TRADE POLICY REVIEW Report by the Secretariat EUROPEAN

RESTRICTED WORLD TRADE WT/TPR/S/214 2 March 2009 ORGANIZATION (09-1000) Trade Policy Review Body TRADE POLICY REVIEW Report by the Secretariat EUROPEAN COMMUNITIES This report, prepared for the ninth Trade Policy Review of the European Communities, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the European Communities on its trade policies and practices. Any technical questions arising from this report may be addressed to Jacques Degbelo (tel: 022/739 5583), Ricardo Barba (tel: 022/739 5088), Eugenia Lizano (tel: 022/739 6578), and Thomas Friedheim (tel: 022/739 5083). Document WT/TPR/G/214 contains the policy statement submitted by the European Communities. Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the European Communities. European Communities WT/TPR/S/214 Page iii CONTENTS Page SUMMARY OBSERVATIONS vii (1) THE ECONOMIC ENVIRONMENT vii (2) INSTITUTIONAL FRAMEWORK vii (3) TRADE POLICY INSTRUMENTS viii (4) SECTORAL POLICIES ix (5) TRADE POLICY AND TRADING PARTNERS x I. ECONOMIC ENVIRONMENT 1 (1) MAIN CHARACTERISTICS 1 (2) RECENT ECONOMIC DEVELOPMENTS 3 (3) TRADE AND INVESTMENT 6 (i) Trade in goods 7 (ii) Trade in services 11 (iii) Foreign direct investment 12 (4) OUTLOOK 13 II. TRADE AND INVESTMENT REGIMES 14 (1) INSTITUTIONAL FRAMEWORK 14 (2) POLICY FORMULATION AND IMPLEMENTATION 15 (3) TRADE POLICY OBJECTIVES 17 (4) TRADE REGULATIONS AND BUSINESS ENVIRONMENT 18 (5) TRADE AGREEMENTS AND ARRANGEMENTS 20 (i) Overview 20 (ii) WTO 21 (iii) Preferential trade agreements and arrangements 23 (iv) Aid for Trade (AfT) 32 III. TRADE POLICIES AND PRACTICES BY MEASURE 34 (1) INTRODUCTION 34 (2) MEASURES DIRECTLY AFFECTING IMPORTS 35 (i) Customs procedures 35 (ii) Tariffs 38 (iii) Other charges 43 (iv) Duty and tax exemptions and concessions 47 (v) Customs valuation and rules of origin 48 (vi) Import prohibitions, restrictions, and licensing 49 (vii) Contingency measures 51 (viii) Technical regulations and other technical requirements 56 (ix) Government procurement 65 (3) MEASURES DIRECTLY AFFECTING EXPORTS 71 (i) Registration and documentation 71 (ii) Export taxes, charges, and levies 71 WT/TPR/S/214 Trade Policy Review Page iv Page (iii) Export prohibitions, restrictions, and licensing 71 (iv) Export subsidies 72 (v) Export finance, insurance and guarantees 73 (vi) Export promotion and marketing assistance 73 (4) MEASURES AFFECTING PRODUCTION AND TRADE 73 (i) Assistance and other incentives 73 (ii) State trading and state-owned enterprises 77 (iii) Competition policy and regulatory issues 79 (iv) Intellectual property rights (IPR) 85 IV. TRADE POLICIES BY SECTOR 96 (1) INTRODUCTION 96 (2) AGRICULTURE AND RELATED ACTIVITIES 97 (i) Main features 97 (ii) Common agricultural policy 98 (iii) Fisheries 113 (3) ENERGY 117 (4) MANUFACTURING 121 (i) Overview 121 (ii) Selected industries 126 (5) SERVICES 132 (i) Overview 132 (ii) Financial services 135 (iii) Telecommunications and postal services 143 (iv) Transport 146 (v) Tourism 152 (vi) Professional services 153 REFERENCES 155 APPENDIX TABLES 159 European Communities WT/TPR/S/214 Page v CHARTS Page I. ECONOMIC ENVIRONMENT I.1 Direction of merchandise trade, 2003-07 9 I.2 Structure of merchandise trade, 2003-07 10 III. TRADE POLICIES AND PRACTICES BY MEASURE III.1 Breakdown of applied MFN tariff rates, 2008 40 III.2 Tariff escalation by ISIC 2-digit industry, 2008 42 IV. TRADE POLICIES BY SECTOR IV.1 EC-27 production growth by manufacturing activity, 1996-2006 123 IV.2 EC tariff by ISIC classification, 2008 125 TABLES I. ECONOMIC ENVIRONMENT I.1 Selected indicators, 2007 1 I.2 Key macroeconomic indicators, 2006-07 4 I.3 Growth in real GDP and expenditure components, 2003-07 5 I.4 Euro exchange rates, 2000-08 6 I.5 Balance-of-payments, 2003-07 7 I.6 Trade in services, 2005-07 11 I.7 FDI inflows and outflows, 2005-07 12 II. TRADE AND INVESTMENT REGIMES II.1 Distribution of EC AfT by category, 2001-06 33 II.2 Distribution of EC AfT by recipient, 2001-06 33 III. TRADE POLICIES AND PRACTICES BY MEASURE III.1 Structure of EC MFN tariffs, 2006 and 2008 40 III.2 Summary analysis of EC MFN tariff, 2008 41 III.3 National VAT rates in the EC, 2006 and 08 44 III.4 VAT exemption thresholds in the EC, 2008 45 III.5 VAT and excise duty exemptions on imports (for personal use) from non-EC countries, 2008 46 III.6 Contingency measures notified by the EC, 2005-08 52 III.7 Notifications of technical regulations by the EC and its Member States, 2000-08 59 III.8 (a) Emergency SPS measures 63 (b) SPS measures restricting imports 63 III.9 Minimum public procurement thresholds, mid-2008 67 III.10 Selected procurement indicators, 2004-06 68 