EU INVESTMENT CLIMATE STATEMENT, 2010

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SUBJECT: EU INVESTMENT CLIMATE STATEMENT, 2010

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1. Per reftel, this is the 2010 Investment Climate Statement for
the European Union. Post will email Word versions as instructed in
reftel. The statement covers the following categories:

--Openness to Foreign Investment
--Conversion and Transfer Policies
--Expropriation and Compensation
--Dispute Settlement
--Performance Requirements and Incentives
--Right to Private Ownership and Establishment
--Protection of Property Rights
--Transparency of Regulatory System
--Efficient Capital Markets and Portfolio Investment
--Political Violence
--Corruption
--Bilateral Investment Agreements
--OPIC and Other Investment Insurance Programs
--Labor
--Foreign-Trade Zones/Free Ports
--Foreign Direct Investment Statistics
--Web Resources

OPENNESS TO FOREIGN INVESTMENT
--------------

EU Treaty Provisions Governing Investment/Historical Background


2. The European Union has one of the most hospitable climates for
U.S. investment in the world, with the historical book value of U.S.
investment in the 27 EU member states exceeding $1.6 trillion. This
is a result, in part, of the process of European integration. The
1957 Treaty of Rome (now renamed, with the December 2009 entry into
force of the Lisbon Treaty, the "Treaty on the Function of the
European Union" - TFEU) established the European Community among six
European countries (Belgium, France, Germany, Italy, the Netherlands
and Luxembourg; this has now grown into a European Union of 27
countries covering virtually all the territory of Europe. TFEU
Article 43 requires all of these EU "Member States" to provide
national treatment to investors from other Member States regarding
the establishment and conduct of business.


3. The TFEU also continues and deepens the Treaty of Rome's "four
freedoms" (free movement of capital, labor, goods and persons)
within the European Union. The free movement of capital requirement
in particular benefits all potential investors, whether they
originate from an EU Member State or not. Investors in principle
are guaranteed national treatment. Finally, any violation of these
rights can be adjudicated by the European Court of Justice, which
may hear cases related to violations of Treaty rights directly, or
overturn national court decisions found inconsistent with the
Treaty. This was a remarkable achievement, given that the six
original signatories to the Treaty had been at war with one another
just over a decade previously.


4. The 1986 Single European Act further reduced barriers to
intra-EU investment, and legislation adopted subsequently even
created opportunities for companies from one Member State to receive
better than national treatment in another Member State. For
example, in the financial services sector, German universal banks
can conduct securities business freely in other Member States, even
if local banks are not allowed to offer these services domestically
by their local licensing authority.


5. Prior to the 1992 Treaty on the European Union (TEU, often known
as the "Maastricht" Treaty),the Community had virtually no role in
determining conditions that would affect the entry of investors from
third countries into the territories of the Member States. Member
States were compelled by the Treaty to grant national treatment to
investors from other EU countries (including subsidiaries owned by
third countries),but could erect and maintain barriers to investors
coming directly from non-EU countries, consistent with their
international obligations. These obligations include the Treaties
of Friendship, Commerce and Navigation (FCNs) and Bilateral
Investment Treaties (BITs) which the United States has with most EU
countries, as well as obligations under the OECD codes on capital
movements and invisible transactions. The only role Community law
played was to ensure that a foreign-owned company that was
established in one Member State received non-discriminatory
treatment in other Member States, as mandated under Article 43 of
the TFEU.


6. EU power to regulate Member State treatment of incoming foreign

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investment increased considerably in 1993. A Treaty revision that
year abolished all restrictions on the movement of capital, both
between EU Member States and between Member States and third
countries (Article 56). However, Member State measures in force on
December 31, 1993 denying national treatment to third-country
investors were grandfathered. The Treaty (then Article 57)
expressly provided for the adoption of common regimes in these
areas: "The Council may, acting by a qualified majority on a
proposal from the Commission, adopt measures on the movement of
capital to or from third countries involving direct investment
establishment, the provision of financial services or the admission
of securities to capital markets. Unanimity shall be required for
measures under this paragraph which constitute a step back in
Community law as regards the liberalization of the movement of
capital to or from third countries." The generally accepted
interpretation of this provision was that EU law governed the
treatment of incoming investments (excepted where grandfathered
provisions existed) and their treatment after establishment, while
the Member States were responsible for ensuring the treatment of
their investors outside the territory of the EU.


7. In June 1997, the European Commission issued a Communication
clarifying the scope of EU Treaty provisions on capital movements
and the right of establishment. The Commission was reacting to
limits that some Member States had imposed on the number of voting
shares investors from other Member States could acquire during
privatization. The Commission stressed that free movement of
capital and freedom of establishment constitute fundamental and
directly applicable freedoms established by the Treaty. Nationals
and companies of other Member States should, therefore, be free to
acquire controlling stakes, exercise the voting rights attached to
these stakes and manage domestic companies under the same conditions
laid down by a Member State for its own nationals. The European
Court of Justice ruled in three precedent-setting cases in 2002
against golden shares in France, Belgium and Portugal, triggering
several infringement actions by the Commission. The Court
subsequently ruled against golden share cases in other Member
States.


8. In June 2007, a new EU Directive to strengthen investor
cross-border voting rights came into force. The Directive bolsters
cross-border investment by abolishing shareholder voting impediments
then prevalent in several Member States, such as the inability to
vote electronically or by proxy. It is not yet clear how the
Directive is being implemented by the affected Member States and
whether the Commission will need to take legal action to compel
implementation.


9. As discussed in more detail in the Capital Markets section
below, in November 2007, the EU's Markets in Financial Instruments
Directive (MiFID) came into force. This law seeks to eliminate many
barriers to cross-border stock trading by establishing a common
framework for European securities markets, increasing competition
between market exchanges, raising investor protection and providing
investors a broader range of trading venues. It gives EU securities
exchanges, multilateral trading facilities and investment firms a
"single passport" to operate throughout the EU on the basis of
authorization in their home Member States. MiFID is broadly
considered a success.


10. At the Commission's request, and in order to identify possible
areas of improvement, the Committee of European Securities
Regulators (CESR) is evaluating MiFID's impact. CESR's preliminary
assessment has shown that the introduction of MiFID significantly
changed the secondary markets landscape across Europe, in particular
through the introduction of new Multilateral Trading Facilities
(MTF) platforms, increasing competition between trading venues,
resulting in downward pressures on direct execution costs.


11. However, market participants expressed concerns over:

-- a number of pre-trade transparency issues ranging from
interpretation issues, to potentially undesirable impacts on
innovation and an unlevel playing field between various trade
execution venues;

-- market data fragmentation, in particular that there would be a
need for better quality of post-trade data and a consolidated set of
market data;

-- the existence of a level playing field among trading platforms,
both by regulated markets vis-`-vis MTFs and by regulated markets
and MTFs vis-`-vis investment firms' OTC activities.


