12CouncilDecision94/294anddocumentG/SP/2,3August1994,ofthePreparatoryCommitteefortheWorld
Trade Organization. SeealsoGATT (1993).
From mid-1995, apples other thancider apples aresubject tomixed duties withaspecific component
ofECU 297pertonne plusadvalorem tariffs, depending onseason, between 6and14percent. Cider apples
andpearsandquincesenterundereithersimilarconditionsor,duringspecifiedperiods,alternatedutiescomprising
aminimum rateinspecific terms (ECU 4.50 pertonne) and,ifhigher, anadvalorem rateof9percent.
13On1January 1993, Germany andtheNetherlands unilaterally abolished theirnational restrictions vis-à-vis
State-trading countries without discharging theinformation andco-ordination procedures under Community
legislation (Council Regulation 3420/83). TheCommission, which hadreferred thecasetotheEuropean Court
ofJustice, withdrew itscomplaint following theintroduction ofacommunity régime under Regulation 519/94.
14According toCommission estimates, non-restricted items account formore than65percentofEUimports
offootwearfromChina.Totalimportsroseby30percent(innumberofpairs)between1990and1993,increasing
import penetration from 38to48percent. Over thesame period, employment intheEUfootwear industry
fellbymore than10percent, to288,000, andoutput by8percent.European Union WT/TPR/S/3
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(c) Basemetals andmetal products
21. While arestructuring planfortheEUsteelindustry foresaw negotiations withcountries in
central andeastern Europe toestablish tariff quotas onimports of"sensitive" items, theonlyquotas
actually imposed concerned imports fromtheCzech Republic andtheSlovak Republic.15Introduced
inJanuary 1993, these areapplicable untiltheendof1995 (Table IV.1(a)). Restrictions maintained
byindividual member States onsteelimports fromCISrepublics werereplaced byCommunity-wide
autonomous quotas oncertain flat-rolled andlongproducts on1January 1993; thequotas were
subsequently renewed through 1994.16For1995 and1996 (Table IV.1(b)), newquota arrangements
apply tomain suppliers, i.e.Russia, Ukraine andKazakhstan (pending), while trade withother CIS
republics hasbeenliberalized, according totheCommission.
Table IV.1a
Tariff quotas onsteelimports from theCzech Republic andtheSlovak Republic, 1993-95
2ndSemester 1993 1994 1995
Czech
RepublicSlovak
RepublicCzech
RepublicSlovak
RepublicCzech
RepublicSlovak
Republic
Hot-rolled coils - 78,167 - 167,000 - 200,000
Cold-rolled sheets 11,970 54,530 21,960 100,040 24,300 100,700
Wire rods 119,000 - 220,000 - 242,000 -
Hot-rolled strips 2,392 21,525 4,400 69,600 4,800 43,200
Cutlengths - 55,417 - 102,000 - 112,000
Seamless tubes 25,905 12,012 51,240 23,760 58,072 26,928
Welded tubes 29,167 - 60,000 - 70,000 -
Table IV.1b
Quantitative restrictions onsteelimports from CISrepublics, 1993-96
EC-wide autonomous
quotasNegotiated agreements withprincipal suppliers
Russia Ukraine
1993 1994 1995 1996 1995 1996
Flat-rolled products 218,998 225,566
Coils 140,200 144,404 152,163 174,988 35,385 40,693
Heavy plates 49,099 50,570 36,455 41,923 34,551 39,734
Other flatproducts 29,699 30,592 22,343 25,695 10,642 12,238
Long products 102,335 105,406
Beams 10,000 10,298 12,854 14,782 5,738 6,599
Wire rods 10,233 10,540 15,219 17,502 5,885 6,767
Other longproducts 82,102 84,568 68,652 78,950 48,632 55,927
Total 321,333 330,972
Source: European Commission.
15Therestructuring planforthesteelindustry waswithdrawn inOctober 1994 duetolackofindustry support
forcapacity reductions (Chapter V(2)(v)(c)).
From August toDecember 1992, shipments ofcertain steelproducts fromtheCzech andSlovak Federal
Republic toGermany, ItalyandFrance were subject tounilateral quotas operated under theEurope Agreements.
16Decisions 94/66/ECSC and94/345/ECSC.WT/TPR/S/3
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22. InAugust 1993, theECimposed quotas onimports ofinwrought aluminium fromtheformer
Soviet Union. They were terminated on28February 1994 under theterms ofaMemorandum of
Understanding involving Australia, Canada, theEuropean Union, Norway, Russia andtheUnited States
(Chapter V(2)(v)(c)).
23. Ex-post Community surveillance ofallironandsteelimports (ECSC) expired attheendof
1994. Prior surveillance ofspecified primary andsemi-manufactured products, dating backtothe
late1970s, wasreviewed andextended through 1995 under Commission Recommendation
3118/94/ECSC.
(iii) Trade sanctions
24. TheEuropean Union hascontinued toimplement trade embargoes based ondecisions bythe
United Nations Security Council. Council Regulation 990/93 of26April 1993 prohibits alltrade in
goods andservices withtheFederal Republic ofYugoslavia (Serbia andMontenegro); exceptions
aresolely related tohumanitarian aid.17Sanctions against Libya areprimarily designed tobarcertain
supplies tothecountry 'saircraft andoilandgasindustries (Council Regulations 3274/93 and3275/93);
equipment destined forother uses, butwithpotential applications intheembargoed sectors, maybe
exported ifthere isnoriskofdiversion. Saleorsupply ofpetroleum, petroleum products andrelated
activities toAngola 'sUnita havebeenprohibited since October 1993 (Council Regulation 2976/93).
25. Since February 1991, theEUhasgradually removed thesanctions introduced against South
Africa in1985and1986; thelastmeasure -abanonmilitary co-operation -waslifted on27May1994.
Restrictions oneconomic andfinancial relations withHaiti lapsed inOctober 1994.
26. Greece imposed aneconomic embargo ontheFormer Yugoslav Republic ofMacedonia in
February 1994. TheCommission viewed theblockade mainly asacommercial policy issue, which
would accordingly besubject toexclusive Community jurisdiction, while Greece considered itsaction
tobecovered byArticle 224oftheECTreaty.18Toobtain asuspension, theCommission requested
aninterim order bytheEuropean Court ofJustice under Article 186oftheECTreaty. TheCourt
turned down therequest inJune1994, butproceeded inFebruary 1995 toexamine thecaseonthe
basis ofArticle 225(improper useofArticle 224). Afinalruling isnotexpected before end-1995.
(iv) Trade defence instruments
27. Attheendof1994, theCouncil approved fourregulations constituting theCommunity 'sfuture
systemof"commercialdefence".TheregulationswereintendedprimarilytoincorporateUruguayRound
results intheareasofdumping, subsidies andsafeguards, andtospecify internal procedures forremedial
action intheevent ofother countries infringing international rules. Thesignificance ofthechanges
totheTokyo Round Agreements onAnti-Dumping andonSubsidies prompted theCommunity toadopt
separate legislation inbothareas (Regulations 3283/94 and3284/94). TheWTO Agreement on
Safeguards wasimplemented through Council Regulation 3285/94, while Regulation 3286/94 -the
newTrade Barriers Regulation -isdesigned to"ensure theexercise oftheCommunity 'srights under
17Embargo legislation inthiscontext alsoincludes Council Regulation 2471/94 concerning theseverance
ofcommercial, financial andindustrial links withareas ofBosnia-Herzegovina controlled bytheBosnian-Serb
forces; member States maygrant exemptions onacase-by-case basis.
