WORLD TRADE ORGANIZATION

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1 WORLD TRADE ORGANIZATION 30 April 2007 ( ) Trade Policy Review Body 26 and 28 February 2007 TRADE POLICY REVIEW EUROPEAN COMMUNITIES Minutes of Meeting Chairperson: H.E. Mr. Vesa Himanen (Finland) I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE EUROPEAN COMMUNITIES 4 III. STATEMENT BY THE DISCUSSANT 7 IV. STATEMENTS BY MEMBERS 9 V. REPLIES BY THE REPRESENTATIVE OF THE EUROPEAN COMMUNITIES AND ADDITIONAL COMMENTS 22 VI. CONCLUDING REMARKS BY THE CHAIRPERSON 32 Page Note: Advance written questions by WTO Members and the replies provided by the European Communities are reproduced in document /Add.1 and will be available online at:

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3 Page 3 I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 1. The eighth Trade Policy Review of the European Communities was held on 26 and 28 February The Chairperson H.E. Mr. Vesa Himanen (Finland) welcomed the delegation of the European Communities, headed by Deputy Director General of DG Trade, Mr. Peter Balás, and the discussant Ambassador Claudia Uribe (Colombia). As usual, the discussant would speak in her personal capacity and not as a representative of her country. In accordance with the established procedures, the discussant had made available, in advance, outlines of the main issues she intended to raise (document WT/TPR/D/153). 2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of the procedures for the meeting. The report by the European Communities was contained in document WT/TPR/G/177 and that of the WTO Secretariat in WT/TPR/S/177. As indicated in WT/TPR/6/Rev.1, the Member under review should provide written answers, by the beginning of the review meeting, to questions submitted at least two weeks before the meeting. Questions posed subsequently should be answered, to the extent possible, before the start of the second session of the meeting. Questions left unanswered at the end of the second session should be answered in writing no later than one month after the meeting. Questions by the following delegations had been submitted in writing at least two weeks in advance of the meeting and had been transmitted to the delegation of the European Communities: Ecuador; Singapore; New Zealand; Switzerland; Argentina; Chile; Japan; Thailand; Mexico; Australia; Canada; Brazil; the United States; Peru; Honduras; and Colombia. Copies of these questions and of the answers provided by the delegation of the European Communities were available in the meeting room. Hong Kong, China; Turkey; Costa Rica; the Republic of Korea; China; the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Nicaragua; Pakistan; Bolivia; and India had submitted written questions after the two-week deadline. These questions had also been transmitted to the delegation of the European Communities; copies of these questions and of the answers provided by the delegation of the European Communities were available in the meeting room. Copies of all advance questions, as well as the responses received from the delegation of the European Communities, are reproduced in /Add The Chairperson noted, through the documentation prepared for this review, that economic growth in the European Communities had picked up since its last TPR, accompanied by double-digit growth rates for foreign trade. Major institutional changes included the accession of two new Member States, Bulgaria and Romania, and the beginning of accession negotiations with Croatia and Turkey. The EC's MFN tariff had remained largely unchanged. Nonetheless, the average applied MFN tariff had increased slightly, due to increases in ad valorem equivalents (AVE) of non-ad valorem tariffs. Tariffs on non-agricultural goods were relatively low, but the level of protection and support for agricultural goods remained high, despite steps taken by the EC to reform its common agricultural policy. In commercial services, the EC remained the world's leading exporter and importer, although significant barriers to services trade had remained in place. While the EC had remained one of the most active Members in the WTO, it continued to build on an extensive network of regional trade agreements. A revised GSP scheme had entered into force. Members would be keen to learn more about the EC's recently announced intention to launch new preferential trade negotiations, and about its negotiations on reciprocal Economic Partnership Agreements with the ACP countries under the Cotonou Agreement.

