European UnionWT/TPR/G/248
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World Trade
Organization / RESTRICTED
WT/TPR/G/248
1June 2011
(11-2658)
Trade Policy Review Body / Original: English
TRADE POLICY REVIEW
Report by
EUROPEAN UNION
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by European Union is attached.

Note:This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on European Union.

European UnionWT/TPR/G/248
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European UnionWT/TPR/G/248
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CONTENTS

Page

1.INTRODUCTION5

2.KEY DEVELOPMENTS IN THE EU6

2.1 Institutional developments6

2.2Developments in the internal market and central policy areas7

2.3 Development and implementation of the EU investment policy10

2.4 Economic performance and challenges ahead11

3.kEY DEVELOPMENTS IN THE EU TRADE POLICY (2009-2010)14

3.1.Introduction14

3.2.WTO15

3.3Creating the right environment for trade17

3.4Sectoral policies18

3. 5Bilateral and regional trade relations20

3.6 Sustainability and development23

3.6.1Trade and sustainable development23

3.6.2 Trade and development24

4. LOOKING FORWARD26

European UnionWT/TPR/G/248
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  1. INTRODUCTION
  1. The European Union (EU) acknowledges the central role that the WTO plays in safeguarding the rules-based international trading system, and ultimately in promoting openness and global prosperity. The surveillance of national trade policies through the Trade Policy Review Mechanism is an important element of this work; transparency is a fundamental component of an effective world trading system.
  1. This is the tenth Trade Policy Review of the EU (though the first under the name "European Union"). The aim of this report is to give an outline of how the EU trade policy is formulated and to highlight the EU's current trade priorities.
  2. Since the last Trade Policy Review of the EU in 2009, there have been a number of important developments that have impacted trade and trade related policies, both globally and within the EU.
  3. The EU vision for a new trade policy is outlined in the Commission's Communication, "Trade, Growth and World Affairs"[1], which is part of the important 10-year "Europe 2020" implementation strategy. Together with the Council's conclusions and the European Parliament's resolution on the Communication, these strategy papers set the framework for the Union's future actions on trade.
  4. The EU emerged from the global crisis still as a major trading power, accounting for 16.8% of world trade in goods and for over one fourth of world trade in services in 2009. Being such an important player in the world trade brings responsibility, not only towards the EU citizens to promote economic growth and jobs in Europe, but also towards the rest of the world.
  5. Trade has been and continues to be an engine for global growth. Accordingly, the EU showed leadership in its response to the global economic and financial crisis by shaping its policies guided by the principle that a sustainable recovery needs to remain rooted in open markets and international rules.
  6. Equally, a key feature of the EU trade policy has been an active participation in the DDA negotiations, as well as in the regular work of the WTO councils and committees to monitor and ensure the implementation of the covered agreements.
  7. Besides its commitment to work in the WTO, the EU is pursuing its liberalisation agenda bilaterally and also unilaterally aiming at facilitating trade for the less advanced economies.
  8. The EU aims to achieve these trade policy objectives whilst also driving improvements in social inclusion, supporting green growth and climate change objectives, and promoting sustainable development, both in the EU and in the rest of the world.

2.KEY DEVELOPMENTS IN THE EU

2.1 Institutional developments

  1. This is the first Trade Policy Review after the new Treaty of Lisbon entered into force on 1December 2009. The European Communities was then replaced by the European Union which succeeds it and takes over all its rights and obligations. In the WTO context, this meant changing from "The European Communities" to "The European Union" – the European Union remains a Member of the WTO alongside 27 EU Member States and the Delegation of the European Union continues to represent the EU and its Member States in the WTO. [2]
  2. The Treaty of Lisbon provides the EU with the legal framework and tools necessary to meet future challenges and to respond to citizens' demands: 1) A more democratic and transparent Europe, with a strengthened role for the European Parliament and national parliaments. New legislation is now routinely preceded by assessments of socioeconomic and fundamental rights impact as well as long-term viability. 2) A more efficient Europe, with simplified working methods and voting rules. 3) A Europe of rights and values, freedom, solidarity and security, promoting the Union's values, introducing the Charter of Fundamental Rights into European primary law, providing for new solidarity mechanisms and ensuring better protection of European citizens. 4) Europe as a stronger actor on the global stage as the Treaty brings together Europe's external policy tools.
  3. Overall, the Treaty of Lisbon does not fundamentally change the EU's institutional set-up, which is still based on its three main institutions: European Parliament, Council and European Commission. However, the Treaty of Lisbon has retuned the relations between the European Parliament, the Council, and the European Commission, so that full benefit can be derived from the new arrangements under the treaty. As regards trade policy, the Lisbon Treaty has significantly enhanced the role of the European Parliament, making it a fully fledged decision-maker in this field:

-The European Parliament, together with the Council, adopts legislation implementing the EU's common commercial policy under the ordinary legislative procedure (previously referred to as "co-decision procedure"); and,

-The Parliament's "consent" is required for the ratification of all trade agreements.

  1. This contrasts with the pre-Lisbon situation where the Council alone was responsible for the adoption of trade legislation while the European Parliament was only consulted and in a few limited circumstances involved in the ratification of major trade agreements.
  2. The Lisbon Treaty also modified the way the EU reaches decisions on many day-to-day issues. In light of this, legislation is currently underway to adapt the decision-making procedures of existing trade legislation (such as for instance the Basic Anti-Dumping regulation) to the new rules of TFEU.
  3. The Treaty of Lisbon contains two important institutional innovations that impact EU external action, as it creates: a President of the European Council and a High Representative of the Union for Foreign Affairs and Security Policy. In November 2009, the European Council appointed Ms.Catherine Ashton as High Representative of the Union for Foreign Affairs and Security Policy. She is assisted by the European External Action Service (EEAS).
  4. In June 2009, the European Parliament elections for 2009-2014 took place, and in July 2009, the European Council formally nominated Mr. José Manuel Barroso as President of the next European Commission until 2014. Mr. Karel De Gucht is the Commissioner responsible for trade.
  5. As of 1 January 2011, Mr. Jean-Luc Demarty has been appointed Director General of the Directorate General of Trade, replacing Mr. David O' Sullivan.
  6. During the period since the last Trade Policy Review, the euro-area expanded by one Member: Estonia adopted the euro on 1st January 2011. The euro is now the single currency in 17 European Union's Member States: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
  7. No new Member States acceded the EU since the last Review. Accession negotiations with Croatia and Turkey are ongoing, and new negotiations were opened with Iceland in July 2010. The former Yugoslav Republic of Macedonia is a candidate country since December 2005 and Montenegro since December 2010. The EU has also received applications from Albania and Serbia.

2.2Developments in the internal market and central policy areas

"Europe 2020"

