WT/TPR/S/102 Trade Policy Review
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Customs procedures
(a) Overview
1. On 16 February 2001, the Commission announced a new strategy for the Customs Union1,
building on the "Customs 2002" programme, to be renewed in "Customs 2007".2 In response to the
growing volume of trade across Community frontiers and given the need for more rapid customs
services and better operational implementation of customs rules, the strategy is based on upgrading
the EU’s fully computerized system to process customs declarations.  The EU is also an active
participant in the discussions on customs aspects of trade facilitation in the WTO, the World Customs
Organization (WCO), and other fora.
2. In addition to their traditional role in collecting duties, Customs have taken on new
responsibilities to protect EU citizens and businesses, for example against trade in dangerous or
harmful products (e.g., illicit substances, counterfeit and pirated goods, products infringing safety or
environmental legislation), and illegal traffic in endangered species.  In 1999, fraud amounted to
€ 377 million (2.7% of total import duty revenue collected);  cigarettes and dairy products were thetwo leading products involved.  With respect to counterfeit and pirated goods, the customs
administrations recorded an increase of one third in seizures from 1999 to 2000, under legislation
implementing the TRIPS Agreement at the border (Table III.1).
3  About half of the 6,253 cases
concerned clothing and accessories, followed by books and audio/video material (16%).  The trend
continued in 2001 with a further increase of 27% in the number of cases.  The Commission has
attributed the rising trend to (a) an increased focus of customs authorities, better targeting and sharing
of information;  and (b) an increase in and expanded range of counterfeit and pirated goods that aretraded.
Table III.1
Seizures of counterfeit and pirated goods in EU Member States, 1999-00
(Number of cases)
MEMBERSa
EU B DK D EL E F IR I L NL A P FI S UK
1999 4,694 126 368 2,173 11 159 252 12 129 3 305 128 5 137 20 866
20006,253 234 79 3,185 12 144 435 5 174 16 278 331 15 120 46 1,179
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Spain;  F:  France;  IR:  Ireland;  I:  Italy;  L:  Luxembourg;  N L:  
The Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  United Kingdom.
Source: DG Taxation and Customs (2000).
(b) Community Customs Code
3. The Community Customs Code, which has been in force since 1 January 1994, is
implemented by a Commission Regulation, and administered by the customs authorities of the
                                                     
1 COM(2001)51.  See European Commission Press Release IP/01/219 and MEMO/01/43.
2 COM(2002)26.  A report on "Customs 2002" is contained in SEC(2001)1329.
3 Council Regulation 3295/94, as amended.  See DG Taxation and Customs (2000).European Union WT/TPR/S/102
Page 27
Member States.4  The Code applies uniformly throughout the customs territory of the Community to
exports and imports of goods.5  A "Community good" is either one that originates in the Community
or an imported good that has acquired that status by virtue of being released into free circulation, or a
combination of the two.
4. Goods entering or exiting the Community are assigned to one of five destinations:  placement
under a customs procedure;  admission to a free zone or a free warehouse;  re-exportation from theCommunity territory; destruction;  or abandonment.   Customs procedures comprise:  release for free
circulation;  transit;  exportation;  customs wa rehousing;  inward processing;  processing under
customs control;  temporary admission;  and outward processing.  The latter five are "customs
procedures with an economic impact" (CPEI), because they encourage economic activity on
Community territory.  There are 31 free zones, established by the Member States in enclosed areaslocated in maritime ports, airports or islands.
5. During the period under review, the Code and the implementing Commission Regulation
were amended.
6  To facilitate the computerization of customs clearance procedures (Box III.1),
supporting documents need no longer be submitted for a computerized declaration, but must be
retained for consultation by the customs authorities.  The rules on admission to CPEI and free zoneshave been simplified and relaxed for non-sensitive goods.
7  Also significant is the good faith
provision for importers, which allows for non-recove ry of duties in cases where the amount of duty
legally owed was not entered in the accounts as a result of an error on the part of the customs
authorities, which could not reasonably have been detected by an importer acting in good faith and in
compliance with all of the provisions of the legislation. The provision also indicates how an importer
can meet the standard of good faith, which does not include situations where the exporter has given
incorrect information to the authorities of the exporting country.  Internal Community transit
procedures have also been modified by the introduction of the "New Computerised Transit System
(NCTS)" as of 1 July 2001, which is also to apply to operations under the Common Transit
Convention, which links the EC, EFTA Member States, and Poland, Hungary, the Czech Republic,
and the Slovak Republic.8
                                                     
4 Council Regulation 2913/92, as amended, and implemented by Commission Regulation 2454/93, as
amended.  See DG Taxation and Customs (1997).
5 Defined as comprising the European territories of the Member States (including the territorial waters,
the inland maritime waters and airspace) with certain  exceptions:  the Faroe Islands and Greenland from the
territory of Denmark;  the Island of Heligoland and the territory of Buesingen from the territory of Germany;the municipalities of Livigno and Campione d'Italia and certain waters of Lake Lugano from the territory ofItaly;  Ceuta and Melilla from the territory of Spain.
Certain European territories outside the territorial fr ontiers of the Member States are also included in
the Community customs territory.  The territory of Germ any includes the Austrian territories of Jungholz and
Mittelberg, the territory of France includes the Principality of Monaco, and the territory of Italy includes the
Republic of San Marino;  a customs union agreement between the EC and San Marino entered into force on1 December 1992.
6 Regulation 2700/2000.  See European Commission Press Release IP/00/1123.  For background see
COM(1998)226.
7 Customs authority authorization continues to be required for admission to CPEI, but the
administrative procedures are simplified for non-sensitive goods (those not listed in Annex 73 of Commission
Regulation 2454/93) with respect to the assessment of an adverse Community economic impact (i.e. wheninterests of Community producers are harmed by entry of duty-free goods).  A new option on free zones is afence less perimeter, with entry and exit being subject to a customs declaration.
8 Regulation 2787/2000.  See European Commission Press Release IP/01/153.WT/TPR/S/102 Trade Policy Review
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Box III.1:  Customs clearance procedures
All goods brought into the customs territory of the Community are subject to customs supervision and must
be presented to customs with a written declaration,  consisting of, under normal procedures, the Single
Administrative Document (SAD), accompanied by pertinent documents.  The customs authority may grantpermission to simplify the completion of formalities and procedures, including by waiving the requirementthat the goods be presented to customs.  The use of a customs agent is not required.
Under the normal customs clearance procedure, the documents required include the invoice or other
documents for customs valuation purposes, documents making the consignment eligible for the application ofa preferential tariff arrangement (e.g. the certificate of origin "Form A" is required for GSP) or for derogationfrom the basic customs tariff regime, and any other document required by the specific legal regulations validfor the import of the goods mentioned in the bill of entry (e.g. licence, certificate of conformity, certificate of
authenticity for certain alcoholic beverages).  The customs authorities may verify the declaration by
examination of the documents and/or the goods, or may accept it without verification.
The customs declaration for imported and exported goods must state the customs value, the origin of the
goods, and the classification of the good, under the Integrated Tariff of the Communities (TARIC) atimportation or under the Combined Nomenclature (CN) at exportation.  Upon request, an importer mayobtain "binding tariff information" on the tariff classification of a good for the customs administration,
normally valid for six years;  "binding origin information" may also be obtained (since 1997) as a result of
the Community's implementation of the WTO Agreement on Rules of Origin.  The customs declaration formsthe basis for establishing the amount of the "customs debt",  and the basis for  the payment of import (orexport) duties.  The amount of import duties must be paid or guaranteed at the time of customs clearance.
Appeals against decisions of customs authorities are governed by procedures at the Member-State level, first
to the customs authority and then to national courts, followed by recourse to the European Court of Justice
under Article 230 of the EC Treaty.
Source: WTO (2000a), Vol. 1, pp. 41-42.
(ii) Customs valuation
6. There has been no change during the period under review on customs valuation provisions,
which comprise the WTO Agreement on Implementa tion of Article VII of the GATT 1994 (Customs
Valuation Agreement), and the relevant decisions of the Customs Valuation Committee.9  The Court
of Auditors published a special report in 2001 on customs valuation in relation to the objective of
accuracy and consistency across the customs administrations of the Member States.10  The EU also
participates in the work of the Technical Committee on Customs Valuation of the WCO and acceptsthe instruments of that Committee with re spect to the Customs Valuation Agreement.
(iii) Rules of origin
7. The Community applies two different sets of rules of origin:  non-preferential and
preferential.  The non-preferential rules of origin are set out in the Community Customs Code and
implementing Commission Regulation and apply to all non-preferential commercial policy
instruments, such as the tariff and trade defence measures.
11  With respect to preferential rules of
origin, which are set out in protocols to the individual preferential trade agreements, or in the
Community instruments establishing preferential trade arrangements (Chapter II(4)(ii) and (iii)), the
                                                     
9 "Decision regarding cases where the customs administrations have reasons to doubt the truth or
accuracy of the declared value", "Decision on the treatment of interest charges in the customs value of imported
goods" and the "Decision on carrier media bearing software".
10 Court of Auditors, "Special Report No. 23/2000 concerning valuation of imported goods for customs
purposes (customs valuation), together with the Commission’s replies" (OJ C 84/1 of 14/3/2001).
11 WTO document G/RO/N/1.European Union WT/TPR/S/102
Page 29
EU has more stringent origin requirements to contain the benefit of preferential treatment.  A
"standard protocol" on rules of origin applies to the agreements with the CEEC, partners in the EEA
and EFTA agreements, which has inspired certain aspects of the origin rules contained in recent
agreements (e.g., EU-Mexico free-trade agreement, Euro-Med), and preferential arrangements (e.g.,
GSP, and ATM regime).
8. One aspect of preferential rules of origin is the scope for cumulation, which counts inputs
from the Community or from other partners in a system of regional trade as originating materials.
Bilateral cumulation applies for instance under GSP (donor-country content) and in free-trade
agreements. Diagonal cumulation applies mainly between the EC, the EFTA countries, the CEECs,
and Turkey within the "PanEuropean System of Cumulation".12  Full cumulation applies within the
EEA, between the EC, the ACP, and the OCT under the Cotonou Agreement, and between the EC andthe Maghreb countries under their respective Euro-Med agreements.
(iv) Community tariff
9. The EU has bound 100% of tariff lines in Schedule CXL.  The Commission publishes
annually in the Official Journal  the most-favoured-nation (MFN) tariff to be applied to imports in the
following calendar year.
13  The EU also submits annually to the WTO's Integrated Database (IDB), in
database format, the MFN tariff, and exports and imports, at the eight-digit level of the Combined
Nomenclature (CN).  This submission, for 2002, forms the basis of the Secretariat's analysis of the
MFN tariff.
10. For 2002, the EU's tariff consisted of 10,399 CN eight-digit lines;  the simple average applied
rate of duty on all products is estimated at 6.4% (Table III.2), compared with 6.9% for 1999.14  The
simple average tariff on non-agricultural products (WTO definition, excluding petroleum) was 4.1%,
down from 4.5% in 1999;  the decline is explained by lower applied tariffs for certain paper andpaperboard, chemical, textile, iron and steel products, and toys.
15  On agricultural products, the simple
average tariff was estimated at 16.1% in 2002 down from 17.3% in 1999.  The decline is not
attributable to policy changes, but to differ ent estimates resulting from the conversion to ad valorem
equivalents (AVEs) of the non- ad valorem  rates applied on  946 lines (44.8% of  agricultural product
lines).16
                                                     
12 Notified to the WTO in WT/REG/GEN/N/1.  WT/REG/GEN/1 contains questions and replies on the
system.  Notes on the meetings of the Committee on Regional Trade Agreements to examine the system arecontained in WT/REG/GEN/M/1, WT/REG/GEN/M/2 and WT/REG/GEN/M/4.
13 The analysis in this section is based on the tariff for 2002 contained in Commission Regulation
2031/2001.  The tariff indicates the "conventional" rate of duty, assessed on imports from all countries (whether
or not members of the WTO), unless the "autonomous" rate of duty, shown as a footnote, is lower.
14 WTO (2000a), Vol. 1, Table III.1, p. 44.
15 Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01
to 24 less fish and fish products (Chapter 3), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52and 53.
16 These are computed on the basis of average unit values for imports in the categories concerned, and
thus depend on international price movements;  an upwards trend, such as in 2000, automatically reduces the
AVE.  The estimates do not however factor in the tariff treatment of imports under tariff quotas, which providefor reduced or duty-free treatment up to a ceiling quota level;  estimates refer to out-of-quota imports only.Other sources of bias in the tariff regime, such as seasonal entry prices for fruits and vegetables, which remainin place, were reported upon more fully in mid-2000.WT/TPR/S/102 Trade Policy Review
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Table III.2
Applied MFN tariff, 2002
Imports 2000 8-digit tariff lines
Value ShareSimple average
tariffShare
(US$ billion) (%) (%)Number
(%)
Total 807.4 100.0 6.4 10,400 100.0
WTO Agriculturea50.3 6.2 16.1 2,111 20.3
WTO Non-agriculture
(excluding petroleum)652.7 80.8 4.1 8,248 79.3
Petroleum 104.3 12.9 2.8 41 0.4
.. Not applicable.
a Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01 to 24 less fish and fish
products (Chapter 3), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52 and 53.
Note: Ad valorem equivalents (AVEs) for 2000 were provided by the European Commission. In addition, the Secretariat has used dat a
on the ad valorem component of mixed duty lines to complete its data on the EC's 2002 tariff.
Source : WTO Secretariat calculations, based on European Union online information.  Available at: http://europa.eu.int/eur-
lex/en/index.html, and information provided by the European Commission.
11. Tariff peaks (triple the simple average) remain in evidence for meat, dairy products,
processed and unprocessed cereal products, processed fruits and vegetables (Table AIII.1).  The range
of applied tariffs, in terms of the minimum and maximum rates, is also more important on agricultural
products (from 0 to 470.8%) than on non-agricultural products (from 0 to 36.6%).  The structure oftariffs in terms of stage of processing continues to show evidence of tariff escalation, notably for food,
beverage and tobacco products, as well as textile products.
12. The EU grants duty-free or reduced tariff treatment under preferential agreements and
arrangements to most trading partners; exclusively MFN treatment applies to imports of all products
from only nine WTO Members:  Australia; Canada; Hong Kong, China; Japan; Republic of Korea;New Zealand; Singapore; Chinese Taipei; and the United States.  The most beneficial treatment is
granted to least developed countries and ACP countries, followed by countries that have concluded
free-trade agreements with the EU, and then developing countries.
17
(v) Indirect taxes
(a) Overview
13. All EU Member States apply value-added tax (VAT) and excise taxes to imported products at
rates that, in accordance with the national treatment principle, are the same as for goods supplied
within the territory by a taxable person.  Full customs clearance of imported products in a Member
State requires payment of VAT and excise duties, if applicable.  Such clearance may be completed
either in the Member State where the product is landed, after which it enters into free circulation, or in
the Member State of destination if the product is placed under a suspensive customs procedure
(usually the external transit procedure).  Goods e xported outside the territory of the Community are
exempt from indirect taxes.
                                                     
17 WTO (2000a), Vol. 1, Table III.2, p. 47.European Union WT/TPR/S/102
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(b) VAT
14. There has been little change in the VAT regimes of Member States during the period under
review.18  As is the case for company taxation, unanimous agreement is required in the Council for
adoption of a Community-wide VAT system.  Two new directives were adopted during the period
under review:  in June 2001, to remove barriers to administrative cooperation between the Member
States to improve efforts to combat fraud19; and in December 2001, on harmonizing the VAT
requirements for invoicing on internal Community  exchanges, including e-commerce transactions.20
As part of its tax strategy for the EU, the Commission will continue to favour legislative actions to
harmonize Member State practices in the area, promote informal coordination mechanisms, as well as
using the infringement procedure.21
(c) Excise duty
15. The excise duty regimes of Member States have remained largely unchanged during the
period under review.22  In February 2002, the Council adopted new legislation on cigarettes and
manufactured tobacco.  Cigarettes in the most popular price category are required to bear a specific
duty of a minimum of 57% of the retail price (inclusive of all taxes)23, and the overall duty must not
be less than € 60 per 1,000.24  The latter level is to be raised to € 64 as from 1 July 2006, with the
exception of two Member States, for which the date is 1 January 2008. The new legislation also
amends the minimum excise levels for cigars, ciga rillos, fine-cut tobacco, and other tobacco products.
(vi) Prohibitions, restrictions, surveillance, and licensing requirements
(a) Common Foreign and Security Policy (CFSP)
16. Since the entry into force of the Treaty on Eu ropean Union in 1993, the EU adopts, through
common positions, the measures on trade and economic relations provided for by resolutions of the
United Nations Security Council, which may include embargoes falling within  the competence of the
Community.  At the time of the last Trade Policy Review of mid 2000, the EU had reduced trade and
economic relations with Iraq and the Federal Republic of Yugoslavia (Serbia and Montenegro), and
instituted various embargoes on exports (section (2)(ii)).  During the period under review, the
restrictive measures affecting the Federal Republic of Yugoslavia were lifted following the
presidential elections of 24 September 2000.25  The EU also implemented United Nations Security
Council Resolution 1343 setting out measures to be imposed against Liberia, which include the
prohibition of direct or indirect imports of all rough diamonds into the Community.26  The EU and the
Member States are participating in international efforts to combat the illicit traffic in diamonds.27
                                                     