4 Page 4 II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE EUROPEAN COMMUNITIES 4. The representative of the European Communities stated that the purpose of this trade policy review exercise was not to promote the European Communities in the most positive light, but to use this forum for some reflection on what the EC's steps and measures had meant and would mean for its partners in the WTO. Accomplishments since the last EC TPR in October 2004 (a) Internal policies of relevance to trade 5. At the time of the last TPR, the EU had just enlarged to 25 Member States; the last two years had been a period of consolidation and of preparation for the next enlargement, of Bulgaria and Romania, on 1 January Economically, the indicators had shown marked improvements, in particular in The "catching up" process of the new Member States in terms of narrowing growth differentials and differences in GDP per capita was well on its way, even though there were still quite substantial discrepancies. Slovenia had adopted the euro on 1 January and the Lisbon agenda had been further refined in 2005, with a package of measures providing a new focus on growth and employment. 7. The EC strongly believed that economic and social development had to go hand in hand, reinforcing each other. During the review period, the EC had undertaken measures both internally and in its trade policy to promote decent work and sustainable development, as manifested, for example, in its "GSP+" incentive scheme. Another innovative measure was the setting up of the European Globalisation Fund, which, since January 2007, provided one-off, time-limited individual support to workers affected by redundancies resulting from trade adjustment. 8. The point of departure for the EC's external relations was its Internal Market. The representative noted with some surprise that the Secretariat's Report discussed in detail internal barriers to intra-ec trade in services, rather than focusing on the openness of the services markets and the fact that the EC was the world's largest trader in services. The EC had taken a very important step internally with the adoption of the Services Directive in December Once this directive was incorporated into the national legislation of its Member States and implemented, in 2009, the remaining legal and administrative barriers to the development of EC-wide services markets would be by and large removed. The new opportunities offered by the Services Directive would benefit the EC's partners, and even more so once the ongoing DDA negotiations on services have been concluded; the EC had offered significant further market access in these negotiations. 9. All internal accomplishments over the last two years were intrinsically linked to the EC's trade policy. One obvious area was agriculture. The far-reaching reform of the Common Agricultural Policy had started in 2003 and was continuing. This reform aimed to increase the competitiveness of Europe s farmers, while assuring them a stable income and eliminating trade distortions. Emphasis was on rural development and the observance of environmental, food safety, and animal welfare standards. The internal reform had enabled the EC to make far-reaching proposals in the DDA, conditional on equivalent steps by major partners. Only the WTO could ultimately deliver the consolidation of fundamental reform programmes of farm subsidies in developed countries. The competitiveness of agricultural producers everywhere depended on further market access and reduced subsidization, but also on the ability to market high quality products with a specific origin that made them characteristic. Thus, results on geographical indications were of fundamental importance in the DDA.

5 Page Despite the EC's significant progress in recent years, the extent of its agricultural reform programme still seemed to be underestimated. The EC was using only a small portion of its Uruguay Round limits; in its conditional offer tabled in the DDA negotiations, it had proposed to go much further. The EC was already the world s largest importer and exporter of agricultural products. Major shares of its agricultural imports came from developing countries, and the EC received almost 60% of all agricultural exports from LDCs. (b) Trade policy 11. The EC had continued to put its trade policy at the service of its wider objective of achieving sustainable development. In its trade policy making, it had carefully considered the economic, social, and environmental implications of its decisions. It had continued to maintain an extensive dialogue with civil society and also used increasingly sustainability impact assessments. 12. The most important goal of the EC's trade policy over the past two years had been the DDA. The advanced stage of the DDA was to a high degree due to the EC's engagement. The EC had also continued and further strengthened its bilateral and bi-regional trade relations but never to the detriment of the multilateral system. The EC had also maintained its engagement to not to enter into any new FTA negotiations as it was convinced that true development for all WTO Members could be achieved only in the multilateral context. Development concerns were in numerous EC submissions to the DDA; and at the Hong Kong Ministerial, the EC had been instrumental in achieving the decision on duty-free-quota-free market access for LDCs. 13. This commitment to development had been the guiding principle of the EC's bilateral trading relations. The main aim of the Economic Partnership Agreements (EPAs) with partners in Africa, the Caribbean and the Pacific was to serve as a development tool, promoting their gradual integration into the world economy. 14. Over the years, the EC had continuously improved access for developing countries to its already quite open markets, both for industrial and agricultural goods. This included the far-reaching reform of its GSP, which entered into force in LDCs had free access under the EBA scheme. The majority of WTO Members had more privileged access to EC markets under the EC's preference schemes and bilateral agreements than under the MFN regime. However, the importance of MFN trade for the EC should not be underestimated. The EC received MFN treatment for over 50% of its exports, from all its major trading partners. 15. The EC had continued to couple its trade policy measures with significant financial assistance to its partner countries, including trade-related assistance. The EC was a substantial donor of TRA atthe global level, and was committed to do more, as exemplified in its pledge to increase commitmentsto Aid for Trade, as well as those of its Member States, to 2 billion a year. Where was the EC going from here? 16. The previous two years had been a period of internal reflection on trade. This had resulted in the refinement of the EC's trade policy objectives, although the basic orientation had not changed. The main reason for this review was to better set the EC's trade policy in the context of its overall focus on the Lisbon agenda, i.e. growth and competitiveness, and to strengthen the link between its internal and external policies. The result was the "Global Europe" concept, endorsed by the Council in November This new "competitiveness agenda" was a strategy to create and strengthen new areas of growth, both through increased market access abroad and stronger rules in new trade areas of economic importance, such as intellectual property rights, services, investment, public procurement, and competition. The EC was committed to keeping its own markets open, as Europe needs to import in order to be able to export.

