|
World Trade Organization |
RESTRICTED |
|
| |
|
WT/TPR/S/102 26 June 2002 | |
|
|
(02-3443) |
|
|
|
|
Trade Policy Review Body |
|
|
TRADE POLICY REVIEW EUROPEAN UNION Report by the Secretariat |
|
This report, prepared for the sixth Trade Policy Review of the European Union, 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 Commission on the EU's trade policies and practices. Any technical questions arising from this report may be addressed to Mr. Willy Alfaro (tel. 022-739 53 72). Document WT/TPR/G/102 contains the policy statement submitted by the European Commission. |
Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on the European Union.
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) Recent Economic Developments vii
(2) Policy developments viii
(3) Institutional Developments ix
(4) External Trade Relations ix
(i) WTO ix
(ii) Preferential trade agreements and arrangements ix
(5) Trade Policy Measures x
(6) Measures Affecting Production and Trade xii
(i) Company law xii
(ii) Competition policy xii
(iii) Subsidies xiii
(iv) Intellectual property rights xiii
(7) Developments in Selected Sectors xiii
(i) Agriculture xiii
(ii) Fisheries xiv
(iii) Financial services xiv
(iv) Telecommunications and information society xiv
I. Economic Environment 1
(1) Main Characteristics 1
(2) Recent economic developments 2
(3) Policy Developments 3
(i) Objectives of economic policy 3
(ii) Economic and monetary union (EMU) 4
(iii) Public finances 6
(iv) Structural reforms 7
(4) Developments in Trade 10
(i) Merchandise trade 10
(ii) Commercial services trade 11
(5) Outlook 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 13
(5) General Framework 13
(i) Overview 13
(ii) Institutional framework 13
(iii) Transparency and public consultations 14
(2) Enlargement 15
(3) Common Commercial Policy 16
(i) Objectives 16
(ii) Framework 16
(iii) Instruments 17
(4) External Trade Relations 19
(i) WTO 19
Page
(ii) Regional trade agreements 21
(iii) Preferential trade agreements and arrangements 24
III. trade policies and practices by measure 26
(1) Measures Directly Affecting Imports 26
(i) Customs procedures 26
(ii) Customs valuation 28
(iii) Rules of origin 28
(iv) Community tariff 29
(v) Indirect taxes 30
(vi) Prohibitions, restrictions, surveillance, and licensing requirements 31
(vii) Safeguard measures 36
(viii) Product regulations and standards 37
(ix) Government procurement 46
(x) State-trading (as defined in GATT Article XVII) 48
(xi) Anti-dumping and countervailing measures 48
(2) Measures Directly Affecting Exports 50
(i) Procedures 50
(ii) Prohibitions, restrictions and licensing 50
(iii) Duties 51
(iv) Export subsidies 51
(v) Export assistance 51
(vi) State-trading enterprises 51
(3) Measures Directly Affecting Production and Trade 52
(i) Legal framework for businesses 52
(ii) Competition policy 54
(iii) Subsidies 59
(iv) Intellectual property rights protection 63
IV. Developments in Selected Sectors 69
(1) Agriculture 69
(i) Main characteristics 69
(ii) Common Agricultural Policy (CAP) 70
(iii) Developments in selected sectors 73
(2) Fisheries 77
(i) Main characteristics 77
(ii) Common Fisheries Policy (CFP) 78
(3) Financial Services 83
(i) Main characteristics 83
(ii) Policy developments 85
(4) Telecommunications 91
(i) Main characteristics 91
(ii) Policy developments 92
(5) E-Commerce 97
(i) Main characteristics 97
(ii) Policy developments 97
references 103
appendix tables 109
Page
CHARTS
I. Economic Environment
I.1 Merchandise trade developments in the EU, 2000-01 10
TABLES
I. Economic Environment
I.1 Major features of the EU and euro area, 2000 1
I.2 Growth in real GDP and expenditure components of EU-15 and euro area, 1998-01 2
I.3 Internal Market Scoreboard, March 2002 8
I.4 Commercial services exports and imports (extra-EU), 1992-00 11
I.5 Spring 2002 forecasts of real GDP growth for the EU and the euro area, 2002 and 2003 12
III. trade policies and practices by measure
III.1 Seizures of counterfeit and pirated goods in EU Member States, 1999-00 26
III.2 Applied MFN, tariff 2002 30
III.3 EC's liberalization of quantitative restrictions on imports of textile and clothing products 34
III.4 WTO notifications of technical regulations by the EU and Member States, 1995-01 39
III.5 Open procurement indicators, 1995 and 2000 46
III.6 Anti-dumping actions, 1991-01 49
III.7 Selected innovation indicators, 1997-99 60
III.8 State aid cases, 2000 to January 2002 62
III.9 Patent statistics, 1999-00 66
IV. Developments in selected sectors