18 Directive 77/388/EEC, as amended.  See WTO (2000a), Vol. 1, Table III.3, p. 49.
19 Council Directive 2001/44/EC.
20 Council Directive 2001/115/EC.
21 COM(2001)260.  See European Commission MEMO/01/193.
22 DG Taxation and Customs (2001).
23 Council Directive 2002/10/EC. See European Commission Press Release IP/01/87 and
MEMO/01/87.
25 Decision 2000/599/CFSP.
26 Council Regulation 1146/2001.
27 Decision 2001/758/CFSP.WT/TPR/S/102 Trade Policy Review
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(b) Protection of the consumer, the environment or animal welfare
17. A general safety requirement applies to the placement of consumable products on the
Community market, except for those for which specific product regulations or standards have been
established at Community or Member State level (section (viii)), such as food products.28  Mem ber
States may invoke this requirement to take action in emergency situations, and Community-wide
measures may be taken, at the initiative of the Commission, under the RAPEX system  for non-foodproducts.  At the time of the last Trade Policy Re view of the EU, the Commission had decided to ban
the placement on the market of toys and childcare articles, intended to be placed in the mouth of
children under three years of age, made of soft PVC containing certain phthalates, as from 1 January
2000
29;  this Decision has been extended continuously during the period under review, most recently
until 20 February 2002.30  For food products, the EU adopted a new instrument for food safety in
February 2002 (section (viii)), which was first used on 27 March 2002 to suspend the placing on the
Community market and import of jelly confectionary containing the food additive E 425 konjac.31
18. The placement and use of dangerous substances on the Community market, including by
importation, is strictly regulated to protect the public;  the list of covered substances is regularly up-
dated for technical progress.32  In addition, during the period under review, bans affecting creosote
and hexachloroethane were announced, and are to be made effective on 30 June 2003.  The ban on
remaining uses of chrysotile asbestos, which had been  noted in the last Review of the EU and which is
to be made effective by 2005, was unsuccessfully challenged by Canada under the WTO dispute
settlement procedures.33
19. Through a common system of notification and information for imports from and exports to
third countries, the EU controls the trade of certain chemicals that are banned or severely restricted on
account of their effects on human health and the environment;  the Community applies theinternational notification and prior informed consent (PIC) procedure established by the United
Nations Environment Programme (UNEP) and th e Food and Agriculture Organization (FAO).
34
20. The EU applies regulations to trade in wild faun a and flora to implement the provisions of the
Convention on International Trade in Endanger ed Species of Wild Fauna and Flora (CITES),
including by prohibitions and licensing requirements, which are regularly updated in the light ofdecisions made under CITES.
35  The Community has implemented a series of trade measures related
to international resource management and conservation agreements such as the International
Commission for the Conservation of Atlantic Tunas (ICCAT) or the Commission for the Conservation
of Antarctic Marine Living Resources CCAMLR.  The measures include bans on imports of Atlantic
bluefin tuna36 and swordfish37 from countries ICCAT has identified as fishing in a manner prejudicial
to the organization's measures to conserve the species, and the compulsory presentation of a statistical
                                                     
28 Council Directive 2001/95/EC
29 Commission Decision 1999/815/EC.
30 Commission Decision 2001/804/EC.
31 Commission Decision 2002/247/EC.
32 Council Directive 76/769/EEC, as amended.
33 WTO document WT/DS135.
34 Council Regulation 2455/92, as amended.
35 Council Regulation 338/97, as amended.  Commission Regulation 2087/2001 contains the latest list
of restrictions.  Other measures for species protectio n include a prohibition on imports of whales and other
cetacean products for commercial purposes (Council Regulation 348/81), and a prohibition on imports of skins
of seal pups, except for those harvested by Inuit using traditional techniques (Council Directive 83/129/EEC, asamended).
36 Council Regulation (EC) 2092/2000, 28 September 2000.
37 Council Regulation (EC) 2093/2000, 28 September 2000.European Union WT/TPR/S/102
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document when Atlantic bluefin tuna is imported into the territory of a Contracting Party of ICCAT.38
The Council adopted a regulation in May 2001 transposing into Community law measures to
document catches of Antarctic and Patagonian toothfish ( Dissostichus spp ) established by the
CCAMLR.39  The EC is of the view that the measures are fully compatible with its obligations under
Article XX of GATT 1994.40
21. The EU implemented the Montreal Protocol as from 1988, as well as the subsequent
amendments, to control the production, importation, exportation, use and recovery of ozone-depleting
substances, including by prohibitions and licensing requirements.  This framework was replaced
during the period under review with changes designed to broaden the coverage of ozone-depleting
substances subject to disciplines.41  The EU implemented the Basel Convention as from 1994 to
control the export, import, and disposal of hazardous wastes42, and controls by prohibitions and
licensing requirements the movement of radioactive waste.43
22. The EU prohibited the use of leg-hold traps in the Community as from 1995 and, as from
1996, the importation of pelts of certain wild species (e.g. beaver, otter, mink) from countries that
permit leg-hold traps or trapping methods that do not meet international humane trapping standards;
in particular, those agreed in 1998 with Canada, the Russian Federation, and the United States, inbilateral agreements.  Imports of covered species from covered countries are subject to certification.
44
(c) Textiles and clothing products
23. The general principle of the EU's regime for imports is "liberalization of imports, namely the
absence of any quantitative restrictions", although the EC retains the right to apply surveillance or
safeguard measures (section (vii)), as well as trade defence measures (section (xi)).45  This regime
applies to imports of all products from WTO Members except for textile and clothing products that
are not yet integrated into GATT 1994.46  A special regime applies to certain third countries
(section (d)), and imports of textile and clothing products are subject to restrictions either under
bilateral agreements or on an autonomous basis (see below).
24. The main development with respect to textile and clothing products during the period under
review was the implementation by the EU on 1 Ja nuary 2002 of Stag e III of its integration programme
under the WTO Agreement on Textiles and Clothing (ATC).  This stage concerned 18.08% of 1990imports of 3.9 million tonnes, bringing to 51.39% the imports integrated into GATT 1994 since
1995.
47  It included the removal of quantitative restrictions on imports of 11 product categories
(Table III.3), affecting Hong Kong, China; Indi a; Indonesia; Macao; the Philippines; Republic of
Korea; Sri Lanka; and Thailand.  Quota growth rates of between 0.18% and 16.37% apply to
remaining restrictions;  higher growth rates are applied to imports from Peru and Sri Lanka, as smallsuppliers.  All other textile and clothing products are to be integrated on 31 December 2004.
                                                     
38 Council Regulations (EEC) 858/94 and (EC) 1446/99.
39 Council Regulation (EC) No 1035/2001, 22 May 2001 establishing a catch-documentation scheme
for Dissostichus spp .
40 See, for example, COM(2000)344.
41 Council Regulation 2037/2000, to replace Council Regulation 3093/94.
42 Council Regulation 259/1993, as amended.
43 Council Directive 92/3/EURATOM.
44  Council Regulation 3254/91.  The list of countries from which importation is permitted was
established by Council Decision 97/602/EC, as amended, and certification was implemented by Commission
Regulation 35/97.
45 Council Regulation 3285/94, as amended.
46 Council Regulation 3030/1993, as amended.
47 WTO document G/TMB/N/363 and Add.1.WT/TPR/S/102 Trade Policy Review
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Table III.3
EC’s liberalization of quantitative restrictions on imports of textile and clothing products
Product categories subject to limits Product categories not subject to limits
1990 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15, 16, 17, 18,
19, 20, 21, 22, 23, 24, 26, 27, 28, 29, 31, 32, 33, 35,
36, 37, 39, 46, 50, 61, 67, 68, 70, 72, 73, 74, 77, 78,
83, 86, 91, 97, 100, 111, 1350A, 34, 38A, 38B, 40, 41, 42, 43, 47, 48, 49, 51, 53, 54, 55,
56, 58, 59, 60, 62, 63, 65, 66, 69, 75, 76, 84, 85, 87, 88, 90,
93, 94, 95, 96, 98, 99, 101, 109, 110, 112, 113, 114, 115,
117, 118, 120, 121, 122, 123, 124, 125A, 125B, 126, 127A,127B, 128, 129, 130, 130A, 130B, 131, 132, 133, 134, 136,
137, 138, 139, 140, 141, 142, 144, 145, 146A, 146B, 146C,
147, 148A, 148B, 149, 150, 151A, 151B, 152, 153, 154,
156, 157, 159, 160, 161
Product categories integrated
Stage I None 69, 75, 85, 99, 134, 148A, 149, 150, 153
Stage II 19, 77, 46, 61, 67, 70, 72, 74, 86, 91, 100, 111 41, 58, 65, 76, 84, 87, 88, 96, 110, 124, 126
Stage III 10, 18, 21, 24, 27, 32, 33, 36, 37, 68, 73 0, 34, 38, 40, 42, 43, 47, 48, 49, 53, 54, 55, 56, 59, 60, 62,
63, 66, 93, 95, 98, 101, 109, 112, 113, 114, 120, 123, 125,127, 129, 131, 133, 137, 138, 140, 141, 142, 144, 145, 146,
151, 152, 161
Stage IV 1, 2, 3, 4, 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 17, 20, 22,
23, 26, 28, 29, 31, 35, 39, 50, 78, 83, 9751, 90, 115, 117, 118, 121, 122, 128, 130, 130A, 130B, 132,
136, 139, 146C, 147, 148B, 154, 156, 157, 159, 160
Note: See Table AIII.2 for the definitions of product categories and the country coverage of EC trade restrictions.
Source: WTO documents G/TMB/N/60; G/TMB/N/1, Corr.2 and Corr.2/Suppl.1; G/TMB/N/207, Add.1 and Corr.1; 
G/TMB/N/363 and Add.1.
25. The share of restricted 1990 imports concerned by Stage III of the EU’s integration
programme was 15%, three times more than the share concerned by Stage II integration (no restricted
imports were integrated in Stage I).  The main product category concerned by the liberalization in
2002 was nightwear.  This brings to 20% the share of 1990 restricted imports on which the EU has
eliminated the quantitative restrictions, leaving 80%  for the final elimination scheduled for the end of
2004.  These figures tend to show that the EU has back-loaded the liberalization of quantitativerestrictions required under the ATC to the end of the transition period, while meeting the letter of its
commitments on integration of the sector into GATT 1994.
26. As of 1 January 2002, the EU thus continues to maintain quotas carried over into the WTO
from the longstanding Multi-Fibre Arrangement on imports from Argentina; Brazil; Hong Kong,
China; India; Indonesia; Republic of Korea; Macao; Malaysia; Pakistan; Peru; the Philippines;Singapore; Sri Lanka (suspended); and Thailand (Table AIII.2).
48  Consultation levels were
established with Egypt.
27. During the period under review, the EU has continued to conclude memoranda of
understanding with individual exporters of textiles and clothing products, providing for the reciprocal
exchange of concessions on market access for textile and clothing products.  Following those agreedwith India and Pakistan in 1994
49, two more were agreed in 2001, with Sri Lanka and with Pakistan.50
Other memoranda are under negotiation;  the Commission anticipates that these will form the basis for
                                                     
48 Council Regulation 3030/93, as amended.
49 "Memorandum of Understanding between the EC and Pakistan on arrangements in the area of market
access for textiles and clothing products" (OJ L 15 of 27/6/1996) and "Memorandum of Understanding betweenthe EC and India on arrangements in the area of market access for textiles and clothing products" (OJ L 153 of
27/6/1996).
50 "Memorandum of Understanding between the EC and Pakistan on arrangements in the area of market
access for textiles and clothing products" (OJ L 80 of 20/3/2001), and "Memorandum of Understanding betweenthe EC and Sri Lanka on arrangements in the area of market access for textiles and clothing products" (OJ L 80of 20/3/2001).European Union WT/TPR/S/102
Page 35
market-access improvements made by the EU until the end of the transition period for full integration
of the textiles and clothing sector into GATT 1994.51  The memorandum concluded with Sri Lanka
provides for the binding of tariffs on textile an d clothing products in the country’s GATT 1994
Schedule, and their reduction, as well as commitments on non-tariff measures;  similar engagements
have been made by Pakistan.  In exchange, the EU has suspended the application of the quotas on
imports from Sri Lanka, while increasing the base quota level for Pakistan by 15%, to be carried overuntil 2004.
28. With respect to China, which acceded to the WTO in late 2001, the EU maintains quotas under
the ATC carried over from the MFA
52, as well as other quotas (linen, silk, and ramie).53  With respect
to the former, the timetable for the elimination of quotas by 1 January 2005 is presumed to apply.
With respect to the latter, the EU libera lized certain quotas fo llowing China’s accessi on, and intends to
remove the remainder of the quotas no later than 1 January 2005 depending on China’s progress in
removing state trading in silk products, as agreed between the parties in their bilateral agreement on
China’s accession to the WTO. With respect to Chinese Taipei, which also acceded to the WTO in late
2001, the EU removed the quantitative restrictions on products already integrated into GATT 1994 in
the course of Stages I, II, and III of its integration programme, and w ill remove remaining restrictions
no later than 1 January 2005.
29. The EU also maintains quotas on imports from Belarus, Uzbekistan and Viet Nam under
bilateral agreements.54  The EU applies quantitative restrictions on an autonomous basis on imports
from the Federal Republic of Yugoslavia (Serbia and Montenegro) and the Democratic People's
Republic of Korea.55  Surveillance of imports of textile and clothing products under the
double-checking system applies under agreements wi th Armenia, Azerbaijan, Bangladesh, Belarus,
Bosnia and Herzegovina, Cambodia, Croatia, Fo rmer Yugoslav Republic of Macedonia (FYROM),
Kazakhstan, Kyrgyzstan, Laos, Moldova, Mongolia, Nepal, Russian Federation, Tajikistan,
Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, and Viet Nam.56
30. The EU also maintains quantitative restrictions on imports of goods resulting from economic
outward processing traffic (OPT) arrangements.57  These arrangements are available only to
established Community producers and have the objective of maintaining industrial activity in theCommunity.  A producer must obtain prior authorization, which is subject to conditions.
58  An annual
allocation for imports under OPT may be granted up to a maximum of 50% of the value of production
in the Community.  In practice, they have been used to import clothing products into the EU after
textiles exported from the EU have been worked or processed in third countries.  In 2000 and 2001,
allocations of OPT quotas were made to Belarus, China, Federal Republic of Yugoslavia, India,Indonesia, Macao, Malaysia, Pakistan, the Philippines, Singapore, Thailand, and Viet Nam.
                                                     
51 WTO document G/TMB/N/407/Add.1.
52 WTO document G/TMB/N/60/Add.5.
53 WTO document G/TMB/N/64/Add.2.
54 Council Regulation 3030/93, as amended.
55 Council Regulation 517/94, as amended, and implemented by Commission Regulation 3168/1994.
56 WTO document G/LIC/N/3/EEC/4.
57 Council Regulation 3036/94, implemented by Commission Regulation 3017/95.
58 According to Article 2(2)(a) of Council Regulation 3036/94, "that person must:  manufacture, in the
Community, products which are similar to, and at the same stage of manufacturing as, the compensatingproducts in respect of which the application for the arrangement is made, and perform in his own factory, withinthe Community, the main production processes on those products, at least sewing and assembly, or knitting inthe case of fully fashioned garments obtained from yarn".WT/TPR/S/102 Trade Policy Review
Page 36
(d) Special regime for certain third countries
31. A special regime applies to the EU's import arrangements with certain countries:  Albania,
Armenia, Azerbaijan, Belarus, China, Georgia, Ka zakhstan, Democratic People's Republic of Korea,
Kyrgyzstan, Moldova, Mongolia, Russian Federati on, Tajikistan, Turkmenistan, Ukraine, Uzbekistan,
and Viet Nam.59  This regime applies to imports of all products with the exception of textile and
clothing products (see above), and provides for safeguard and surveillance measures of specificapplication to these countries.
32. The regime also provides for quotas on imports from China of footwear, tableware and
kitchenware (ceramic, porcelain and china), as well as surveillance on certain products.  Upon the
accession of China to the WTO, the EU made the commitment to progressively liberalize the quotas
and remove them by 2005.
60  Products from China that are subjec t to surveillance include glassware,
toys, footwear, and bicycles.61
33. The EU maintains quotas on certain steel products imported from Kazakhstan, the Russian
Federation, and the Ukraine, and maintains surveillance on imports of certain steel products from
these origins.
(e) Licensing62
34. The Community requires import licences for products subject to quantitative restrictions,
safeguard measures (section (vii)), or import surveillance.  In addition to imports of textiles and
clothing products subject to quotas, surveillance, or consultation (see above), the Community requires
licensing of imports from WTO Members of certain agricultural products subject to common market
organization – cereals, rice, beef and veal, sheepmeat and goatmeat, milk and milk products, sugar,
processed fruit and vegetables, bananas, oil and fats, seeds, and wine – which, according to the
Commission, serves a statistical purpose and is granted automatically.  A licence is also required toimport within a tariff quota, which applies to a large number of agricultural products.
63
35. Automatic licensing applies to imports from the Czech Republic, the Former Yugoslav
Republic of Macedonia (FYROM), Poland, and the Sl ovak Republic of certain ECSC and EC steel
products subject to surveillance;  under the double-checking system, an export document is required.
During the period under review, the EU reintroduced the prior Community surveillance that applied in2000 to imports of certain iron and steel products covered by the ECSC and EC Treaties from all third
countries, except for EFTA Member States, parties to the EEA, and Turkey.
 64  The Commission
claims surveillance constitutes a monitoring system intended to improve transparency of import trends
of the products concerned, and not to restrict trade.
(vii) Safeguard measures
36. The EU has two safeguard regimes for imports from WTO Members:  Article XIX of GATT
1994 and the relevant WTO Agreement65;  and, for agricultural products, the special safeguard
                                                     