6 Page The WTO and the DDA remained the EC's key trade policy goal, the EC continued to work vigorously to successfully conclude the DDA negotiations as soon as possible. It had already put a lot on the table, not least in the area of agriculture; in return, the EC expected equally ambitious offers from others, as well as appropriate contributions on non-agricultural market access and services. It also continued to attach importance to the development of rules guiding international trade. 18. A new generation of bilateral free-trade agreements with some of the EC's key partners had been foreseen. However, this would not lower the EC's commitment to the WTO and the DDA: the new negotiations were intended to complement the DDA, building on its results, and not interfere with it. 19. The EC had also planned to launch the next stage of its global strategy for protecting intellectual property rights and to renew its market access strategy focussing on non-tariff barriers. The EC would work further on ensuring better access to major public procurement markets. The EC had been very measured in its use of trade defence instruments, with more restrictive conditions of application than other trading partners; the Commission had also launched an analysis of these instruments. In parallel, the EC was looking forward to a substantive outcome of the ongoing rules negotiations in the DDA.

7 Page 7 III. STATEMENT BY THE DISCUSSANT Introduction 20. The discussant (H.E. Mrs. Claudia Uribe) noted that when the European Economic Community was adopted by six States on 25 March 1957, the objective was to unify Europe and generate economic well-being; 50 years later, in 2007, the results were apparent. The EC had grown in terms of number of Members, and its internal discipline had supported the development of its Members and neighbours. 21. The European Union was a unique and particularly dynamic project. No other regional integration scheme had achieved such good results. Its members and its institutions had constantly taken up new challenges, such in the Lisbon Strategy which was seeking to convert the region into the world's most competitive and dynamic economy by Over the past three years, the EC economy had shown a considerable recovery and it held an important role in the world economy. The positive growth climate had helped create new jobs. Unemployment had dropped to 7.8% in the EC and 7.5% in the Euro-zone in July 2006, the lowest rates of the decade. Nevertheless, unemployment continued to be high. Inflation had been under control thanks to improvements in productivity and international competition. Imports and exports had grown strongly, which showed the dynamics of the external sector. 23. The most important development during the period under review was the consolidation of EC enlargement. Nevertheless, the economies of some members, old as well as new, required improvements. One of the characteristics of EC trade policy was its broad network of regional trade agreements. The EC was the largest user of GATT Article XXIV, which generated major tensions between regionalism and multilateralism. She asked about the EC's vision of the economic impact of its trade policy on third countries, in terms of trade deviation and other effects. 24. The European Council had adopted economic reforms and intended to adopt policies that would respond effective to globalization. Referring to the European Globalization Fund, she noted that 500 million per year were intended to benefit workers in the EU, particularly in regions and sectors that had suffered from radical changes in world trade. In this regard, she asked the Commission to further explain the concept of radical changes and whether it also took into account future changes such as those resulting from the conclusion of the Doha Round. 25. The institution of this Fund was undoubtedly positive, particularly for the Doha Round, because the EU had sectors which were not very exposed to international competition. She asked the EC to explain the strategy for the use of the Fund and whether there were estimates for its use for different sectors, particularly agriculture. 26. A customs agreement had been signed with the United States to extend and intensify trade operations on a reciprocal basis, giving equal treatment to ports and operators in the United States and the EC. She asked the Community to share with Members the usefulness of this agreement and how trade between the two economies had benefited, as well as whether new negotiations were planned. 27. The use of the purely MFN tariff for only nine Members of the WTO showed the importance of regional trade negotiations and unilateral preferences. While generally tariffs were low in the industrial sector, tariff peaks still affected the competitiveness of the industry. Agriculture continued to benefit from the highest tariff protection. Additionally, this sector was characterized by complex non ad-valorem tariffs; a complex system of quotas, which reduced transparency in the customs regime; tariff escalation; and tariff peaks. On this point, she asked whether the EC intended to make unilateral reforms to its tariff structure as an additional step or as a part of the Lisbon Strategy.