IV.1 Selected agricultural statistics for Member States, 2000 and 2001 69
IV.2 EAGF Guarantee and Guidance expenditure by Member State, and national expenditure on
agriculture, 2000 71
IV.3 Old and new tariff suspensions and tariff quotas for fishery products 82
IV.4 Legislative measures of the Financial Services Action Plan adopted between 2000
and March 2002 86
IV.5 Legislative programme of the Financial Services Action Plan, 2002-03 87
IV.6 Telecommunication markets in the EU, 2001 91
IV.7 Internet penetration rates, 2001 92
APPENDIX TABLES
I. Economic Environment
AI.1 Merchandise exports (extra-EU trade) by region and country, 1995 and 1998-00 109
AI.2 Merchandise imports (extra-EU trade) by region and country, 1995 and 1998-00 110
AI.3 Leading merchandise exports (extra-EU trade) by SITC Rev.3 category, 1997-00 111
AI.4 Leading merchandise imports (extra-EU trade) by SITC Rev.3 category, 1997-00 112
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
AII.1 Selected most recent WTO documents of the European Communities, 1995 to 9 April 2002 113
AII.2 Regional trade agreements of the European Union, 2002 115
Page
III. trade policies and practices by measure
AIII.1 Applied MFN tariffs by HS Chapter, 2002 116
AIII.2 Quantitative restrictions on imports of textile and clothing products after Stage III
of liberalization, 2002-04 120
IV. Developments in Selected Sectors
AVI.1 Main indicators of support by commodity, 1986-00 122
AVI.2 Share of telecoms incumbents in call segments, 2001 123
SUMMARY OBSERVATIONS
1. The European Union (EU) plays a vital role in the WTO and its support for the rules-based multilateral trading system is crucial to the ability of the system to deliver the benefits from trade to all its Members. The EU’s position as the world’s leading exporter of goods and the second-largest importer is testimony both to the importance of trade to the European consumer and producer, and to the significance of the EU as a market for most WTO Members, notably developing countries. This interdependence is the result of a longstanding commitment to the multilateral trading system, in addition to an extensive network of regional trade agreements and preferential trade arrangements.
2. The EU was very important in building support for the launch of the Doha Development Agenda (DDA) in November 2001. The EU, together with its trading partners, worked to rebuild confidence and cooperation within the WTO. It has also sought to improve public understanding of the WTO through greater transparency and interaction with parliamentarians and civil society representatives. The continued commitment of the EU to the WTO and the multilateral trading system will be critical to the success of the DDA.
(1) Recent Economic Developments
3. Since its last Trade Policy Review in mid 2000, the EU has maintained the momentum of its internal economic integration agenda. It has continued to advance towards the completion of its Internal Market by pursuing product and capital market reform, has undertaken the final step towards a single currency in the euro area, largely maintained control of public finances despite lower economic growth, and has actively enforced competition policy, to complement Member State domestic reform. Trade policy developments have been supportive of this agenda, by maintaining largely open markets for non-agricultural products (except for textiles and clothing), proceeding on WTO liberalization commitments, and supporting further deepening of multilateral commitments, while further expanding the extensive system of regional trade agreements.
4. Maintaining a supportive policy environment for economic operators has been vital to reviving growth prospects of the European economy in 2002. Economic growth in the EU slowed sharply in 2001, with a slight contraction in GDP in the final quarter of the year. Growth was 1.7% in 2001 down from 3.3% in 2000. The slowdown is attributed by the Commission mainly to a sequence of external shocks – higher oil prices, the burst technology bubble, weak external demand, exacerbated by the shock to confidence of the events of 11 September. The Commission’s Spring 2002 forecasts are for a recovery to develop in the course of the year, due in part to the strengthened economic prospects of the United States, the EU’s main external trade partner. A weaker first half, however, is expected to lead to a decline in the growth rate recorded for 2002 as a whole, to 1.5%, followed by a rebound to 2.9% in 2003.