59 Council Regulation 517/94, as amended, and implemented by Commission Regulation 3168/94, as
amended.
60 Annex 7 of WTO document WT/L/432.
61 Annex II of Council Regulation 1139/98.
62 WTO document G/LIC/N/3/EEC/4.
63 WTO document G/LIC/N/3/EEC/4/Add.1.
64 Commission Regulation 2727/1999.
65 Council Regulation 3285/94.European Union WT/TPR/S/102
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mechanism of the WTO Agreement on Agriculture fo r products noted as "SSG" in Schedule CXL.66
For China, specific safeguard regimes have been incorporated into its Protocol of Accession for
textiles and clothing products67, and for other products.68  The EU applies a separate safeguard regime
to certain third countries not Members of the WTO (see above).
37. The Commission initiated a safeguard investigation on 21 steel products on 27 March 200269,
and took provisional action on the same date on 15 steel products in response to the U.S. safeguardaction on imports of steel, effective on 20 March 2002
70;  a dispute settlement proceeding was also
initiated on 13 March 2002.71  Supplementary duties of between 14.9% and 26% are to be triggered
by volumes rising above levels of trade set at 2001 levels (the average reached for 1999-01 plus 10%),
to prevent diversion of trade from the U.S. market onto the EU market.  In addition, the Commission
proposed on 19 April 2002 that the Council agree additional duties of between 8% and 100% onproducts imported from the United States, to match the amount of duties to be collected on
Community exports of the products covered by the U.S. safeguard measure (€ 626 million), as "re-
balancing" measures, given the failure of the two parties to agree compensation for the Article XIX
measure on steel imposed by the United States.
72
38. The EU continues to make use of the special safeguard mechanism under the WTO
Agreement on Agriculture.  This mechanism permits the imposition of "snap-back" tariffs, which the
EU may invoke either when import prices fall below trigger prices, or if import volumes rise above
trigger volumes.73  During the period under review, the EU invoked, for the marketing year 1999-00,
the price-based SSG for poultry meat and certain sugar products, and made operational the volume-
based SSG for tomatoes, cucumbers, artichokes, courgettes, oranges, clementines, mandarins,
satsumas, wilkings and similar citrus fruits, lemons, apples, table grapes, and pears.74
(viii) Product regulations and standards75
(a) Overview
39. In order for a product to be placed on the market of a Member State, it must comply with the
relevant regulations, where they exist, to meet health, safety, and environmental objectives,
established by means of conformity assessment procedures;  in all other cases, a general product
safety requirement applies.76  Other general requirements for all products include:  protection against
misleading advertising and dishonest provisions in contracts with consumers, liability for defective
products, including for primary agricultural products, and correct indication of prices.77
40. Where they exist, regulations lay down product characteristics or their related processes and
production methods, and may include or deal with terminology, symbols, packaging, marking or
                                                     
66 WTO document G/SG/N/1/EEC/1.
67 WTO document WT/ACC/CHN/49.
68 WTO document WT/L/432, section 16.
69 OJ C 77 of 28/3/2002.
70 Commission Regulation 560/2002.  See European Commission MEMO/02/67.
71 WTO document WT/DS248.  See also complaints initiated by Japan (WT/DS249), Republic of
Korea (WT/DS251), China (WT/DS252), Switzerland (WT/DS253), and Norway (WT/DS254).
72 COM(2002)202.
73 WTO document G/AG/N/EEC/2.
74 WTO document G/AG/N/EEC/33.
75 According to Annex 1 of the WTO Agreement on  Technical Barriers to Trade (TBT Agreement),
compliance with a technical regulation is mandatory, while compliance with a standard is voluntary.
76 Council Directive 2001/95/EC.
77 Council Directives 84/450/EEC, 85/374/EEC and 98/6/EEC, respectively.WT/TPR/S/102 Trade Policy Review
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labelling requirements as they apply to a product, process or production method.  Fulfilment of these
requirements is established through conformity assessment procedures.  Such regulations are
developed at Community level ("harmonized" areas)  for EU-wide application, or at national level
("non-harmonized" areas);  as was noted at the ti me of the previous Review, exporters benefit from
Community harmonization efforts, in principle, as one set of regulations replaces 15 potentially
different sets.  Non-harmonized products account for about 21% of the total.78
41. Product regulations at Community level are of two main types:  "old approach" product-
specific regulation lays down detailed and specific technical requirements, and applies in particular to
motor vehicles, chemicals, food products, and pharmaceutical products;  "new-approach" regulations,
which apply to a large number of areas, limit mandatory obligations to essential requirements, defined
to meet health, safety, and environmental objectives, while leaving specific technical solutions tomeet these requirements to the market, either th rough voluntary standards or a manufacturer's own
solution.
79  New approach directives apply to the relevant products placed and put into service on the
Community market for the first time, including imported products.  The person placing the product on
the market assumes responsibility for compliance with the relevant legislation.  The manufacturer
must affix the "CE" mark to the product to indicate compliance with essential requirements, which hasbeen established by the prescribed conformity assessment procedures, including, among others, the
manufacturer’s declaration of conformity, without which the product may not be placed on the EU
market.  European standard-setting bodies have  developed harmonized standards for new approach
directives, the application of which leads to a presumption of conformity with essential requirements.
42. In non-harmonized areas, Member States may legislate but are required to notify the
Commission of draft national measures to prevent unjustified restrictions to trade.
80  Furthermore,
Member States are required to grant mutual recognition to products lawfully produced and marketedin another Member State, subject to protection of overriding public interests.
81  In the latter case,
departure from mutual recognition must be both necessary and proportionate.  The Commission has
noted the "economically significant impact" of pr oblems encountered with the application of the
                                                     
78 COM(2001)736.
79 New approach directives concern:  low voltage equipment;  simple pressure vessels;  safety of toys;
construction products;  electromagnetic compatibility;  machinery;  personal protective equipment;  non-automatic weighing instruments;  active implantable medical devices;  appliances burning gaseous fuels;  energy
requirement for new hot-water boilers fired with liquid or gaseous fuels;  explosives for civil uses;  medical
devices;  equipment for use in explosive atmospheres (ATEX);  recreational craft;  packaging and packaging
waste;  lifts;  interoperability of trans-European high-speed rail system;  energy efficiency requirements forhousehold electric refrigerators, freezer s and combinations thereof;  marine equipment;  pressure equipment;  in
vitro  diagnostic medical devices;  and radio equipment and telecommunications terminal equipment and the
mutual recognition of their conformity.  See online information.  Available at:  http://www.newapproach.org/ .
80 Directive 98/34/EC.  Decision 3052/95/EC allows the Commission to be informed of measures
already taken and implemented that derogate from the principle of the free movement of goods within theCommunity. The Commission has organized sector-specific round tables on mutual recognition with respect tofood products and industrial products.
81 According to the 1979 "Cassis de Dijon" ruling of the European Court of Justice, discussed in a
Commission Communication (OJ C 256, 3/10/1980), free movement of goods between Member States is the
core principle, and accordingly any product lawfully produced and marketed in one Member State must, in
principle, be admitted to the market of any other Member State.  Article 30 of the EC Treaty provides forjustified prohibitions or restrictions of imports, exports or goods in transit on the grounds of the protection ofhealth and life of humans, animals or plants provided that such prohibitions or restrictions do not constitute ameans of arbitrary discrimination or a disguised restriction on trade.European Union WT/TPR/S/102
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principle, and estimated the upper bound of the trade gains from perfect application of mutual
recognition at 1.8% of EU GDP.82
43. Major developments in the period since the la st Review of the EU include the adoption in
February 2002 of a framework of general principles for food law, on which all future food law will be
based, and against which all existing food law will be reviewed.83 As was noted at the time of the
previous Review, a number of food scares at the Community level, as well as controversies over theplacement of novel foods on the market, had led to a debate on the issue of food safety.
84 The EU also
established on 28 January 2002 the European Food Safety Authority (EFSA), to provide scientific
input to the Community decision-making process, to become operational as soon as possible in 2002.
Another major development concerns the issue of managing waste more effectively, as 1.3 million
tonnes are generated each year, with each type of waste posing specific environmental concerns.85
The Commission is proposing an "integrated product policy", which concerns the strategy on the
sustainable use of resources and on waste recycling, and will issue a White Paper.
44. Regulatory activities in both harmonized and non-harmonized areas are subject, where
appropriate, to the obligations assumed by the EU and the Member States under the WTO Agreement
on Technical Barriers to Trade (TBT Agreement) and the WTO Agreement on the Application ofSanitary and Phytosanitary Measures (SPS Agreement).  The EU or a Member State is to publish draft
and final legislation, notify the WTO of draft regulations that may "have a significant effect on trade
of other Members", and generally provide a 60-day period for comments;  in 2000 and 2001, the EU
and its Member States notified the WTO of 148 and 110 measures under the TBT Agreement,
respectively (Table III.4);  additional measures were notified to the SPS Committee.  The
Commission has also established enquiry points for harmonized areas, and Member States have
enquiry points in their domains.  The European st andard-setting organizations and their national
committees have each accepted the TBT Code of Good Practice for the Preparation, Adoption and
Application of Standards.
Table III.4
WTO notifications of technical regulations by the EU and Member States, 1995-01
MEMBERSa
Year Total EU B DK D EL E F IR I L NL A P F S UK
1995 123 3 1 1 7 2 8 20410 0 0 3 3 0 0 4 5 0
1996 123 4 6 1 3 1 5 30720 0 0 0 0 0 7 3 0 0
1997 437 20 48 23 3 0 5 15 1 0 1 287 2 0 5 22 5
1998 276 36 49 40 3 0 9 20 0 0 2 91 1 0 5 18 2
1999 185 34 23 27 3 0 9 21 0 0 1 48 2 0 3 9 5
2000 148 1 6 1 9 2 5 00670 0 0 4 6 0 0 5 1 5 9
2001 110 7 2 67 00990 0 0 4 0 0 0 3 8 1
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Spain;  F:  France;  IR:  Ireland;  I:  Italy;  L:  Luxembourg;  N L:  
The Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  United Kingdom.
Source: WTO Secretariat.
                                                     
82 COM(2001)736.
83 Regulation 178/2002.
84 COM(2000)1.
85 European Commission SPEECH/01/302.WT/TPR/S/102 Trade Policy Review
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(b) Regulatory developments
Chemical products
45. During the period under review, the Commission proposed:  the simplification and
environmental upgrading of legislation on detergents, as well as new mandatory labelling
requirements86;  and the simplification of legislation on fertilizers.87  The EU adopted new legislation
on the manufacture and the placing on the market of drug precursors.88
46. The Commission launched a debate, in February 2001 on the future policy on chemicals,
concerned with meeting high standards of health and consumer protection, the efficient functioning of
the Internal Market and stimulating innovation in the sector in the context of the objective of
sustainable development.89  The Commission notes the weaknesses of the existing system with respect
to risk assessment of the many chemicals on the EU market, and proposes the reversal ofresponsibility from public authorities to industry for testing and risk assessment of chemicals.  A new
system of registration, evaluation, and authorization/restriction for new (post-1981) and existing
(pre-1981) chemical substances (REACH) would be  phased in over a period of 11 years.  The
REACH System will apply to producers and importers of substances and to downstream industries.
Pharmaceutical products47. During the period under review, the EU adop ted Community Codes on medicines intended
for human use and for veterinary use, consolidating the bodies of legislation in these areas.
90  A
Community authorization permits placement on th e Community market of medicinal products,
including imported products, and requires a scientific evaluation by the European Agency for the
Evaluation of Medicinal Products (EMA).91  Such an authorization is required for placement on the
market of certain novel medicinal products (e.g., recombinant DNA technology), and may be
requested for any other new medicinal product for human or veterinary use, as an alternative toobtaining marketing authorization in each Member State, noting that the principle of mutual
recognition applies in intra-Community exchanges.  In November 2001, the Commission proposed to
modify the framework for the single Community authorisation.
92  In addition to speedier procedures,
in principle, the proposal clarifies the authorization procedures for generics, and for medicinal
products containing or produced from GMOs.
Food
48. The new framework for food law, adopted by the EU in 2002, harmonizes the concepts,
principles and procedures to be used by Member States by 1 January 2005, and all existing law is to
be reviewed by 1 January 2007;  harmonization of food law as such is not implied.  Scientific
evidence is to underpin the food safety policy, with the precautionary principle to be used whereappropriate.
93 The primary task of the new European Food Safety Authority (EFSA) is to provide
scientific advice on food safety issues to the Commission and, upon request, to Member States;
several Member States have established their own capacity in this area during the period under review
                                                     
86 European Commission Press Release IP/01/1158.
87 COM(2001)508.  See European Commission Press Release IP/01/1275.
88 Directive 92/109/EEC, as amended by Directive 2001/8/EC.
89 COM(2001)88. See European Commission Press Release IP/01/201.
90 Directives 2001/83/EC and 2001/82/EC.
91 Regulation 2309/93.
92 COM(2001)404.
93 COM(2000)1.European Union WT/TPR/S/102
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(e.g., AFSA in France).  The establishment of E FSA is intended to respond to consumer concerns on
the independence of the process by which food law is developed and monitored at Community level,
and to create additional capacity for scientific assessment.94  EFSA is also to administer the
Commission system for the rapid exchange of information among the Member States in the event of a
serious and immediate risk to the health and safety of consumers from foodstuffs.
49. Changes were also made to the legislative framework for the placement on the market of
genetically modified organisms (GMOs) and produc ts that may contain GMOs or GMO derivatives,
which was noted to be an area of controversy at the time of the last review, both within the EU and
between the EU and the United States.95  Although 18 authorizations for placement on the Community
market had been issued in the course of the 1990s, the process of marketing new products throughout
the Member States was effectively frozen since 1998.  The new legislation tightens authorizationprocedures, which are to be time-bound, and provides for mandatory labelling;  however, certain
Member States have continued to oppose the licensing of GMOs, pending the introduction of
traceability on labels (see below).
96 The Community is also considering amendments to its legislation
banning the use of hormones as growth promoters (see below) with the objective of bringing the
legislation into compliance with WTO rulings on the matter.97
Industrial products
50. During the period under review, the EU revised downwards the noise and emission limits for
pleasure boats98, and new lower emission limits were agreed for non-road machinery.99  T h e
Commission has issued a number of proposals to simp lify or update for technological progress certain
directives on product regulations.  Simplification and enhanced scope are being proposed for a new
machinery directive.100  Simplification and upgrading has been proposed for measuring instruments.101
Labelling
51. At the time of the last Review of th e EU in mid 2000, the Community had mandatory
labelling requirements for:  health warnings on tobacco products; alcoholic content of beverages;
cosmetic products; energy consumption of household appliances; materials used in the main
components of footwear for sale to a final consumer; textile names; foods and food ingredients
produced from GMOs (novel foods); traceability of  beef and beef products; and medicinal products
for human use.102  During the period under review, the EU adopted a new policy on tobacco products,
concerning their manufacture, presentation and sale, including labelling, to be implemented by
30 September 2002;  the rules also apply to Community tobacco products sold in third countries as
                                                     