18Article 224requires member States toconsult eachother withaview totaking together thesteps needed
tomaintain thecommon market ifamember State actsonthegrounds ofnational security.European Union WT/TPR/S/3
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international trade rules, inparticular those established under theauspices oftheWorld Trade
Organization".19
28. Decision-making procedures foranti-dumping andcountervailing actions hadalready been
"streamlined" inMarch 1994, allowing theCouncil tointroduce definitive duties, orextend provisional
measures, bysimple majority voting.20Thechange wasinspired bytheCouncil 'sfinding thatthe
qualified-majority requirement could delay, andsometimes impede, efficient action against unfair trade
practices.21Since qualified majority voting wasretained forsafeguard andother commercial defence
measures, thismaycreate aprocedural biasinfavour ofanti-dumping orcountervailing actions.
29. Since 15March 1994, theCourt ofFirstInstance hasbeenempowered tohearactions brought
bynatural orlegalpersons inanti-dumping oranti-subsidy cases. TheCourt mayreview questions
offactindeterminations bytheCouncil orCommission whereas reviews bytheEuropean Court of
Justice arerestricted toquestions oflaw.Theinvolvement oftheCourt ofFirstInstance hasalsoeased
theburden ontheEuropean Court ofJustice andaccelerated legalproceedings.22
30. Allexisting trade defence measures, including anti-dumping measures, havebeenextended
toAustria,FinlandandSwedensince1January1995.TheCommissionispreparedtoreviewonrequest
anydefinitive measures inforce forlessthanoneyear, provided theinterested party cansubstantiate
thattheoutcome would besignificantly different fortheenlarged Union.
(a) Anti-dumping
Legislation
31. Council Regulation 3283/94 amends theCommunities 'anti-dumping legislation inthelight
oftheAgreement onImplementation ofArticle VIoftheGeneral Agreement onTariffs andTrade
1994(the1994Anti-DumpingAgreement).23TheRegulationentailsnewdetailedrulesonthecalculation
ofdumpingmargins,initiation,investigationprocedures,establishmentandtreatmentoffacts,imposition
ofprovisional anddefinitive measures, dutycollection, duration andreview ofanti-dumping measures,
19TheTrade Barriers Regulation istoreplace theCommunity 'sNewCommercial Policy Instrument of1984,
Council Regulation 2641/84, atend-1995.
20Undertakings areconcluded between theCommission andexporters, thusterminating aninvestigation if
noobjection israised bymember State representatives within anAdvisory Committee (seefollowing section).
TheCommission submits areport ontheconsultations totheCouncil. Theundertaking isfinalunless theCouncil,
acting byqualified majority, decides otherwise within onemonth.
21ECCommission (1995).
22Theprocedures forprice undertakings remain unchanged.
23Regulation 3283/94 wasamended inturnbyRegulation 355/95.WT/TPR/S/3
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andpublic disclosure ofinformation. TheRegulation entered intoforceon1January 1995, butapplies
toinvestigations initiated after1September 1994.24
32. Building onprevious EClegislation inthearea,Regulation 3283/94 alsoaddresses issues not
regulated under theWTO Agreement, inparticular actions against absorption ofduties (Article 12)
andcircumvention (Article 13)ofmeasures. Industry complaints substantiating thatananti-dumping
measure hasbrought noor"insufficient" changes inresale orsubsequent selling prices intheEU,may
prompt anexamination ofthepriceeffect. Acting onaproposal bytheCommission, theCouncil may,
bysimple majority, amend themeasure inforceshould theexamination confirm "increased dumping".25
33. Modifying andbroadening theCommunity 'searlier legislation oncircumvention, thenew
Regulation allows anti-dumping duties tobeextended toimports oflikeproducts orparts thereof if
existing measures arecircumvented.26Circumvention isdefined asachange intrade patterns dueto
apractice, process orwork "forwhich there isinsufficient duecause oreconomic justification, other
thantheimposition oftheduty". Thesubstantive criteria governing theextension ofduties require,
among other things, thattheparts imported from thecountry subject toameasure constitute atleast
60percentofthetotalvalue oftheparts incorporated inthefinalproduct, andthatthevalue added
totheimported partsduring assembly within theEUdoesnotexceed 25percentofthemanufacturing
cost.
34. New provisions allow forthesuspension ofanti-dumping measures fornine months
(Article 14(4)). Anysuchdecision istobetaken bytheCommission afterconsultation withanAdvisory
Committee, formed byrepresentatives ofmember States andchaired bytheCommission. Ona
Commission proposal, theCouncil mayextend thesuspension bysimple majority voteforuptoan
additionaltwelvemonths.Measuresmaybesuspendedonlywhereconditionshave"temporarilychanged
toanextent thatinjury would beunlikely toresume asaresult ofthesuspension".
35. Ademinimis clause defines "negligible imports" tobeexcluded fromaninitiation. Article 5(7)
oftheRegulation stipulates thatproceedings shallnotbeinitiated against countries representing amarket
share oflessthan1percentofCommunity consumption ofaproduct, unless thecollective share of
suchcountries amounts to3percentormore. Therespective limits intheWTO Agreement are
3percentforindividual countries and7percentfortheircollective share intotalimports.
36. TheRegulation further specifies aparticular feature ofECtrade defence legislation, the
consideration ofCommunity interest. Article 21requires thatanydecision toimpose measures be
based onanappreciation ofallinterests, including those ofusers andconsumers. Within thetime
limits indicated inthenotice ofinitiation ofaninvestigation, interest groups (including "representative
24Time limits governing theinitiation ofproceedings willbespecified byaCouncil decision, adopted by
qualified majority.
25EUproducers lodged fourcomplaints under the"anti-absorption clause" oftheCommunity 'sprevious
anti-dumping Regulation (2423/88), inonecase(silicon metal from China) leading toadoubling ofthelevel
ofduty. GATT (1993).
26Apanel found theoriginal EClegislation inconsistent withtheGeneral Agreement. Itsreport wasadopted
bytheGATT Council inMay 1990, buttheCommunity stated thatitwould maintain itslegislation until an
acceptable solution hadbeen found fortheproblem ofcircumvention. Under Regulation 2433/88,
anti-circumvention duties could havebeenimposed onproducts thatwere marketed afterhaving beenassembled
orproduced intheCommunity ifspecified criteria, including alocal-content requirement, were fulfilled.European Union WT/TPR/S/3
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consumer organizations") maymake themselves known, provide information totheCommission, and
subsequently request ahearing.
37. Underthe"AgreementrespectingNormalCompetitiveConditionsintheCommercialShipbuilding
andRepairIndustry",concludedintheOECDframeworkandduetoenterintoforceon1January1996,
theEChassubscribed toan"Injurious Pricing Code", i.e.anewtrade-defence instrument specific
toshiptransactions.27Sanctions maybelevied against shipbuilders whose pricing practice "causes
orthreatens material injury toanestablished industry ormaterially retards theestablishment ofan
industry". TheAgreement includes specific provisions regarding theinitiation andsubsequent conduct
ofaninvestigation, presentation ofevidence, thedetermination ofinjurious pricing, theimposition
andcollection ofcharges, judicial review andaction onbehalf ofathirdcountry.
38. TheECdoesnotmaintain,norisitconsideringintroducing,anygeneralanti-dumpinglegislation
intheareaofservices (Chapter V(3)(i)). However, Community procedures existtoreactagainst "unfair
pricing practices" ininternational cargo liner shipping. Therelevant procedures under Council
Regulation 4057/86 (Annex) havebeenusedonlyoncetodate(Chapter V(3)(v)(d)).
