Developments in the Internal Market and Central Policy Areas

CONTENTS

 

Page

 

1.INTRODUCTION 5

2.KEY DEVELOPMENTS IN THE EU 6

2.1 Institutional Developments 6

2.2 Developments in the Internal Market and Central Policy areas 7

2.3 Development and Implementation of the EU Investment Policy 10

2.4 Economic Performance and Challenges Ahead 11

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

3.1. Introduction 14

3.2. WTO 15

3.3 Creating the Right Environment for Trade 17

3.4 Sectoral Policies 18

3.5 Bilateral and Regional Trade Relations 20

3.6 Sustainability and Development 23

3.6.1 Trade and sustainable development 23

3.6.2 Trade and development 24

4. LOOKING FORWARD 26

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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

KEY DEVELOPMENTS IN THE EU

Institutional Developments

10. This is the first Trade Policy Review after the new Treaty of Lisbon entered into force on 1 December 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]

11. 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.

12. 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.

13. 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.

14. 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.

15. 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).

16. 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.

17. 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.

18. During the period since the last Trade Policy Review, the euro-area expanded by one Member: Estonia adopted the euro on 1^st 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.

19. 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.

Introduction

58. The communication "Trade, Growth and World Affairs"[20], an integral part of the "Europe 2020” strategy, was adopted in November 2010. It sets the direction of the EU trade and investment policy for 2010-2015, based also on the lessons learned from "The Global Europe 2006-2010"[21]. It proposes a strategy to reduce trade barriers, to open global markets and to get a fair deal for European businesses. The overall aim is to ensure the benefits of trade reach European citizens — in the form of stronger economic growth, more jobs and increased consumer choice at lower prices.

59. The EU plans to draw on its trade policy to help exit the current crisis and to create the right environment for a strong EU economy. Specifically, the communication proposes to complete the negotiations on the Doha Development Agenda in the WTO by reaching an ambitious and comprehensive agreement before the end of 2011. Moreover, it calls for concluding the negotiations of FTAs with major trading partners such as India and Mercosur; to deepen trade relations with other strategic partners, such as the US, China, Russia and Japan, where the main focus will be on tackling non-tariff barriers to trade. To help European businesses access global markets, the Commission will present in 2011 a legislative proposal for an EU instrument to increase the leverage to secure improved symmetry in access to public procurement markets in developed and large emerging economies, building on the implementation of international commitments.

60. The European Commission on 18 November 2010 adopted a regulation[22] revising rules of origin for products imported under the generalised system of preferences (GSP), notified to the WTO on 29 March 2011. This regulation relaxes and simplifies rules and procedures for developing countries wishing to access the EU's preferential trade arrangements, while ensuring the necessary controls are in place to prevent fraud. In addition, special provisions are included for Least Developed Countries (LDCs) which would allow them to claim origin for many more goods which are processed in their territories, even if the primary materials do not originate there. The new rules of origin are applied from 1 January 2011. The proposal also puts forward a new procedure for making out proofs of origin, which places more responsibility on the operators. From 2017, the current system of certification of origin carried out by the third country authorities will be replaced by statements of origin made out directly by exporters registered via an electronic system. This will allow the authorities of the exporting country to re-focus their resources on better controls against fraud and abuse, while reducing red-tape for businesses. This future Commission proposal will be subject to ordinary legislative procedure by the Council and Parliament.

61. The EU uses transparency mechanisms in the design and implementation of trade policy which significantly contribute in identifying and addressing potential barriers to international trade and investment. These instruments include meetings between civil society and the EU officials to discuss aspects of Europe's trade policy, and public consultations with domestic and foreign stakeholders.

WTO

62. The World Trade Organisation (WTO) and the multilateral trading system are the focus for the EU trade policy, as the EU believes that a system of global rules is the best way to ensure that trade between countries remains open and that prosperity can be widely shared.

63. Despite the slow progress since the last review, completing the Doha Round remains the EU's top priority. The potential benefits are simply too important to be lost. 2011 represents the best opportunity to conclude an ambitious, balanced and comprehensive agreement to which all major players make significant contributions and from which all players, big and small, could benefit. Doha represents a potentially sizable boost to the world economy. A failure to conclude the Doha Round would on the other hand be significantly detrimental to the current global economic uncertainty and could challenge the credibility of the multilateral trading system.