94 European Commission SPEECH/00/425 and MEMO/01/441.
95 Directive 90/220/EEC, as amended.  See European Commission MEMO/00/43 and WTO(2000),
Box III.1.
96 Financial Times , 16 February 2001.
97 Directive 96/22/EC.
98 European Commission Press Release IP/01/512.
99 European Commission Press Release IP/00/1497.
100 COM(2000)899.  European Commission Press Release IP/01/184.
101 COM(2000)566.  European Commission Press Release IP/01/1015.
102 Directive 89/622/EEC, as amended; Directive 76/776/EEC; Directive 76/768/EEC, as amended;
Directive 92/75/EEC;  Directive 94/11/EC;  Directive 96/74/EC, as amended;  Directive 258/97;  Regulation1139/98;  Regulation 820/97 provided for a beef-labelling scheme that was optional up until the end of 1999 andbecame compulsory on 1 January 2000 for products of Community or imported origin; and Directive92/27/EEC.WT/TPR/S/102 Trade Policy Review
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from 2007.103  The EU adopted stricter labelling requirements for beef.104  The Commission also
adopted mandatory labelling requirements for eggs105, in line with the minimum standards for the
protection of laying hens.106  A mandatory labelling requirement has been proposed for animal-tested
cosmetics until the entry into force of a ban on animal-tested cosmetics, which would apply to all such
products, including of imported origin.107  The Commission has also proposed comprehensive
traceability labelling requirements for products containing, or produced, from GMOs.108
52. A voluntary European eco-label (the Flower) award scheme has been in place since 1992, and
was revised in 2000;  certain Member States have established their own eco-labelling system (e.g.,
Germany’s Die Grune Punkt).109  The label may be awarded to  products that meet the ecological
criteria established by the Commission.  These criteria take into account the life cycle of the product,
are normally valid for three years, and are then  revised.  Public consultations accompany the
establishment and revision of criteria, which are open to participation by non-EU parties. Companies
from developing countries benefit from a 25% reduction in fees, as well as small and medium-sized
enterprises (both reductions are cumulative) .110  To date, 100 companies use the logo.
Waste
53. With respect to product-related waste management, during the period under review the EU
adopted the directive on end-of-life vehicles for transposition into national law by 21 April 2002111;
the Commission issued a proposal on waste electronic and electrical equipment (WEEE) and on
restricting use of certain hazardous substances in such equipment112;  it proposed a revision to the
packaging waste directive113;  and launched a consultation on managing PVC (e.g., plastics from
vehicles).114  Both the end-of-life vehicles directive and the proposed WEEE directive depart from the
previous practice of delegating waste management to public authorities by introducing "producer
responsibility" for the treatment, recovery, and disposal of products, based on the argument that it willact as a financial incentive for producers to design their products to facilitate waste management,
particularly recycling.  Further developments may result from the "Integrated Product Policy" under
elaboration by the Commission.
54. According to the end-of-life vehicles directive, producers of vehicles, imported or
Community-produced, must either take back vehicles or finance the cost of treatment facilities to
                                                     
103 Directive 2001/37/EC, to replace Directives 89/622/EEC and 90/239/EEC, and the 1998 Directive
on advertising that was annulled by the European Court of Justice.
104 Regulation 1760/2000.  See European Commission Press Release IP/00/799.  See European
Commission Press Release IP/01/1913 for tighter rules applicable from 1 January 2002.
105 Commission Regulation 1651/2001 states that egg packs must be labelled as either "free range
eggs", "barn eggs" or "eggs from caged hens", and that eggs must be labelled as either "free", "barn" or "cage".The instrument also clarifies the minimum production requirements for each category of egg.
106 Directive 1999/74/EC.
107 European Commission Press Release IP/00/335.
108 European Commission Press Release IP/01/1095.
109 Regulation 1980/2000.  The EU Eco-labelling Board (EUEB) has been established to develop the
ecological criteria, and assessment and verification requirements, and to promote the eco-label;  non-EU
countries have the status of observers.
110 European Union online information.  Available at:  http://europa.eu.int/environment/ecolabel
111 Directive 2000/53/EC.
112 COM(2000)347.  See European Commission Press Release IP/00/602.  Also related are the
Commission initiatives on the free movement of green electrical goods (see European Commission PressRelease IP/01/313).
113 COM(2001)729.  See European Commission Press Release IP/01/1773.
114 COM(2000)469.  See European Commission MEMO/00/46.European Union WT/TPR/S/102
Page 43
process end-of-life vehicles, by 2007 for vehicles placed on the market prior to 2002, and as of July
2002 for vehicles placed on the market at that date or later.  By 2005, vehicles on the Community
market are to be recyclable to a minimum of 85% by  weight per vehicle and are to be re-usable and/or
recoverable to a minimum of 95% by weight per vehicle.
55. Under the proposed WEEE directive, producers will be responsible for collecting waste
electrical and electronic equipment from designated collection points for treatment;  such wasteaccounted for 4% of the waste stream in 1998, but is the fastest growing component, increasing at
3-5% annually, and is a source of pollutants in the municipal waste stream.  The proposal sets
minimum percentages for the recovery of waste of between 60% and 80%, depending on the product
category, to enter into force no later than 2006.  According to the Commission, this producer’s
responsibility to organize and finance the treatment, recovery, and disposal of waste is in line with thepolluter-pays principle, since the additional costs for waste management will be passed on to the
consumer by the producer.
115  Producers are free to establish the mechanisms to fulfil the
requirements of the directive, either on an individual basis or collectively.  It should be noted that, at
the time of the last review of the EU, when the pr oposal had just been issued, a number of EU trading
partners had expressed disapproval with the nature of the obligations imposed on producers and on thelate stage in the process at which the proposal had been discussed in the TBT Committee.
116
56. The Commission has also proposed raising the recovery and recycling targets for Member
States.  In particular, the recycling target for packaging is to be raised from 25-40% in 2001 to
55-70% in 2006.  The proposal does not contain provisions on producer responsibility for attaining
these targets, which the Commission intends to address in forthcoming planning documents.  In
another development, the Commission has pursu ed an infringement proceeding on Germany’s
implementation of the directive, which is considered to impose re-use packaging requirements onproducers of natural mineral waters that are a barrier to trade.
117
(c) Standards118
European standard-setting
57. European standards organizations, CENELEC and CEN, develop European standards in a
consensual process with national committees (representing all 15 Member States, Norway,Switzerland, Iceland, the Czech Republic, and Malta).   The European Telecommunications Standards
Institute (ETSI) is constituted upon membership representing public authorities, manufacturers, and
operators from the geographic area of the European Conference on Postal and Telecommunications
Administrations (CEPT).
119 According to the Commission, more than 80% of the standardization
activity of the EU takes place at European level (or international level), whereas 80% was at nationallevel in 1985.
120  However, the speed of delivery of standards is a key concern, as it may take up to
                                                     
115 European Commission Press Release IP/00/602.
116 WTO document WT/TPR/M/72.
117 European Commission Press Release IP/01/473.
118 According to Annex 1 of the TBT Agreement.
119 CEPT members are: Albania, Andorra, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina,
Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain,
Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova,
Monaco, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, San Marino, Slovakia,Slovenia, Spain, Sweden, Switzerland, the former Yugoslav Republic of Macedonia, Turkey, Ukraine, and theVatican.
120 COM(2001)736.WT/TPR/S/102 Trade Policy Review
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eight years to complete a standards programme in response to a New Approach directive as a result of
the difficulty of reaching consensus among the numerous stakeholders.
58. The main avenue for standard-setting activity at European level is an industry-led initiative,
whose costs are borne by the industry.  For a small fraction of standards, the initiative comes from the
Commission, in particular for the harmonized standards to provide technical solutions to meet the
essential requirements of the new approach directives.  Progress in agreeing European standards forNew Approach directives has continued to be made during the period under review, in particular for
construction products (e.g., cement, structural bearings, and lifting plants), after a 12-year process of
elaboration.  Standardization is nearing completion for toys, weighing instruments, gas appliances,
and simple pressure vessels.
121
International standard-setting
59. In non-food product areas, both the European and the national standard-setting bodies of the
Member States are active in the technical bodies of the International Organization for Standardization
(ISO) and International Electrotechnical Commi ssion (IEC) in order to develop voluntary
international standards.  With respect to food regulations and standards, each Member State is
represented at the Codex Alimentarius Commission, which is a joint FAO/WHO programme todevelop an international food code.
60. The Commission issued further guidelines in mid-2001 on the EU policy with respect to
international standards.
122  The guidelines confirm that, on the one hand, the advantages of
international standardization are recognized as facilitating trade, and that, on the other hand,
"standards cannot replace governmental responsibility to safeguard a high level of protection
concerning health, safety and the environment".  The Commission notes that the TBT Agreement
establishes the obligation to use international standards where they exist as the basis for technicalregulations, except when these would be inappropriate to meet public policy objectives.  The
Commission is of the view that "each WTO Member has the sovereign right to define the level of
protection it deems appropriate to meet legitimate objectives, subject to the requirement that they not
be applied in an arbitrary or discriminatory manner". It is also of the view that international standards
"may be seen as beneficial in some instances, but they may be perceived as little advantageous oreven as threats in others".
 123
61. Through the Vienna and Dresden agreements with ISO and IEC, respectively, the CEN has
committed itself to, and the CENELEC has obliged itself to, adopt international standards as
European ones.  In the case of some harmonized standards used in relation with New Approach
directives, modifications to the international sta ndards may be necessary to ensure compliance with
legal requirements concerning the protection of public health, safety or the environment in the
Community. The result of the agreed cooperation between the European and international standards
organizations is, according to the Commission, a high level of transposition of international standards
as European standards:  over 40 % for CEN and about 80% for CENELEC.
62. As was noted at the time of its last Review, the EU has been involved in a long-standing
WTO dispute settlement proceeding on hormone-t reated beef, as a result of which Community
exports underwent retaliation by the United States and Canada in 1999;  this continues to be in
                                                     
121 COM(2001)527.
122 SEC(2001)1296, p.3.  See also COM(1996)564.
123 SEC(2001)1296, p.5.European Union WT/TPR/S/102
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place.124  According to the Commission, a WTO Member may impose more trade restrictive measures
if there is scientific evidence (a risk assessment) justifying measures leading to a higher level of
protection than by applying Codex standards.125  During the period under review, the Community has
engaged in a risk assessment for its measures with respect to hormone-treated beef, and is considering
revisions to  its legislation banning the use of ho rmones as growth promoters.  Another controversial
issue at the time of the last Review concerned a regulation on aflatoxin, which affected in particularthe trade interests of exporters of  cereals, dried fruit, and nuts.
(d) Conformity assessment
63. In the area of New Approach directives, conformity assessment is based on the intervention of
a first party (manufacturer) or a third party (notified body), and relates to the design phase of products
and/or to their production. Should a manufacturer subcontract the design and/or production, he stillremains responsible for the execution of the conformity assessment procedures for both phases.
Conformity assessment procedures are defined in a limited number of modules, which give the
legislator, in relation to the type of products and risks involved, the means to set up the appropriate
procedures for manufacturers to demonstrate product conformity against the provisions of the
directive. In setting the range of possible modules, directives take into consideration such issues as thetype of products and the nature of risks involved. Additionally, the conformity assessment procedures
under a specific directive must provide, in an equivalent way, sufficient confidence as regards the
conformity of products to the relevant essential requirements.
64. To reduce the burden of conformity assessment, two types of agreement have been concluded
by the EU:  Protocols to the Europe Agreements on Conformity Assessment and Acceptance of
Industrial Products (PECAs);  and Mutual Reco gnition Agreements (MRAs) for the results of
conformity assessment with certain third countries.  Both types of agreement provide for the mutualacceptance of test reports, certificates, and marks of conformity issued by designated CABs in
"sectors" established in Annexes.
65. PECAs are based on the commitment of the candidate countries to ensure full conformity
with Community technical regulations and European standardization and conformity assessment
procedures, while no such commitment underlies the MRAs.  PECAs have been concluded withHungary and the Czech Republic and entered into force in mid 2001, with sectors being added as
negotiations progress.  PECAs have been concluded with Latvia and Lithuania, and are under
negotiation with Estonia, Latvia, Lithuania, Slovakia, and Slovenia.  Negotiations on a PECA are
expected to be launched with Poland.
66. During the period under review, an MRA with Japan entered into force on 1 January 2002,
and the MRA with Switzerland is expected to ente r into force in the course of 2002.  MRAs were
already in force at the time of the last Review with Australia, Canada, Israel, New Zealand, and the
United States.  In the guidelines ("tool-box" paper) issued in mid 2001 on the subject, theCommission noted that "MRAs are only worth negotiati ng in the following circumstances:  (i) where
certification systems are not too different in principle and in practice;  (ii) where there are substantial,
functioning regulatory, standards and certification infrastructure and market surveillance
infrastructures and capacities, that are comparable and compatible with those of the EU;  (iii) where
trade between the parties is sufficient to justify the cost involved in setting them up;  and (iv) wherethe trade that is being liberalised offers some opportu nities to open markets to EU industry as well as
                                                     
124 See complaints by the United States (WT/DS26) and Canada (WT/DS48).  For the latest
information on the proceeding, see WTO online information.  Available at:  www.wto.org  .
125 European Commission MEMO/00/27.WT/TPR/S/102 Trade Policy Review
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to that of the third country, since political support from industry is evidently necessary if trade
liberalisation measures are to gain support."126
(ix) Government procurement
(a) Overview
67. The Commission continues to give priority to the opening up of public procurement to
competition due to its importance in the market for goods and services – some 16% of CommunityGDP, or over  € 1,350 billion, in 2000 – and potential benefits in terms of a better use of public
monies and a more efficient allocation of resources.
127  The Community framework to attain this
objective, consisting of harmonizing directives for Member State legislation on procurement adopted
in the context of the Single Market, has not been modified during the period under review.  To
consolidate the existing framework and make substantive amendments to provisions, the Commissionissued proposals for two Directives
128, and for a regulation to mandate the use of the "Common
Procurement Vocabulary (CPV)" to ensure full comparability of published tenders.129  Standard forms
are to be used as from 1 May 2002 in contract notices published in the Official Journal .130
68. An indicator of the extent to which procurement is "open" to competition is the share of
procurement that is openly advertised in the Official Journal  (Table III.5).  According to the latest
available figures, some 15% of all procurement in the EU (about € 205 billion) was advertised in the
Official Journal  in 2000, up by almost 100% from 1995.  All Member States recorded considerable
improvement in this respect, with the exception of  Germany, the largest procurement market in the
EU, which raised the share of advertised procurement from 5% to 6%, and Portugal, which
maintained its share at 15%.  In relation to GDP, the share of openly advertised procurement has also
risen considerably since 1995 in all Member States, with the exception of Greece, Portugal, and
Germany, to reach 2.41% of EU GDP.
Table III.5
Open procurement indicators, 1995 and 2000
MEMBERSa
EU B DK D EL E F IR I L NL A P FI S UK
Openly advertised public procurement (% of total procurement)
1995 8 7 16 5 34 9 5 11 10 5 5 5 15 8 12 15
2000 15 16 21 6 38b25 15 21 18 12 11 13 15 13 20 22
Openly advertised public procurement (% of GDP)
1995 1.44 0.99 2.67 0.91 4.87 1.18 0.94 1.54 1.23 0.8 0.99 0.83 2.19 1.3 2.41 3.28
2000 2.41 2.32 3.55 0.96 4.37 3.25 2.44 2.6 2.17 1.67 2.19 2.31 2.12 2.01 3.67 3.81
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Spain;  F:  France;  IR:  Ireland;  I:  Italy;  L: Luxembourg;  NL :  
The Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  United Kingdom.
b 1999.
Note The term "openly advertised" refers to publication in the Official Journal .
Source: Eurostat, Public procurement 1 and 2, Key Indicators.
                                                     
126 SEC(2001)1570, p.15.
127 European Commission SPEECH/00/185.
128 COM(2000)275 and COM(2000)276.  See European Commission Press Release IP/00/461.  For
background see COM(98)143.
129 European Commission Press Release IP/01/1189.
130 Council Directive 2001/78/EC.  See European Commission Press Release IP/01/1271.European Union WT/TPR/S/102
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69. Suppliers of goods and services from parties to the WTO plurilateral Agreement on
Government Procurement (GPA) may tender for cont racts (above specified thresholds) in accordance
with the commitments assumed by the EU.131  In addition, the regional trade agreements recently
concluded by the EU (Chapter II(4)(ii)) provide for reciprocal access to procurement.
(b) Proposed legislative framework
Current framework70. Under the current legislative fr amework, three directives concern public supplies, works, and
services
132, complemented by a remedies directive.133  Another directive concerns the procurement by
publicly owned entities and private entities with special or exclusive rights operating in the water,
energy, transport, and telecommunication areas (utilities directive)134, also complemented by a
remedies directive.135  The scope of application in each of the directives is established by minimum
thresholds for contracts, which correspond where necessary to those in the GPA, while below-
threshold contracts are covered by the provisions and principles of the EC Treaty.
71. During the period under review, the Commission has pursued a "more systematic, horizontal
approach in handling cases of infringement of the public procurement rules rather than just reacting
case-by-case to complaints received".136  This has involved preventing infringements from taking
place when major events or infrastructure projects are being prepared, or taking a horizontal approach
to a problem detected in one Member State.  The Commission continues to have recourse as well to
the infringement (Article 226) procedure for dealing with instances where directives have not been
transposed;  infringement proceedings against Austria, France, Greece, and the United Kingdom
concerning failure to transpose legislation, which inter alia  take into account certain provisions of the
GPA, were concluded upon implementation of the directives in question.  The Commission also
handled 272 complaints concerning the award of contracts in 2001, including 103 new ones, withprogress reported on resolving irregularities.
Proposed legislation
72. Under the proposed new legislative framework, the first group of three directives would be
consolidated into a single directive, covering supplies, works, and services (excluding most defence
contracts and those covered by the utilities directive), still complemented by the remedies directive.A single harmonized threshold expressed in euros would apply for each category of contract:  supplies
and services (€ 130,000 for a central purchasing entity and € 200,000 for sub-central purchasing
entities); and works (€ 5,300,000).  According to the Commission, the new thresholds would not
change the effective scope of application of the procurement rules, and would therefore pose no issues
                                                     