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The report is expected to be finalized during the first quarter of

2010.


12. In January, 2008, the European Commission proposed to remove
barriers to cross-border venture capital investment and fundraising.
The Commission proposal would authorize national regulators to
recognize venture capital funds operating in other EU Member States
in order to help innovative small businesses access risk capital.
The Commission invited Member States, when reviewing existing or
adopting new legislation, to enable cross-border operations and
consider mutual recognition of venture capital funds.

Lisbon Treaty Impacts


13. The entry into force in December 2009 of the Lisbon Treaty
changes EU jurisdiction over direct investment issues in major
respects. Full implications of Lisbon in this area are still
unclear, however, and will need to be agreed upon by EU
institutions. As noted above, after the Maastricht Treaty the EU
and the Member States essentially divided responsibility for the
treatment of foreign investment, with EU law covering investment
inflows and post-establishment treatment within the EU, while the
member states remained "competent" for some aspects of establishment
of foreign investments and for protections for their investors
overseas. Article 207 of the Lisbon Treaty, however, now brings
"Foreign Direct Investment" under the umbrella of the EU common
commercial policy, making it an exclusive EU competence. FDI is not
defined in the treaty, though, leaving the practical implications of
the Treaty for EU external investment policies still to be defined.


14. If, as expected, the term "Foreign Direct Investment" is
interpreted broadly, this would extend EU authority over much of the
subject matter, including both internal and external investment
liberalization and investment protection, heretofore addressed by
Member State International Investment Agreements. The EU will gain
the ability to negotiate Bilateral Investment Treaties (BITs) or
investment chapters of Free Trade Agreements. Also, the Lisbon
Treaty requires the consent of the European Parliament for new EU
investment agreements.


15. A narrow definition of FDI, on the other hand, may potentially
not limit authority of Member States to pursue external protections
in their BITs. If Member States and the Commission cannot agree on
a common definition of FDI treatment under Lisbon, it likely would
fall to the European Court of Justice to provide clarity. The EU is
thus likely to only gradually extend its activity in the area of
investment agreements, given the time it will take to clarify and
define the issues above. In the meantime, EU Member State
investment treaties will remain in force.

U.S.-EU Efforts to Promote Open Investment


16. In November 2007, the United States and the European Commission
under the umbrella of the Transatlantic Economic Council (TEC)
launched a "U.S.-EU Investment Dialogue" to reduce barriers to
transatlantic investment and promote open investment regimes
globally. Thet recently he Dialogue prepared fo discussing 7urther Investment
Dialogue
meetings Qn 2010, and continue to discuss the evolving EUrole with
respect to foreign investment in other fora.

Ownership Restrictions and Reciprcity Provisions


17. EU Treaty Articles 43 (Qstablishment) and 56/57 (capital
movements) hQlped the EU to create one of the most hospitablQ legal
frameworks for U.S. and other forei'n investment in the world.
However, restrictions on foreign direct investment do exist. UnderQ
EU law, the right to provide aviation transpoQt services within the
EU is reserved to firmsrovide maritime transport services within
certain EU Member States is also estricted. Currently, EU banking,
insurance Qnd investment services directives include "reciprocal"
national treatment clauses, under which financial services firms
from a third country may be denied the right to establish a new
business in the EU if the EU determines that the investor's home
country denies national treatment to EU service providers. In
addition, as with the United States, a number of regulatory

BRUSSELS 00000176 004.4 OF 018


measures, particularly in the financial sector, are also subject to
"prudential exceptions" and thus are not guaranteed national and
most favored nation treatment under the EU's GATS and other
international commitments.


18. In March 2004 the Council of Ministers approved a Directive on
takeover bids ("Takeover Directive"),which sought to create
favorable regulatory conditions for takeovers and to boost corporate
restructuring within the EU. The Directive authorizes Member States
and companies to ban corporate defensive measures (e.g. "poison
pills" or multiple voting rights) against hostile takeovers. It
includes a "reciprocity" provision to allow companies that otherwise
prohibit defensive measures to sue if the potential suitor operates
in a jurisdiction that permits takeover defenses. Article 12.3 of
the text is ambiguous as to whether the reciprocity principle
applies to non-EU firms. However, the preamble states that
application of the optional measures is without prejudice to
international agreements to which the Community is a party. France
has indicated its intent to apply reciprocity to third countries.
Some other Member States appear to be leaning in the same
direction.


19. The Takeover Directive was due to be implemented by Member
States by May 20, 2006, but full implementation was delayed. By
February 2007, seventeen Member States had transposed the Directive
or adopted necessary framework rules. Other Member States
implemented the Directive throughout 2007-08.

Energy Sector Liberalization


20. In September 2007 the European Commission introduced
legislation intended to increase competition and investment in the
gas and electricity sectors, featuring controversial plans to
separate the production and distribution arms of large integrated
energy firms. After a year of negotiation over competing proposals,
the French Presidency of the EU forged a political compromise during
the EU Energy Ministers meeting of October 10, 2008. On June 25,
2009, after passage by the European Parliament, the European Union
officially adopted the Third Energy Package, legislation consisting
of two directives and three regulations designed to promote internal
energy market integration and to enhance EU energy security.


21. Specifically, the legislation mandates the separation of energy
production and supply from transmission through the unbundling of
European energy firms. The objective is to create a level playing
field by preventing companies engaged in the generation and
distribution of gas and electricity from using their privileged
position to prevent access to transmission systems or limit
connectivity of transmission networks. The original concept, which
mandated full ownership unbundling, has been broadened and permits
energy firms that operate within the European market three options:
1) full ownership unbundling; 2) an Independent System Operator
(ISO); and 3) an Independent Transmission Operator (ITO).


22. Additionally, the package includes a "Third Country Clause"
that requires all non-EU countries to comply with the same
unbundling requirements as EU companies before they are certified to
own and/or operate transmission networks in the Common Market.
Moreover, the clause permits Member States to refuse a foreign
company certification/permission to acquire or operate a
transmission network - even if it meets other requirements - if it
is deemed to have a potential negative impact on the security of
energy supply of an individual Member State or the EU as a whole.
Member States are required to seek the opinion of the Commission
with regards to the unbundling requirement and "security of supply"
issue. The Commission's opinion is not binding, but Member States
must take it into consideration. Member States have up to 18 months
to put most of the package into effect; however, implementation of
the Third Country Clause can take up to three-and-a-half years.