64. This commitment to multilateralism was clearly demonstrated in the EU negotiation activity since the last report. The EU has remained flexible to ensure an agreement is reached and has played a constructive and proactive role in all areas of negotiation.

65. Concerning Non-Agricultural Market Access (NAMA), the EU seeks meaningful liberalisation through sectoral arrangements, which it sees as a necessary complement to the formula approach. Liberalisation in non-agricultural products is key for the development dimension of the round since the large majority of exports from developing countries are manufactured products. An ambitious outcome in NAMA is beneficial also for South-South trade, as 70% of the duties paid in this sector by developing countries (DCs) are paid to other DCs. The EU considers that WTO Members should contribute to sectoral initiatives in accordance with their capacity and share in world trade: in addition to developed countries, also the more advanced emerging economies should make a meaningful contribution, given both their increasingly important role in the world trading system and the importance of improved access to their markets for the development of South-South trade to the benefit of other developing countries. The EU recognises that developing countries should be able to benefit from appropriate flexibility in response to their particular development needs and challenges. The EU considers that the sectoral initiatives for chemicals and machinery are particularly important, and sees scope for sectoral arrangements also for gems and jewellery, forestry and possibly some other industrial sectors. Non-tariff barriers are another clear priority for the EU, and it considers the horizontal mechanism and a series of proposals for the elimination of non-tariff barriers for electric and electronic products, textiles, clothing and footwear as crucial complements to the tariff side of the negotiations.

66. The EU pursues gradual liberalization of global trade in services, which represents a very important contribution to economic performance, long term investment and development. At the multilateral negotiations, the EU seeks the consolidation of existing liberalisation as well as new market access for services providers. The EU's approach is respectful of national public policy priorities such as public services or cultural diversity and takes into account developing and least developed members' priorities. Services liberalization is essential to ensure an overall balance with the two other core market access pillars (Agriculture and NAMA). Since the last EU TPR, the EU has been heavily involved in the negotiations and has continued to push for meaningful progress in this key economic sector.

67. The EU has played a leading role in the agricultural negotiations throughout the Doha Round with the firm belief that further liberalization of trade in agricultural products is an important contribution to sustainable growth of the global economy. Conditional on meaningful offers by our negotiating partners and a balanced outcome in all areas of the negotiations, and hence of a successful conclusion of the round, the EU has in particular shown its willingness to make substantial cuts in its agricultural tariffs based on a tiered formula which will cut highest tariffs the most, to significantly reduce trade distorting subsidies, and to eliminate export refunds, on the condition of a successful completion of the Doha Round, containing inter alia the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect. Furthermore, the EU seeks to promote the protection of geographical indications through the establishment of a meaningful multilateral register and the extension of additional protection of geographical indications for wines and spirits to geographical indications for all products.

68. The EU has also participated actively in negotiations on Trade Facilitation and would hope to find an agreeable solution that provides enhanced technical assistance and capacity-building in this area and has been active in suggesting solutions acceptable to developing countries on the rules governing the aid. The EU will be working to clarify and improve GATT Articles V, VIII and X with a view to facilitating trade and removing obstacles to the movement of goods across borders, as well as unnecessary and cumbersome formalities while promoting cooperation across agencies for that purpose. This streamlining may offer some of the biggest gains from the Doha Round, as it can dramatically reduce the cost of trading across borders.

69. The EU's approach to the DDA has been to complement further market opening with stronger rules and disciplines. The EU has been an active participant in the Negotiating Group on Rules. The EU favours amendments of the Anti-Dumping Agreement so as to clarify existing rules and prevent protectionist abuse. Equally, the EU seeks to strengthen current rules of the Agreement on Subsidies and Countervailing Duties and disciplines on fisheries subsidies. Furthermore, the EU has continued to support the further clarification of existing rules on regional trade agreements.

