APRIL 2009 TRADE POLICY REVIEW OF THE EC

UNCLAS GENEVA 000303


EEB/TPP/MTAA FOR CRAFT
PASS USTR FOR ROHDE, STILLMAN
USDA/FAS/ITP, MTND
USDOC FOR ITA
USEU FOR DMULLANEY

E.O. 12958: N/A
TAGS: ETRD WTRO USTR
SUBJECT: APRIL 2009 TRADE POLICY REVIEW OF THE EC


1. SUMMARY: WTO Members conducted the Trade Policy Review of the
European Communities (EC) on April 6 and 8, 2009. The head of the
European delegation, Deputy Director General Peter Balas, said that
the EC is taking active steps, including fiscal stimulus packages,
to foster their recovery and thus a global recovery. He reiterated
their commitment to completing the Doha Round and pledged to
continue to play a leadership role in forging consensus. About 40
Members made interventions, with many raising deep concerns over the
EC's agricultural protection (including the reintroduction of dairy
export subsidies)and its trade-restricting regulatory environment,
notably technical barriers to trade (TBT) and sanitary and
phytosanitary requirements. The EC's regulations on chemicals,
REACH, was highlighted by no fewer than 10 delegations. Other
issues of concern included the EC's extensive use of trade remedies
and preferential trade arrangements, which some Members viewed as
discriminatory and limited in scope. Members praised the EC for
their leading role in the WTO, the Doha Round, and in Aid for Trade.
END SUMMARY.


2. At the onset of the meeting, Balas criticized the accuracy of
the report prepared by the WTO Secretariat in several areas,
particularly the notion that the EC's preferential trade
arrangements are discriminatory. In the second day opening
statement, where the country under review addresses issues raised
during the first day, Balas dismissed the numerous concerns on
agricultural policies by saying that these can all be addressed by
completing the Doha Round. He defended the use of dairy export
subsidies as being within WTO limits and justified by changes in
market conditions. The Discussant noted that the EC seemed to miss
the point raised by so many Members on the export subsidies and
warned that this could give rise to similar responses to the global
economic crisis by developing countries, using the same "strange"
justification. Balas engaged in a lively tit-for-tat discussion
with Members, in which he responded to concerns by pointing out
areas where they or other Members were deficient. For example,
Argentina and Balas had several exchanges on agriculture, where
Balas criticized Argentina's export taxes to counter concerns over
the EC's export subsidies. When China asserted the EC's use of
antidumping was abusive and targeted unfairly against China, Balas
responded that there are countries that utilize antidumping more
frequently than the EC (including the US) and that China wouldn't
have so many cases brought against it if its companies cooperated
more fully during the investigations. In response to a US question
on when the EC plans to notify its revised list of government
procurement entities to the WTO, Balas avoided the question by
stating how government procurement access in the EC is far different
from the US market since they don't have any equivalent to "Buy
American" provisions.

Chairperson's Summary Remarks


3. The Chairman, Ambassador Major of Hungary, summarized the
meeting as follows:


4. "The ninth Trade Policy Review of the European Communities has
given us all a better understanding of its trade and related
policies and their developments since its previous Review in 2007.
Our dialogue has been thorough and comprehensive, stimulated by the
full and open participation of Deputy Director General of DG Trade,
Mr. Peter Balas, and his delegation. We have also greatly benefited
from the perceptive remarks by our discussant, Ambassador Peter
Grey, and the active engagement of many Members."


5. "Members commended the EC on its positive economic performance
in recent years supported by the continuation of its trade reform.
Members appreciated the EC's strong commitment to the multilateral
trading system, including the DDA negotiations where the EC was
recognized as having played a leadership role in pressing for an
ambitious conclusion. The EC was also praised for its technical
assistance efforts and for its non-reciprocal preferences to
developing countries."


6. "The EC's tariff structure has remained largely unchanged since
its last Review, with the average applied MFN tariff rate having
decreased slightly from 6.9% in 2006 to 6.7% in 2008. Members
commended the EC for maintaining generally low tariff protection for
non-agricultural products. With regard to agriculture, Members
welcomed the fact that the EC was implementing the 2003 Common
Agricultural Policy centred on the move towards the Single Payment
Scheme. However, Members observed that agriculture remains
protected by a complex tariff structure, with high rates and tariff
quotas, and benefits from high levels of domestic support and export
subsidies, including the recent reintroduction of export refunds on
dairy products which some Members said had sent out a discouraging
signal at a time of economic crisis and contraction of world trade.
They encouraged the EC to consider the benefits of a more open
agriculture sector for consumers and food processors, as well as for
exporters, especially from developing countries. The EC referred to
its agricultural offer under the DDA, the implementation of which
would provide solution to these concerns."