8 Page The EC's well known competition legislation and authority was in charge of promoting competition and preventing violation of competition regulations. Referring to recent statements by the Commission, she asked whether the EC's competition policy aslo had the objective of regulating the subsidies the Commission granted to business activities. 29. The EC's Service Directive was adopted during the review period. Given the importance of services in the EC's economy it was no surprise that the EC had set as an objective the elimination of any barriers to the domestic services market. Nevertheless, challenges of harmonization remained because service providers were subject to regulation in the importing country. Legislation duality 30. The presence of dual legislation, at the EC and national level, increased complexities for those engaged in foreign trade. Although some of standards were intended to protect health and environment, their coexistence implied a heavy burden for exporters and constituted excessive protection for community producers. She asked whether the Commission had plans to harmonize these dualities. Sectoral policies 31. The EC was the only WTO Member to date that had decided to make an impact on world agriculture by eliminating export subsidies by 2013, with or without the Round. In 2004, total development aid granted by the EC and its Member States to the developing world was 43 billion; total support for agriculture was 48 billion; and total exports by ACP countries to the EC were 28.4 billion. Aid for trade and trade facilitation 32. It was agreed in 2006 that aid for trade was an essential complement for the conclusion of the Doha Round and that there would be a mechanism to rationalize this aid. This had been a friendly topic in the negotiating process, but it generated expectations that would be difficult to satisfy. The EC had a fundamental role in the development of this topic, and the European Council had offered to increase funds for this purpose to 1 billion per year. However, the amount offered as support or aid for trade contrasted with the large sums earmarked for the domestic market. As this was not a discussion on resources, but rather on the quality of aid, she asked the EC to share its vision on aid for trade. Trade policy challenges 33. The EC faced the challenges of: reducing the unemployment rate, reducing considerable regional imbalances, continuing with the reform of its agriculture policy, increasing global competitiveness through a number of measures including tariff reductions, implementing the services directive on the domestic market, overcoming remaining barriers to foreign investment, implementing a policy for innovation, research, and development as stated in the Lisbon Strategy, and taking advantage of resources in aid for trade to also promote the conclusion of the Doha Development Round. 34. The EC was not perfect but was unquestionably a strategic partner for all WTO Members. The EC had its own identity and with the promotion of good governance, with good practices, with the development of human wellfare, and with its trade policy, its had signed the best peace treaty in history.

9 Page 9 IV. STATEMENTS BY MEMBERS 35. The representative of Ecuador stated that the EC had become one of Ecuador's major trading partners. The EU was a major supplier of primary commodities and capital goods. Although bilateral trade flows had increased, certain EC initiatives in the area of sanitary and phitosanitary measures had had a negative impact on trade. The additional benefits created by the GSP+ were unilateral, without any guarantee over time. For this reason, Ecuador attached particular importance to the negotiation of an Association Agreement between the EU and the Andean Community. He agreed with the EC that coherence should be maintained in the Doha Round by implementing a policy to achieve prosperity, social justice, and sustainable development. In this context, Ecuador had encouraged the EU to satisfy the international convention on the protection of immigrant workers and their families. When the EC enlarged to 25 members in 2004, Ecuador had negotiated and signed a concession agreement with regard to services; this constituted an important precedent for negotiating compensation with regard to the recent accession of Romania and Bulgaria. 36. In the area of agriculture, Ecuador encouraged the EU to submit up-to-date notifications and to reduce subsidies. Furthermore, there had been an increase in agricultural quotas, some of which had not been used. He wished to know why these unused quotas were still maintained. As regards domestic support for banana producers, since the implementation of the new banana regime of the EC in 2006, Ecuador had paid more than US$130 million in additional tariffs. He asked why support for the community banana had increased. 37. With regard to preference erosion, he noted that this was a natural effect of the liberalization process and sought information on the EC's approach to this problem. Referring to the reform of the common fisheries policy, the European Fisheries Fund, instituted in 2006, might lead to an increase of overcapacities and he asked about the reasons for the proposed increase of de minimis thresholds in the fisheries subsector. 38. The representative of Brunei, speaking on behalf of ASEAN noted that the EC s basic trade regime had remained largely unchanged. Despite some positive developments in agriculture, there was still room for improvement and he looked forward to further improvement by the EC in this crucial sector. Services played an important role in the EC s GDP and employment. The EC had undertaken steps to review its GSP scheme and the Cotonou Agreement: this was a significant step as it paved the way for enhanced liberalization of trade in both agricultural and non-agricultural goods and services. He hoped that the proposed new rules of origin criteria for exports under the GSP would continue to promote cross-regional trade. 39. ASEAN noted with concern the entry into force of the REACH scheme in 2007, which could adversely effect chemical imports into the EC. He looked forward to more information from the EC, and invited the EC to consider providing differential fees for the registration of products manufactured in or imported from developing countries. ASEAN recognized the EC s long-standing commitment to the multilateral trading system. However, the EC s own internal process was complex and he urged the EC to further strengthen transparency in its trade policies that affected developing countries, through a process of prior information as well as bilateral consultations, to allow sufficient time for developing countries to adjust accordingly. The EC and its individual member States were leading contributors to the WTO Doha Global Trust Fund for technical cooperation. ASEAN also welcomed the recent announcement by the EC to launch new preferential trade negotiations based on the market potential of new PTA partners. ASEAN was pleased to note that it was one of the groupings identified as a potential partner, along with several other members and regional groupings. 40. The representative of New Zealand stated that, like the EC, his country was considering ways to maintain economic dynamism and prosperity in the face of global change. New Zealand was committed to sustainable economic growth, which included seeking optimal access for its products in