Recent application
39. TheECcontinues tobeoneofthemostfrequent users ofanti-dumping procedures under the
GATT. Attheendof1994, 156anti-dumping measures (provisional anddefinitive duties andprice
undertakings)wereinforce(TableIV.2).In1993and1994,21and43newinvestigationswereinitiated,
respectively; thefigures remain comparable withpastyears. Relatively fewcases wereinitiated in
thesecond halfof1994; newinvestigations concerned tapered roller bearings from Japan, polyester
yarn(India, Indonesia andThailand), polyester staple fibres (Belarus), advertising matches (Japan),
and3.5inchmicrodiscs originating inMalaysia, Mexico andtheUnited States.28
Table IV.2
Anti-dumping actions, 1990-94
(Number ofcases)
1990 1991 1992 19931994
(Jan.-June)1994
(July-Dec.)
Initiations 43 20 39 21 34 9
Measures taken 27 22 16 19 14 9
thereof: definitive duties 18 19 16 19 8 9
riceundertakings 9 3 0 0 2 0
Findings ofnodumping 0 1 1 1 5 0
Findings ofnoinjury 13 6 4 1 1 0
Measures inforce 139 142 158 150 ... 156
... Notavailable.
Source: European Commission.
27Theagreement wasconcluded bytheEuropean Community, Finland, Japan, Republic ofKorea, Norway,
Sweden andtheUnited States (Chapter V(3)(v)(a)).
28GATT document ADP/134/EEC, 10March 1995.WT/TPR/S/3
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40. Onentry intoforceoftheEEAAgreement onJanuary 1994, theECsuspended allanti-dumping
actions affecting participating EFTA members29,since these countries haveimplemented the"acquis
communautaire "including ECcompetition law. Theactions concerned container corner fittings and
ureaoriginating inAustria, silicon carbide from Norway, ferrosilicon from Iceland, Norway and
Sweden; anddiesel engines produced inSweden andFinland.
(b) Countervailing measures
Legislation
41. Inview ofthechanges required bytheWTO Agreement onSubsidies andCountervailing
Measures, theCommunity followed closely thetextoftheAgreement, rather thanamending existing
legislation (Council Regulation 2423/88), asthebasisforthenewcountervailing dutyrules(Council
Regulation 3284/94). Following theWTO Agreement, newdetailed provisions govern thedefinition
andcalculation ofasubsidy, itscountervailability, theprocedures forinitiation andsubsequent
investigation, andtheimposition ofmeasures. Inaddition, Regulation 3284/94 incorporates specific
provisions defining negligible import volumes, sampling procedures, actions intheevent ofnon-co-
operation orcircumvention, andCommunity interest. Inthesecases, theRegulation mirrors provisions
oftheECanti-dumping regulation (Regulation 3283/94) whenever considered nottoconflict withthe
WTO Agreement.
Recent application
42. TheCommunity 'scountervailing legislation hasbeenusedsparingly. Theonlymeasures in
place attheendof1994 concerned polyester fibres andyarns from Turkey, introduced in1991, and
certain ballbearings originating inThailand since July1993. Inthelatter case, countervailing duties
havebeenimposed onindirect exports through other countries, while direct supplies aresubject to
anundertaking bytheThaiauthorities.30
(c) Safeguards under GATT/WTO provisions
Legislation
43. Tocomply withtheWTO Agreement onSafeguards, theEUundertook areview ofitscommon
rulesforimports (Council Regulation 518/94).31Among themainchanges introduced under Council
Regulation 3285/94 areexplicit provisions fortheestablishment ofaquota anditsallocation between
supplier countries (Article 16(3) and(4);alimitontheduration ofasafeguard measure toamaximum
offouryears withapossible extension offouryears afteranewinvestigation (Article 20); regular
progressive liberalization ofmeasures applying formore thanoneyear(Article 20(4)); theinstitution
ofamid-term review foranymeasure withaduration ofmore thanthree years (Article 21(1)); and
aminimum two-year moratorium onthere-imposition ofameasure (Article 22).
29Council Regulation 5/94.
30Official Journal oftheEuropean Communities (L163/93). Indirect imports aresupposed tocircumvent
anexport taxlevied bytheThai Government.
31TheCommission notes thatthisreview wasfacilitated bythefactthatCommunity legislation wasalready
close totheSafeguards Agreement, notably therules concerning theexamination ofacausal linkbetween an
increase inimports andserious injury ofCommunity producers.European Union WT/TPR/S/3
Page 65
44. Under theWTO Agreement (Article 11(1)(b)), allgrey-area measures, suchasvoluntary export
restraints andorderly marketing arrangements, aretobephased outaccording tofixed timetables or
broughtintoconformitywiththeAgreementwithinfouryearsfrom1January1995.TheEUhasnotified
eightmeasures which aretobeeliminated.32These concern restrictions onimports intoSpain oflive
bovine animals, swine andmeatofswine, rabbit meat, andcoal; limits ondeliveries ofpotatoes to
theCanary Islands; quantitative restrictions onlignite maintained byAustria; andCommunity quotas
onbothpreserved sardines andtuna(section (ii)(a) above). TheEC-Japan "consensus" relating to
certain types ofmotor vehicle hasbeen treated separately; itistoexpire attheendof1999.33
(Article 11(2) oftheAgreement allows eachWTO Member tomaintain onespecific measure until
31December 1999.)
45. TheWTO Agreement onAgriculture includes aspecial safeguard provision (Article 5).Itis
intended toafford aminimum levelofprotection aftertheconversion ofimport restrictions intoduties
intheevent ofsubstantial reductions inworld market prices orrising imports, andmaybeapplied
onlytoproducts specifically identified inthefinalschedules.34TheEU'simplementing legislation
allows fortheintroduction ofsupplementary tariffs; theprecise conditions aretobedecided ona
case-by-case basis bythemanagement committees ineachsector.
46. Similarly, theWTO Agreement onTextiles andClothing (Article 6)provides foratransitional
safeguard mechanism, which maybeapplied toproducts notyetintegrated intoGATT 1994
(Chapter V(2)(iv)). Themechanism maybeinvoked ifincreased imports ofaproduct cause, orthreaten
tocause, serious damage todomestic producers oflikeordirectly competing products; application
isonabilateral basis. TheAgreement would allow theEU,likeanyother customs union, tousethe
mechanism onbehalf ofamember State thatfulfils thebasic requirements.
Recent application
47. Three safeguard measures were maintained under Article XIXoftheGeneral Agreement in
January 1995: restrictions byGermany oncoalimports since 1958(Chapter V(2)(iii)) andminimum
prices forCommunity imports ofdriedgrapes andpreserved cherries sinceOctober 1982andJuly1989,
respectively. Inaccordance withArticle 10oftheSafeguards Agreement, these measures aretobe
terminated by31December 1999. TheCommission hasindicated thatthesystem ofminimum import
prices ondried grapes andprocessed cherries might remain inforce untilthatdate.
48. Since its1993 Trade Policy Review, theEUhastaken onefurther safeguard measure under
Article XIX. Itconcerned sixspecies ofwhite fishandAtlantic salmon, which entered under minimum
import prices during most of1993 andthefirsthalfof1994.
32GATT document G/SG/N/2 and3,24March 1995. Thetimetable forthetermination ofthemeasures
istobepresented totheCommittee onSafeguards before 1July1995.