5. Inflation in the EU rose to 2.3% in 2001, from 2.1% in 2000 and 1.2% in 1999. Contributing factors in 2000 were higher energy prices and the decline of the euro and, in early 2001, rising food prices. Price pressures eased in mid 2001, but higher food prices and indirect tax increases lifted inflation in early 2002. Although euro area inflation in 2001 was above 2%, the medium-term target set by the European Central Bank (ECB), the Commission expects the target to be met in Q2 2002.
6. Unemployment rates continued to decline in most Member States in 2001 despite slower economic growth. The Commission expects a slight rise in unemployment in the EU as a whole in 2002, even as the recovery proceeds, due to the lagged nature of employment adjustment to cyclical upturns. A decline to 7.5% is forecast for 2003.
7. Slower economic growth had a marked impact on external trade developments in 2001. The value of merchandise exports rose by 4% in 2001, compared with 23% in 2000, while imports were 1% lower in value. Merchandise exports were estimated at € 1,051 billion and imports at € 1,020 billion in 2001, reducing the EU’s merchandise trade deficit to € 45 billion in 2001, from € 91 billion in 2000.
(2) Policy Developments
8. The strategic goal for the EU for 2010, set by the Lisbon European Council, is "to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable growth with more and better jobs and greater social cohesion". The 2002 Broad Economic Policy Guidelines (BEPG) for the EU and the Member States emphasize safeguarding macroeconomic stability by fulfilling pledges for budgetary balance made in the Stability and Growth Pact (SGP), and continued moderation in wage demands. Other objectives include raising productivity through product market reform, fostering entrepreneurship and the knowledge-based economy, and financial market integration. Member States are to reduce labour costs, strengthen incentives for people to take up work and participate in the labour force, and remove barriers to labour mobility. Sustainable development is to be promoted.
9. The 11 Member States that launched the euro area on 1 January 1999 were joined by Greece on 1 January 2001. Euro banknotes and coins were put into circulation on 1 January 2002, to be used in all transactions. The single currency facilitates cross-country price comparisons, and thus strengthens the Internal Market. Non-EU countries also benefit through lower costs for international trade transactions. The main benefit of Economic and Monetary Union (EMU), however, is the lasting contribution of price stability to the foundations for sustained economic activity.
10. The ECB conducts monetary policy for the euro area with the core objective of price stability. After progressively tightening monetary policy throughout 2000 in the face of persistent inflationary pressures, the ECB shifted to a more accommodating stance in May 2001 as price pressures eased. After the euro fell below a level that the ECB considered posed a risk to price stability, the ECB intervened to support the euro in September 2000 in a concerted G-7 action, and on its own in November 2000. The euro has since recovered to about US$0.90, 25% below its level of 1 January 1999.
11. Following the progress made in 2000 by all Member States, towards the goal of budgetary balance or surplus, slippage occurred in 2001 due to the onset of slower economic growth. Most governments still in deficit position anticipated even greater difficulty in meeting their deficit targets in 2002. To maintain the credibility of the SGP, activation of the early warning system was considered for certain Member States whose deficits were forecast to be close to the 3% "excessive deficit" level, but activation was set aside following pledges to meet agreed balanced budget targets by 2004. Pressures on deficits should ease in 2003 as a result of the anticipated recovery. Other public finance concerns are the relatively high levels of government debt in certain Member States, as well as the substantial pressure of ageing populations on social welfare systems.
12. Under EMU, structural reforms have assumed a greater importance in fostering the conditions for growth, due to the combination of a strict anti-inflationary monetary policy stance and fiscal policy constraints under the SGP. Since the last Review of the EU in mid 2000, good progress has been made on achieving the goal of fully integrated securities markets by 2003 and financial markets by 2005 under the Financial Services Action Plan (FSAP), and on fostering the "information society" through more competitive markets for telecommunications services and a new framework for e-commerce.
13. Progress in other areas of the Internal Market has been slower. Political agreement was reached at the Barcelona European Council in March 2002 to open non-household use of electricity and gas to competition as of 2004, and to ensure cross-border electricity interconnectivity of at least 10% of production capacity by 2005. On postal services, the scope of business segments reserved to the incumbent postal operator is to be reduced in 2003 and again in 2006, and a decisive step to full liberalization could take place in 2009.