10 Page 10 all markets. Like the EC, New Zealand strongly advocated further multilateral trade liberalization, while at the same time strengthening trade relationships through bilateral and regional agreements. New Zealand had a diverse services trade with the EU, from education to engineering services, and the EU was New Zealand's second-largest direct investment partner. He appreciated the Commission's constructive approach in the amendment of their mutual recognition agreement on conformity assessment. He welcomed the EC's indispensable role in the multilateral system to advance trade liberalization. The EC was also strengthening trade relationships through bilateral and regional agreements with trading partners. He commended the EC's on-going efforts to reform its common agricultural policy, most recently with the European Commission's proposal to establish a single common market organization for all products. 41. The recent CAP reforms had been far-reaching and were heading in the right direction. Reduction or elimination of export subsidies and tariffs on agricultural imports would benefit EC consumers, improve resource allocation, and significantly contribute to the development of the global economy. He expected EC fisheries to change in order to reflect the need for a sustainable approach, not only in their own waters, but also internationally. He remained of the view that adopting ad valorem rates would provide more transparency and prevent effective rates of protection from increasing. New Zealand agreed with the EC about the importance of policy coherence for trade and growth; however, it meant that the offer of duty-free and quota-free access needed to provide liberalized market access for all products. He also agreed with the EC about the significance of services and of the EC's key stake in the GATS negotiations. The adoption in 2006 of the amended Services Directive had been a welcome development. 42. The modernization of the EC's Customs' code was of great interest: improved data-sharing between Member States was a welcome development for the EC's trading partners. He urged the EC to continue to take into account the interests and rights of its trading partners, even on issues that appeared to have minimal external relevance. He congratulated the EC on its enlargement to 27 member States and noted that this would contribute to increased trade flows and economic growth. In this context, he was looking forward to conducting and successfully completing Article XXIV:6 negotiations with the Commission regarding appropriate modification of the EC's WTO commitments. 43. The representative of Switzerland recalled the legal foundations of trade relations between the EC and Switzerland. Their affinities led almost naturally to a shared outlook on overall trade policies and their development. This was the case for agriculture where their approach respected the multifunctional role of that sector. 44. However, such close cooperation quite naturally gave rise to certain problems. One related to safeguard measures on several steel products, which the EC had adopted in order to avoid a distortion of trade flows. While he could understand why the EC had taken these measures, he was concerned by their effects and that they had not yet been abrogated. Another concerned trade in textiles and clothing: the existing restrictions affected products that had a fairly high-priced Swiss component. However, he also pointed out that trade relations between Switzerland and the EC were very good and that there was no major bilateral trade problem. He welcomed the close and active cooperation with the EC in areas such as market access for industrial products, services, trade facilitation and geographical indications. 45. The representative of Argentina congratulated the EC for its enlargement to 27 members and added that it was one of Argentina's main trading partners. An ambitious and balanced conclusion of the Round was important to consolidate the reform process in international trade that had begun in the Uruguay Round. However, it was worrying to see the growing number of substantial tariff increases, including to prohibitive levels, on agricultural products of considerable interest for developing countries. High border protection and domestic support had isolated some products from competition and had generated surpluses. The 2003 CAP reform represented an effort in the right direction, but it

11 Page 11 was premature to assess all its results. The EC was an important importer of agricultural and fisheries products, however this should not be measured in absolute terms but in terms of specific restrictions that remained and that hampered the formation of prices based on supply and demand. 46. Faithful observance of trade disciplines was essential for the credibility of negotiations of new multilateral rules in the Doha Round. He encouraged the EC to comply with the Doha mandate without making exorbitant market access demands on developing countries for industrial goods. He asked what types of state-aid were given to the manufacturing sector and how the competitiveness of this sector was being promoted. On non-ad valorem tariffs he asked if the EU could report on the methodology to calculate AVEs. 47. The representative of Chile said that the EU was a very important trading partner and an important source of foreign direct investment in Chile. Their healthy bilateral relationship had been strengthened by the Association Agreement in force for four years. Multilaterally, the EC and Chile had shared interests in many areas of the Doha Round negotiations, such as services, NAMA, rules, and trade facilitation, but also some differences, particularly in agriculture. 48. He welcomed the recent approval of the Services Directive and appreciated the reform of the CAP, in particular the decoupling of payments and production. He urged the EC to complement this reform with a more aggressive cut in the levels of its border protection in the context of the Doha Round. He was following with particular interest the reform process of the common fisheries policy. 