33Thebasic principles ofthe"consensus" arepresented inGATT (1993). Updated information canbefound
inChapter V(2)(v)(b).
34Such products, marked "SSG", cover several hundred eight-digit tariff linesintheSchedule oftheEuropean
Communities.WT/TPR/S/3
Page 66Trade Policy Review
(d) Thetrade barriers regulation
Legislation
49. UndertheNewTradeBarriersRegulation,CouncilRegulation3286/94,EUindustries,enterprises
andmember States mayrequest theCommunity todefend itsrights under international trade rules.
While industries maycomplain about obstacles totradehaving aneffect ontheEUmarket andcausing
material injury, enterprises maycomplain about obstacles having aneffect onthird-country markets
andresulting inadverse tradeeffects.35Member States maypursue either avenue. Regulation 3286/94
applies togoods and,tosome extent, services aswellastointellectual property rights affecting trade
ingoods andcertain services. TheCommission seestheRegulation 'smainpurpose notinprotecting
thedomestic market but,based oncomplaints byEUenterprises, inachieving greater tradeliberalization
within thecontext ofinternational rules. TheRegulation repealed andreplaced theCommunities '1984
NewCommercial Policy Instrument (Council Regulation 2641/84).36
Table IV.3
Procedures under theTrade Barriers Instrument
Complainant Practice Effects Relevant market
1sttrack
(complaint Art.3)Community industry
(ormajor proportion
thereof) providing goods
orservicesIllicit practices
(includes violations of
GATT/WTO rules)Material injury Community market or
thirdcountry markets
2ndtrack
(referral Art.6)Member States Exercise ofthe
Community 's
international rights
(includes anycommercial
practice byathird
country)Depending ontheaction
requested (including
"nullification or
impairment" orother
adverse trade effects in
GATT "non-violation"
cases)Community market or
thirdcountry markets
3rdtrack
(complaint Art.4)Community enterprises
(includes afortiori the
Community industry asa
whole) providing goods
orservicesAnycommercial practice
byathirdcountryAdverse trade effects as
defined bytherelevant
international rules
(including "violation"
and"non-violation" cases
under GATT/WTO) plus
"material impact" onthe
CommunityThird country markets
(including thecountry
applying ormaintaining
thepractice inquestion)
Source: ECCommission (1994g).
50. Complaints orrequests foraction aretobeforwarded totheCommission, which informs the
member States. Consultations aresubsequently held inanAdvisory Committee made upof
representatives ofmember States andchaired bytheCommission; thespecial consultative committee
under Article 113oftheECTreaty iskeptinformed toassess anywider commercial policy implications.
AnoticeispublishedintheOfficialJournalif,afterconsultations,theCommissionconsiderstheevidence
35Theterm"obstacles totrade" covers anytrade practice byathirdcountry inrespect ofwhich international
trade rules, especially WTO provisions, establish aright ofaction.
36GATT (1993).European Union WT/TPR/S/3
Page 67
sufficient toinitiate anexamination. Thecountry concerned isinformed, andwhere appropriate,
consultations maybeheld. Examinations mayinclude, ifdeemed necessary andnotobjected to,
investigations inathird-country territory.
51. Thefinaldecision ontheadoption ofanycommercial policy measure lieswiththeCouncil,
byqualified majority. Among possible options, theRegulation lists: suspension orwithdrawal of
concessions, increased customs duties orimport surcharges, andtheintroduction ofquantitative
restrictions, oranyothermeasures modifying oraffecting trading conditions withthecountry concerned.
However, inWTO cases, measures cannot betaken unless thedispute settlement procedure results
inadecision infavour oftheEUandthemeasures areauthorized bytheDSB.
Recent application
52. Fiveprocedures havebeeninitiated under theNewCommercial Policy Instrument of1984
(CouncilRegulation2641/84).ThemostrecentcasesconcernpiracyofECsoundrecordingsinThailand
(initiated inJuly1991) andtheimposition byTurkey ofanimport levyandhigher customs duties on
EUexports ofpolyester fibre(initiated inJanuary 1993). Thetwoprocedures arestillpending; since
1January 1995 theyaregoverned bytheTrade Barriers Regulation.
(e) Other trade remedies
53. Toensure harmonious commercial relations andaverttradedefence actions, foreign companies
orgovernments mayhavepreferred tomoderate theirexports of"sensitive" products. Forexample,
therecent TPRreport onJapan listsvarious cases ofexport monitoring orrestraints vis-à-vis theEU
inaddition tothecar"consensus".37Theproducts covered were: video taperecorders; forklift trucks
(until December 1994); ballbearings (until July1993); cotton fabrics (export approval foroneitem
sinceDecember 1994); pottery andchinaware (exports totheUnited Kingdom); andclothing (exports
totheUnited Kingdom untilDecember 1994). TheJapanese Government hasconfirmed thatthe
monitoring agreement oncarexports willbeeliminated uponexpiry in1999; other voluntary restraints
willbeterminated within theperiod specified intheWTO Agreement onSafeguards.38
54. JointCommittees established under theEU'svarious free-trade andco-operation agreements
provide aquasi-permanent forum toaddress anddiscuss trade disruptions, including sudden import
surges orcases ofinjurious pricing. Remedial actions taken (orencouraged) bytheexporting
governmentsconcernedmaythensubstituteforformalinvocationofsafeguardprovisionsortradedefence
instruments; intheCommission 'sview, consultations atanearlystagemayhelpprevent tradeconflicts
fromdeveloping. Forexample, theCommission seeks toinform thesignatories toEurope Agreements
beforetheinitiationofproceedingsforanti-dumpingandsafeguardsmeasures.39Asindicatedinprevious
Trade Policy Review reports, several Mediterranean countries haveforyears moderated theirexports
of"sensitive" textiles andclothing categories toavoid ECsafeguard actions under bilateral agreements.40
37Theoverall number ofJapanese bilateral export restraints has,however, declined significantly since the
Communities 'initial Trade Policy Review in1991.
38GATT (1995b).
39Annex IVtotheConclusions oftheEssen European Council inDecember 1994.
40See, forexample, GATT (1993).WT/TPR/S/3
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(v) Local content requirements
55. The"Television Without Frontiers Directive" (Council Directive 89/552) callsonmember States
toensure thatbroadcasters reserve atleast51percentoftheirtransmission timeforEuropean works
"where practicable andbyappropriate means" (Chapter V(3)(vi)). According totheCommission, there
arenosimilar access criteria inother EUmarkets forgoods andservices, noriseligibility under any
Community programmes orcommercial policy instruments subject tonationality criteria.41
(vi) Rules oforigin
56. TheCommunities 'non-preferential rules oforigin haveremained unaltered since theinitial
(1991) Trade Policy Review. Likeother WTO Members, theECiscommitted under theAgreement
onRules ofOrigin toworking towards international harmonization. Recent changes inpreferential
rules arerelated totheentry intoforce oftheEuropean Economic Area on1January 1994 andthe
EU'sevolving traderelations withcentral andeastern European countries, inparticular withsignatories
toEurope Agreements.
57. Since theEEAparticipants haveretained theirtrade régimes vis-à-vis thirdcountries, bilateral
preferential tradecontinues torequire thedetermination oforigin. According totheCommission, the
rulescontained intheEEAAgreement permit some flexibility regarding theincorporation ofmaterials
andvalue added fromoutside theEEA. Under thebilateral agreements withEFTA countries, aproduct
lostitspreferential status when leaving thefree-trade area, andtheuseofnon-originating inputs was
prohibited. Rules arespecified foreachChapter oftheCustoms Tariff.