CONVERSION AND TRANSFER POLICIES
--------------


23. Europe's single currency, the Euro, and the eleven remaining
national EU Member State currencies are freely convertible. The EU,
like the U.S., places virtually no restrictions on capital
movements. Article 56 of the EU Treaty specifically prohibits
restrictions on the movement of capital and payments between Member
States and between Member States and third countries, with the
grandfathered exceptions noted above. The adoption of the Euro in
16 of the 27 EU Member States has shifted currency management and
control of monetary policy to the European Central Bank (ECB) and
the EU Council of Ministers. In recent years, EU members Malta and
Cyprus adopted the Euro on January 1, 2008; Slovakia adopted the

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currency a year later, on January 1, 2009.


24. Remaining new EU Member States must join the Euro upon meeting
specific economic convergence criteria although no time limit is
placed for the application process to be completed. The global
financial crisis initially led some countries outside of the
Eurozone, including Denmark, to consider accelerating entry into the
zone. More recently, however, high deficits and debt crises in
Greece, and to a lesser degree Portugal and Spain, have raised
questions over the stability of the Eurozone. While Estonia, with
relatively high macroeconomic stability, seeks to enter the Eurozone
in 2011, most other remaining EU members are expected to enter in
2014 or later.

EXPROPRIATION AND COMPENSATION
--------------


25. The European Union does not have the authority to expropriate
property; this remains the exclusive competence of the Member
States.

DISPUTE SETTLEMENT
--------------


26. Foreign investors can, and do, take disputes against Member
State governments directly to local courts. In addition, any
violation of a right guaranteed under the EU law - which has been
ruled supreme to Member State law, including constitutional law -
can be heard in local courts or addressed directly by a foreign
investor with a presence in a Member State to the European Court of
Justice. Further, all EU Member States are members of the World
Bank's International Center for the Settlement of Investment
Disputes (ICSID),and most have consented to ICSID arbitration of
investment disputes in the context of individual bilateral
investment treaties. While the EU is not itself a party to ICSID or
other such arbitration conventions, it has stated its willingness to
have investment disputes subject to international arbitration.

PERFORMANCE REQUIREMENTS AND INCENTIVES
--------------


27. The approach of the ten-year anniversary - January 1, 2009 - of
the implementation of European Economic and Monetary Union sparked
interest in a coordinated tax policy among some EU officials.
Subsequently, however, Member States and key Commissioners rejected
proposals to move toward tax harmonization or create a "common
consolidated tax basis" across Member States. European Union grant
and subsidy programs are generally available only for nationals and
companies based in the EU, but usally on a national treatment
basis. For more information, see Chapter 7 "Trade and Project
Financing" in the EU Country Commercial Guide as well as individual
Country Commercial Guides for Member State practices.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
--------------


28. The right to private ownership is firmly established in EU law,
as well as in the law of the individual Member States. See
individual country commercial guides for EU Member State practices.

PROTECTION OF PROPERTY RIGHTS
--------------


29. The EU and its Member States support strong protection for
intellectual property rights (IPR) and other property rights. The
EU and/or its Member States adhere to all major intellectual
property rights agreements and offer strong IPR protection,
including implementation of the WTO TRIPS provisions. Together, the
U.S. and the EU have committed to enforcing IPR in third countries
and at our borders in the EU-U.S. Action Strategy endorsed at the
June 2006 U.S.-EU Summit.


30. In October 2007, the U.S. and key trading partners announced
their intention to negotiate an Anti-Counterfeiting Trade Agreement
(ACTA) in order to bolster efforts to combat counterfeiting and
piracy by identifying a new, higher benchmark for enforcement that
countries can join on a voluntary basis. Talks continued through
2009, with a 7th round occurring in January 2010 in Mexico.


31. Despite overall strong support for IPR enforcement, several EU
Member States have been identified in the U.S. Special 301 process
due to concerns with protection of certain intellectual property
rights. The United States continues to be engaged with the EU and
individual Member States on these matters.

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Enforcement of Intellectual and Industrial Property Rights


32. In April 2004, the EU adopted the Intellectual Property
Enforcement Directive (IPRED)
(http://ec.europa.eu/internal_market/iprenfor cement/
directives_en.htm). This Directive requires Member States to apply
effective and proportionate remedies and penalties to form a
deterrent against counterfeiting and piracy and harmonizes measures,
procedures, and remedies for right holders to defend their IPR
within Member States. Remedies available to right holders under
IPRED include the destruction, recall, or permanent removal from the
market of illegal goods, as well as financial compensation,
injunctions, and damages. Although Member States were to have
transposed the Directive into national legislation by April 2006,
Luxembourg, the last to do, implemented IPRED in May 2009.


33. In January 2008 the European Court of Justice (ECJ) issued a
decision confirming that EU rules do not require countries to
disclose names of Internet file sharers in civil cases. Spanish
firm Promusicae and other European rights holders had hoped that the
ECJ would rule that Telefonica (a Spanish Internet service provider)
had to provide the proper data to protect its property rights. The
Court, however, ruled that Member States could - but do not have to
- require communication of personal data to ensure effective
copyright protection in the context of civil proceedings as long as
such national laws are not in conflict with the fundamental EU
rights of respect for private life and protection of personal data.


34. At the 2nd High Level Conference on Counterfeiting and Piracy
April 2, 2009, the Commission launched the European Observatory on
Counterfeiting and Piracy. The role of the Observatory, which is
composed of private industry representatives and designees chosen by
Member States, is to serve as the central resource for gathering,
monitoring and reporting information related to IPR infringement in
the EU. The first meeting of the Observatory took place September
4, 2009. Two initial subgroups were created to look at issues
surrounding data gathering and existing legal frameworks.

Specific Enforcement Measures


35. Copyright: In 2001, the EU adopted Directive 2001/29
establishing pan-EU rules on copyright and related rights in the
information society. In December 2006, the Council and Parliament
passed an updated version of the 2001 Copyright Directive modified
to clarify terms of copyright protection. This new Directive
entered into force in January 2007. The Directive is meant to
provide a secure environment for cross-border trade in
copyright-protected goods and services, and to facilitate the
development of electronic commerce in the field of new and
multimedia products and services. Authors' exclusive reproduction
rights are guaranteed with a single mandatory exception for
technical copies, and an exhaustive list of exceptions to copyright
which are optional for Member States in terms of including them in
national law. The Commission released a comprehensive
anti-counterfeiting plan, including criminal enforcement of IPR,
which was supported by the Council in September 2008.


36. In April 2009 the Parliament approved a Commission proposal to
extend term of copyright protection for performers and record
producers from 50 to 70 years. The proposal also contains a new
claim for session players amounting to 20 percent of record labels'
offline and online sales revenue, a 'use-it-or-lose-it' provision
that allows performers to recover their rights after 50 years,
should the producer fail to market the sound recording, a so-called
'clean slate' which prevents record producers from making deductions
to the royalties they pay to featured perormers. The text also
invites the Commission to conduct a separate impact assessment on
audiovisual performers and to come forward with appropriate
proposals in the course of 2010.