70. The EU maintains its strong commitment to environmental protection and the fight against climate change in its trade policy, including through its work in the Committee on Trade and Environment and its Special Session; the EU promotes the liberalisation of trade in environmental goods and services and seeks a clarification of the relationship between the WTO and Multilateral Environmental Agreements (MEAs).

71. The EU, together with Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru, Venezuela initialled the "Geneva Agreement on Trade in Bananas" (GATB) on 15 December 2009and in parallel, a separate EU-US agreement on bananas was initialled by the parties on the same day. This closed one of the most protracted disputes in the multilateral trading system. According to GATB, the EU will gradually reduce its banana tariff from 176? per tonne to 114? per tonne by 2017 (or by 2019 at the latest should the conclusion of the Doha Development Round be postponed). The GATB includes a "settlement clause" for the definitive settlement of all pending disputes. The EU-US agreement reflects the GATB: the EU-US dispute on bananas will be considered as settled upon settlement of the disputes brought by the Latin-American banana exporters. GATB was signed on 31 May 2010, the tariff cuts being provisionally applied as of 8 June 2010(and retroactively as of 15 December 2009, the date of initialling). The EU internal procedure for the ratification of the agreements has been completed and it has been notified to the WTO on 8 March 2011. The GATB will enter into force once all parties to the agreement notify the WTO on the completion of their internal procedures while the US agreement will follow suit and will enter into force upon entry into force of GATB.

72. On 18 November 2010, the EU has lodged a waiver request in the WTO to be allowed to grant exceptional autonomous preferences to imports of a limited number of Pakistani products as part of the EU response to the devastating floods that hit Pakistan in August 2010.

73. In a rapidly changing environment that poses ever new challenges, the importance of full compliance and effective implementation of all WTO rules and agreements, including the plurilateral accords, cannot be overemphasized. In parallel with its committed participation in the DDA negotiations, the EU has paid full attention and has been engaging actively in all other negotiating and non-negotiating work within the various WTO bodies and committees.

74. In particular, the EU has been very actively engaging in the TPRB tasks of monitoring protectionism. The EU has been the most transparent and cooperative Member by timely reporting comprehensive information on its trade practices and measures to the WTO Secretariat. Consequently, the WTO TPRB monitoring reports contain substantial information on wide-ranging EU practices, illustrating the high level of transparency exerted by the EU. In this context, the EU has strongly advocated greater transparency, and encouraged other WTO Members to follow the EU example and champion in transparency.

75. The EU will continue to give priority to further accessions, notably of LDCs, and will aim to improve and clarify the unique dispute settlement system of the WTO.

Sectoral Policies

Agriculture

82. The Common Agricultural Policy (CAP) has successfully undergone substantial reforms in the recent years which achieved market orientation of the policy. Most aid to farmers is now granted in the form of decoupled income support whereby no obligation to produce exists and farmers are therefore free to follow market incentives, while for certain sectors a limited safety net is provided. In parallel, the role of the rural development policy has been further strengthened

83. On the basis of this reformed policy, a debate on the future CAP post 2013 has been initiated. As outlined in the Communication from the Commission entitled "The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future"the main focus of the debate is set on the following aspects:

- 'Greening' of the first pillar direct payments by supporting environmental measures and thus contributing to the overall environmental performance of the CAP;

- A more equitable distribution of payments among Member States in order to increase effectiveness and efficiency of the income support;

- An increased focus on competitiveness, innovation and environment in the rural development policy in line with the Europe 2020 objectives.

84. The legislative proposals for the CAP post 2013 will, for the first time in the history of the policy, follow the ordinary legislative procedure as mandated by the Lisbon Treaty with increased participation of the European Parliament alongside the Council and the Commission. The presentation of legal proposals is foreseen for later this year. The reformed CAP is expected to enter into force on 1 January 2014.

Manufacturing

85. The manufacturing sector is an integral part of the EU economy and an engine for its growth. In 2006, it generated?6,816 billion in turnover, producing?1,711 in added value, generated a trade surplus (outside the EU) of?107 billion, and employed 34 million people. Specific policies in this sector focus on creating better framework conditions for manufacturing industries in the EU so that they attract investment and job creation, and ensure that business can compete openly and fairly. In respect of the EU strict competition policy, measures involving state-aid would only be approved if consistent with the requirements of a level-playing field where competitive companies succeed.