58. TheEEA rules allow forfullcumulation, treating theEEA asasingle territory fororigin
purposes.42Withthemajor exception oftextiles andclothing, theAgreement (Protocol 4)alsoincludes
a"general tolerance rule". Itallows fortheincorporation ofnon-originating inputs uptoamaximum
value of10percentoftheex-works price (f.o.b. export price) ofthefinalproduct andrelaxes the
principle of"territoriality". Aproduct maybeworked oninanon-EEA country aslongasthevalue
added fromsuchoperations amounts tolessthan10percentofthetotalex-works price. Simplified
criteria apply tochemicals andplastics, allowing upto40percentnon-originating components inthe
ex-works priceofbasicchemicals (HSChapters 28and29)andchemicals (HS31to38),and25percent
inplastic products (HSChapter 39).
59. TheEEA Agreement hasbeen adjusted totakeaccount ofSwitzerland 'snon-participation.
Cumulation withSwiss-originating materials, direct transportation through Switzerland andspecific
"insufficient" processing operations inSwitzerland donotaffect aproduct 'sEEAorigin status. Duty
exemptions anddrawbacks mustnotbegranted onSwiss materials incorporated ingoods subsequently
41Article58oftheECTreatyextendstherightofestablishment,andtodobusinessthroughouttheCommunity,
toanycompany -irrespective ofownership -formed inaccordance withthelawofamember State andhaving
itsregistered office, central administration orprincipal place ofbusiness within theEC. Anexception clause
(Article 56(1)) provides scope forspecial treatment offoreign nationals ongrounds of"public policy, public
security orpublic health".
42EFTA countries originally applied fullcumulation between themselves. In1972, theyaligned theirorigin
rules tothebilateral free-trade agreements withtheEC,which allowed onlyfordiagonal cumulation.European Union WT/TPR/S/3
Page 69
exported under preferential rules. Theprinciple offullcumulation, particularly important to
Switzerland 'sinternationally integrated textiles andclothing sector, hasnotbeenextended.43
60. TheEurope Agreements allow fordiagonal cumulation, enabling, forexample, Polish
manufacturers toclaim origin status forproducts incorporating components imported fromHungary.
TheEssen European Council (December 1994) provided fortheextension ofdiagonal cumulation to
Bulgaria andRomania, noting, however, thatsuccessful implementation depended ontheassociated
countries agreeing ononesystem andconcluding anagreement among themselves. TheCouncil also
endorsed thefuture participation ofassociated countries suchastheBaltic States andSlovenia.
(vii) Recent developments inother import-related areas44
(a) Government procurement
61. Reciprocity provisions inthe"Excluded Sectors" Directive -covering supplies andworks in
theareasofwater, energy, transport andtelecommunications (Chapter V(3)(iii)(b)) -triggered adispute
withtheUnited States in1993. On30April, theUnited States excluded EUsuppliers, except German
firms, from U.S.federal procurement contracts notcovered byaMemorandum ofUnderstanding.45
TheMoU ofMay1993 provides fornational treatment inspecified areas, including heavy electrical
equipment andselected services, onthebasis ofsectoral reciprocity. Inreturn, central government
entities ofcertain member States arerequired toreject bidsfromU.S.firms forpublic works, supplies
andservice contracts below certain thresholds.
62. InApril 1994, theCommission andtheU.S.authorities concluded anagreement extending the
1993 MoU uptotheentry intoforce oftheWTO Agreement onGovernment Procurement (GPA).
Theagreement, ratified inlate-May 1995, improves access conditions toalimited number ofsub-federal
U.S.entities notcovered bytheWTO Agreement asoriginally signed andextends alimited number
ofconcessions onbothsides intheelectricity sector andinpostservices. Inreturn, theEUopened
upsub-central government entities toU.S.suppliers ofgoods; theagreement alsocommits bothparties
toco-operating ontransparency. Potential procurement covered bythe1994 bilateral agreement is
estimated atoverUS$100 billion annually ineachmarket. Since thetelecommunications sector was
notincluded intheagreement, theU.S. sanctions arestillinplace, extended since 1January 1995
tothethree newmember States.
(b) Standards andother technical requirements
63. EUlegislation introduced during 1993and1994reflects theincreasing impact ofenvironmental
objectives andconstraints onproduction andtrade. AnewEuropean Parliament andCouncil Directive
43AJointDeclaration,addedtotheminutesofaSwiss-ECJointCommitteemeetingon5May1994,reportedly
commits thetwoparties toreviewing thesituation infuture andtocontinuing efforts toimprove andsimplify
therules oforigin inparallel withEEA rules.
44Forageneral overview ofthesystem ofCommunity legislation -itsobjectives, main instruments and
implementation programme -inareas such asgovernment procurement andstandards, seeGATT (1993).
45Itwasargued bysome German observers thatGermany wasprohibited under a1954 friendship agreement
withtheUnitedStates,grandfatheredundertheTreatyofRome,fromdiscriminatingagainstU.S.firms.However,
theextension ofCommunity recognition ofthe1954 agreement, attheendof1993, wasmade conditional upon
Germany 'srecognition ofthepriority ofEClaw.WT/TPR/S/3
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(94/62/EC) onpackaging andpackaging waste entered intolawattheendof1994.46TheDirective,
tobeimplemented bymember States within 18months, includes targets forrecovery andrecycling
ofwaste. Theessential requirements willbeincorporated innewstandards; from end-1997 only
packaging complying withthese requirements will,inprinciple, beallowed inEUmarkets.47
64. Recent Commission Decisions specify criteria fortheaward ofeco-labels forwashing machines
anddishwashers (inJune1993), kitchen rolls, toilet paper andsoilimprovement substances
(November 1994). Factors taken intoconsideration include theconsumption ofrenewable and
non-renewableresources,emissionsofcarbondioxide,sulphurdioxide,thedischargeoforganicmaterials
intowater, useoforgano-chlorides, andamounts ofwaste. Paper products should bebased onwood
fromforests subject tosustainable management.48TheCommission isoftheopinion thattheeco-label
scheme doesnotaffect international trade asitispurely voluntary.
65. CouncilRegulation2455/92ontheexportandimportofcertaindangerouschemicalswasamended
inDecember 1994 tosubmit further substances toCommunity restrictions and/or controls. Existing
"green", "amber" and"red" listsofwastes governing shipments toandfrom theEUwerealtered in
October 1994 toreflect modifications agreed under anOECD review mechanism.49Council
Regulation 594/91 onsubstances thatdeplete theozone layerwasextended inDecember 1994, tocover
production, supply anduseofadditional substances (methyl bromide, hydrochlorofluorocarbons) and
introduce stricter controls incertain cases.50Directive 76/769 specifying restrictions onthemarketing
anduseofcertain dangerous substances andpreparations wasamended onthreeoccasions during 1994,
modifying rules oncertain carcinogenic, mutagenic andtoxic substances, flammable substances
(Directive94/48)andprohibitingtheuseofnickelinproductsintendedtocomeintodirectandprolonged
contact withhuman skin(Directive 94/27).
66. Current negotiations withthirdcountries areintended tospecify equivalence criteria forsanitary
andphytosanitary practices andmayleadtoveterinary agreements.51According totheCommission,
suchagreements should include timetables forremoving anyveterinary barriers totrade onthebasis
ofbalanced efforts, assuming inprincipal thatbothsidesapply comparable safeguards intheveterinary
area.