  1. Beyond the immediate action required to tackle the most pressing challenges posed by the economic and financial crisis, the EU has continued laying solid foundations for a sustainable and job-creating growth. This is the purpose of the new economic strategy, the "Europe 2020 Strategy[3]" for jobs and growth, adopted in June 2010. It is a new 10-year plan for spurring growth and creating jobs in the EU. The structural measures under the "Europe 2020" strategy tackle the underlying causes of the crisis. The goal is smart, sustainable, inclusive growth. This strategy will maximise the EU's assets, in particular the single market, and equip it for success in a rapidly changing world. It identifies specific areas of action to turn ambition into achievement. Sound public finances, tighter financial supervision and open world markets are part of the EU's comprehensive strategy to create a more sustainable and dynamic growth path delivering high levels of employment, productivity and social cohesion.
  2. To counter the risks from strained public finances, dented business confidence and the threat of unemployment, the EU proposed a series of actions over the course of 2010 to invigorate the economy, to unlock the EU's growth potential, stimulate investment and to upgrade skills. The EU put emphasis on low energy use, low carbon emissions, up-skilling its population, making work attractive, seizing the potential of a digital single market, research and development and advanced technology.
  3. The strategy is complemented by the EU's continued development of the single market and the pursuit of smarter regulation coupled with a stimulating environment for competition. Equally important is the goal of creating an ever-more inclusive society, which is why social cohesion and social inclusion are at the heart of the "Europe 2020" strategy.
  4. The "Europe 2020"strategy provides a coherent framework for the Union to mobilise all its instruments and policies to secure the structural reforms that Europe needs. It sets five specific targets on employment, innovation, education, social inclusion and climate/energy[4] to be achieved by 2020. The specific targets are amplified by a series of flagship initiatives[5], and by integrated guidelines for economic and employment policies.
  5. The first flagship initiative is the "Digital agenda for Europe"[6] - Europe’s strategy for a flourishing digital economy by 2020 - a sector that can deliver smart growth. This initiative will promote a digital single market, extend Internet access, help make devices and applications more interoperable, boost trust in the Internet by enhancing security and protecting privacy for citizens and businesses and leveraging investment in ICT research and innovation.
  6. The second flagship initiative – "Innovation Union"- places innovation at the heart of the "Europe 2020" strategy. With over thirty action points, the Communication on Innovation Union[7] aims at improving conditions and access to finance for research and innovation in Europe, to ensure that innovative ideas can be turned into products and services that create growth and jobs.
  7. The third flagship initiative – "Youth on the move"[8]- aims at enhancing young people's chances of finding a job by helping students and trainees gain experience in other countries, and improving the quality and attractiveness of education and training in the EU.
  8. The fourth flagship initiative – "An Agenda for new skills and jobs"[9] - aims to give fresh momentum to labour market reforms, to help people gain the right skills for future jobs, to create new jobs and to overhaul the EU employment legislation.
  9. The fifth flagship initiative – "European platform against poverty and social exclusion[10]"- aims to increase the pace towards the target of lifting at least 20 million people out of poverty and exclusion by 2020.
  10. The sixth flagship initiative – "An integrated industrial policy for the globalisation era"[11] - sets out a strategy that aims to boost growth and jobs by maintaining and supporting a strong, diversified and competitive industrial base in Europe, offering well-paid jobs while becoming less carbon intensive.
  11. "A resource-efficient Europe"[12] is the seventh flagship initiative, which establishes resource efficiency as the guiding principle for EU policies on energy, transport, climate change, industry, commodities, agriculture, fisheries, biodiversity and regional development. By using synergies across these policy-areas, the strategy will be instrumental in reaching a variety of EU objectives, from reducing European greenhouse gas emissions by 80 to 95% by 2050 to reforming the agricultural and fisheries sectors, from reducing food insecurity in developing countries to making the Union more resilient to future rises in global energy and commodity prices.

Single Market Act

  1. Improving the single market is a pillar of the "Europe 2020" strategy and a prerequisite for its success. In October 2010 the Commission set out its plans to strengthen the single market with measures to boost growth and enhance citizens' rights. To boost growth, competitiveness and social progress, it made proposals to make the single market work better, and make life easier for companies, consumers and workers. The Single Market Act[13], issued on 13th April 2011 and based on the results of a public consultation from November 2010 to the end of February 2011 is a comprehensive two-year plan for 2011–12 designed to relaunch growth and create jobs in the EU. Its "12 levers to boost growth and strengthen confidence", together with the 12 key actions proposed thereunder should be implemented before the end of 2012.

Customs legislation

  1. The "Safety and Security Amendment" to the Customs Code was introduced by Regulation 648/2005 and its implementing Regulation 1875/2006. The Amendment aims to ensure an equivalent level of protection through customs controls for all goods brought into or out of the EU's customs territory and provides Authorized Economic Operators (AEO) with facilitation measures. The "Safety and Security Amendment" entered into force in an incremental fashion. After the entry into force in 2007, risk management became immediately applicable. On 1 January 2008, the EU AEO programme became operational and on 1 July 2009 the automated advance cargo information requirements were introduced. However, a transitional period was provided to grant customs authorities and traders the opportunity to adapt to these requirements. At the end of this transitional period, on 1 January 2011, relevant security data have to be sent in advance - before goods leave or enter the EU – to customs. The aim of this measure is to increase security in international trade, by enabling customs to carry out better risk analyses on the basis of the information received in advance and therefore to better target controls without delaying the customs clearance of consignments at the border.