131 The GPA was transposed into EC law by Council Decision 94/800/EC.  The scope of the EU's
commitments concern the procuring entities listed in Annexes 1, 2 and 3 of Appendix I of its Schedule, relating
to central government entities, sub-central government entities, and other entities such as utilities, respectively,
and subject to minimum thresholds for contract values;  and of goods and services and construction servicesspecified in positive lists, found respectively, in Annexes 4 and 5 of Appendix I (WTO documentGPA/W/35/Rev.1).
132 Directives 93/36/EC, 93/37/EC and 92/50/EC, amended by Directive 97/52/EC.
133 Directive 89/665/EEC.
134 Directive 93/38/EC, amended by Directive 98/4/EC.  In order to open the market for public
procurement, the Community amended the directive to extend the scope of utilities operating under conditionsof effective competition, notably in energy and telecommunications.
135 Directive 92/13/EC.
136 COM(2001)309, p.88.WT/TPR/S/102 Trade Policy Review
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in relation to the GPA.  The scope of covered services would extend to telecom services, currently
excluded.
73. Other proposed substantive amendments to these directives concern the introduction of the
new possibilities for relations between the contracting authority and suppliers.  One proposal concerns
"dialogue" with candidates during the tendering process, which is not allowed under existing
procedures, for "particularly complex contracts".    Another proposal concerns exempting the award of
contracts from the requirements of the Directive when a "framework" agreement has been concluded
between the contracting authority and selected suppliers, itself awarded on the basis of the Directive.
Other proposed substantive amendments concern greater flexibility for technical specifications, as
well as modified award and selection criteria.
74. A new utilities directive has also been proposed, whose scope would be reduced to water,
energy, and transport, still complemented by the relevant remedies directive.  The Commission has
justified the exemption for telecoms operators on the grounds that effective competition has been
realized in the sector (Chapter IV(4)) and commercial considerations govern procurement decisions.
New thresholds would apply:  supplies, services and designs (€ 400,000);  and works (€ 5,300,000).
The Commission has noted that the objective is to harmonize thresholds for GPA and non-GPAcovered procurement, posing no issues in relation to the GPA.
75. Provisions common to both sets of proposals are:  to extend the scope for electronic tendering
to 100% of all covered contracts, shorten the delays for the award procedure in certain circumstances
where electronic means are used;  and describing the subject-matter of tender by reference to CPV.
137
(x) State-trading (as defined in GATT Article XVII)
76. The Commission has notified the WTO of the existence of two state-trading enterprises:  Gaz
de France, for lighting gas, producer gas, water gas, and similar gases;  and Entreprise Minière etChimique, for mineral or chemical potassium fertilizers.
138  The Commission has also informed WTO
Members that the import and export monopoly on electricity of Electricité de France was eliminated
in 2000.  The monopoly on the importation of tobacco from third countries in Italy was eliminated
during the period under review.
(xi) Anti-dumping and countervailing measures
(b) Anti-dumping measures
77. As was noted at the time of the last Review of the EU in mid 2000, the anti-dumping
legislation for imports from third countries, as notified to the WTO139, applies to agricultural and
industrial products, and separate legislation applies to products covered by the ECSC Treaty.140  The
legislation applies to all third countries, including preferential trade partners, except for members ofthe EEA in the sectors where the EU's competition policy framework applies.  The legislation
contains special rules for economies in transition, which were amended in October 2000 to grant
"market economy treatment" to exporters from Albani a, Georgia, Kazakhstan, Kyrgyzstan, Mongolia,
                                                     
137 COM(2001)449.  See European Commission Press Release IP/01/1189.
138 WTO documents G/STR/N/5/EEC, G/STR/N/6/EEC, G/STR/N/7/EEC.
139 Regulation 384/96 notified in WTO documents G/ADP/N/1/EEC/1, G/ADP/N/1/EEC/1/Suppl.1 and
G/ADP/N/1/EEC/2.
140 Commission Decision 2277/96/ECSC (commonly referred to as the "ECSC Decision").  Upon the
expiry of the ECSC Treaty in 2002, the products covered are to become subject to the common commercialpolicy under Article 133 of the EC Treaty.European Union WT/TPR/S/102
Page 49
Ukraine, and Viet Nam on an ad hoc basis for the purpose of anti-dumping investigations, in addition
to those from China and the Russian Federation.141  Other countries with an economy in transition are
to benefit automatically from the provision upon their accession to the WTO.
78. A complement to the anti-dumping regime concerns the implementation of rulings adopted by
the DSB in dispute settlement proceedings initiated by third countries on anti-dumping and
countervailing measures imposed by the EU.142  Such "disputed measures" may be repealed or
amended, or other special measures may be adopted as appropriate to implement legal interpretations
developed in the ruling.  However, there is to be no retroactive effect, as the EU has argued that DSB
rulings have only a prospective nature.  In particular, the implementing measures "shall not serve as
basis for the reimbursement of the duties collected prior to that date, unless otherwise provided for".
79. The latest comparative data for 2001 indicate that the EU had the second largest number of
product categories with measures in force, at 175, behind the United States;  this was the same level
as in 2000 and down from 192 in 1999 (Table III.6);  the Commission emphasizes that some 40% of
anti-dumping investigations are terminated without measures being taken.  In cases where measures
are taken, a number of exporters from more than one WTO Member are generally involved, and the
measures may combine definitive duties and price undertakings;  price undertakings and definitiveduties were imposed in 49 of the 175 cases in which measures were in force at the end of 2001.
Among WTO Members, China was the most affected at the end of 2001, with 34 cases, followed by
Chinese Taipei, and Thailand, with 13 cases each.
143  Most affected product categories continue to be
iron and steel products, consumer electronics, and chemicals.
Table III.6
Anti-dumping actions, 1991-01
(Number of cases)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Initiations 20 39 21 43 33 24 23 21 66 32 28
M e a s u r e s  t a k e n 2 21 61 92 11 32 63 23 14 04 11 5
Measures in force 142 158 150 151 147 163 153 162 192 175 175
Source: WTO Secretariat.
(c) Countervailing measures
80. There has been no change in the countervailing legislation of the EU during the period under
review.144  The Commission has proposed the adoption of a new instrument "to react against unfair
competition from subsidized third country airlines" (section (3)(iii)).145  The current regime was
complemented, as noted above, with respect to the implementation of rulings adopted by the DSB in
dispute settlement proceedings.
81. Although it was noted in its last Review that th e EU was not a frequent user of countervailing
procedures, there was a significant increase in measures in force in 2000, which remain in place in
2001.  From six cases in 1999, the EU had 17 cases with definitive measures in place in 2000, of
                                                     
141 Regulation 2238/2000 notified in WTO document G/ADP/N/1/EEC/2 Suppl.2.  See European
Commission Press Release IP/00/1144.  For China and the Russian Federation, see Regulation 905/98 notifiedin WTO document G/ADP/N/1/EEC/2.  Commission Decisions 1000/1999/ECSC and 434/2001/ECSC of
2 March 2001 amend Decision 2277/96/ECSC.
142 Regulation 1515/2001.
143 WTO document G/ADP/N/85/EEC.
144 Regulation 2026/97 notified in WTO document  G/SCM/N/1/EEC/2.
145 European Commission Press Release IP/02/394.  For background see COM(2001)574.WT/TPR/S/102 Trade Policy Review
Page 50
which 16 were still in place at the end of 2001.  In almost all cases, the investigations concern
products also subject to an anti-dumping investigation.  Among WTO Members, India's exporters
were most affected, with seven measures in force at the end of 2001, and three new investigations
under way.
(2) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
82. The Community Customs Code (section (1)(i)) also applies to exports.  All goods leaving the
customs territory of the Community are subject to customs supervision and must be presented to
customs with, under the normal procedure, an export declaration consisting of the Single
Administrative Document (SAD), accompanied by  pertinent documents (e.g. licence for products
covered by the Common Agricultural Policy).  The customs authority may grant permission to
simplify the completion of formalities and procedures.
83. The Community continues to recognize the righ t of developing countries to engage the
services of preshipment inspection entities on its customs territory for the purpose of carrying out
controls on the quality, quantity or price of goods destined for export to the territory of these third
countries.146  However, contracts are subject to prior notification to the Commission (except for the
remuneration), and other conditions concern information to the exporter, the non-discriminatory
conduct of preshipment inspection activities, limits on disclosure of information by exporters, and
procedures regarding exporters' grievances.
(ii) Prohibitions, restrictions, and licensing
84. Measures affecting exports are adopted by the Community to implement the Common
Foreign and Security Policy (CFSP).  During the period under review, restrictions affecting the
Federal Republic of Yugoslavia were lifted following the presidential elections of24 September 2000.
147 As of end 2001, the EU had embargoed the export of arms, munitions, and
military equipment to Afghanistan, Angola (only Unita), Ethiopia and Eritrea, Iraq, Libya, Myanmar,
Sierra Leone (only RUF), and Sudan.
85. In June 2000, the EU established a Community policy on the control of exports of dual-use
items and technology (which can be used for both civil and military purposes), to replace the commonframework established by the Council.
148  An authorization is required for a listed good (Annex I) or
for a good that, although not on the list, has been determined by a Member State to be subject to
authorization because of its potential use for the production of chemical, biological or nuclear
weapons, and had been duly notified to the Commission.  Certain destinations are also subject to
authorization for goods not listed (e.g., subject to an arms embargo).  Exports to certain destinationscontinue to take place under simplified procedures, such as general authorization (Annex II).
149
86. Measures that apply on the Community market to protect the consumer, environment or
animal welfare generally concern exports as well as imports.  Thus, for example, controls on trade of
dangerous chemicals apply both to imports and exports, and measures to implement the Montreal
Protocol or Basel Convention affect both imports and exports of products covered.  The Community
                                                     
146 Regulation 3287/94 notified in WTO document G/PSI/N/1.
147 Decision 2000/599/CFSP.
148 Regulation 1334/2000.
149 Annex II lists Australia, Canada, Japan, New Zealand, Norway, Switzerland, and the United States.European Union WT/TPR/S/102
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maintains export licensing requirements on certain categories of cultural goods, including
archaeological objects, sculpture, and books more than 100 years old.150
87. In all other respects, the general principle of EU policy with respect to exports of other goods
to third countries is freedom from quantitative restrictions.151  Exceptions include protective measures
to prevent a critical situation from arising due to a shortage of essential products;  these may be
limited to exports from certain regions of the Community or only to certain destinations.  Currently,statistical surveillance applies on exports of untreated calf and bovine hides
152;  surveillance on
secondary copper materials, in place since 1998, was removed.153  Automatic licensing applies on
certain products concerned by common market organization (section (2)(vii)(c)), or subject to export
licensing for the allocation of tariff-quota commitments by trading partners.154
(iii) Duties
88. The Community does not apply duties or charges on exports.
(iv) Export subsidies
89. In principle, the Community does not grant subsidies conditional upon exportation, except for
those provided for under the CAP on alcohol and incorporated products, milk and milk products, beef
and veal, pigmeat, eggs, poultry meat, sugar and re lated products, wine, cereals, rice, fruit and
vegetables, and processed fruit and vegetables.155  These subsidies are to cover the difference between
Community prices and international prices, without which such exports could not take place.
According to the latest available data, the total amount of export refunds in 2000 was € 4.2 billion
(not including the "self-financed" refunds on sugar), of which the largest shares went to milk and milk
products (40%), and arable crops (19.7%).156
(v) Export assistance
90. The Community does not have a policy of direct or indirect assistance to exports, which
remains within the competence of Member States, subject to Community rules.157  Member States
observe the guidelines on direct assistance unde r the 1978 OECD Arrangem ent on Guidelines for
Officially Supported Export Credits.158
(vi) State-trading enterprises
91. One state-trading enterprise in France, Gaz de France, has an impact on exports of lighting
gas, producer gas, water gas, and similar gases (section (1)(x)).159  The Commission has notified the
WTO that the export monopoly on electricity of Electricité de France was eliminated in 2000.
                                                     
150 Council Regulation 3911/92, implemented by Commission Regulation 752/93, as amended.  The list
of categories covered is contained in Annex I of the Council Regulation, as last amended in 1996 by CouncilRegulation 3911/92.
151 Council Regulation 2603/69, as amended.
152 Annex I of Council Regulation 2603/69, as modified by Commission Decision 79/365/EEC.
153 Commission Decision 98/562/EC.
154 The allocation of export licences for certain chee ses exported to the United States is covered most
recently by Commission Regulation 2054/2001.
155 Commission Regulation 800/1999, as amended.
156 WTO document G/SCM/N/71/EEC.
157 Directives 84/568/EEC and 98/29/EC.
158 OECD online information.  Available at:  http://www.oecd.org  [1 March 2002].  The arrangement
does not apply to agriculture products and military equipment.
159 WTO document G/STR/N/5/EEC, G/STR/N/6/EEC, G/STR/N/7/EEC.WT/TPR/S/102 Trade Policy Review
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(3) MEASURES DIRECTLY AFFECTING PRODUCTION AND TRADE
(i) Legal framework for businesses
(a) Company law
92. The main development during the period under review concerns the adoption in October 2001
of the Statute for a European Company ( Societas Europeae (SE) ), due to enter into force in 2004.160
The SE provides companies with the option of operating under Community law rather than operating
under the national company law regimes where subsidiaries are located, with the annual cost savings
of simplified organization and administration estimated at € 30 billion.161  Adoption of this long
standing proposal required the resolution of the controversial issue of employee involvement.162
93. Subject to a minimum capital requirement (€ 120,000), an SE can be established by:
- formation of a holding company promoted by private or public limited companies from at 
least two Member States;
- formation of a joint subsidiary by companies from at least two Member States;
- by the merger of two or more public limited companies from at least two Member States; or
- by the transformation of a public limited company which has had, for at least two years, a 
subsidiary in another Member State.
94. A company that does not have its head office in the Community may also participate in the
formation of an SE, provided that the company is formed under the law of a Member State, has its
registered office in that Member State, and has demonstrated a real and continuous link with a
Member State’s economy.  Each SE will be published in the Official Journal  and be registered in the
Member State where the administrative head office is located.  The SE will continue to be taxed in all
places of operation.
95. The proposed Takeover Bids Directive, an other long standing Commission proposal to
complete the company law framework and a key component of the Financial Services Action Plan
(Chapter IV(3)), was not agreed, although the Commission intends to issue a revised proposal in
2002.163  In addition, the Commission intends to issue a revised proposal to harmonize legislation on
                                                     
160 Regulation 2157/2001.  See European Commission Press Release IP/01/1376 and MEMO/01/384.
161 SEC(96)2378.
162 Directive 2001/86/EC, also to enter into force in 2004.  See European Commission Press Release
IP/01/1376.  The controversy on the issue stemmed from different national company law regimes on theparticipation of employees;  Member States with such traditions were anxious that the formation of an SE
should not be used to circumvent these requirements, and Member States without such traditions were anxious
to ensure that requirements were not imposed.  Under the Directive on worker involvement, the creation of an
SE would require negotiations on the involvement of employees with a body representing all the employees ofthe companies concerned.  If a mutually satisfactory solution could not be found, the Directive requiresapplication of a set of standard principles on regular consultation and information to employees.  Workerparticipation requirements apply to an SE formed fr om companies where at least 25% of employees had the
right to participate previously.
163 Following the rejection of the proposed Takeover Bids Directive by the European Parliament in a
vote on 4 July 2001, the Commission established a High Level Group of Company Law Experts to examineissues identified by the European Parliament for further harmonization;  a report was made in early 2002(European Commission Press Release IP/02/24).European Union WT/TPR/S/102
Page 53
cross-border mergers (the10th company law directive).164  As part of a general clean-up of long-
pending proposals, the Commission withdrew the pr oposed fifth company law directive, which would
have harmonized national laws on the structure of public limited liability companies and the powers
and obligations of their organs.
(b) Reporting standards
96. Companies established in Member States use national reporting standards, as harmonized by
Community legislation165;  a new initiative launched during the period under review is to harmonize
the requirement of independence for the statutory auditor.166  To prepare their consolidated financial
statements, listed companies have the option of using International Accounting Standards (IAS) in
Austria, Belgium, France, Fi nland, Italy, and Luxembourg167, or, in Austria and Germany, the option
of United States’ General Agreed Accounting Principles (US-GAAP).  Of the 7,000 companies listedon Community stock exchanges, about 200 use IAS and 400 use US-GAAP.  About half of those
using US-GAAP have a dual listing in the United States, where its use is required by the Securities
Exchange Commission (SEC).
97. In a major development during the period under review, the Commission proposed a
regulation to require the use of IAS by all listed companies as of 2005, as part of the FinancialServices Action Plan (FSAP) (Chapter IV(3)).
168  The Commission did not consider use of US-GAAP
as the basis for Community reporting requirements, although equivalent to IAS, mainly because it
considers that "allowing use of GAAP would run against the fundamental objective of the strategy to
move in the direction of one single set of global standards", that GAAP "are developed without any
input from outside the US", and that "the application of US GAAP within the European environment
as an alternative to IAS would give an unwarranted advantage to US interests".169  Although the
change-over to IAS will imply costs for companie s, the Commission anticipates they will gain
through reduced costs of raising capital as a result of increased transparency and improved
comparability of financial statements across the Community.170  For companies currently using
US-GAAP, the changeover to IAS would require them to prepare a reconciliation to US-GAAP (Form
20F);  the Commission  "hopes and expects" that the SEC will accept "in the near future" statements
prepared on the basis of IAS without such a reconciliation being required.171
98. Another development is the emergence of a new agenda for corporate responsibility in
reporting on company activities.  The Commission issued a recommendation on environmental issues
in companies’ annual accounts and reports, so that shareholders could be better informed on the
environmental dimension of company activities, and better assess the nature and scope of associated
risks and liabilities for the company’s financial position.172  The Commission also issued a Green
                                                     