46Article15oftheDirectivereferstotheuseof"economicinstruments"forenvironmentalpurposes.Measures
maybeintroduced atCommunity level orbymember States acting inaccordance withCommunity policies,
including thepolluter-pays principle. Failure toreach aconsensus onenergy/CO2 taxproposals inOctober 1994,
which relied onhigher minimum excise taxes onenvironmentally harmful products andagradual expansion of
taxcoverage, highlights differences among member States withrespect totheuseofsuch instruments.
47Packaging previously manufactured incompliance withexisting legislation ofamember State isaccepted
foraperiod offiveyears fromtheDirective 'sentry intoforce, evenifthepackaging doesnotfulfil theDirective 's
essential requirements.
48Chemical testsandemission levels aremeasured bydesignated laboratories, forexample those certified
under standards EN45001 orISO9001 and9002.
49Commission Decision 94/721.
50Council Regulation 3093/94 of15December 1994. EUtargets regarding thephasing-out ofsubstances
thatdeplete theozone layer gobeyond those established intheCopenhagen Amendment totheMontreal Protocol,
according totheCommission.
51Participants include Australia, New Zealand, theUnited States andsome central European countries.European Union WT/TPR/S/3
Page 71
67. EUpolicies ontheuseofhormones inmeatandmilkproduction haveremained unchanged.52
RetaliatorymeasurestakenbytheUnitedStatesinthecontextoftheCommunities'"HormoneDirective"
haveremained inforce, although reduced inscope totakeaccount ofU.S.exports ofhormone-free
beef.
(c) Countertrade
68. Asnoted inthe1991 and1993 TPR reports, while there arenational differences, most
Governments seektolimittheirinvolvement incountertrade deals tomilitary offsets. Nocommon
policy initiatives, guidelines, orEUco-ordination procedures existinthisarea.
(3) Measures Directly Affecting Exports
(i) Export promotion (including financing andinsurance)
69. Current export promotion activities atEUlevelappear tobedwarfed, bothinterms ofscope
andfunding, bynational measures.53However, nodetailed information isavailable onrecent
developments.
70. Though Article 112oftheECTreaty requires member States progressively toharmonize their
export aidschemes, current commitments areconfined mainly tomutual information andconsultation
(Council Decision 73/931) andcoverage ofproducts imported under subcontracts fromother member
States (Council Decision 82/854). Inessence, export finance andinsurance activities havethusremained
within thenational domain, subject mainly toOECD disciplines. However, theCouncil iscurrently
working onaCommission proposal foradirective establishing EUrulesforexport credit insurance.54
71. TheWTO Agreement onAgriculture specifies reduction commitments forexport subsidies
("refunds") andsubsidized export volumes, thusaddressing aprominent feature oftheCommon
Agricultural Policy (Chapter V(1)(i)).55Reductions of36percent(subsidies) and21percent(volumes)
aretobephased inby1July2001.
(ii) Export controls andrestrictions
72. National export controls ondual-use (military andcivilian) goods andtechnologies havebeen
among theproblem areas intheInternal Market context. TheCommission proposed aregulation in
August 1992toensure common standards among member States intheapplication ofexport controls.
While theproposal wasunder consideration, therelevant goods, destinations andcriteria wereelaborated
ininformal inter-Governmental meetings. Additional measures (workshops, training programmes and
exchanges ofofficials andinformation networks) weredeveloped toreinforce co-operation ofnational
administrationsandstrengthennationalcontrolsystems.Finally,inDecember1994,theCounciladopted
atwo-pillar framework forexport controls ondual-use goods (Council Decision 94/942/PESC ona
52GATT(1993).
53Asnoted inthe1993 TPRreport, inthelate1980s Belgium alone spent about three timeasmuch onexport
promotion (fairparticipation, trade missions, Chambers ofCommerce, etc.) astheCommunity.
54COM(94)297 final of13July1994.
55ECexport refunds totalled some ECU 9to10billion p.a.inrecent years.WT/TPR/S/3
Page 72Trade Policy Review
jointaction based onArticle J.3oftheTreaty onEuropean Union andCouncil Regulation 3381/94
based onArticle 113oftheECTreaty); itisapplicable from 1July1995.
73. Thenewframework commits member States tosubmitting exports ofdual-use goods toeffective
controls andworking towards common standards during atransition period. Itseeks toensure that
theinternational commitments ofmember States (and, thus,theEuropean Union), especially onnon-
proliferation, arecomplied with. TheCommission views thesystem asafirststeptowards the
establishment ofacomplete andconsistent Community régime.
(4) Measures Affecting Production andTrade
(i) Competition policy
74. TheCommission hascontinued enforcing ECcompetition lawagainst restrictive business
arrangements deemed todistort theInternal Market. Three important cases in1994, drawing record
fines, affected producers ofcement (ECU 248million; BoxIV.1), cartonboard (ECU 132million)
andsteelbeams (ECU 100million).
75. Within theCommission, theresponsibility forcompetition policy -including thedevelopment
ofrulesandguidelines,policingandprosecution-isassignedtoDirectorateGeneralIV.Finaldecisions,
prepared byDGIV,aretaken bytheCommission asabody. While theinstitutional integration of
competition policy mayhavehelped toavoid frictions andinconsistencies withotherpolicy areas, some
observers havecriticized alackoftransparency, political independence andpublic control.56Others
have cautioned, however, thatinstitutional independence might beachieved onlyattheprice of
introducing somesortofpolitical vetointothedecision-making process which, inturn,would contradict
theveryideaofastrong andindependent body.57Theissue islikely tobediscussed inthecontext
ofthe1996 Intergovernmental Conference.
BoxIV.1 Competition intheEuropean cement industry
TheEuropean Union isthelargest cement producer intheworld, withanannual production capacity of
some 220million tonnes andanestimated turnover ofECU 7billion. Eastern European producers are
generally considered thestrongest external competitors, inparticular therelatively large Polish industry.
On30November 1994, theEuropean Commission imposed fines totalling ECU 248million on
33cement producers found tohave participated insecret arrangements torigmarkets over aperiod of
more than10years. Thedecision affected suppliers inall12member States aswellasNorway, Sweden
andSwitzerland. According totheCommission, cement companies andassociations blatantly breached
Single Market principles with aview toartificially segmenting national markets. Cartel members
colluded toreduce price differences between markets andpressurize importers toalign with local
producers. Thelargest fines were imposed onItalcementi (ECU 32.5 million), alsohaving acontrolling
interest inlaSociété deCiments Français(fined ECU 24.7 million), Lafarge Coppée (ECU 22.8 million)
andBlue Circle (15.8 million). Thecompanies areentitled toappeal against thedecision.
56GATT (1993).
57C.D. Ehlermann, theformer Director-General forCompetition intheECCommission, Financial Times,
7March 1995.European Union WT/TPR/S/3
Page 73
76. Thegeneral competition rulesoftheECTreaty (Article 90)apply alsotopublic orprivileged
enterprises provided suchapplication doesnotcontravene theirtasks.58While theabolition ofnational
barriers hasincreased thepotential forEU-wide distortions resulting from theoperation ofpublic
enterprises, inparticular given national differences inpolicy orientation, ongoing liberalization efforts
maygradually defuse suchproblems. Inrecent years, theCommission andcertain member States
havepursued deregulation initiatives inareas suchasgas,electricity, telecommunications, airand
maritime transport, andfinancial services (Chapter V(3)(i)), andarange ofpublic enterprises have
beenprivatized. Table IV.4listssome ofthelarger projects.