37. The Commission launched a public consultation on a reflection
paper on the challenge of creating a European Digital Single Market
for creative content like books, music, films or video games. The
focus on the consultation, open from October 22, 2009 to January 5,
2010, was to solicit views from rightholders, consumers, and
commercial users regarding the digital availability of content in
Europe. The consultation will be used to inform the Commission's
crafting of consumer- and competition-friendly rules needed to
create a genuine Single Market for creative content on the
internet.


38. On December 14, 2009, the European Union and Member States
ratified the World Intellectual Property Organization (WIPO)

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Copyright Treaty and the WIPO Performances and Phonograms Treaty.

39. Trademarks: Registration of trademarks with the European
Union's Office for Harmonization in the Internal Market (OHIM) began
in 1996. OHIM issues a single Community Trademark (CTM) that is
valid in all EU Member States. In October 2004 the European
Community acceded to the World Intellectual Property Organization
(WIPO) Madrid Protocol. The accession of the Community to the
Madrid Protocol established a link between the Madrid Protocol
system, administered by WIPO, and the Community Trademark system,
administered by OHIM. Since October 2004 Community Trademark
applicants and holders have been allowed to apply for international
protection of their trademarks through the filing of an
international application under the Madrid Protocol. Conversely,
holders of international registrations under the Madrid Protocol are
entitled to apply for trademark protection under the Community
trademark system. The link between the OHIM and the WIPO
registration systems allows firms to profit from the advantages of
each while reducing costs and simplifying administrative
requirements.


40. On March 31, 2009, the Commission announced new, lower fees and
simplified procedures for EU-wide trademark rights, eliminating
registration fees and reducing application fees by 40 percent. The
new rates entered into force May 1, 2009, and applications for
trademarks can be done online. In October 2009 the Commission
awarded a contract for a study on the trade mark system in Europe to
the Max Planck Institute for Intellectual Property, Competition and
Tax Law. The aim of the study is to assess the current state of
play of the Community trade mark system and the potential for
improvement and future development.


41. Designs: The EU adopted the Community Designs Regulation, a
Regulation introducing a single Community system for the protection
of designs, in December 2001. The Regulation provides for two types
of design protection, directly applicable in each EU Member State:
the Registered Community Design (RCD) and the unregistered Community
design. Under the Registered Community Design system, holders of
eligible designs can use an inexpensive procedure to register them
with OHIM, and will then be granted exclusive rights to use the
designs anywhere in the EU for up to twenty-five years.
Unregistered Community designs that meet the Regulation's
requirements are automatically protected for three years from the
date of disclosure of the design to the public. Protection for any
registered Community design was automatically extended to Romania
and Bulgaria when those countries acceded to thethat belongs to the 08 OHIhelp
acceleraQQnt paves the way for further discussion
towars a future patent system, but, given institutional and
procedural hurdles, such a system is likely still one or more years
away.


44. At present, the most effective way to secure a patent across EU
national markets is to use the services of the European Patent
Office (EPO). EPO offers a one-stop-shop enabling right holders to
obtain various national patents using a single application.
However, these national patents have to be validated, maintained and
litigated separately in each Member State. In September 2008 the
EPO and the U.S. Patent and Trademark Office (USPTO) launched the
Patent Prosecution Highway, a joint trial initiative leveraging
fast-track patent examination procedures already available in both
offices to allow applicants to obtain corresponding patents faster
and more efficiently. This will permit each office to exploit work
already done by the other office and reduce duplication. In
addition, the two offices, along with the patent offices of Japan,
Korea, and China, announced a joint agreement (IP5) in November 2008

BRUSSELS 00000176 008.4 OF 018


to undertake projects to harmonize the environment for work sharing
and eliminate unnecessary work duplication.


45. Geographical Indications: The United States continues to have
concerns about the EU's system for the protection of Geographical
Indications (GIs). In a WTO dispute launched by the United States,
a WTO panel found that the EU regulation on food-related GIs was
inconsistent with EU obligations under the TRIPS Agreement and the
General Agreement on Tariffs and Trade of 1994. In its report, the
panel determined that the EU regulation impermissibly discriminated
against non-EU products and persons, and agreed with the United
States that the EU could not create broad exceptions to trademark
rights guaranteed by the TRIPS Agreement. The panel's report was
adopted by the WTO Dispute Settlement Body (DSB) in April 2005. In
response to the DSB's recommendations and rulings, the EU published
an amended GI regulation, Council Regulation (EC) 510/06, in March
2006 (amended by Council Regulation (EC) 179/2006 and Commission
Regulation 417/2008). The United States continues to have some
concerns about this amended regulation, about the recently
promulgated Council Regulation (EC) 479/08, which relates to wines,
and about Commission Regulation (EC) 607/09, which relates inter
alia, to GIs and traditional terms of wine sector products. The
United States is carefully monitoring the application of these
regulations.


46. EU International Efforts to expand GI protection: The EU
continues to campaign to have its geographical indications protected
throughout the world without regard to consumer expectation in
individual markets, and to expand the negotiations for a registry of
geographical indications beyond wines and spirits to other
foodstuffs. This has developed into a major EU priority in the
context of the Doha Development Agenda negotiations in the WTO, in
which a discussion is ongoing concerning the extension of so-called
"additional" GI protection to products in addition to wine and
spirits. The U.S. and other WTO members continue to oppose the EU's
proposals to extend "additional" GI protection, noting that the
objective of effective protection of such indications can be
accomplished through existing GI obligations.


47. U.S.-EU coordination on IP counterfeiting and piracy: Since the
U.S.-EU summit of June 2005, where leaders agreed to more closely
cooperate on IPR enforcement, the U.S. and the EU have intensified
customs cooperation and border enforcement, strengthened cooperation
with and in third countries, and built public-private partnerships
and awareness raising activities together. The U.S.-EU action
strategy for the enforcement of intellectual property was launched
at the US-EU Summit in June 2006. Since then, U.S. and EU officials
have regularly met with stakeholders to identify new areas for
cooperation including capacity building, joint messaging and
coordinated border actions as well as continued U.S.-EU multilateral
cooperation toward successful conclusion of the Anti-Counterfeiting
Trade Agreement.


48. On February 22, 2008, the United States and European Union
announced the results of Operation Infrastructure, the first joint
IPR operation undertaken by the U.S. Customs and Border Protection
and the EU. The operation resulted in the seizure of over 360,000
counterfeit integrated circuits and computer network components
bearing more than 40 different trademarks. At the September 2009
session of the U.S.-EU IPR Working Group, U.S. and EU Customs
officials rolled out a new brochure titled "Protecting Intellectual
Property at Our Borders," and a webkit providing information to
rights holders on how to work with Customs officials to obtain
enforcement of intellectual property rights in both markets.