164 See WTO (2000a), Vol. 1, p. 72, Box III.3.
165 Directives 78/660/EEC and 83/349/EEC.
166 European Commission Press Release IP/00/1478.
167 Standards developed by the International Acco unting Standards Committee (IASC), replaced by the
International Accounting Standards Board (IASB) in 2001.  There are 41 IAS and 25 interpretations.
168 COM(2001)80.  See European Commission Press Release IP/01/200 and MEMO/01/40.  For
background see COM(2000)359.
169 European Commission MEMO/00/606.  For background see COM(95)508.
170 European Commission Press Release IP/02/584.
171 European Commission MEMO/01/40.
172 "Commission Recommendation on the recognition, measurement and disclosure of environmental
issues in the annual accounts and annual reports of companies" (OJ L 156, 13/6/2001).  See EuropeanCommission Press Release IP/01/814.WT/TPR/S/102 Trade Policy Review
Page 54
Paper on Corporate Social Responsibility (CSR), which addresses the social dimension of company
operations (e.g., human resource management, labour standards).173
(c) Taxation
99. Average rates of corporate taxation in the EU Member States continue to differ significantly,
with no sign of convergence during the period under review.174    Although the Commission has long
favoured harmonization to reduce these differences, the Member States are not unanimous on theissue
175;  consequently, Commission action to date has focussed on enhanced mechanisms for tax co-
ordination, notably action to reduce or eliminate "harmful tax competition".  The Council has been
considering a package of three measures, to be adopted by the end of 2002, consisting of:  (i) a
proposed Directive on taxation of cross-border savings income, part of the FSAP (Chapter IV(3)),
substantially revised in July 2001;  (ii) the Code of Conduct for business taxation;  and (iii) aproposed Directive to eliminate withholding taxes on payments of interest and royalties made between
associated companies of different Member States.
176  Under the proposed Code of Conduct for
business taxation, Member States would refrain from introducing any new harmful tax measures and
would amend any laws or practices deemed to be harmful in respect of the principles of the Code.177
A related development is the investigation launched by the Commission in July 2001 on 15 tax
provisions in 12 Member States, including preferential tax arrangements granted to multinational
companies (e.g., Ireland's rules on the repatriation of foreign income from foreign subsidiaries or
branches), or to companies active in the insuran ce and financial services sector (e.g., Luxembourg's
finance companies regime).178  For the future,  the Commission intends to propose that companies, in
particular those operating as European companies (see above), would be able to consolidate their
corporate tax base.179
(ii) Competition policy
(a) Overview
100. As reported in previous Trade Policy Reviews of the EU, the Commission gives central
importance to an effective Community-wide competition policy, based on the provisions of the EC
                                                     
173 DOC/01/9.  See European Commission SPEECH/02/14.
174 During the period under review, France, Germany, Ireland and the United Kingdom have reduced
corporate tax rates, and Finland has increased them.  S ee KPMG (1999 and 2000).  In addition, a study by the
Commission (SEC(2001)1681) indicates variations of up to 30% in effective rates of company taxation –
Germany at the top end and Ireland at the bottom-noting that such differences alone do not explain location and
investment decisions.
175 COM(2001)260.  Unanimity in the Council is required for adoption of directives on taxation
(Article 93 of the EC Treaty).  Three instruments have been agreed:  Directive 90/435/EEC, to eliminate thedouble taxation of parent companies and subsidiaries;  Directive 90/434/90, which requires taxation to beapplied when capital gains are realized from mergers, divisions or transfers of assets and exchanges of shares
concerning companies of different Member States;  and a five-year Convention to prevent double taxation as a
result of transfer pricing used between associated comp anies located in different Member States.  See "Company
Taxation:  introduction" [Online].  Available a t:  http://europa.eu.int/scadplus [9 February 2002].
176 European Commission MEMO/01/434.
177 European Commission SPEECH/02/15.  The Code of Conduct Group was established in
March 1998 and reported in November 1999 on 66 measures identified in the course of its activity, certain of
which have been the subject of state-aid investigations.
178 European Commission Press Release IP/01/982.  Its Annex provides a complete list of the tax
measures included in the investigation.  For app licable guidelines see the Commission's "Notice on the
application of the State aid rules to direct business taxation" (OJ C 384/3, 10/12/1998).
179 COM(2001)582.  See European Commission Press Release IP/01/1468.European Union WT/TPR/S/102
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Treaty, and complementing the competition policies of the 15 Member States on their national
territories.180  The Community’s competition policy encompasses antitrust and mergers, liberalization
(e.g., telecommunications), and state aid (section (iii) below).  Its decisions are subject to judicial
review by the European Court of First Instance  (CFI) and the European Court of Justice (ECJ).
101. The Commission conducted 284 antitrust investigations in 2001, down from 297 in 2000, and
385 in 1999;  the downward trend is explained mainly by the new policy on vertical restraints.  Incontrast,  the number of notified merger cases remained on a steady trend, with 335 cases in 2001,
compared to 345 in 2000 and 292 in 1999.
181  The Commission is of the view that globalization and
the development of the Single Market, for which economic potential has been enhanced by adoption
of the euro, are the two most important factors driving the consolidation of industry across EU
Member States and on a transnational basis.  For the period 1990-01, the Commission took 1,922
decisions on merger cases, of which 18 cases were blocked, 18 proposals were withdrawn, and 144
mergers were approved with undertakings.182
102. Mergers of a transnational character require assessment by competition policy authorities in
different countries, on the basis of different laws and competition policy practices;  the Commission
has been increasingly concerned with developing new means of promoting convergence of decisionsand remedies.  As noted by the Commissioner in charge, "the transnational character of today’s
competition cases clashes with the traditionally territorial scope of domestic antitrust rules".
183  I n
such instances, the Commission cooperates with the competition policy authorities of EEA members
and, on the basis of bilateral agreements, with those in Canada, the United States, and the candidate
countries in Central and Eastern Europe;  a bilateral agreement with Japan is expected to be concluded
shortly.
103. To foster international cooperation on competition policy, the Commission was at the
forefront of efforts to launch the "International Competition Network" (ICN), accomplished in
October 2001.  The ICN links antitrust agencies in an informal network to exchange experiences and
promote convergence.184  The EU has also long been an advocate of negotiations in the WTO to
conclude a multilateral agreement on competition, which would rest on a commitment to establish and
enforce national competition laws, including certain minimum substantive requirements (e.g.,prohibition of hard-core cartels), rather than a harmonization of substantive competition laws.
185  On
trade and competition, the Doha Ministerial Declarati on states that "negotiations will take place after
the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit
consensus, at that session on modalities of negotiations".186
(b) Antitrust
104. Article 81(1) of the EC Treaty prohibits, as incompatible with the common market,
anti-competitive agreements between undertakings that may affect trade between the Member
                                                     
180 Based on Articles 31, 81-86 of the EC Treaty and Articles 65 and 66 of the European Coal and Steel
Treaty (ECSC) until its expiry in July 2002.
181 European Commission Press Release IP/01/698.
182 European Commission Press Release IP/00/1525.
183 European Commission SPEECH/01/147.
184 European Commission SPEECH/01/147.  See also European Commission Press Release IP/001230.
185 "European Commission Communication to the Council and the European Parliament, The EU
Approach to the Millennium Round", and "EU Council Conc lusions, Preparation of the Third WTO Ministerial
Conference" [Online].  Available at:  http ://europa.eu.int/comm/trade/2000_round/position.htm
[15 November 1999].
186 WTO document WT/MIN(01)/DEC/1.WT/TPR/S/102 Trade Policy Review
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States187, except for those exempted by the Commission  under Article 81(3) as providing a benefit on
balance.  Article 82 prohibits, as incompatible with the common market, the abuse of a dominant
position, without exception.  In principle, agreements affecting the common market are covered,
irrespective of whether the undertakings are established in the Member States, in third countries, or in
both a Member State and in a third country.
105. Under current rules of procedure for the application of Articles 81 and 82, potentially anti-
competitive agreements must be notified to the Commission to obtain an exemption.188  In 2001, the
Commission raised its turnover thresholds for de minimis  agreements under Article 81(1) to 10% for
agreements between competitors and 15% for agreements between non-competitors, from 5% and
10%, respectively.189  The Commission has also block exempted certain categories of agreements as
providing benefits on balance.190 During the period under review, the Commission adopted a revised
block-exemption regulation for specialization agreements and for research and development
cooperation agreements191, issued new guidelines on vertical restraints192, and announced plans to
revise the block exemption for technology transfer agreements.193
106. A development of major significance to consumers in the EU is the adoption by the
Commission in February 2002 of a proposal for a new draft block-exemption regulation for motor-vehicle distribution and servicing agreements between carmakers and dealers, to enter into force on
1 October 2002.  Persistent and relatively high car  price differentials - even after adjustment for
domestic tax differentials and exchange rate movements between euro and non-euro Member States -
have provided the main evidence to support a change in the block-exemption regulation, as well as
consideration of other factors.
194  A review of the operation of the sector since the current block
exemption regulation was introduced in 1995 concluded that "consumers in particular do not seem to
derive from this distribution system the fair share of the benefits of a European single market ".195
107. The current block exemption covers distribution systems that combine selective and exclusive
features, as well as brand exclusivity in most instances;  under an exclusive distribution system, a
dealer is allocated a territory, while under a selective system, the dealers are chosen by qualitative
and/or quantitative criteria.  The draft block-exemption regulation is, according to the Commission, a
more pro-competitive outcome than would have obtained had the block exemption lapsed and theagreements in question been folded into the rules on vertical restraints, mainly due to the safeguards
included to deal with specific features of motor-vehicle distribution.
196
                                                     
187 No definition of this concept for the purposes of competition law is provided by the EC Treaty;
however, the term is understood to encompass a wide range of legal forms, including companies, partnerships,
cooperatives, nationalized industries, and other kinds of public corporations, and individuals, engaged in theproduction and distribution of goods and services.
188 Council Regulation 17/62/EEC.
189 OJ C 368, 22/12/2001.  See European Commission Press Release IP/02/13.  The Commission notes
that "the main reason for treating vertical restraints more leniently than a horizontal restraint lies in the fact that
the latter may concern an agreement between competitors producing substitute goods/services while the former
concerns an agreement between a supplier and a buyer of a particular product/service" COM(1998) 542, p. 13.
190 Council Regulation 19/1968/EEC sets out the block exemption concept and procedures.
191 Commission Regulations 2658/2000 and 2659/2000.  See European Commission Press Release
IP/00/1376.
192 OJ C 291, 13/10/2000.
193 Commission Regulation 240/96.  See European Commission Press Release IP/02/14.
194 European Commission Press Release IP/01/1051.  See Degryse and Verboven (2000).
195 COM(2000)743.  See European Commission Press Release IP/00/1306.
196 European Commission Press Release IP/02/196 and MEMO/02/18.  If the regulation had simply
lapsed, the car sector would have fallen under the block-exemption regulation for vertical restraints, which theEuropean Union WT/TPR/S/102
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108. The draft regulation is also of significant interest to carmakers that have not established a
distribution system in the EU.  Multi-brand sales were allowed under amendments introduced in 1995,
but major carmakers could impose onerous requirements on car dealers as conditions for exclusive
distribution agreements – separate premises, separate company, separate management and sales team
– which made multi-brand operations uneconomic in practice.  Under the new draft regulation, these
restrictions are no longer permitted, although carmakers may still require their models to be displayedin a brand-specific area of the showroom.  In addition, while car manufacturers retain the choice of
either a selective or exclusive distribution system, the combination of the two is no longer permitted.
The Commission, however, stopped short of requiring carmakers to sell to supermarkets or supply
Internet distributors, although they can do so if they wish.
109. Another development of significance to consumers is the increased emphasis placed by the
Commission on fighting cartels;  in 2001, a record number of cases were closed with fines reaching
€ 1.8 billion.
197  As noted by the Commissioner in charge, collusive behaviour aimed solely at raising
prices by reducing output can only be costly to the consumer, unlike joint ventures that may imply
positive benefits such as scale economies.198  Given the difficulties of investigating cartels (because of
secrecy practices), the Commission has, since 1996, offered a leniency programme to companiesparticipating in investigations;  this was clarified in February 2002.
199  More than 80 companies have
filed leniency applications in 16 cartel cases, and otherwise applicable fines – up to 10% of turnover
under existing rules - have been partially or entirely reduced.
110. For the future, the Commission has proposed new rules of procedure for the application of the
antitrust provisions of the EC Treaty that would eliminate the general notification and exemption
procedure for individual agreements.  The Commission has argued that the notification procedure,
while diverting Commission resources from their purpose, which is to pursue violations ofcompetition law, has not brought to light serious violations of the competition rules.
200  Par t of the
proposal is the possibility of requiring registration for certain types of agreement.  Once freed from
onerous administrative tasks, the Commission would be better able to focus on complaints and own-
initiative proceedings.  Under the proposed new rules, the Commission would also benefit from
expanded powers of investigation201,  and over remedies to end infringements.202
111. Competition policy enforcement is to be shared more equally between the Commission and
national courts and competition policy authorities.  The latter are to be given, under the proposed
"directly applicable exception system", competence to apply Article 81(3) to individual agreements.
The Commissioner in charge has noted that, although Articles 81(1) and 82 have direct effect in the
Member States, the sole power of the Commission over negative clearances and exemptions under
                                                                                                                                                                    
Commission did not believe offered sufficient safeguards to remedy the problems identified in the report
evaluating the operation of the sector (COM(2000)743).
197 € 855 million in fines was imposed on participants in the Vitamins cartel, the highest level ever
imposed on a cartel by the Commission (European Commission MEMO/02/23).
198 European Commission SPEECH/00/295.
199 European Commission MEMO/02/03.
200 COM(2000)582.  See European Commission Press Release IP/00/1064.  See also "White Paper on
Modernisation of the Rules Implementing Articles 85 and 86 [81 and 82] of the EC Treaty" (OJ C 132, 1999).
201 Under existing rules, the Commission can conduct inspections on business premises and request
written information.  Under the proposed new rules, Co mmission inspectors would be able to search private
homes for company documents, seal cupboards or offices to ensure documents are not removed or destroyed,
and conduct oral examinations.  Fines for non-cooperation would be substantially increased.
202 Under existing rules, the Commission is empowered only to direct the undertakings to bring the
infringement to an end.  Under the proposed new rules, the Commission would be able to specify the remedies,including structural remedies (e.g., divestiture), as well as interim measures.  The new rules clarify thatcommitments could be made by undertakings to allay competition concerns, which would be binding.WT/TPR/S/102 Trade Policy Review
Page 58
Article 81(3) has given it the major role in competition policy enforcement.203  Private economic
operators have been concerned that the proposal will "re-nationalize" competition policy leading to
possible inconsistency of application of the same rule, thereby reducing legal certainty for companies.
The Commission notes that its opinions will guide national courts and consistency of application will
be promoted through a network of national co mpetition policy authorities and the Commission.
(c) Mergers
112. Under the Merger Regulation in place since 1990, the Commission assesses proposed
concentrations with a "Community dimension", defined according to turnover, on the basis of the
criterion of whether a dominant position is created or strengthened, considered to be incompatible
with the common market.204  The Commissioner in charge has noted that "the harmful mergers are
those which give rise to companies in such strong positions that allow them either to control conducton today’s markets or to control the development of tomorrow’s ones", harming consumers through
higher prices, reduced choice and innovation.  Even in such instances, it is still possible for the merger
to proceed, provided suitable remedies to restore competition are offered by the parties.  Such
remedies normally require divestiture, but other remedies may also be proposed, such as reducing
entry barriers to other competitors.  To clarify its practices in this area, the Commission issued anotice in December 2000 setting out the principles on which the Commission will assess proposed
remedies.
205  Prohibition decisions may still be taken if satisfactory remedies are not offered.
113. As noted above, the Commission cooperates with the competition policy authorities of other
countries when proposed mergers have a transnational character.  The Commissioner in charge has
noted that "such co-operation can be highly effective in merger cases, substantially reducing the risk
of divergent or incoherent rulings".206  During the period under review, one instance of divergence
was the proposed General Electric/Honeywell merger, cleared by the United States’ Department ofJustice but prohibited by the Commission on 3 July 2001;  an appeal has since been lodged by GE at
the CFI.
207  The Commission considered that the remedies proposed by GE were not sufficient to allay
the competition concerns identified by the Commission.  However, despite this instance of
divergence, the  Commissioner in charge has made the more general assessment that convergence has
intensified in recent years, strengthening the prospects for multilateral cooperation in this area.208
114. During the period under review, the Commission undertook to review the operation of the
merger control system in the light of more than a decade of experience.  In this context, the
Commission considered whether the thresholds that  define a Community dimension, which were last
lowered in 1998209, remain too high to encompass all mergers with cross-border effects, notably those
                                                     