77. Prominent candidates forpartial orfullprivatization intransport sectors include Lufthansa,
AirFrance, TAP(Portugal), Olympic Airways (Greece), theFrench linercompany GAM, andBritish
Rail.59TheItalian Government soldstakes inthreemajor banks andaninsurance company (Ina)between
December 1993andJune1994, raising Lit11.6trillion (ECU 6billion) intotalrevenue. Inaddition
totheenergy conglomerates mentioned inTable IV.4, theItalian telecommunications operator, Stet,
mayalsobeopened forprivate ownership during 1995. Apublic offering ofshares intheFrench
tobaccomonopolySeitatookplaceinearly1995.PartialprivatizationofRenault,atransactionestimated
atFF20 billion, maybeeffected during 1995; andfirststeps tofloatshares inUsinor Sacilor (steel)
havebeentaken.60
(ii) Subsidies
78. UnderCommunitylaw,theCommissionismandatedtokeepunderconstantreviewallaidsystems
within theECand,asnecessary, issuedecisions andinitiate proceedings withaviewtotheirtermination
ormodification. Member States mustnotintroduce aidprogrammes without Community approval.61
Certain industries (coal, steel, shipbuilding, synthetic fibres, motor vehicles, airandmaritime services)
aresubject tosector-specific guidelines clarifying and/or tightening thegeneral criteria forauthorization.
58Under Article 37,member States must alsoensure thatState-trading monopolies, including monopolies
delegated tothird parties, donotdiscriminate ininternal trade.
59However, concrete plans have thusfarbeen developed onlyforLufthansa andBritish Rail.
60Nachrichten fürAußenhandel, 9February 1995.
61Foramore comprehensive presentation seeGATT (1993).WT/TPR/S/3
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Table IV.4
Current status ofselected privatization plans inmember States
Country/sector Company Project
Italy
Electricity E.N.E.L. Created afterthenationalization ofexisting private enterprises in1962, ENEL has
been alimited liability company (wholly owned byTreasury) since 1992. The
Ministry ofIndustry hasstudied plans tosellitforseveral years, butnoaction
hasbeentaken.
Energy, chemicals E.N.I. ENIrecently became alimited liability company, wholly owned byTreasury.
Several privatization options arebeing scrutinized.
United Kingdom
Electricity National Grid Theintended saleofNational Grid(owned bytheRegional Electricity Companies,
buteffectively controlled bytheGovernment) hasrunintocomplications asan
initial valuation wasmuch below market price. Flotation mayresult innon-UK or
non-sector takeover andimply significant windfall gains fortheelectricity
companies (scheduled for1995).
Electricity Nuclear Power While theGovernment hasindicated willingness tosell,noaction islikely, asthe
unitcostofelectricity produced ismuch higher thanfrom conventional fuels.
Electricity Scottish Nuclear Seeabove.
Electricity Atomic Energy
Authority (AEA)Thecompany wassplitintooperation/research andregulatory sections. AEA
Technology, soldontheopen market, provides consultancy services. The
Government hasretained unsaleable bits(such asliabilities).
Electricity Northern Ireland
ElectricitySoldinJune1993.
Electricity Power Genand
National PowersPossible saleofremaining government-owned shares (40percent) announced for
February 1995.
Coal British Coal Tenders forpits; majority soldtoRSBMining (some pitstaken onbysingle
operators).
Gas British Gas Break-up envisaged (November 1994). Pipes aretobeturned intoacommon grid
forallcompetitors andaccess tofinalconsumers istobederegulated (programme
tobebrought inbetween 1996 and1998).
Electricity - Choice ofsupplier forconsumers below 1MW andabove 100kW (choice was
previously restricted tolarge energy consumers) (April 1994).
Germany
Electricity, gas,basic
chemical products- Companies inallthree sectors arelargely privately owned. Some minority
Government shares have been soldsince January 1993. Anexception isthe
Treuhandanstalt, abody under public law, which in1990 took over many
companies owned bytheoutgoing German Democratic Republic (GDR) withthe
sole object ofselling them toprivate natural andlegal persons. The
Treuhandanstalt wasdissolved on31December 1994 afterhaving almost entirely
completed itsprivatization task. Themost prominent casein1993 and1994 was
theestablishment ofVEAG (Vereingte Energiewerke AG)intheelectricity sector.
VEAG tookoverthewhole high-voltage electricity (compound) gridoftheformer
GDR andsupplies distributors andendconsumers; itisowned byeight West-
German electricity compound companies.
France
Energy (petroleum),
chemicalsElfAquitance InJanuary 1994, 51percent ofthecompany wassold forapproximately
FF35billion. A"hard core" oflarge-enterprise shareholders purchased
10percentoftheprivatized shares.
Chemicals Rhône-Poulenc Thegroup wasprivatized inNovember 1993; theState soldalmost allitsshares
(41percent oftheequity). Current holders arethegeneral public and
institutional investors (67percent), long-term investors (24percent) and
employees (16percent).
Source: European Commission.European Union WT/TPR/S/3
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(a) Industry-specific schemes andguidelines62
79. Thecurrent SteelAidCode, introduced on1January 1992, expires attheendof1996. Aid
isconfined tosupporting research anddevelopment, environmental protection, andclosures, including
accompanying measures toalleviate thesocial effects.63Until 31December 1994, theSteelAidCode
alsoallowedfortheapprovalofregionalinvestmentaidintheterritoryoftheformerGermanDemocratic
Republic, Greece andPortugal, albeit under certain restrictions andconditions. InApril 1994, the
Commission cleared, under Article 95ECSC Treaty, restructuring aidforIlva(Italy), CSIandSidenor
(Spain), SEW Freital (Germany) andSiderurgia Nacional (Portugal); inDecember itdecided on
restructuring aidforEKO Stahl (Germany). Thedecision wasconditional onsignificant capacity
reductions inhot-rolled steelproducts.
80. Theseventh Directive onaidtoshipbuilding hasbeenextended untiltheendof1995, pending
theentry intoforce oftheOECD-based Agreement Respecting Normal Competitive Conditions in
theCommercial Shipbuilding andRepair Industry. Under theDirective, production aidislimited to
9percentofthecontract value before aid(4.5percentforsmall ships andconversions); theonly
exemptions arerelated tocredit facilities complying withtheOECD Understanding onExport Credits
forShips andtoaidtodeveloping countries. Aidmaybegranted forresearch anddevelopment, closures
andinvestment linked toyardrestructuring (contingent oncapacity reductions). Aspecial derogation
applies toshipyards intheformer GDR which mayreceive considerably higher operating aidinreturn
foragenuine andirreversible capacity reduction (40percenton1July1990) tobeachieved bythe
endof1995.
81. Aidproposals inthetextiles sector must beinaccordance witha1977 communication to
member States. Capacity increases should notbesupported inbranches withexcess capacity; aid
forsectoral conversion isgenerally viewed favourable. Under aCode forthesynthetic fibres industry,
covering theperiod January 1993 toend-March 1996, allsupport -inwhatever form -toproducers
must benotified totheCommission; authorization isdependent onsignificant capacity reductions.
82. Underanaidframeworkforthemotorvehicleindustry,memberStatesmustnotifyanysupport
project exceeding ECU 12million andsubmit anannual report onallpayments totheindustry. In
cases involving regional aid,theCommission hascompared car,truck andengine manufacturing in
assisted andnon-assisted areasonacost-benefit basis, considering thatinvestment aidmaycompensate
forstructural handicaps indisadvantaged areas. Additional incentives (regional top-ups) havebeen
permittedintheabsenceofforeseeablesectoraldistortions.Restructuringaidislinkedtothepresentation
ofa"satisfactory" plantoreduce capacity andrestore profitability; asaruleofthumb, theshare of
aidinrestructuring costs should correspond totheplanned cutincapacity.