86. In parallel with efforts on the external front to open up international markets, the current priority areas of the EU enterprise and industrial policy on the internal front include: promoting entrepreneurship, for example through better access to funding and support networks; flexible regulatory framework that facilitates access to the single market, with an additional focus on the contribution of voluntary standards to the regulatory framework; simplification of the regulatory and administrative environment; promoting competitive performance by encouraging businesses to adapt to structural change and maintaining a high and consistent level of productivity growth; ensuring availability of essential inputs for industry; promoting innovation; and improving skills. Increasing attention also goes into fostering consistency with energy and environmental policies.

87. The EU tariffs for industrial products are among the lowest in the world. The EU average level of customs duty protection amounts to around 3.9% on industrial goods, 2.4% in trade-weighted terms (taking into account MFN rates)[26]. However, the effective average industrial tariff is much lower because imports from many of the EU's suppliers of industrial products enter the EU preferential rates under the terms of bilateral agreements, the Generalised System of Preference (GSP) or tariff suspension regimes. Furthermore, low non-tariff barriers also contribute significantly to making the EU economy one of the most open to trade.

Services

88. Services are the largest economic sector in the EU, accounting overall for close to 70% of its GDP and for a similar – and rising – proportion of employment. The Treaty on the Functioning of the EU (TFEU) establishes the central principles governing the internal market for services: the freedom for EU companies to establish themselves in other Member States, and the freedom to provide services on the territory of another Member State other than the one in which they are established. In so far as the market integration for services is still not complete within the EU, significant efforts have been underway to remove the remaining regulatory and administrative obstacles to trade in services between Member States within the framework provided by the Directive on Services in the Internal Market (the "Services Directive" No. 2006/123/EC) adopted in December 2006 and other sector-specific legislation and initiatives. The deadline for the implementation of the Services Directive by Member States has expired: very significant results have been achieved and next steps for further deepening the internal market for services are being examined. Since the last TPR of the EU, notable progress has been achieved particularly in the financial services, telecommunications and postal services.

89. Despite the effects of the financial and economic crisis, the EU holds firmly the position of the world's leading exporter and importer of commercial services with a share of 25.5% in 2009 (extra EU trade). In 2009, it accounted for over a quarter of global services exports as well as imports. The latter reflects the degree of openness of its trade regime in services. The EU and its Member States have undertaken major scheduled commitments under the GATS in practically all major service categories. The EU and its Member States have also entered into commitments on the protocols for the telecommunication and financial services sectors. MFN exemptions are maintained in compliance with Article II.

90. In recent years, further trade openness in services beyond the multilateral commitments made in the WTO has been provided through bilateral negotiations with different countries and regions. These have been based on a platform that combines trade in services and establishment in both services and non-services sectors under one set of provisions and often some provisions on further liberalisation in the telecommunications, financial services, international maritime transport services or postal and courier services, which enable trade liberalisation while preserving each partner's right to regulate its market.

LOOKING FORWARD

127. Notwithstanding the difficulties that the WTO Members encounter in moving forward the Round, the EU remains convinced that concluding the Doha round of negotiations is the priority on the WTO agenda. An ambitious, balanced and comprehensive outcome should be achieved that would deliver substantial new trade opportunities for all WTO members. This would be the right response to the global economic crisis and in order to achieve this, all major players, including large fast-emerging economies, will have to make significant contributions so that all players, big and small, can benefit.

128. The EU will continue to play its leadership role in promoting trade liberalization and developing a trading system of benefit to all. In this regard, the EU will continue to participate actively in the work of the WTO, while pursuing regional trade agreements which are a catalyst for multilateral liberalization, encouraging sustainable development and supporting the advancement and integration of less advanced economies in the multilateral scene. The EU believes that the transparency pillar is of utmost importance for the good functioning of the WTO. The surveillance and monitoring capacity of the WTO should be enhanced by pursuing work in peer reviews processes, transparency and multilateral scrutiny of trade policies in order to stem possible protectionist tendencies. The dispute settlement pillar remains central for ensuring stability to the global trading system and its judicial nature should be further developed.