(3) Institutional Developments
14. The Treaty of Nice was agreed in December 2000, to prepare EU institutions for enlargement in the light of the objective of the candidates’ participation in the 2004 elections to the European Parliament. Of particular significance to the WTO is the exclusive Community competence that would apply to negotiations of agreements that concern services (with certain exceptions), and the commercial aspects of intellectual property rights upon ratification by all Member States of the Treaty of Nice (ten had done so by May 2002). To prepare for the next phase of work on the EU treaties in 2004, the Convention on the future of Europe, launched in March 2002, is engaged in a deeper and wider debate about the future of the European Union.
15. Transparency in the functioning of the EU has been further enhanced during the period under review by a new policy adopted in 2001 to give all persons, regardless of their nationality, access to documents of Community institutions, subject to limits for the protection of public and private interests. The Commission has made increasing use of public consultations to provide input into proposals for Community action, in keeping with the White Paper on European Governance.
(4) External Trade Relations
16. The overall objectives of the EU’s trade policies have remained largely the same during the period under review. The EU continues to pursue trade liberalization through multilateral, regional, and bilateral initiatives. At the multilateral level, the EU played a leading role in building support for the launch of the DDA in November 2001. At the regional level, new trade agreements were concluded and existing agreements with candidate countries were deepened. Bilateral negotiations on prospective extra-regional agreements also continued. In addition, a new scheme for the grant of preferences to developing countries was adopted, including enhanced preferences for least-developed countries.
(i) WTO
17. Notable actions undertaken by the EU to build support for the launch of the DDA include: the “Everything-but-arms” (EBA) initiative, adopted in March 2001, to expand market access for least-developed countries (LDCs); supporting the resolution of implementation-related concerns; and providing resources for enhanced levels of trade-related technical assistance, for which the EU and Member States are major donors.
18. In addition, the EU continues to be an active participant in all the regular activities of the WTO and periodically notifies its trade policy developments to the WTO. The EU is among the leading users of the dispute settlement procedures to enforce the multilateral trade obligations of its trading partners, and is frequently involved as a respondent. Disputes with the United States continue to be the leading category.
(ii) Preferential trade agreements and arrangements
19. The EU grants preferential access to most of its trading partners for some or all imports: in 2002, nine WTO Members are subject to exclusively MFN treatment in all product categories: Australia; Canada; Chinese Taipei; Hong Kong, China; Japan; Republic of Korea; New Zealand; Singapore; and the United States. These countries accounted for 45.2% of EU’s total merchandise imports in 2001. For other trading partners, the most beneficial treatment is granted to LDCs and the Overseas Countries and Territories (OCT), followed by the ACP and countries having concluded free-trade agreements with the EU, and then GSP-only countries.
20. The EU expanded its free-trade agreement with Switzerland through the completion of seven bilateral agreements, on land-based transport, air transport, free movement of people, agriculture, research, procurement, and technical barriers to trade, which should enter into force in 2002. With the ten candidates from Central and Eastern Europe (CEEC), protocols on reciprocal tariff concessions on agricultural products raised the share of CEEC duty-free agricultural exports to the EU to 75%, and the share of EU duty-free exports of agricultural products to the CEEC to 61%.
21. Free-trade agreements are also being used as an instrument to integrate the Western Balkans. Stabilisation and Association (SAA) agreements were concluded with the Former Yugoslav Republic of Macedonia (FYROM) and Croatia. Albania and certain countries and territories of the former Yugoslavia – Bosnia-Herzegovina, the Federal Republic of Yugoslavia, including Kosovo – remain under the regime of Autonomous Trade Measures (ATM), which runs until the end of 2005.
22. Further progress was also made on the "Euro-Med" agreements to replace non-reciprocal agreements, and advance the goal of a Euro-Med free-trade area by 2010.
23. A new Council Decision on the OCT association arrangements was adopted in November 2001 to continue the regime without major modification until the end of 2011. A revised GSP scheme applies for 2002-04, with GSP-plus treatment available to LDCs under the EBA, as well as to countries that combat drug production and trafficking, and to encourage adherence to core labour standards or to environmental standards.
(5) Trade Policy Measures
24. The EU market for non-agricultural products (except for textiles and clothing products) continues to be largely open. In addition to tariffs, imported products are subject to value-added tax (VAT) and excise duties in the Member State of destination. The EU has bound 100% of its tariff lines in the WTO, and tariffs applied on products are closely aligned to bound levels.