Agriculture

  1. The implementation of decisions under the Health Check of the Common Agricultural Policy[14] (CAP) started on 1 January 2009. This reform package is a continuation of the process of reforms which modernise, streamline and simplify the CAP. Reforms were also introduced in specific markets, the most recent one being the wine sector reform in force since 2009.
  2. The EU is currently in the process of designing the Common Agricultural Policy after 2013. Following a wide-ranging public debate, the Commission presented in November 2010 the Communication entitled "The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future"[15], which outlines options for the future policy and launches the debate with the other institutions and stakeholders. The presentation of legal proposals is foreseen for later this year.

Energy

  1. On 10 November 2010, the European Commission has adopted the Communication "Energy 2020 - A strategy for competitive, sustainableand secure energy"[16] . The Communication defines the energy priorities for the next ten years and sets the actions to be taken in order to tackle the challenges of saving energy, achieving a market with competitive prizes and secure supplies, boosting technological leadership, and effectively negotiate with our international partners.
  2. On 4 February 2011, for the first time a European Union Summit dedicated to Energy took place[17]. One of the decisions taken at this summit was to complete an internal market for energy by 2014. Also, the Commission was invited to adopt a Communication on Energy Security and International Cooperation, which is now scheduled for September 2011.

2.3 Development and implementation of the EU investment policy

  1. Prior to the Lisbon Treaty, investment was an area in which the EU shared competence with Member States. The Union negotiated the liberalisation of investment, by establishing conditions for the access of EU investors to foreign markets (either multilaterally in GATS – for mode 3 commitments - or bilaterally through FTAs). At the same time, the EU Member States were seeking to promote and protect investment. Investment promotion and protection was generally pursued by Member States through the negotiation of so-called Bilateral Investment Treaties (BITs) with third countries, of which about 1200 have been concluded as of today by the EU Member States.
  2. The Treaty of Lisbon has established the EU's exclusive competence on foreign direct investment (FDI), as part of the common commercial policy (Article 207(1) and Article 3(1)e).This change implies two immediate needs:

-for transitional arrangements to enhance legal certainty for existing investment agreements concluded by Member States with 3rd countries; and

-for developing a targeted and gradual policy that would define EU interests in exercising its newly gained competence.

  1. In response to these needs on 7 July 2010, the Commission adopted two initiatives on investment.
  2. In a proposal for a Regulation on transitional arrangements regarding BITs concluded by Member States with third countries, the Commission proposes to authorise Member States to maintain in force all investment agreements they concluded prior to entry into force of the Regulation, and – under certain conditions – to negotiate new and/ or to renegotiate old agreements. The draft Regulation is to be adopted by the Council and the Parliament in the ordinary legislative procedure. Discussions are ongoing at the moment.
  3. In the Communication "Towards a comprehensive European international investment policy" the Commission lays down its views on the broad orientations of the future EU comprehensive investment policy that in addition to investment liberalization should also seek for best available standards of protection for all European investors, to ensure they can operate in a stable, fair and predictable environment. In this Communication, the Commission takes the view that the principles and parameters for EU investment protection negotiations will be inspired by the best practices developed by Member States, and include among others such standards as the guarantee of a fair and equitable treatment, full protection and security, non-discriminatory treatment or protection against unlawful expropriation. As enforcement mechanisms are of crucial importance for ensuring effectiveness of any investment agreement, the Communication calls to include in the EU agreements provisions establishing investor-to-state dispute settlement mechanisms. The Communication determines criteria for defining priority countries for the EU comprehensive investment negotiations. These include the magnitude of actual and potential investment flows, and the stability and predictability of the investment climate in countries – prospective candidates for the EU investment negotiations. The Communication has already been followed by conclusions by the Council and a resolution in the Parliament on the Communication is also underway.
  4. The best prospects for comprehensively addressing EU investment interests, both in terms of market access and investment protection, arise in the context of broader trade negotiations. Nonetheless, the EU will also explore the desirability and feasibility of negotiating stand-alone investment agreements with certain countries which receive a high proportion of EU investment, and with whom an FTA negotiation is not envisaged.
  5. The EU will develop its investment policy progressively. The Commission has already tabled proposals for investment negotiating directives for Canada, India and Singapore to seize opportunities of ongoing wider trade negotiations with these countries.These directives are currently under consideration by the Council.

2.4 Economic performance and challenges ahead