203 European Commission SPEECH/00/466.
204 Council Regulation 4064/89.  Mergers with a Community dimension are not submitted for
assessment at the national level, thereby offering a "one-stop-shop" to enterprises in such cases.  With the aim ofreducing the administrative burden on Commission services, the "Commission notice on a simplified procedure
for treatment of certain concentrations under Council Regulation 4064/89" (OJ C 217, 29/7/2000) was applied
as of 1 September 2000.  For an explanation, see DG Competition (2001), Box 5.
205 "Commission notice on remedies under Council Regulation 4064/89" (OJ C 68, 2/3/2001).  For an
explanation, see DG Competition (2001), pp. 82-84.  See also European Commission SPEECH/00/240, PressRelease IP/00/1525, and SPEECH/02/10.
206 European Commission SPEECH/00/240.
207 European Commission Press Release IP/01/939.  The Commission reported to the European
Parliament and Council on the application of the agreements with Canada and the United States in the year 2000(COM(2002)45).
208 European Commission SPEECH/01/540.
209 Council Regulation 1310/97, implemented by Commission Regulation 447/98.European Union WT/TPR/S/102
Page 59
concurrently filed in several Member States.210  This issue was among those taken up in the Green
Paper issued in December 2001, with the Commission suggesting the possibility of automatic
Community competence for mergers subject to filing requirements in three or more Member States.211
(iii) Subsidies
(a) Overview
115. A large variety of programmes have been established to provide assistance to enterprises in
the EU, at Community level and at the Member State level, under which subsidies may be granted.
The EU notifies subsidies under GATT 1994 and the WTO Agreement on Subsidies and
Countervailing Measures;  the most recent notification concerns 2000.212  According to the
notification, the total budget for the EU was € 93 billion in 2000, of which 43.9% was allocated to
agriculture (Chapter IV(1)) and 35.2% to struct ural operations.  Research and technological
development is another important area of Community-wide activity, accounting for an estimated 3.9%
of total expenditure;  the sixth framework programme, adopted in January 2002, increases funding to
€ 17.5 billion, up by 17% in relation to the fifth programme, reflecting the priority given to
research.213
116. No figures are available on subsidies granted by the 15 Member States, but the Commission
has estimated that the category of "State aid" (see below) was  € 80 billion in 1999, amounting to 1%
of EU's GDP.214  For the period 1997-99, state aid averaged € 90 billion annually, down by about 10%
from 1995-97.215  Rail transport was the leading category on average (€ 31.5 billion annually),
followed by manufacturing (€ 27.6 billion).  The Commission reports that grants were the leading
form of state aid to manufacturing (61%), follow ed by tax exemptions (22%).  Among the Member
States, over 90% of state aid is provided in grant form in Greece, Luxembourg, Spain, and the
United Kingdom, while less than one third is provided in this form in France and Ireland.
117. Germany ranks first in state aid (€ 23.6 billion), followed by France (€ 15.3 billion), Italy
(€ 10.5 billion), and the United Kingdom (€ 6.3 billion).  In relation to GDP, Ireland has the highest
level of manufacturing sector assistance (1.01%) , followed by Portugal (0.82%), Germany (0.64%),
and Denmark (0.63%).  At the Stockholm European  Council in March 2001, Member States pledged
to "demonstrate a downward trend" in state aid by  2003, and to shift the emphasis of subsidies from
supporting individual companies or sectors towards horizontal objectives of Community interest, such
as employment, regional development, en vironment, and training or research.
118. Of particular significance in this respect is the objective set at the Barcelona European
Council in March 2002, to increase the EU’s overall expenditure – from both private and government
sources - on research and development (R&D) to 3% of GDP by 2010.  Expenditure on R&D in theEU was estimated at € 153 billion in 1999, the equivalent of 1.92% of the combined GDP of the 15
Member States;  this is considerably lower than in Japan (2.93%) or the United States (2.64%).
216
Increased expenditure is designed to promote the goal set at the Lisbon European Council, which is to
                                                     
210 European Commission Press Release IP/00/671.
211 COM(2001)745/6.  See European Commission Press Release IP/01/1795.
212 WTO document G/SCM/N/71/EEC and Add.1-15.
213 European Union online information.  Available at:  http://europa.eu.int/comm/research  [28 April
2002]
214 COM(2001)412.
215 COM(2001)403.
216 European Commission Press Release IP/02/290.WT/TPR/S/102 Trade Policy Review
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make the EU "the most competitive and dynamic knowledge-based economy" by 2010 (Chapter I(3)).
Evidence suggests a positive relationship between expenditure on R&D and patents filed (Table III.7).
Table III.7
Selected innovation indicators, 1997-99
(Annual averages)
MEMBERSa
EU B DK D EL E F IR I L NL A P FI S UK
R&D expenditure (€ billion) 150 43 4 7 15 2 9 1 1 1 . .73148 2 5
R&D expenditure (% of GDP) 1.88 1.92 1.99 2.35 0.51 0.87 2.19 1.39 1.00 .. 1.99 1.78 0.69 2.93 3.74 1.85
Patents (per million
inhabitants)126 133 151 261 7 20 121 56 63 161 180 131 3 277 293 101
a B:  Belgium;  DK:  Denmark;  D:  Germany;  EL:  Greece;  E:  Spain;  F:  France;  IR:  Ireland;  I:  Italy;  L:  Luxembourg;  NL:
The Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  United Kingdom.
.. Not available.
Source: COM(2001)403.
119. Trade-distorting subsidies have continued to be contentious issues in relations between the
EU and its trading partners during the period under review, and have been the object of ongoing
multilateral and bilateral discussions.  With respect to agriculture (Chapter IV(1)), disciplines apply
under the WTO Agreement on Agriculture, and their scope is to be addressed under the ongoing
negotiations;  while EU funding commitments to the sector have remained stable during the period
under review, the EU has been concerned by the rising budgetary commitment of the United States inthe proposed 2002 Farm Bill.
217  The Doha Development Agenda also includes, for the first time,
negotiations on disciplines for fisheries subsidies (Chapter IV(2)).  Regular discussions have been
taking place in the OECD on government support to steel in the light of oversupply on world markets
and safeguard measures taken by the United States (section (1)(vii)).218  On subsidies to aircraft
manufacturers, the EU has been engaged in discussions with the United States under the 1992 EC-US
Bilateral Agreement on Trade in Large Civil Aircraft, as well as the 1979 Agreement on Trade in
Civil Aircraft (ATCA), and in the WTO.  With respect to shipbuilding, the Commission initiated aprocedure under the Trade Barriers Regulation (TBR) concerning subsidies granted by the Republic
of Korea that allegedly "jeopardise the future of the European shipbuilding industry".
219
120. In the wake of the events of 11 September 2001, which led the United States to make
commitments to support air transport service prov iders, the Commission decided to continue the
existing framework for state aid in the sector, with a few minor modifications (e.g., subsidizingincreased insurance expenditure), but to propose the adoption of a new instrument "to react against
unfair competition from subsidised third country airlines".
220  The instrument would allow for duties
to be imposed on foreign air carriers equal to the amount of subsidies granted, and the procedures to
do so would follow closely along the lines of the existing instrument for manufactured products
(section (1)(xi)(b)).  The proposed instrument is design ed to fill a gap in the existing EU legislative
framework to counter allegedly unfair practices in the air transport sector, noting that an instrument
                                                     
217 European Commission Press Release IP/02/647.
218 European Commission Press Release IP/01/1784.   In the OECD, a Disciplines Study Group has a
mandate to analyse the nature and scope of government interventions and other market distortions in the steel
sector and commitments governments might make to limit such interventions and distortions  ("High-Level
Meeting on Steel, 7-8 February 2002 - Conclusions" [Online].  Available at:  http://www.oecd.org
[22 February 2002]).
219 European Commission MEMO/00/97.
220 European Commission Press Release IP/02/394.  For background, see COM(2001)574.European Union WT/TPR/S/102
Page 61
exists for unfair pricing practices in maritime transp ort;  it should also be noted that countervailing
procedures for subsidies in the services sector do not exist under GATS although the possibility of
their negotiation is foreseen.221
121. Under the WTO Agreement on Subsidies and Countervailing Measures, products imported
from EU Member States that are determined to be subsidized and meet the conditions established for
injury and causation may be the subject of a countervailing measure imposed by a WTO Member.The United States has initiated investigations on certain subsidy programmes of the EU and its
Member States
222, and is the WTO Member most frequently imposing countervailing  measures on
imported products from EU Member States;  at the end of 2001, 19 such orders were in place.223
(b) State aid
122. According to Article 87 of the EC Treaty, "sta te aid is incompatible with the common market
if it:  (a) is granted by a State through State resources;  (b) distorts competition by conferring an
economic advantage on the recipient and granting aid selectively to 'certain undertakings' or for the
'production of certain goods';  and (c) affects trade between Member States".224  Exceptions apply for
certain defined circumstances (e.g. aid of a social character, natural disasters), or may be approved to
meet certain horizontal objectives (e.g. regional development, environmental protection) or in specificsectors (e.g., shipbuilding).  Specific provisions of the EC Treaty apply to agriculture and fisheries
(Article 36), and transport (Article 73).  The Eu ropean Coal and Steel Treaty (ECSC) covers aid to
coal and steel (Articles 4, 54 and 95), and is set to expire on 23 July 2002, at which time the sector is
to be folded into the EC Treaty.
123. Under the procedural rules on state aid, Member States are required to notify proposed
measures to the Commission for an assessment of their compatibility with the EC Treaty.
225  The
Commission is empowered to declare existing or proposed programmes to be incompatible with thecommon market, and decide remedies, including termination, modification or repayment of grants.  In
1999, the Commission issued negative decisions in 9% of notified cases, noting that 82% of cases
were cleared without review.
226  The number of notifications should decline as a result of the new
block exemption of various categories of state aid meeting horizontal objectives:  training aid;  de
minimis  aid to enterprises (€ 100,000 over any period of three years);  and aid in favour of small and
medium-sized enterprises (not more than 10% gross aid intensity for small enterprises and 7.5% for
medium enterprises).227
124. "Non-notified aid" is aid provided or committed without notification, or already been put into
effect when it is notified, or put into effect after being notified but before the Commission has reached
a decision.  Of the 747 cases between the start of 2000 and January 2002, some 20% underpreliminary examination by the Commission were "non-notified aid" according to statistics made
available by DG Competition in its register of stat e aid cases (Table III.8).  Non-notified aid that is
granted without Commission authorization is unlawful.
                                                     
221 See Article XV of GATS.
222 United States Department of Commerce, Electronic Subsidy Enforcement Library  [Online].
Available at:  http://ia.ita.doc.gov/esel  [23 February 2002].
223 WTO document G/SCM/N/81/USA.
224 DG Competition (2001), pp.72-73.
225 Council Regulation 659/1999.
226 COM(2001)412.
227 Commission Regulations 68/2001, 69/2001 and 70/2001, issued under Council Regulation 994/98.WT/TPR/S/102 Trade Policy Review
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Table III.8
State aid cases, 2000 to January 2002
MEMBERSa
EU B DK D EL E F IR I L NL A P FI S UK
N 578 18 18 73 10 71 85 18 144 3 38 18 13 15 7 47
NN 155 98 2 84 2 2 1 17 2 5066855 1 1
E 14 002002431010100
Total 747 2 72 6 1 0 31 49 39 82 9 1 7 2 44 42 52 12 11 25 8
a B:  Belgium;  DK:  Denmark;  D:  Germany;  EL:  Greece;  E:  Spain;  F:  France;  IR:  Ireland;  I:  Italy;  L:  Luxembourg;  
NL:  The Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  United Kingdom.
Note: N=notified;  NN=non-notified;  E=existing measure.
Source: State Aid Register, Part I [Online].  Available at:  http://europa.eu.int/commm/competition/state_aid/register/i
[22 February 2002]
125. The Commission has issued a number of guidelines on its methods for assessing state aid.
During the period under review, it modified the guidelines for short-term export credit insurance,
reviewed those on environmental aid, and issued guidelines on risk capital, as well as on public
service broadcasting.  The Commission has also clarified that public funding to provide risk capital orpromote the development of its supply is to be permitted, under conditions, on the argument that it
overcomes certain forms of market failure that impact especially on SMEs.
228
126. In February 2002, the Commission issued a new framework for regional aid to large
investment projects to apply to all sectors for the period 2004-09, and to the motor-vehicle and
synthetic-fibre industries as of 2003.229  The new framework provides for horizontal treatment of such
projects, currently subject to sectoral rules.  As a result, the Community framework on state aid to the
motor-vehicle industry granted as regional assistance was extended until 31 December 2002, with a
transitional mechanism in place for 2003.
(c) Selected sectoral developments
Coal and steel
127. The Commission decided during the period under review on a new framework for coal aid
after the expiry of the ECSC Treaty in July 2002, which is to apply until 2010.230  Only four Member
States continue to produce coal (France, Germany, Spain, and the United Kingdom) and the
Commission has noted that, alt hough most EU mines cannot compete with imported coal, these
Member States have chosen to support their coal mining industry on social and regional grounds.231
In 2000, the Commission authorised € 6.8 billion in state aid under the current framework, mainly tocover operating losses, averaging € 192 per tonne, or € 76,405 for each of the 89,000 workersemployed in the industry.  The Commission has expects current aid levels to be maintained until
2005, "after which State aid should fall to half of the amount granted in 1998".
232
128. The Commission has approved guidelines for the continuation of the prohibition of regional
investment aid and restructuring aid to the steel sect or, which is also affected by the expiry of ECSC
                                                     
228 OJ C 235, 21/8/2001.  As part of its economic strategy, the EU has decided to implement a Risk
Capital Action Plan (RCAP) by 2003 to promote entrepreneurial activity.
229 European Commission Press Release IP/02/242.
230 COM(2001)423.  See European Commission Press Release IP/01/1080.
231 DG Competition (2001).
232 COM(2001)423.European Union WT/TPR/S/102
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Treaty.233  In 2000, the Commission authorized state aid of € 5.2 million for environmental and R&D
purposes.234
Shipbuilding
129. The ban on operating (contract-related) aid to shipbuilding came into effect on
31 December 2000 as foreseen;  subject to conditions, permissible forms of state aid to the sector
continue to be:  (i) regional aid for upgrading or modernizing installations;  (ii) aid to cover closure ofshipyards;  (iii) aid for rescue and restructuring of undertakings in difficulties;  (iv) aid for innovation
in existing yards;  and (v) aid to cover expenditure on R&D or on environmental protection.
235
Contract-related aid amounted to € 632 billion fo r the period 1997-99, compared with € 622 billion
for rescue and restructuring aid, and was given mainly by Germany, France, Italy and Spain.
130. The Commission’s Trade Barriers Regulation complaint on subsidies to shipbuilding granted
by the Republic of Korea followed an assessment of the state of the world shipbuilding industry by
the Commission in which it concluded that the depres sed state of prices for ships was due to the low
prices offered by shipyards in the Republic of Korea.236  The Commission stated that if an agreement
with the Republic of Korea was not reached by 1 May 2001237, a complaint would be lodged at the
WTO, and a "defensive" system of support for certain ship types found to be injured by the disputedpractices would be proposed to the Council for the duration of the WTO proceedings;  the proposal is
still under consideration by the Council.
238
Aircraft manufacture
131. A number of Member States have announced their participation through "reimbursable" loans
in the development of the Airbus A380 "super-jumbo" aircraft launched in December 2000 for
delivery in 2006.239  The new model is intended to provide Airbus with a full range of models to
compete with Boeing, the other large aircraft manufacturer;  each company holds about half the
market for aircraft sales.  Although full details on the terms and conditions of the participation of the
Member States have not been made publicly available, total development costs are estimated at
US$12 billion.240  The EU has confirmed that public support will be in conformity with the 1992
EC-US Bilateral Agreement, which provides for a ceiling of one third.241
(iv) Intellectual property rights protection
(a) Overview
132. There has been no change during the period under review in the basic structure of intellectual
property rights (IPR) legislation and its enforcement in the EU and the Member States, although the
Community has assumed a more significant role in the external dimension of IPR protection, which is
                                                     