49. Chile was not against the fundamental principles of REACH; however, this registry could possibly affect access for Chile's exports to the European market. Chile was watching carefully to ensure that its implementation was in full conformity with the Agreement on Technical Barriers to Trade. With regard to IPR enforcement, Chile was dissatisfied with the EC's approach i.e. to set up a blacklist of countries. He requested more information on the EC's strategy for the negotiation of bilateral and sub-regional agreements. He welcomed the accession of Bulgaria and Romania, but urged the EC to take into consideration the legitimate interest of other WTO Members. 50. The representative of Japan congratulated the EC for its recent expansion, hoping that this would increase trade and business opportunities for all. He hoped that EC would take the necessary measures to conclude GATT Article XXIV and GATS Article XXI negotiations expeditiously and sufficiently. He understood the necessity for the EC to require, under the Prospectus and Transparency Directives, companies from third countries, which had made or would make public offerings or listings within the EU to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) or equivalent standards. However, he underlined that Japanese accounting standards were equivalent to IFRSs. He hoped that the equivalence decision by the EC would be issued as soon as possible. 51. Referring to the taxation of IT products, he believed that the EC's classification was not consistent with the Information Technology Agreement (ITA) and urged it to take steps to remedy the situation. Harmonization of the patent systems could help expedite patent acquisition, reducing costs, and bring about legal stability. On the DDA, Japan respected the EC for taking positive steps on many fronts and hoped to continue to cooperate with EC to bring about an ambitious and balanced conclusion of the DDA. Japan was also interested in cooperating with the EC in line with the Lisbon agenda, as well as "Global Europe- competing in the world", announced in October 2006, and hoped that the interests of non-ec enterprises would be secured. 52. The representative of Mexico said that EC and Mexico were linked by a system of agreements that covered all aspects of bilateral relations. The basis of this relationship was the Economic Partnership, Political Coordination and Cooperation Agreement, which had entered into force in The EU was Mexico's second largest trade partner, and Mexico was one of the main importers of

12 Page 12 European goods amongst the emerging markets. Foreign direct investment played a very important role in the bilateral relationship. He was convinced that a regional liberalization agreement carried out in accordance with the rules of the WTO constituted an important step towards multilateral liberalization; the only way in which regional agreements could be efficient was to base them on a solid multilateral system. He emphasized the role to be played by the EC as a negotiator and the flexibility required. 53. Obstacles to trade were still substantial in important areas. In agriculture, for example, the elimination of export subsidies and a substantial reduction of tariffs would be beneficial not only for European consumers but also for the world economy. He expressed concerns about the REACH system and its possible impact on trade flows. He also raised concerns about false tequilas, noting that the best and indeed the only, tequila was Mexican. 54. The representative of Australia congratulated the EC on the forthcoming 50 th anniversary of the signing of the Treaty of Rome. The EC was Australia s largest trading partner and the largest source of foreign investment. Australia had a deep interest in the evolution of the Common Agricultural Policy. He welcomed the reforms that had taken place, but remained disappointed that the CAP continued to take up so much of the EC s common budget and that the EC did not adequately expose its agriculture to international market forces. He urged the EC to take the opportunity of the Round and the forthcoming CAP "Health Check Review" and Financial Perspectives Review to maintain the reform agenda. In the area of agricultural export competition, the EC had foreshadowed an important contribution in the phase out of export subsidies. Australia remained concerned about EC border protection for agricultural products: the EC needed to do more in the area of agriculture market access, where studies had consistently shown that the greatest benefits flow to developing countries. 55. Australia praised the EC s support for the multilateral system, and urged it to pursue RTAs in a manner that supported the multilateral trading system. He appreciated the efforts that the EC had made to comply with adverse dispute settlement outcomes. While Australia had finished Article XXIV:6 consultations with the EC others still had not. He recognized that there were legitimate public policy concerns relating to issues such as food safety and environmental protection, and acknowledged the generally transparent way in which the EC had developed and adopted measures affecting trade. However, there were problems in the decision-making process and in the execution of policies. Concerning REACH, he was uncertain about how this would turn out, how it would affect trade, and how consistent it would be with the EC s WTO obligations. 56. The representative of Canada recalled the importance of bilateral trade relations and commended the EC for the considerable progress it had achieved since 1995 in the process of enlargement. Progress had been made within the EC to achieve an internal market on services through the Services Directive, and he was looking forward to receiving periodic updates from the EC regarding the implementation of this Directive. He also looked forward to continued discussions on the issue of counterfeit and pirated goods and welcomed the EC Directive on the enforcement of intellectual property rights. Canada was satisfied with the compensation negotiations with respect to the new member States, recently concluded pursuant to Article XXI of the GATS. The recent accession of Romania and Bulgaria had had a serious economic impact on Canadian exporters. Thus, he was looking forward to fruitful negotiations with the EC under GATT Article XXIV:6 and the commencement of GATS Article XXI negotiations to compensate Canadian exporters for any loss of market access they had incurred. 57. Canada was concerned about common customs procedures and practices, which were not always consistent from one member State to another. Another cause for concern was a recent development pushing for a ban on the import and use of seal products at the member State and EC levels. The proposed Belgian and Dutch measures to ban the importation of seal products were inconsistent with the EC's obligations under the WTO Agreement. He was pleased that the European