III.11 Public monopolies in EC Member States, 2007 77 III.12 (a) State aid in the EC, 2006 83 WT/TPR/S/214 Trade Policy Review Page vi Page III.12 (b) State aid in the EC, 2007 84 III.13 Statistics on trade marks and designs, 2000-08 86 III.14 Term of protection of copyrights and related rights, 2008 91 IV. TRADE POLICIES BY SECTOR IV.1 Selected agricultural statistics, 2005 and 2007 97 IV.2 EC crop area 98 IV.3 Transfers associated with agricultural policies in the EC, 1986-88 and 2005-07 99 IV.4 EAGF and EAFRD expenditures by EC Member State, 2007 100 IV.5 Expenditures by the EAGF, 2007 101 IV.6 Reference prices for products subject to intervention measures, 2008 105 IV.7 Selected sugar indicators, 2005-08 106 IV.8 Tariff quotas on fishery products, 2007 116 IV.9 Production and consumption of energy, 2002-06 118 IV.10 Electricity generation, 2002-06 119 IV.11 Main indicators of EC-27 manufacturing, 2005 122 IV.12 Main indicators of EC-27 manufacturing by subsector, 2005 124 IV.13 Trade in high-tech products, 2005 129 IV.14 Selected basic metals statistics, 2005 130 IV.15 Production of basic metals, 2006 131 IV.16 Number of banks and total assets, 2003-07 137 IV.17 Total assets under management by insurance corporations and by investment funds, 2003-07 140 IV.18 Selected telecommunications indicators, 2007 143 IV.19 EC freight transport by mode, 2000-06 146 IV.20 Tourism receipts, expenditure, and nights spent, 2000-06 152 APPENDIX TABLES I. ECONOMIC ENVIRONMENT AI.1 Destination of exports, 2003-07 161 AI.2 Structure of exports, 2003-07 162 AI.3 Origin of imports, 2003-07 163 AI.4 Structure of imports, 2003-07 164 II. TRADE AND INVESTMENT REGIMES AII.1 EC notifications to the WTO, January 2007-May 2008 165 III. TRADE POLICIES AND PRACTICES BY MEASURE AIII.1 Applied MFN tariff averages by HS2, 2008 169 AIII.2 Zero-rated goods and services by Member States, 2008 172 AIII.3 Selected state-owned enterprises in the EC, October 2008 173 AIII.4 EC membership in IPR treaties and conventions 187 IV. TRADE POLICIES BY SECTOR AIV.1 Applied MFN tariffs, by ISIC Rev.2 category, 2008 189 European Communities WT/TPR/S/214 Page vii SUMMARY OBSERVATIONS processing activities. As a result, the EC is implementing, since October 2005, a new (1) THE ECONOMIC ENVIRONMENT industrial policy to become more competitive. The participation of agriculture (including 1. Real GDP growth in the European livestock, hunting, forestry and fishing) in the Communities (EC) was 3% on an annual EC's GVA is relatively low (around 2%), but average during 2006-07, but fell to an remains significant for many new Members estimated 1% in 2008 partly due to the global States such as Bulgaria and Romania. financial crisis (and subsequently economic slowdown) that emerged in the second half of 4. The EC accounts for some 17% of the year. While the moderation in growth was world merchandise trade. Its trade account has broad-based, performance at Member States been in persistent but sustainable deficit, level remained dispersed. Following an amounting to €141.8 billion in 2006 and increase in government revenues and a €153.4 billion in 2007. As a percentage of decrease in expenditure related to, inter alia, GVA, the EC had external current account the pension system reforms in several Member deficits of 0.8% in 2006, 0.7% in 2007, and States, the EC fiscal deficit, as percentage of 1% (estimation) in 2008. The EC remains the GDP, declined from 1.4% in 2006 to 0.9% in world's largest trader in services, as well as the 2007 (its best fiscal performance in many largest recipient and supplier of foreign direct years), but is estimated at 2% in 2008. Further investment (FDI), accounting for some 40% of efforts to address concerns about long-term global inward stock and over 50% of global fiscal sustainability would appear to remain outward stock. It is also a net investor in the needed, particularly in the light of the large rest of the world. costs of the measures envisaged to respond to the global economic downturn. (2) INSTITUTIONAL FRAMEWORK 2. As of January 2009, sixteen EC 5. Since its last TPR in February 2007, Member States have the euro as their currency. the EC has made no major changes to its Romania has set a target euro adoption date for institutional framework. The Treaty of 2014. Denmark and the United Kingdom have Lisbon, which will alter the structure of EC opted to retain their national currencies, while institutions, was signed by EC heads of state Bulgaria, the Czech Republic, Estonia, or government in December 2007, but its Hungary, Latvia, Lithuania, Poland, and ratification has not been completed.

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