25. The overall simple average MFN tariff is estimated at 6.4% for 2002. The simple average applied tariff on non-agricultural products is 4.1%, slightly lower than at the time of the previous Review in mid 2000, due to tariff reductions for certain chemicals, textiles, iron and steel products, and toys. The simple average tariff on agricultural products is, at 16.1%, about four times higher than that on non-agricultural products, with above average tariffs on products subject to the Common Agricultural Policy (CAP). Evidence of tariff escalation remains, in particular on processed products.
26. Tariffs well above the average also apply to textiles and clothing products. The EU has long maintained restrictions on imports of textile and clothing products from a number of developing countries and transition economies. Following its WTO commitments, the EU integrated a further 18.08% of textiles and clothing products on 1 January 2002, bringing to 51.39% the imports integrated into GATT 1994 since 1995. It involved the lifting of restrictions on 11 product categories, accounting for 15% of products restricted in 1990. To date, the EU has lifted restrictions on 20% of products restricted in 1990, leaving the elimination of the remaining 80% of restricted imports “back-loaded” for the final stage at the end of 2004.
27. As of 1 January 2002, the EU had in place definitive anti-dumping measures (duties and/or undertakings) on 175 product categories, down from 192 in 1999. The EU is the second most frequent user of these measures, behind the United States, but some 40% of the anti-dumping investigations initiated by the EU are terminated without measures being taken. Products imported from China are the most frequently affected. The EU also had 16 definitive countervailing measures in place, up from 6 in 1999, with products from India the most frequently affected.
28. Safeguard action was taken in March 2002 on 15 steel products in response to the United States’ safeguard action on steel imports. Supplementary duties are to be triggered by volumes rising above 2001 levels to prevent diversion of trade from the U.S. market onto the EU market. The Commission also proposed the Council agree additional duties of between 8% and 100% on imported products from the United States as "re‑balancing" measures, given the failure of the two parties to agree compensation for the Article XIX measure on steel imposed by the United States. The EU continues to make frequent use of the special safeguard (SSG) mechanism under the WTO Agreement on Agriculture to impose "snap-back" tariffs.
29. During the period since the last Review in mid 2000, the EU and the Member States have put in place new regulations for certain products – notably in relation to the safety of products and the disposal of waste – requiring economic operators, including those outside the EU, to adapt. Although international standards may be used as the basis for regulations, to facilitate trade, the Commission has stated that "standards cannot replace governmental responsibility to safeguard a high level of protection concerning health, safety and the environment". Certain trading partners of the EU perceive these new product regulations as significant trade barriers, and are concerned with preserving the viability of the international standard-setting process. Another concern is ensuring that the multilateral processes for consultation on proposed regulations are effective. While proposed regulations are subject to WTO notification requirements to allow concerned Members to comment, participation in the consultations phase, before the Commission issues the proposal, is also desirable should resources permit.
30. To build consumer confidence in food safety after a number of food scares on the Community market, the EU adopted a new framework for national food law and food safety procedures. Scientific evidence is to underpin food safety policy, with the precautionary principle to be used where appropriate. A new European Food Safety Authority (EFSA) was also established to provide scientific advice to the Commission on food policy matters, as well as to Member States should they so request. A number of Member States have established authorities with mandates at national level to ensure independent scientific advice. New regulatory requirements have also been put into place with respect to labelling of food products of all origins to ensure traceability.
31. One area of reported controversy concerns the placement on the EU market of genetically modified organisms (GMOs) and products that may contain GMOs or GMO derivatives. Although the new legislative framework for authorizations is tighter in a number of respects, certain Member States remain opposed to placement on the market without comprehensive labelling requirements on traceability, currently under consideration. Another area of controversy concerns the ban on the use of hormones as growth promoters, on which the Commission has conducted a risk assessment in recent years. Amendments to the legislation are under consideration to ensure compliance with WTO rulings.
32. A key objective of the EU is to manage waste more effectively, as a result of which new requirements on producers have been imposed or are under consideration. The EU directive on end-of-life vehicles and the proposed directive on waste electronic and electrical equipment (WEEE) depart from the previous practice of delegating waste management to public authorities by introducing "producer responsibility" for the treatment, recovery, and disposal of products. This is intended as a financial incentive for producers to design their products to facilitate waste management, particularly recycling. Other requirements could also result from the Integrated Product Policy currently under elaboration.