7. "Some delegations raised concerns about the EC's regime on
technical barriers to trade in products such as chemicals (REACH),
and SPS measures; its state aid and export incentive programmes; and
about the lack of harmonization within the EC in areas, such as
customs procedures and internal tax rates. It was noted that the EC
remains an important user of contingency trade remedies. Other
issues of interest to Members included economic prospects and
planned reforms in the light of the global economic crisis;
competition regime; protection of intellectual property rights; the
dismantling of the remaining trade barriers in services at the
intra-EC level and further liberalisation vis-`-vis third countries;
and the EC regime on, inter alia, fisheries, energy, financial
services, telecommunications and postal services, and transport."


8. "Some delegations noted that the EC has continued to build upon
its wide network of preferential trade agreements (PTAs); the EC was
exhorted to ensure that its PTAs were complementary to the
multilateral trading system."


9. "Members appreciated the comprehensive responses provided by
the EC delegation, and looked forward to receiving written replies
to any unanswered questions within one month."


10. "In conclusion, the wide interest shown by Members, through the
depth of the interventions and the large number of advance written
questions, are commensurate to the role played by the EC in the
multilateral trading system. Members recognized the EC's liberal
trade regime for non-agricultural products, and stressed that
further reforms, in particular greater liberalization of
agriculture, would help it to better allocate resources.
Furthermore, Members urged the EC to continue to resist
protectionist pressures in this context of the global economic
downturn. I invite all Members to abide by this principle."


Statement of the United States


11. The representative of the United States made the following
remarks:


12. "Thank you, Chair. We would like to welcome Deputy Director
General Peter Bals, Ambassador Eckart Guth, and their entire
delegation to the ninth review of the trade policies and practices
of the European Communities. We thank the EC delegation for its
thorough submission and for its responses to our questions. We
would also like to thank the Secretariat for its informative report,
and the discussant, Ambassador Peter Grey, for his and thoughtful
contribution."


13. "As a point of departure, I would like to take a moment to
reflect on the many valuable attributes of our commercial and trade
policy relationship with the EC. Like many other WTO Members, the
United States has benefitted immensely from its commercial
relationship between the United States and the EC. Indeed, EC
member States are, collectively, our largest trading partner. Every
day, nearly $2.7 billion in goods and services originating on one
side of the Atlantic are delivered on the other side. U.S. and
European companies have directly investd nearly $1.5 trillion in
each other's economies supporting tens of millions of jobs. The
growth and technological development generated by these immense
trade and investment flows have created valuable opportunities for
exporters all around the world."


14. "The United States and other WTO Members have also benefitted
from the EC's strong support, over many decades, for a rules-based
multilateral trading system. Finally, it is important to note that
the vast majority of our bilateral trade with the EC proceeds
without conflict, and the disagreements that we sometimes have on
bilateral issues or on multilateral issues of common interest do not
interfere with our cooperation on a wide range of issues."


15. "Precisely because the EC plays such an important role in
international commerce and in global trade policy deliberations,
however, we have an obligation to conduct a constructive and
responsible review of its trade policies. The Secretariat's
comprehensive analysis and the European Commission's detailed
description of its trade regime have given us a lot of valuable
material with which to work. These documents - as well as the
knowledge of EC trade policies that we have acquired through our
engagement over many years - have prompted a number of our questions
about the relationship of specific trade policies to the EC's WTO
obligations. This review of EC trade policy could not come at a
more critical time. With the volume of global trade declining
significantly for the first time in many years, and with the
temptation to erect new barriers to imports growing, Members should
expect that their trade policies will be of great interest to their
trading partners."


16. "We have concerns about EC policies in several areas. I would
briefly like to highlight several of these concerns."