TRANSPARENCY OF REGULATORY SYSTEM
--------------


49. The EU is widely recognized as having a generally transparent
regulatory regime. The Commission, which has the sole authority to
propose EU-level laws and regulations, generally announces an
interest in legislating in a certain area, issuing a "green paper"
for broad discussion, followed by a "White Paper" with more detail
on the proposed measure, and eventually a formal legislative
proposal. The Member State Ministers and experts examine and amend
these proposals in Council in tandem with European Parliament
consideration of them; Council decisions and EP amendments are
publically available. Informal working documents are not published,
but interested parties usually can get fairly detailed information
as these processes unfold. All adopted measures are published in 22
languages in the EU's Official Journal, which is available on line.


50. Despite this overall transparency, the EU has worked to improve
transparency and simplify its regulatory system. In December 2007

BRUSSELS 00000176 009.4 OF 018


the EU released a comparative study of codes of conduct for
public-office holders. To improve lobbying transparency, the
Commission set up a voluntary public register in 2007, followed by
the establishment of a common code of conduct for all lobbyists in

2008. In 2008, the Commission also strengthened the role of the
Impact Assessment Board (IAB),and now requires that all Commission
proposals undergo IAB scrutiny before they can be adopted.


51. In 2005, the Commission adopted an action plan for simplifying
existing EU legislation and reducing the administrative burden on
stakeholders within the regulatory process. The EU's Better
Regulation policy aims at simplifying and improving existing
regulation, to better design new regulation and to reinforce the
respect and the effectiveness of the rules, while respecting the EU
proportionality principle. In 2007, the Commission announced its
intention to cut administrative burd


52. Iprogram and hlights of our bilateral regulatory cooperQtion
include:

--The Forum met twice in 200Q, in July and October. At the July
meeting, 4he Forum reviewed progress in the areas of impact
assessment, the use of standards in regultion, risk assessment, and
import safety.

Q-Energy efficiency standards were among the issQes discussed during
the July and October meetings. The two sides agreed to develop an
inventory of regulations and initiatives in this aQea.

--OIRA and DG Enterprise presented paperQ during the October meeting
describing the U.S. and EU approaches to the use of voluntary
standards in support of regulation. Both sides also discussed the
usefulness of continued dialogue regarding developments related to
the risk analysis and regulation of nanomaterials.

--Contacts between OIRA and the U.S. Office of Science and
Technology Policy (OSTP) with the Commission's Directorate of Health
and Consumer Affairs (DG SANCO) to facilitate an international
dialogue on risk analysis, led to on-going risk analysis discussions
starting in July 2008 that included representatives from the United
States, EU, and Canada.

--In January 2009 OMB, SANCO, and Canadian government risk managers
reinstituted the practice of weekly conference calls to ensure
progress in work groups that will develop white papers in three
focus areas: 1) development of a framework for exposure assessment;
2) uncertainty and terminology; and 3) new/rapid approaches to risk
assessment. The risk assessment papers are expected to be available
for broad discussion in 2010.

--CPSC and DG SANCO agreed to discuss the follow-up to the 2008
trilateral meetings and outreach with China. CPSC and DG SANCO will

BRUSSELS 00000176 010.4 OF 018


meet in early 2010 to discuss the way forward, including a possible
trilateral to be hosted by Beijing in 2010.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
-------------- --------------


55. The EU Treaty specifically prohibits restrictions on capital
movements and payments between the Member States and between the
Member States and third countries.


56. The single market project has spurred efforts to establish
EU-wide capital markets. The EU has acted to implement the 1999
Financial Services Action Plan (FSAP) to establish legal frameworks
for integrated financial services (banking, equity, bond and
insurance) markets within the EU. By the end of 2008, the EU had
adopted and almost fully implemented 43 of the 45 measures to
increase market and regulatory efficiency and increase coordination
among Member State supervisory and regulatory authorities, and has
acted to implement the remaining two measures.


57. FSAP measures include Directives on: Prospectuses (permitting
one approved prospectus to be used throughout the EU),Transparency
(detailing reporting requirements for listed firms, including
adoption of International Accounting Standards),Markets in
Financial Instruments (MiFID - providing framework rules for
securities exchanges and investment firms),Takeover Bids (to
facilitate cross-border takeovers),and Capital Requirements
(implementing the Basel II Accord- see EU responses to financial
crisis).


58. Accounting equivalence: On December 12, 2008, the European
Commission granted equivalence to the Generally Accepted Accounting
Principles (GAAPs) of certain third countries (including the U.S.)
as from January 2009. As a result, foreign companies listed on EU
markets are able to file their financial statements prepared in
accordance with those GAAPs.


59. Review of the Prospectus and Transparency Directives: In
September 2009 the Commission proposed legislation reviewing the
Prospectus Directive, in order to increase efficiency and legal
clarity in the prospectus regime, to reduce administrative burdens
for issuers and intermediaries, and to enhance investor protection.
The Prospectus Directive lays down rules governing information that
must be available to the public in case a public offer or admission
to trading of transferable securities in a regulated market takes
place in the EU. The main changes proposed are as follows:

-- certain securities issues will be subject to less comprehensive
disclosure requirements (small companies, small lenders, rights
issues and government guarantee schemes);

-- the format and content of the prospectus summary have been
improved;

-- there are clearer exemptions from the obligation to publish a
prospectus when companies sell through intermediaries ("retail
cascades") and for employee share schemes;

-- disclosure requirements that currently overlap with the
Transparency Directive will be repealed;

-- issuers of all non-equity securities will be able to determine
their home Member State;

-- the definition of 'qualified investors' in the Prospectus
Directive will be aligned with the one of 'professional clients' as
defined in the MiFID.

Outlook: The Council and the European Parliament are currently
working on this issue, but neither has reached an agreement. The
European Parliament plans to adopt the text in the first reading in
April 2010.


60. Solvency II: Solvency II is the new risk-based solvency regime
for the EU insurance sector, approved in 2009 and due to come into
force in 2012. It introduces the concepts of group solvency and
group supervision. Third-country insurers will be allowed to
operate in the EU if their home country regulatory framework is
found to be equivalent to the EU's. Third-country insurers whose
home jurisdictions have not been found equivalent will likely have
to establish a holding company in the EU.

Outlook: The Committee of European Insurance and Occupational
Pensions Supervisors (CEIOPS) published draft criteria for assessing

BRUSSELS 00000176 011.4 OF 018


the equivalence of third country regimes on November 30. Final
criteria are expected in March 2010. The Commission will make its
equivalence decision by June 2012, on the basis of these criteria,
and after having received advice from CEIOPS on the individual
country assessments. It is not clear whether the United States will
be determined equivalent, as the EU has on numerous occasions
expressed concern that the state-based insurance regulatory regime
in the U.S. creates discriminatory features for foreign insurance
companies.