233 Commission Decision 2496/96/ECSC.  See European Commission Press Release IP/02/241.
234 COM(2001)151.
235 Council Regulation 1540/98.  See European Commission MEMO/00/90.
236 COM(2000)730, subsequently confirmed in COM(2001)219.
237 The "Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and
Repair Industry" was signed in December 1994 by the EC, the United States, Japan, the Republic of Korea, andNorway. It was due to enter into force on 1 January 1996,  but ratification by the United States is still pending.
See WTO (2000a), Vol. 1, p. 114, Box IV.5.
238 COM(2001)412.
239 Airbus online information.  Available at:  http://www.airbus.com .
240 United States Department of Commerce (2001a).
241 European Commission Press Release IP/01/587.WT/TPR/S/102 Trade Policy Review
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set to be expanded under the (still-to-be-ratified) Treaty of Nice (Chapter II(3)).   The Member States
legislate on IPR protection taking into account Community legislation242, and commitments under the
European Patent Convention (EPC)243,  the WTO TRIPS Agreement, and the WIPO Convention and
treaties administered by WIPO.  Community-wide (unitary) rights co-exist with national IPR regimes.
Enforcement of IPRs is at Member State level and the borders of the customs union.244
133. During the period under review, the EU has pu rsued policies designed to strengthen IPR
protection in the Community and abroad.  Internally, the EU has adopted harmonizing directives
under the Single Market with respect to resale rights  for the author of an original work of art, and
copyright and related rights for the digital environment245, and proposed harmonizing legislation on
the patentability of computer-implemented inventions.246  A new unitary right on a Community design
was created, adding to the existing Community trademark and Community plant variety.  Noconsensus was reached in the Council on the Commission’s proposal to create a "Community Patent",
a new unitary right, including a "Community Intellectual Property Court" for its enforcement
247;  the
Treaty of Nice, once ratified, could be used to establish such a court system.
134. Further measures were also announced to streng then internal enforcement in the light of the
debate launched in 1998 on combating counterfeiting and piracy;  customs authorities report asubstantial increase in seizures at the borders of the Community as a result of increased emphasis and
a growing volume of traded counterfeit and pirated goods (section (1)(i)).
248  In November 2000, the
Commission suggested a harmonizing directive on enforcement of IPRs to go beyond the "minimalist
approach" of the TRIPS Agreement, which is to be presented in the course of 2002.249
135. In the TRIPS Council, the EU has sought esta blishment of a multilateral system for the
notification and registration of geographical indications for wines and spirits, in accordance with
Article 23.4 of the TRIPS Agreement, with a possible extension to other products (e.g., cheese).  TheDoha Ministerial Declaration provides for the negotiation of a system for wines and spirits, while the
TRIPS Council could take up the issue of other products.
250
                                                     
242 According to the Commission, "both the Communities and their Member States have the possibility
to legislate in the area of patents and industrial property in general.  But once the Communities have legislatedin one specific area, the Member States are no longer free to legislate or to derogate from Community law."
(WTO document IP/Q3/EEC/1, p. 8).
243 The EPC has 19 members, including all 15 Member States of the EU, Cyprus, Liechtenstein,
Monaco, and Switzerland.  The Community is not a member.
244 Council Regulation 3295/94, as amended.
245 Directive 2001/29/EC.  See European Commission Press Release IP/01/528.  For background, see
"Green Paper on Copyrights and Related Rights in the Information Society" (COM(95)382) andCOM(1999)250.
246 COM(2002)92.  See also European Commission Press Release IP/02/277 and MEMO/02/32.
247 COM(2000)412.  See European Commission Press Release IP/00/714 and MEMO/00/414.  The
legal basis for the Commission’s proposal is Article 308 of the EC Treaty, which concerns residual areas forlegislation, and requires adoption by unanimity in the Council after consultation with the European Parliament(European Commission MEMO/01/451).
248 COM(98)569.
249 COM(2000)789.  See European Commission Press Release IP/00/1385.  The Commission is
considering presenting proposals harmonizing minimum th resholds for sanctions and criminal proceedings, and
to extend Europol’s powers to combat counterfeiting and piracy.
250 WTO document WT/MIN(01)/DEC/1.European Union WT/TPR/S/102
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136. The Member States also participated in the revision of the EPC concluded on 29 November
2000.251  In addition to institutional improvements and revisions to improve patent filing and granting
processes, modifications were made to substantive provisions on patent law.  In particular, the
definition of a patentable invention was amended to bring it into line with the TRIPS Agreement,
making it possible to obtain patents for "second medical use" of pharmaceutical compounds.
137. With some exceptions, the 15 Member States are parties to all the 19 treaties administered by
WIPO.252  In particular, all Member States provide protection of copyrights and neighbouring rights,
are parties to the Paris Convention (1883), and are required to be parties to the Berne Convention
(Paris Act of 1971) and the Rome Convention (1961).253  The EC and the Member States have signed
the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT)
concluded in 1996, and have decided to accede to these treaties, subject to ratification, uponimplementation of Community legislation on copyrigh t and related rights in the information society,
to be transposed into national law by 22 December 2002 (see below).  The EU and the Member States
participated in the negotiations that took place in December 2000 to conclude a protocol to the WPPT
on the protection of audiovisual performances (e.g., TV, film and video);  these were however
inconclusive.
254  The EU and its Member States are also participating in the negotiations to conclude a
new WIPO treaty on the protection of broadcasting organizations.
(b) Patents
138. No new Community-level legislation on patents was adopted during the period under review,
and no change has occurred with respect to the altern atives available for filing for patents valid in the
EU Member States, which comprise:  the national pr ocedure;  the unitary procedure available at the
European Patent Office (EPO) to obtain a European patent255;  or the international procedure under the
Patent Cooperation Treaty (PCT).  With respect to the protection of plant varieties, applicants inMember States may use either the national system, or the unitary procedure available at the
Community Plant Variety Office.  Enforcement is also unchanged since the last review of the EU:
legal actions relating to the validity of a patent must be instituted in the Member State for which the
patent has been granted.
139. Information on patent applications filed during 2000 compiled by the trilateral web-site of the
EPO, the Japanese Patent Office (JPO), and the United States Patent and Trademark Office (USPTO),
indicates that almost all the activity of these three entities is devoted to each other’s membership
(Table III.9).  The EPO received 100,692 applications for European patents in 2000, of which almost
half were filed from EPC members
256;  the rest were mainly from the United States (28%) and Japan
(17%).  In 2000, the EPO granted 27,523 European patents, of which 49% were granted to EPCmembers and the remainder mainly to Japan and the United States.  The Community Plant Variety
                                                     
251 "Act Revising the Convention on the Grant of European Patents" (29 November 2000) [Online].
Available at:  http://www.european-patent-office.org  [22 February 2002].
252 WIPO online information.  Available at: http://www.wipo.org/eng/ratif/doc/index.htm.
253 In 1999, the Commission initiated infringement proceedings with respect to Ireland, which has not
joined the Paris Act of the Berne Convention, and Portugal, which has not joined the Rome Convention (1961).
254  The main disagreement concerned the law applicable to a transfer of economic rights from the
performer to the film producer or others (DG Internal Market (2000)).
255 In practice, the first filing generally takes place at the national level to secure a priority date,
followed within one year by an EPO filing.  Applicants can avail themselves of the accelerated search and
examination procedures offered by certain national patent offices to obtain an early indication of patentability
before deciding to proceed with an EPO and/or wide international filing.  See Japanese Patent Office and
European Patent Office (2001), Section 4.1.
256 Germany (43.6%), France (14.9%), the United Kingdom (12.3%), and Italy (7.5%).  See Eurostat
News Release 42/2001.WT/TPR/S/102 Trade Policy Review
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Office received 2,200 applications in 2001, and approved 1,500 applications.  The Office for
Harmonisation in the Internal Market received 60,000 applications for the Community Trademark in
2001.257
Table III.9
Patent statistics, 1999-00
European Patent Office Japanese Patent OfficeUnited States Patent and
Trademark Office
1999 2000 1999 2000 1999 2000
Applications 89,322 100,692 405,655 436,865 270,187 295,926
Country of origin (% share):
- EPC 50 49 5 51 7 1 5
- Japan 16 17 89 89 18 17
- United States 28 28 5 55 5 5 5
- Other 5 5 1 21 0 1 2
Patents granted 35,357 27,523 150,059 125,880 153,493 157,497
Country of origin (% share):
- EPC 51 49 5 599
- Japan 26 27 89 89 20 20
- United States 20 20 4 45 5 5 4
- Other 3 4 2 299
Source: Japanese Patent Office and European Patent Office (2001).
140. The Commission has issued two proposals since the last Review of the EU in mid-2000: a
proposed regulation on a "Community Patent", incl uding a "Community Intellectual Property Court"
for its enforcement, to co-exist with the natio nal and EPC regimes;  and a proposed Directive
harmonizing national legislation with respect to patents on computer-implemented inventions.  The
first proposal highlights the barrier to R&D posed by the translation costs of patents obtained in
Member States, which also are assumed for European patents granted by the EPO.258  The proposed
Community patent would be granted by the EPO, would be valid in all 15 Member States and would
not require translation into all 15 official languages of the Member States, but only into the three
working languages of the EPO.
141. The Commission has justified its proposal for a Community court to enforce the Community
patent on the grounds that "only a centralised Community court can guarantee without fail unity oflaw and consistent case law".  The Court’s jurisdiction would cover the entire territory of the
Community and its judgements would be enforceable throughout the Community.  The Commission
notes that it would represent a significant economy of cost for patent holders and other litigants, since
only one legal action would be required. Discussions in the Council on the proposal for the
Community patent and a court for its enforcement have focussed on a number of political issues: thelanguage and translation regimes, the role of national patent offices, financial arrangements, the
jurisdictional system, and the relationship between the Community patent and the EPC.
142. The Commission has also proposed harmonizi ng legislation for patents on software
("computer-implemented inventions").
259  The basis of the proposal is the practice established by the
                                                     
257 European Commission SPEECH/01/247.
258 The Commission estimates the average cost of a European patent (designating eight countries) at
€ 30,000 with translations accounting for 39% of the costs, significantly higher than in other jurisdictions.
Taking into account all costs and fees, the Commission estimates the cost at € 49,900, compared with € 10,330in the United States and € 16,450 in Japan.  For complaints on the level of costs see, for example, USTR (2001),p.124.
259 COM(2002)92.  See also European Commission Press Release IP/02/277 and MEMO/02/32.European Union WT/TPR/S/102
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EPO and confirmed in the courts of Member States where litigation has taken place, whereby a patent
can be granted for an invention whose novel features are realized through the execution of software,
provided a "technical contribution" has been made.  Although the EPC provides that computer
programs as such are not patentable260, the Commission notes that over 30,000 software-related
patents have been granted by the EPO and national patent offices.261  Resolving this ambiguity and
preventing new potentially divergent Member State legislation on the issue is another justification forthe proposal.  The Commission is also of the view that an added incentive would be created to invest
in R&D for e-commerce applications, with an important downstream impact on employment in the
sector.  A study for the Commission on the economic impact of patentability of computer programs
however shows that "the theoretical and other economic  literature does not demonstrate, indeed casts
doubt, whether economic efficiency, i.e. increased overall welfare, is achieved by having or makingcomputer programs patentable".
262
(c) Industrial designs
143. As was noted at the time of the last review of the EU, applicants for rights of protection with
respect to industrial designs may use:  the nationa l procedure (including the Benelux Design Office),
or international arrangements that have effect in the Member State.263  With respect to national
regimes for the legal protection of designs, Member States were required to have transposed by
28 October 2001 the Community legislation harmonizing the national provisions on design protection
that most directly affect the functioning of the Internal Market, in particular the definition of "design"
and the conditions of protection.264  In December 2001, the Council adopted the Regulation on a
Community design which, like the Community trademark and the Community plant variety, confers
rights throughout the Community.265  To be eligible for protection, designs must be new and have an
individual character.  The term of protection is up to 25 years.
144. Two types of design protection are provided:  the Registered Community Design, which may
be obtained at the Office for Harmonisation in the Internal Market, as from 2003;  and the
Unregistered Community Design, which will benefit from protection as of March 2001 provided the
requirements for protection are met.  The main benefit of registration is that protection will be granted
against both deliberate copying and the independent development of a similar design, while theunregistered variant is protected only against deliberate copying.
(d) Copyright and neighbouring rights
145. Member States provide protection of copyrights and neighbouring rights, within the
framework of harmonizing Community legislation on computer programs, rental and lending rights,
satellite broadcasting and cable transmission, the term of protection, and databases.
266  Two new
                                                     
260 Copyright protection, however, applies under Article 10 of the TRIPS Agreement, and Directive
91/250/EEC.  See COM(2000)199 for a report on the implementation of the Directive.
261 European Commission Press Release IP/00/1187.  It should be noted that the EPC, as revised in
2000, excludes from patentability computer programs "as such".
262 Hart., Holmes and Reid (2000).
263 France, Germany, Greece, Italy, Spain, and th e Benelux countries are parties to the Hague
Agreement.
264 Directive 98/79.
265 Regulation 6/2002.  See European Commission Press Release IP/01/528.
266 Directives 91/250/EEC, 92/100/EEC, 93/83/EEC, 93/98/EEC, and 96/9/EC.  The duration of
copyright in a literary or artistic work is 70 years after the death of the author of the work or the date on whichthe work was lawfully made available to the public;  for related rights it is 50 years.  A work originating in athird country or whose author is not a Community national is protected for the same period as in the country oforigin up to the ceiling of the Community term of protection.WT/TPR/S/102 Trade Policy Review
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harmonizing laws have been adopted since mid 2000:  in May 2001, the Directive on the
harmonisation of certain aspects of copyright and re lated rights in the information society, to be
transposed into national law by 22 December 2002267;  and in June 2001, the Directive on the resale
right for the benefit of the author of an original work of art, to be transposed into national law by
1 January 2006, with implementation of certain provisions delayed until 2010 or to 2012.268
146. The new copyright legislation has two objectives:  to implement the Community's
international obligations under the WCT and WPPT (see above), and to ensure a harmonized legal
framework for copyright protection and related rights in EU Member States, including, but not
restricted to, information society services, complementing the existing EU-wide framework for
copyright and related rights.269   The Directive harmonizes rights of reproduction, communication and
distribution for rightholders, and introduces the new "making available right".  There is a mandatoryexception to the right of reproduction for certain technical copies made in the transmission over
networks of the protected work; the other exceptions are optional and include, inter alia , exceptions
for private use, libraries, educational establishments, and museums, subject to fair compensation in
certain instances.  The Directive also requires that rightholders are to provide the means for
beneficiaries of particular exceptions to access protected material shielded by anti-piracy measures.With respect to distribution, the principle of Commun ity exhaustion applies, rather than international
exhaustion, with the result that parallel imports are permitted throughout the Community, while the
rightholder retains protection against parallel imports from third countries.
147. The Directive on resale rights provides for payment of a percentage of the resale price of a
work of art to the artist, or the heirs, for the term of protection of the copyright (70 years after the
death of the artist).  Once the legislation is fully implemented, the EU will be the only major art
market in which the resale right will exist, as the United States and Switzerland do not have similarrequirements in place;  the Commission intends to pursue the international recognition of resale rights
to ensure a level playing field for the art market.  The minimum threshold for resale rights to apply is
set at € 3,000 per work of art, although a lower limit may be set by a Member State, and the resale
right is set at 4% for these lower limit thresholds.  At higher thresholds for sale prices of works of art,
a tapering scale of rates applies:  3% for the band from € 50,000 to € 200,000;  1% for the band from€ 200,000 to € 350,000;  0.5% for the band from € 350,000 to € 500,000;  and 0.25% for any amount
over € 500,000.  The maximum resale right an artist can receive on any one resale is € 12,500.
                                                     
267 Directive 2001/29/EC.  See European Commission Press Release IP/01/528.  For background, see
Green Paper on Copyrights and Related Rights in the Information Society (COM(95)382) and COM(1999)250.
268 Directive 2001/84/EC.  See European Commission Press Release IP/01/1036.  Resale rights may be
restricted to apply to living artists only up to 2010, and may be extended to 2012.  The Commission notes that
the time limit for transposing the Directive is exceptionally long, and must remain so to maintain effectiveness
of Community action in the Single Market.
269 Directives 91/250/EEC (computer programs), 92/100/EC (rental and lending rights for authors),
93/83/EEC (satellite broadcasting and cable retransmi ssion), 93/98/EEC (term of protection), and 96/9/EC
(databases).