17. "With respect to agriculture, tariff protection continues to be
high in the EC. Agricultural and food products that the United
States safely consumes at home and exports to dozens of other
Members have been excluded from the EC market by SPS measures that
appear to lack sufficient scientific justification. In some cases,
the EC has imposed SPS barriers on products that the EC's own
scientists have concluded pose no risk to human, animal, and plant
life or health. Because of SPS and other barriers, U.S.
agricultural exporters have been unable to access fully the EC's
post-Uruguay Round market."


18. "In the area of technical barriers to trade, the EC is
attempting to transform an essentially EC regional standard on olive
oil into a Codex standard. Although the EC has not been explicit
about the reasons behind its position on linolenic acid, we are
concerned that the effect of this position would be to unjustly
preclude extra virgin olive oil produced outside the EC from bearing
the extra virgin label. The United States also continues to have
concerns regarding EC measures that severely restrict the ability of
non-EC wine to use common or descriptive and commercially valuable
terms, on the grounds that those terms are traditional to European
wines. This is particularly disturbing when some of these terms do
not have a common definition across all member States, we are aware
of no effort to monitor or limit the use of these terms within the
EC, and these terms have been used in the EC market on U.S. wines
for many years with no apparent problems."


19. "EC standards, testing, and certification rules and EC
regulatory practices have become increasingly important determinants
of market access for firms around the world. Unfortunately, we have
found that by the time the EC issues public notices on regulatory
proposals - some with enormous trade implications - deliberations
among EC member States have progressed too far to allow for
meaningful consideration of the views of trading partners. As we
have for several years, we continue to urge the EC to offer WTO
Members and their private sector stakeholders meaningful
opportunities to comment on regulatory proposals and assurances that
those comments will be taken into consideration before a final
regulation is promulgated and enforced."


20. "Some major EC regulatory initiatives, such as REACH, the new
regulatory regime for chemicals, have proven to be extraordinarily -
and needlessly - burdensome to exporters. In the case of REACH -
which has as one of its objectives increasing the competitiveness of
the European chemical industry - the United States has raised
several concerns in TBT Committee meetings. These include REACH's
disproportionate impact on SMEs; its Only Representative provision;
and the continued failure of the EC to remedy discrimination in the
treatment of certain "phase in substances," particularly substances
in imported cosmetics. We have also expressed concern about the
operation of the Substance Information Exchange Fora; the lack of
uniform enforcement and interpretation of REACH across the member
States; and the analytical methods supporting decisions to place
substances on the authorization candidate list and the EC's failure
to clarify the legal status of substances placed on the list. We
have urged the EC to give careful consideration to the expressions
of concern that have been registered by its trading partners and
other interested parties on REACH, and to offer a meaningful
opportunity to reflect the views of non-EC governments and
stakeholders in the implementation process."


21. "Both in the area of SPS regulations and with respect to the
standards applied to manufactured products, we continue to be
concerned that some measures maintained by the EC on the grounds of
food safety or environmental protection may not be appropriately
supported by science-based risk assessments.

More generally, inconsistent implementation of internal market rules
and burdensome regulatory requirements hinder trade for EC and
foreign producers alike. We applaud the European Commission's
efforts to address lingering internal barriers to the free flow of
goods, and look forward to hearing how the Commission intends to
address remaining barriers, including those that are not
scientifically substantiated, to the free flow of goods at the EC
and member State levels."


22. "The United States notes the Secretariat's recognition of the
EC's status as a key player in the WTO and a major force behind the
Doha Development Agenda (DDA) negotiations. Now more than ever we
must work together to minimize barriers to trade and find ways to
increase trade as a means to reverse the economic downturn. A
strong, market-opening agreement for both goods and services in the
Doha Round negotiations would be an important step towards fighting
the threat of protectionism and a major contribution to addressing
the global economic crisis, as part of the effort to restore trade's
role in leading economic growth and development. We look forward to
continuing our work with the EC and other Members to reach an
ambitious and balanced result in the Doha Round."


23. "We would like to thank the EC again for providing answers to
our written questions. We plan to review the responses carefully,
provide substantive comments and request clarifications as necessary
on Wednesday."


24. "In closing, the United States welcomes this opportunity to
learn more about EC trade policies and practices. We are hopeful
that our exchanges during this TPR will give the EC and its trading
partners guidance on ways that the EC trade policy regime can be
improved, increasing the gains we have all made from our commercial
relationship with the countries of the European Communities. Thank
you."

ALLGEIER