61. Reform of mutual funds oversight: In January 2009 the European
Parliament adopted legislation to achieve a less fragmented and more
efficient investment fund market in the EU. UCITS -- Undertakings
for Collective Investment in Transferable Securities -- are
investment funds sold under a common set of EU rules for investor
protection and cost transparency, and that meet basic requirements
on organization, management and oversight of funds. UCITS funds
manage approximately 6.4 trillion and account for 11.5% of EU
household financial assets. The legislation includes a provision
for a management "passport," which will make it easier and less
expensive for investment funds to operate outside their state of
origin. Member States are required to implement the legislation by

2011. The Committee of European Securities Regulators (CESR) has
been asked by the Commission to provide it with technical advice on
the new UCITS Directive implementing measures. CESR's advice is
expected in Spring 2010.


62. Sovereign wealth funds: The Commission outlined its approach to
Sovereign Wealth Funds (SWFs) in a February 2008 Communication. The
EU intends to keep markets open for foreign capital, support
multilateral efforts (such as those which have been conducted by the
IMF and the OECD),rely on existing laws, respect the EU Treaty, and
ensure proportionality and transparency. The EU supported the IMF
work stream that produced the Santiago Principles for SWFs in
October 2008, and the OECD parallel work stream that adopted, also
in October 2008, a framework and guidelines for recipient countries
of SWF investment.


63. Retail Services: The EU has also focused on deepening
integration of retail financial services markets, although this has
become less immediate as a result of the financial crisis. In May
2007 the Commission issued a Green Paper laying out goals and
launching a debate on future EU policy on retail financial services.
In November 2007 the Commission released a package of initiatives
to modernize the EU single market, including steps to increase
consumer choice of banking services, facilitate switching of banking
accounts, complete the development of the Single Euro Payments Area
(SEPA),and improve transparency of retail investment products.
Work on the initiatives, which enjoy broad support from the
industry, continues. In November 2009 the SEPA Direct Debit scheme
took effect, which allowed consumers to make cross-border direct
debits in Euros at the same cost as national direct debits. This
had already been the case with credit transfers, ATM cash
withdrawals and card payments.


64. The transposition into national law of the Payment Services
Directive (PSD),SEPA's legal basis, was supposed to have been
completed by November 1, 2009. Eight Member States (Cyprus, Greece,
Finland, Italy, Latvia, Malta, Poland and Sweden),however, still
need to adopt relevant legislation. Adoption and entry into force
is expected in April 2010 at the latest. In Belgium, Estonia and
Norway entry into force has been delayed and will happen by March

2010.


65. In December 2008 the banking industry took up the Commission's
invitation and adopted a set of 'Common Principles for Bank Account
Switching'. According to the Principles, if a consumer wishes to
change banks, within the same Member State, the new bank will act as
the primary contact point and offer its assistance throughout the
switching process. The Principles were applied in each Member State
as of November 1, 2009.

Regulatory Responses to the Financial Crisis


66. In response to the growing impact of the global financial
crisis in Europe during Fall 2008, the Commission put forward
several legislative proposals to address what was increasingly
perceived as an unacceptable degree of deregulation in the financial
sector, particularly in the wake of massive injections of public
money to rescue weak financial institutions.


67. Credit Rating Agencies (CRAs): In November 2009 the Regulation
on Credit Rating Agencies entered into force. The Regulation
introduces a legally binding authorization and supervision regime,

BRUSSELS 00000176 012.2 OF 018


and stipulates that only ratings issued by EU-registered CRAs can be
used by EU financial institutions for regulatory purposes. It also
addresses conflict of interest issues and introduces certain
governance requirements.


68. For third-country CRAs, the Regulation introduces two
mechanisms:

a) Equivalence determination: For systemically relevant CRAs, the
ratings of entities established, or financial instruments issued,
outside of the EU can be eligible for use in the EU if the CRA's
home jurisdiction is found equivalent to the EU. The Committee of
European Securities Regulators (CESR) has been tasked with
recommending to the Commission which jurisdictions are equivalent.

b) Endorsement: An EU-registered CRA may endorse ratings developed
by an unregistered affiliate located outside of the EU on entities
established, or financial instruments issued, outside of the EU so
that they can be eligible for use in the EU. The endorsing CRA must
demonstrate to its regulator that the endorsed ratings have been
developed following internal standards "at least as stringent as
those" required in the EU, that the affiliate is registered and
supervised and that there exist supervisory and cooperation
agreements between the home and the EU supervisor.

Outlook: CESR is expected to render its advice to the Commission in
April 2010, on whether the U.S., Japan and Canada are equivalent. A
Commission decision is expected by September 2010.


69. Deposit Insurance: In December 2008 the Council and Parliament
approved a Commission proposal to raise the minimum threshold for
deposit insurance to 100,000 in two steps, and to harmonize the
time period for repayment of deposits. As a result, minimum deposit
guarantees were raised to 50,000 on June 30, 2009, and the payout
period shortened from the current three months to 20 days. Coverage
applies to all depositors in all Member States, regardless of
whether the member state is a member of the Eurozone. The threshold
was raised to 100,000 on January 1, 2010.


70. Alternative Investment Fund Managers Directive (AIFM): In 2008,
the European Parliament asked the Commission to enhance regulation
of hedge funds and private equity funds. In April 2009 the
Commission issued a draft AIFM Directive instituting a
legally-binding authorization and supervision regime for all fund
managers managing funds with portfolios in excess of 100 million,
or 500 million if unleveraged and with no redemption for a
five-year period. The Commission proposed a passport approach that
would permit all authorized EU AIFM and equivalent third-country
AIFMs to market their funds to professional investors anywhere in
the EU. It would impose leverage caps and capital requirements on
managers and would mandate that only EU-domiciled credit
institutions would be eligible to serve as depositories.


71. The work by the EP and the Council has produced draft proposals
that soften certain provisions of the original Commission proposals
(e.g. on depositaries and leverage),but this has moved away from
the Passport approach for equivalent third-country AIFMS.

Outlook: The Spanish Presidency intends to resume discussions
amongst Member States on the basis of a new compromise proposal no
earlier than February 2010, and hopes to reach a first reading
agreement by the end of its Presidency in June 2010.


72. Third Amendment to the Capital Requirements Directives: On
November 10, 2009, the Economic and Financial Affairs (ECOFIN)
Council agreed to support the July 2009 Commission proposal amending
for the third time the Capital Requirements Directives (CRD III).
The proposed CRD III would strengthen capital requirements for
trading book and re-securitization instruments, prevent remuneration
polices from encouraging excessive risk-taking in banking, and give
supervisors a say in remuneration policies.