129. The EU will work on the implementation of the communication "Trade, Growth and World Affairs", and continues to be committed to an open, fair and rules-based trading system, in order to achieve sustainability and growth at home and abroad.

__________

[1] Communication from the Commission to the European Parliament, the Council, the European economic and social Committee and the Committee of the regions, 9 November 2010. http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146955.pdf.

 

[2] Member States maintain an active role in the Committee on Budget Finance and Administration.

 

[3] http://ec.europa.eu/europe2020/index_en.htm.

[4] http://ec.europa.eu/europe2020/targets/eu-targets/index_en.htm.

[5] http://ec.europa.eu/europe2020/tools/flagship-initiatives/index_en.htm.

[6] http://ec.europa.eu/information_society/digital-agenda/index_en.htm.

[7] http://ec.europa.eu/research/innovation-union/pdf/innovation-union-communication_en. pdf#view= fit&pagemode=none.

[8] http://ec.europa.eu/social/main.jsp?catId=950&langId=en.

[9] http://ec.europa.eu/social/main.jsp?catId=958&langId=en.

[10] http://ec.europa.eu/social/main.jsp?catId=961&langId=en.

[11] http://ec.europa.eu/enterprise/policies/industrial-competitiveness/industrial-policy/index_en.htm.

[12] http://ec.europa.eu/resource-efficient-europe/index_en.htm.

[13] http://ec.europa.eu/internal_market/smact/index_en.htm.

[14] Council Regulations 72/2009, 73/2009 and 74/2009 of 19 January 2009, published in the Official Journal L30 of 31 January 2009.

[15] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0672:FIN:en:PDF.

[16] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52010DC0639:EN:HTML:NOT.

[17] http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/119141.pdf.

[18] http://ec.europa.eu/employment_social/esf/news/news/article_7362_en.htm.

[19] http://ec.europa.eu/social/main.jsp?catId=326&langId=en&newsId=432&furtherNews=yes.

[20] http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146955.pdf.

[21] http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146941.pdf.

[22] http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_777_
en.htm.

[23] http://trade.ec.europa.eu/doclib/docs/2010/october/tradoc_146796.pdf.

[24] http://trade.ec.europa.eu/doclib/docs/2011/march/tradoc_147629.pdf.

[25] Safeguards: Council Regulation (EC) No 260/2009 and 625/2009, Anti-dumping: Council Regulation (EC) No 1225/2009, Anti-subsidy: Council Regulation (EC) No 597/2009.

[26] World Tariff Profiles 2010, WTO (2010).

[27] http://exporthelp.europa.eu.

CONTENTS

 

Page

 

1.INTRODUCTION 5

2.KEY DEVELOPMENTS IN THE EU 6

2.1 Institutional Developments 6

2.2 Developments in the Internal Market and Central Policy areas 7

2.3 Development and Implementation of the EU Investment Policy 10

2.4 Economic Performance and Challenges Ahead 11

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

3.1. Introduction 14

3.2. WTO 15

3.3 Creating the Right Environment for Trade 17

3.4 Sectoral Policies 18

3.5 Bilateral and Regional Trade Relations 20

3.6 Sustainability and Development 23

3.6.1 Trade and sustainable development 23

3.6.2 Trade and development 24

4. LOOKING FORWARD 26

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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

KEY DEVELOPMENTS IN THE EU

Institutional Developments

10. This is the first Trade Policy Review after the new Treaty of Lisbon entered into force on 1 December 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]

11. 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.

12. 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.

13. 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.

14. 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.

15. 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).

16. 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.

17. 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.

18. During the period since the last Trade Policy Review, the euro-area expanded by one Member: Estonia adopted the euro on 1^st 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.

19. 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.

Developments in the Internal Market and Central Policy Areas

"Europe 2020"

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. "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

 

31. 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 13^th 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

32. 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

33. 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.

34. 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

 

35. On 10 November 2010, the European Commission has adopted the Communication "Energy 2020 - A strategy for competitive, sustainable and 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.

36. 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.