13 Page 13 Commission had recognized that there was no conservation threat to the seal population, and called on the EC not to adopt bans on imports of seal products. A number of significant regulatory impediments had also marked the Canada-EC relationship which, in some instance, had led to Canada initiating WTO dispute settlement proceedings. Canada was encouraged by the progress that had been made on strengthening regulatory cooperation. He agreed with the European push for urgency as it was imperative in the DDA negotiations to demonstrate signs of concrete progress. He encouraged the EC to show flexibility with respect to agricultural tariffs. Canada was encouraged by the EC's various reform initiatives and the development of more market-oriented policies. 58. The representative of Brazil congratulated the European Communities for the 50 th anniversary of the Treaty of Rome on 25 March. Brazilian-European trade and investment had been growing significantly. However, there remained much scope for expansion. He noted that some important agricultural products remained subject to tariffs of several hundred per cent, many tariffs were very complex, there was widespread use of non-ad valorem tariffs, and there was also the special safeguard. The extent and pace of agricultural reform were clearly insufficient. Brazil would be looking closely at the operation of the recently approved European Agricultural Fund for Rural Development in light of the EC's obligations under the Agreement on Agriculture and the results of the DDA. 59. Brazil had concerns about tariff escalation and the EU standard on biodiesel. There was also marked concern about transparency regarding subsidies. EC notifications to the Committee on Agriculture were unjustifiably late; he encouraged the EC to provide and update notifications as soon as possible. He praised the publication of the Green Paper on the "European Transparency Initiative" and was looking forward to concrete outcomes in the current year. Brazil had concerns about the falsification of Cachaça and about the registration of general names of Brazilian biodiversity as commercial trade marks. 60. He welcomed the accession of Bulgaria and Romania, but stated that Brazilian export interests to both countries had been severely affected. He urged the EC to start consultations with Brazil with a view to redressing this situation. He welcomed the EC's issuance of a regulation, in May 2006, on compulsory licensing of pharmaceutical products for countries with public health problems, and expected the EC to take a more positive approach to the need to update the TRIPS Agreement to reflect concerns about piracy of biodiversity. His Government was concerned about the EC Enforcement Survey 2006, which was heavily based on anecdotal information. 61. The representative of the United States congratulated the EC on the 50 th anniversary of the signing of the treaty of Rome. The EC was the United States' biggest trading partner, both in goods and in services; its trade and investment flows directly influenced the United States' economy and the welfare of its citizens. As always, a large and complex relationship generated its share of trade disputes but these represented a minor share of trade flows. Continued cooperation between the European Communities and the United States was of critical importance to the trading system. An important element of this cooperation was putting the Doha negotiations on a path to a successful, strong outcome. As one of the EC s remaining MFN-only trading partners, the United States closely followed the EC trade agenda related to current and future preferential agreements. 62. He hoped that through the DDA, the EC would make commitments to reduce agricultural subsidies significantly and address its high tariffs to provide market access opportunities to other WTO Members. Excessive sanitary and phitosanitary restrictions as well as more traditional market access barriers in agriculture created enormous burdens for U.S. exporters. Real new trade flows in agriculture would remain difficult to achieve without a transparent regulatory regime based on risk assessments and consistent across member States. The United States urged the EC to comply with the recommendations and rulings of the DSB in the Biotech Products dispute, and to work to resolve their long-running beef hormone dispute.

14 Page It was important that the EC allowed WTO Members and affected exporters a meaningful opportunity to comment on regulatory proposals, and took those comments taken into consideration, before a final technical regulation was promulgated and enforced. He was concerned about regulatory approaches such as REACH, which imposed enormous implementation burdens on industry, and looked forward to hearing how the EC intended to ensure that the implementation of REACH and other regulatory initiatives did not unnecessarily impede market access. The United States was also concerned about the consistency and transparency of the EC s customs administration across 27 member States, and about effective adherence to market-opening commitments such as the Information Technology Agreement. He applauded the European Commission s efforts to address internal barriers and looked forward to hearing how it intended to address remaining scientifically unjustified barriers to the free flow of goods at the Community and Member state levels. 64. The representative of Peru hoped that his country, as member of the Andean Group, would soon conclude an association agreement with the EU. Agriculture, in particular sanitary and phitosanitary measures, was a particular concern for Peru. The procedures for authorization of new food products was time-consuming and costly. He enquired about measures adopted to remedy this situation, which was to the detriment of the export interests of several developing countries, particularly Peru and other Andean community countries. 65. The representative of Honduras welcomed the economic results registered in the member States of the EC. He noted, however, the persistent obstacles to trade, particularly in agriculture, which significantly reduced trade opportunities, slowed growth, and prevented other members from benefiting from the multilateral trading system. Honduras had been affected by these restrictions in agricultural trade and urged the EC to comply with its commitments and obligations as Member of the WTO. In addition, he noted that the Commission had refused to recognize the rights of Honduras as a substantial supplier of bananas pursuant to Articles XXIV and XXVIII of GATT. 66. The EC was Honduras' third most important trading partner. Honduras benefited from EC preferences granted under the GSP +, which had made it possible to increase the volume of trade. However, he hoped that the relationship would be strengthened through the negotiation of an economic association agreement. Honduras recognized the EC's important role in bilateral cooperation, in areas such as local development, decentralization, education, and the sustainable management of natural resources. 