Outlook: The relevant EP committee is currently examining the
proposal; a vote iex expected in March 2010. The Spanish Presidency
aims at a first reading agreement before the end of June Q0.


73. Derivatives: In October 2009 the Commission published a
Communication outlining possible future steps to regulate the Over
the Counter (OTC) derivatives market. Specifically, the Commission
aims to:

a) Reduce counterparty risk by establishing common safety,
regulatory and operational standards for central counterparties
(CCPs),improving collateralization of bilaterally-cleared

BRUSSELS 00000176 013.4 OF 018


contracts, raising capital charges for bilaterally-cleared
transactions, and mandate CCP-clearing for standardized contracts;

b) Reduce operational risk by promoting standardization of the legal
terms of contracts and of contract-processing;

c) Increase transparency by mandating market participants to record
positions and all uncleared transactions in trade repositories,
regulating and supervising trade repositories, mandating trading of
standardized derivatives on exchanges, and increasing transparency
of trading for all derivatives markets including for commodity
derivatives; and

d) Enhance market integrity and oversight by clarifying and
extending the scope of market manipulation and by giving regulators
the possibility to set position limits.

Outlook: The Commission plans to publish draft legislation by
mid-2010. The legislation will then need to receive the approval of
the Member States and of the EP to become law. It is unclear at
this point if the legislative process will be completed before
end-2010.


74. Bank capital: Leaders at the October 2009 Pittsburgh G-20
Summit called on regulatory authorities to require improved quantity
and quality capital by end 2012 as financial conditions improve.
These proposals are in line with U.S. proposals on capital. The
Basel Committee of Banking Supervisors is making progress to fulfill
the G-20 mandate. In December 2009 the Basel Committee released
proposals for higher capital requirements, improved quality capital
reserves, a maximum leverage ratio, and minimum liquidity
requirements. By the end of 2010 a fully calibrated and finalized
package of reforms is expected. The Commission has indicated that
it will put forward a proposal amending for the fourth time the
Capital Requirements Directive (CRD IV) to implement these
recommendations. It is expected that the Commission proposal will
follow an agreement by the Basel Committee. The amendments are
expected to introduce the Basel Committee's conclusions on capital,
lending and liquidity requirements. The Commission may also
introduce dynamic provisioning principles.

Outlook: In early 2010 the Commission plans to open a public
consultation on CRD IV amendments.

Financial Supervision Proposals


75. The financial crisis has triggered a deep international debate
over how to update current supervisory architecture in order to
detect and prevent future crises. The EU is involved directly and
indirectly through Member State participation in international
bodies (G20, FSB, G8). The Commission has proposed a number of
regulatory measures that directly affect the way in which financial
supervision at EU level will be carried out in the future (Solvency
II, CRD, CRA).


76. Bank supervision authority and enforcement remains a Member
State competence. However, three EU-wide communities of sectoral
financial supervisors were created some years ago to facilitate
efficient and comparable rule making throughout the EU. These are
the Committee of European Bank Supervisors (CEBS),composed of
Member State supervisors; CESR, the Committee of European Securities
Regulators; and CEIOPS, the Committee of European Insurance and
Occupational Pensions Supervisors. Financial market turmoil in the
second half of 2007 increased discussion among EU institutions of
ways to strengthen mechanisms to coordinate financial supervision
across the EU.


77. In late 2008, the European Commission asked former IMF Director
General Jacques de Larosihre to review the EU's financial
supervisory architecture and make recommendations for improvement.
The "de Larosihre" report, published February 25, 2009, recommended
the creation of a European Systemic Risk Board (ESRB) and a European
System of Financial Supervisors (ESFS) and has served as the basis
for legislative proposals by the Commission seeking to reform the
European system of financial supervision at macro and micro
prudential levels.


78. European Systemic Risk Board: On October 20, 2009, the ECOFIN
Council agreed to create the European Systemic Risk Board (ESRB).
Its main function will be to monitor and collect information
relevant to potential threats and risks to financial stability
arising from macro-economic developments and the EU financial
system. Its tasks will be the following:


BRUSSELS 00000176 014.4 OF 018


a) Identify and prioritize systemic risks;

b) Issue warnings where such systemic risks are deemed to be
significant;

c) Issue recommendations for remedial action in response to the
risks identified including, where appropriate, for legislative
initiatives;

d) Monitor the follow-up to warnings and recommendations; and

e) Coordinate with international institutions, as well as the
relevant bodies in third countries on matters related to
macro-prudential oversight;


79. Warnings or recommendations may be either of a general or
specific nature and shall be addressed to the whole EU, to one or
more Member States, to one or more of the European Supervisory
Authorities (ESA),or to one or more national supervisory
authorities. At ESRB discretion, warnings and recommendations may
or may not be public. At the same time, warnings and
recommendations will be transmitted to the Council and, if
appropriate, to the ESAs. Recommendations will not have legal
force, but addressees will have to communicate the actions
undertaken in response to them to the Council and the ESRB and
provide e Economic andFC); and
-- One represeQompetent national supea rotating basis, depe
discuill be
composed of:

-- The Chair and Vice-Chair oQ the ESRB;
-- Five other members of the General Board (three from a Euro area
Member StatQ and two from a non-Euro area Member State);
Q- A Commission representative;
-- The ChairpeQsons of each of the ESAs; and
-- The President of the EFC.


84. The Secretariat shall provie analytical, statistical,
administrative Qnd logistical support. The ECB has been given Qhe
task to staff the Secretariat, which will "e located at the ECB.


85. The Advisory Technical Committee will be responsible for
providing advice and assistance on technical issues. It will be
composed of:

-- A representative of each national central bank;
-- A representative of the ECB;

BRUSSELS 00000176 015.4 OF 018


-- One representative of each of the competent national supervisory
authorities;
-- One representative of each of the ESAs;
-- Two Commission representatives; and
-- One representative of the EFC.


86. European System of Financial Supervisors: On December 2, the
ECOFIN Council agreed to create the European Banking Authority
(EBA),the European Insurance and Occupational Pensions Authority
(EIOPA),and the European Securities and Markets Authority (ESMA).
These new ESAs will replace the existing EU committees for
securities (CESR - Committee of European Securities Supervisors),
banking (CEBS - Committee of European Banking Supervisors) and
insurance (CEIOPS - Committee of European Insurance and Occupational
Pensions Supervisors). The ESAs and national supervisors will form
the European System of Financial Supervisors (ESFS).


87. The ESAs will have four primary tasks:

a) Develop technical standards to establish a single EU rule book;

b) ensure the consistent application of Community rules;

c) Act in emergency situations; and

d) Settle disagreements between national supervisors.