62Support foragriculture, accounting formore thanhalfoftotalCommunity budget spending, isdealt with
initssectoral context inChapter V(1)(ii). Pending thecompletion oftheCommission 'sFourth Survey onState
AidsintheCommunity, noupdate iscurrently available ofthesubsidy datagiven inthe1993 TPRReport (1981
to1990).
63Supportmaybegrantedforinvestmentslinkedtocapacityreductionsandregionaldevelopmentintheformer
German Democratic Republic (Article 5).Investment aidcould alsobegranted incertain regions ofGreece
until theendof1994, provided production capacity didnotincrease.
Exemption from national CO2 orenergy taxes isgenerally available tothesteelindustry; therelief was
approved inJuly1992 bytheCommission andCouncil onthegrounds thatthetaxes would harm unduly the
competitiveness ofthecompanies affected. Atpresent suchtaxes exist onlyinDenmark andtheNetherlands.WT/TPR/S/3
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83. Aidforresearch anddevelopment andtheenvironment channelled through industry-wide
schemes areexamined case-by-case toensure conformity withCommunity provisions regarding eligible
expenditure andsupport intensity. Themotor vehicles industry isinprinciple expected tofinance all
development costsfornewenergy-efficient orless-polluting products, aidmayexceptionally begranted
ifaproject involves genuine firstapplication oftechnologies attheEuropean level. Constraints are
somewhat relaxed withrespect totheproduction ofcomponents andaccessories, where carproducers
compete withindependent component manufactures notcovered bytheaidframework forthemotor
vehicle industry.
84. Newaiddisciplines forthecoalindustry arecurrently being phased in,starting withimproved
transparency requirements (Box V.2).
85. Given thedegree ofState involvement in,andsupport for,many services sectors, the
Commission hasincreasingly focused onpreventing government-owned or-sponsored suppliers from
thwarting internal market integration.64Recent authorizations oflarge aidpackages fornational air
carriers -benefiting AirFrance, Olympic Airways, TAP, AirLingus, Sabena andIberia -haveproved
particularly sensitive. Toimprove predictability andtransparency, theCommission issued inlate1994
asetofguidelines forStateaidinthesector (Box V.9). Commission guidelines fortheexamination
ofState aidtoCommunity shipping lines, dating from 1989, arecurrently under review
(Chapter V(3)(v)(b)).
(b) General schemes andguidelines
86. EUregionalpoliciesconsistofbothnationalschemesdrawnupandfinancedbymemberStates,
subject toCommunity approval, andcommon programmes using the"Structural Funds". These funds
havebeenestablished topromote specific objectives, namely development andstructural adjustment
inbackward regions (Objective 1);restructuring areas seriously affected byindustrial decline
(Objective 2);combating long-term andyouth unemployment (Objective 3);facilitating industry
restructuring bysupporting measures suchasretraining (Objective 4);adjustment andmodernization
ofagriculture andfisheries (Objective 5a);anddevelopment support forruralareas (Objective 5b).65
Therecent accession ofnewmember States resulted intheintroduction ofasixthobjective, support
forregions oflowpopulation density (lessthan8inhabitants persq.km.).66
87. Annual expenditure under thefunds across allmember States istoincrease gradually from
ECU 25billion in1996 toECU 30billion in1999 (anadditional ECU 2.3billion and2.6billion,
64TheCommission 's1993 Competition Report notes that"theliberalization offinancial andpostal services
continued togenerate complaints from private competitors ofstate-owned banks andpostal administrations",
concerning, among other issues, injections ofpublics funds inthecontext ofprivatizations. (ECCommission,
1994f).ArecentrescueoperationbytheFrenchGovernmentofCreditLyonnaishighlightstheproblemsinvolved.
65Aidmaybeprovided inaccordance withObjectives 3,4and5aanywhere intheEU; areas eligible for
Objective 1support aredefined bytheCouncil; andtheCommission designates Objective 2and5bareas on
therecommendation ofmember States.
66Under thesixthobjective, ECU 511million areearmarked forFinland fortheperiod 1995 to1999 (at1995
prices); totalsupport forthethree newmembers amounts toECU 4.7billion.European Union WT/TPR/S/3
Page 77
respectively, havebeenallocated toacohesion fund).67Chart IV.4shows theallocation bymember
State fortheperiod 1994 to1999.
88. TheFourth Community Framework Programme inthefieldofresearch andtechnological
development, covering theperiod 1994 to1998, wasadopted inApril 1994. Theoverall ceiling for
theProgrammeamountstoECU11billion,whichisalmosttwiceasmuchasspendingunderits1990-94
predecessor.68TheCommission istoreport totheEuropean Parliament andtheCouncil on
implementation atthebeginning ofeachyear.
89. TheProgramme comprises fourgeneral activities, themost important interms offunding
being research, technological development anddemonstration.69Anindicative break-down byindividual
themes andsubjects ispresented inChart IV.5; priority areas include information technologies;
industrialandmaterialtechnologies;environmentandclimate;telematics;communicationtechnologies;
andbiotechnology. Theprogramme isintended tocomplement activities atnational levelwithaview
671992 prices. Over theperiod 1988 to1990, member States 'funding ofregional policy programmes totalled
ECU 13.4 billion perannum. More recent figures arenotcurrently available.
68TheEuropean Parliament andtheCouncil aretoreview theProgramme by30June 1996, andmayincrease
themaximum overall amount toECU 11.6 billion.
69Other activities refer toco-operation withthird countries andinternational organizations; dissemination
andoptimization ofresults; andstimulation ofthetraining andmobility ofresearchers.WT/TPR/S/3
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tostrengthening thetechnological baseofEUindustry andmaking itmore internationally competitive
and/or contributing totheimplementation ofother Community policies.
(iii) Intellectual property protection
90. Pursuant totheWTO Agreement onTrade-Related Aspects ofIntellectual Property Rights
(TRIPS), relevant Community legislation hasbeenmodified.70Regulations governing thedefinition,
description andpresentation ofspirit drinks (Council Regulation 1576/89) andwines (Council
Regulation 1601/91) were amended toprotect thegeographical designation ofproducts originating
inWTO member countries. Theamendments apply from1January 1996. Similarly, national treatment
provisionsinCommunitylegislationprotectingtrademarksandtopographies(layoutdesigns)ofintegrated
circuits were extended tonationals ofallWTO members, whether ornotsignatories totheParis
Convention ontheProtection ofIndustrial Property ortheWashington Treaty onIntellectual Property
inRespect ofIntegrated Circuits.
91. Council Regulation 3295/94 transposes intoCommunity legislation theborder enforcement
provisions oftheTRIPS Agreement. Holders oftrademarks, copyrights, related rights ordesigns may
request customs authorities tosuspend release ofimported counterfeit orpirated goods andrestrict
exports orre-exports. TheRegulation enables customs toactexofficio andseizecounterfeit orpirated
goods andinform interested parties ofthediscovery ofsuchgoods.
70Given thattheTRIPS Agreement covers anareaofmixed Community/national competence (Box II.1),
similar adjustments mayhavebeenmade bymember States; however, noinformation wasavailable inthecontext
ofthisreview.