67. The representative of Colombia stated that the EC was the second most important destination for Colombian exports and the second supplier of imports. However, its complex tariff structure and the diversity of customs procedures created a climate of uncertainty. The high level of protection, domestic support, export subsidies, the Common Agricultural Policy, and sanitary and phitosanitary measures were serious export barriers for Colombian products. Colombia would follow the CAP reforms closely, particularly concerning the reduction of production-distorting subsidies and improvements in market access. Colombia wished to consolidate its trade relations with the EC by giving them a greater degree of certainty. To that end, Colombia wished to conclude negotiations of an association agreement. Investment was also of priority importance for Colombia. 68. Concerning bananas, various international investment treaties were under negotiation. Access to the European market for Latin-American countries was restrictive and discriminatory; this affected producers in regions with very low income and created public order difficulties where banana production was the main source of employment. Thus, Colombia called upon the EC to reduce its banana tariff as soon as possible. In the case of bananas, the EC had notified its intention to modify its concessions, but so far had not notified any such modification. EC Regulation 258/97, on novel foods, affected the export of traditional exports that did not have a consumer history in the EC market after May He trusted that the EC would provide Colombia with technical and financial assistance to ensure that EC authorities had the same trust in these products as Colombian authorities.

15 Page The representative of Hong Kong, China pointed out that the EC was a strategic trading partner for many WTO Members and that there had been substantial and growing cooperation between the EC and Hong Kong, China in many areas, particularly in trade. She welcomed the EC s affirmation of its full commitment to multilateral liberalization through the DDA; the EC s efforts in maintaining a relatively low level of tariffs for non-agricultural products were encouraging. However, the EC's tariff structure remained complex and he encouraged it to further reduce its tariff rates and simplify the structure. The EC remained a leading user of anti-dumping measures: amendments to anti-dumping legislation in 2004 had changed the treatment of abstentions from being considered as negative votes to positive votes in the European Council s decision procedures. 70. He also congratulated the EC on the successful completion of its fifth round of enlargement, and hoped that this would create further trading opportunities for all. In this context, he noted that automatic extension of anti-dumping measures would adversely affect market access to the EC's new Member States and was incompatible with WTO requirements. He called on the EC to further harmonize national standards and technical regulations. With regard to services, he noted that the list of MFN exemptions of the EC and its Member States should remain unchanged. Both the EC and Hong Kong, China were staunch supporters of the multilateral trading system and shared the goal of pursuing further liberalization of trade in services. Hong Kong, China appreciated the EC s active participation in the market access, services, and rule-making negotiations and would continue to look to the EC for leadership in this regard. Barriers to trade in services remained both at the intra-ec level and vis-à-vis third countries: efforts by the EC to address these distortions would boost the overall competitiveness of the economy. Hong Kong, China encouraged the EC to consider binding its more liberal regime in transport and logistics-related services in its next services offer. 71. The representative of Turkey noted that the EC's positive economic performance had been due mainly to private investment and exports. The main positive impact of the growth rates had been on the labour market, with a strong upturn in employment growth. The EC was committed to increasing its competitiveness through internal and external market opening, as adopted within the Lisbon Strategy. The successful recent enlargement of the EC would not only pave the way for increasing its competitiveness but also stimulate the EC's global role as an engine for world economic growth. The EC pursued trade liberalization through multilateral, regional, and bilateral trade negotiations, while the priority was given to multilateralism. In this regard, the EC had a crucial role for the completion of the DDA: further essential steps needed to be taken in the negotiations by all major players. 72. At the multilateral level, the EC's commitment to sustainable development could be seen in its GSP scheme. The EC's technical and financial assistance and the aid for trade initiative were also worth mentioning. Turkey and the EC had deep-rooted relations that dated back to the 1963 Association Agreement and the establishment of the customs union in Following the decision taken by the European Council in 1999 to recognize Turkey as a candidate country, Turkey had been a part of the enlargement process and the customs union was extended to cover the whole "acquis communautaire". The 2004 Decision by the Copenhagen European Council reaffirmed that accession negotiations would be opened once the so-called "Copenhagen Criteria" were fulfilled, and accession negotiations had begun in October The representative of Korea appreciated the EC's pivotal role in the global economy and welcomed the recovery of the EC economy since He also appreciated the leadership role of the EC in promoting an open and fair multilateral trading system and looked forward to continued strong leadership by the EC, especially at this critical juncture of the DDA negotiations. The EC had always been one of the Korea s most important trading partners, and they had been working closely to move forward the DDA negotiations with the firm conviction that the multilateral trading system was indispensable for further enhancing the well-being and prosperity of people in both economies. He