88. Other ESA tasks will include promoting the efficient
functioning of Colleges of Supervisors and assessing market
developments. The ESAs will also be responsible for collecting
information from national authorities and for interfacing with the
ESRB. Member States will be able to challenge a decision by an ESA
if they believe it impinges on its fiscal responsibility.


89. The main decision-making body of the ESAs will be their Board
of Supervisors. It will decide by simple majority of its members,
and will be composed of:

-- the Chairperson (non-voting);
-- The Head of each national supervisor;
-- One Commission representative (non-voting);
-- One representative of the ESRB (non-voting);
-- One representative of each of the other two ESAs (non-voting).

Outlook: The EP has only begun examining the Commission's proposals,
and no opinion has yet been made public. Final approval is expected
in June/July 2010, with the new Authorities starting work in 2011.

POLITICAL VIOLENCE
--------------


90. Political violence is not unknown in the European Union, but is
rare. Such incidents are generally regional in nature, and
individual Country Commercial Guides should be consulted for details
on problems in specific areas.

CORRUPTION
--------------


91. Per EU Treaty Article 280 (5),the EU and the Member States are
jointly responsible for the fight against fraud and corruption
affecting the EU's financial interests. A detailed overview of EU
and Member State achievements in this regard (e.g., increasing EU
capacity to conduct anti-fraud investigations, greater cooperation
with international partners) is provided in the EU's Anti-Fraud
Office (OLAF) most recent annual report (for 2008) on the fight
against fraud.


92. This report is available online at the EU's Anti-Fraud Office
website:

http://ec.europa.eu/anti_fraud/reports/olaf/2 008/EN.pdf

The report broadly outlines the steps that the EU has taken in terms
of protecting its financial interests and addressing fraud and
reviews major developments in 2008.

BILATERAL INVESTMENT AGREEMENTS
--------------


93. The EU as a whole does not yet have any traditional bilateral
investment treaties (BITs),although virtually all the Member States
have extensive networks of such treaties with third countries. The
EU "Europe," "Association" and other agreements with preferential

BRUSSELS 00000176 016.6 OF 018


trading partners have contained provisions directly addressing
treatment of investment, generally providing at national treatment
after establishment and repatriation of capital and profits. In the
context of EU enlargement negotiations, the U.S. Government has
conveyed to the EU its concern that U.S. bilateral investment
treaties with accession countries not be adversely affected.


94. The adoption in December 2009 of the Lisbon Treaty may change
in major respects how the EU treats investment (see Openness to
Foreign Investment, above),but full implications of Lisbon in this
area are still unclear. Since Lisbon makes Foreign Direct
Investment an exclusive EU competence, a broad definition of FDI may
extend EU authority over much of the subject matter hitherto
addressed under member state BITs. This would allow the EU to
negotiate BITs, requiring the EU to develop an EU model agreement to
be applied to future BITs or investment chapters of FTAs. This
would also require the EU to address the legality of existing
bilateral FTAs, given the possibility of legal challenges to
existing agreements. Commission officials and several European
leaders have stressed that Member State bilateral agreements will
remain valid under Lisbon, and that existing BITs will be
"grandfathered" until an EU-level agreement is concluded with a
country in question. EU leaders also have indicated the EU will
move only gradually toward negotiation of BITs, given the time it
will take to clarify and define the complex issues involved.


95. Other regional or multilateral agreements addressing the
admission and treatment of investors to which the Community and/or
its Member States have adhered include:

a) The OECD codes of liberalization, which provide for
non-discrimination and standstill for establishment and capital
movements, including foreign direct investment;

b) The Energy Charter Treaty (ECT),which contains a "best efforts"
national treatment clause for the making of investments in the
energy sector but full protections thereafter; and

c) The GATS, which contains an MFN obligation on all measures
affecting the supply of services, including in relation to the mode
of commercial presence.


96. Since November 2007 the U.S. and the European Commission have
held numerous meetings of a formal bilateral investment dialogue to
reduce barriers to transatlantic investment and promote open
investment regimes globally (see Openness to Foreign Investment
above).

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------


97. OPIC programs are not available in the EU, as a whole, although
individual Member States have benefited from such coverage.

LABOR
--------------


98. Issues such as employment, worker training, and social benefits
remain primarily the responsibility of EU Member States. However,
the Member States are coordinating ever more closely their efforts
to increase employment through macroeconomic policy cooperation,
guidelines for action, the exchange of best practices, and
programmatic support from various EU programs. The best information
regarding conditions in individual countries is available through
the labor and social ministries of the Member States.


99. Helpful information from the EU can be found on the websites
for the European Commission's Directorate-General for Employment and
Social Affairs, http://ec.europa.eu/social/home.jsp?langId=en ,
and on the Eurostat website
http://epp.eurostat.ec.europa.eu/portal/page/ portal/
eurostat/home/


100. In general, the labor force in EU countries is highly skilled
and offers virtually any specialty required. Member States regulate
labor-management relations, and employees enjoy strong protection.
EU Member States have among the highest rates of ratification and
implementation of ILO conventions in the world.


101. There is a strong tradition of labor unions in most Member
States. In many cases, the tradition is stronger than the modern
reality. While Nordic Member States (Denmark, Finland, and Sweden)
still have high levels of labor union membership, many other large
Member States, notably Germany and the United Kingdom, have seen

BRUSSELS 00000176 017.4 OF 018


their levels of organization drop nearly to U.S. levels (around
20-30 percent). French labor union membership, at less than 10
percent of the workforce, is lower than that of the U.S.

FOREIGN-TRADE ZONES/FREE PORTS
--------------


102. EU law provides that Member States manvestment, with $443 billion, followed by the United Kingdom ($421
billion),Luxembourg ($163 billion),and Germany ($111 billion).


106. For virtually all EU Member States, the largest "foreign"
investors are in fact from other Member States. More statistics on
U.S. investment abroad are available at:
http://www.bea.gov/international/di1usdbal.ht m.

WEB RESOURCES
--------------

DG Internal Market and Services
http://ec.europa.eu/dgs/internal_market/index _en.htm

DG Economic and Financial Affairs
http://ec.europa.eu/dgs/economy_finance/index _en.htm

DG Employment and Social Affairs
http://ec.europa.eu/social/home.jsp?langId=en

Office for Harmonization in the Internal Market
http://oami.europa.eu/

EU Anti-Fraud Office
http://ec.europa.eu/anti_fraud/index_en.html

Eurostat - EU Statistical Office
http://epp.eurostat.ec.europa.eu/portal/page/ portal/
eurostat/home/

U.S. Bureau of Economic Analysis - Department of Commerce
http://www.bea.gov


BRUSSELS 00000176 018.4 OF 018


European Patent Office
http://www.epo.org/index.html

KENNARD