33. The burden of conformity assessment procedures is reduced for certain non-EU third countries through Mutual Recognition Agreements (MRAs). New MRAs were recently concluded with Japan and Switzerland, and are already in force with Australia, Canada, Israel, New Zealand, and the United States. A similar outcome is secured for the CEEC under concluded Protocols to the Europe Agreements on Conformity Assessment and Acceptance of Industrial Products (PECAs). Although a number of developing countries would also benefit from a reduced burden of conformity assessment as a result of MRAs, the EU has established its own criteria for such agreements to be concluded.
(6) Measures Affecting Production and Trade
(i) Company law
34. The EU has continued to pursue the objective of a more integrated environment for company activity in the EU, currently segmented into 15 Member State regimes, although harmonized in a number of respects under Community law. The long-standing proposal for a European company was adopted in October 2001, to be in place by 2004, and will simplify company law requirements for enterprises established in at least two Member States. Foreign companies will also have this option, under certain conditions. The Commission plans to propose the consolidation of the tax base for European
companies to facilitate their operation. Another significant proposal concerns the use of International Accounting Standards (IAS) by 2005, which will enhance the transparency and comparability of financial statements, currently subject to national reporting standards.
(ii) Competition policy
35. The Commission has continued to vigorously enforce the rules on antitrust activities and mergers with a Community dimension, to complement national competition law enforcement. To focus its efforts on fighting cartels and other serious infringements of antitrust rules, the Commission has proposed a major simplification of the notification requirements for individual agreements. In 2001, a record number of cartel cases were closed, with fines reaching € 1.8 billion.
36. Merger activity continued to be high. For mergers of a transnational character, the Commission has cooperated actively with the competition policy authorities of EEA members and, on the basis of bilateral agreements, with those in Canada, the United States, and the CEEC, to promote convergence of decisions and remedies; an agreement with Japan is also expected. To promote convergence on a wider basis, the Commission played a leading role in the launch of the "International Competition Network (ICN)" in late 2001. The EU has long been an advocate of a multilateral agreement on competition.
37. A development of major significance to consumers in the EU, where car price differentials remain high, is the Commission’s proposed new draft block-exemption regulation for motor-vehicle distribution and servicing agreements between carmakers and dealers, to enter into force on 1 October 2002. Foreign carmakers that have not established a distribution system in the EU will also benefit, as most restrictions on multi-brand sales are to be lifted.
(iii) Subsidies
38. At EU level, funding for the CAP continues to represent the single largest expenditure; 44% of the total budget of € 93 billion in 2000. Structural operations account for 35% of the budget, with research and technological development a distant third.
39. At Member State level, latest available figures show that State aid was € 80 billion in 1999, amounting to 1% of the EU's GNP. Member States have pledged to reduce levels of state aid by 2003, and to shift the emphasis of subsidies from supporting individual companies or sectors towards tackling horizontal objectives of Community interest, such as employment, regional development, environment and training or research. More generally, Member States are encouraged to increase public and private investment in R&D to promote a knowledge-based European economy.
40. The Commission has played a supportive role in efforts to advance domestic reform by vigorously enforcing rules on state aid to individual enterprises, in particular for non-notified aid. In July 2001, the Commission launched a large-scale state aid investigation into business taxation schemes, which are said to be less transparent than other forms of assistance, and raise the potential for harmful tax competition.
41. Also significant is the Commission’s decision to firmly abide by state aid rules on airline carriers in the aftermath of the events of 11 September, with the exception of assistance for supplementary insurance. To ensure a more level playing field with non-EU carriers and fill a void in the GATS Agreement, the Commission proposed a new instrument to react against unfair competition from subsidized third-country airlines.
42. In certain sectors, the Commission has faced greater difficulty. Aid to shipbuilding was to be discontinued but its prolongation has been proposed on a "defensive" basis to pursue a WTO dispute settlement proceeding. Aid to the coal mining industry will continue until 2010. Although most EU mines cannot compete with imported coal, the industry that remains in four Member States has long been assisted on social and regional grounds.
(iv) Intellectual property rights
43. To strengthen intellectual property rights protection, the EU adopted harmonizing directives on resale rights for the author of an original work of art, and copyright and related rights for the digital environment. A new unitary right on a Community design was created, in addition to the Community trade mark and Community plant variety. No agreement has been reached on the Commission’s proposal to create a unitary Community patent (including a centralized court for its enforcement), due to issues of translation as well as jurisdiction. Also outstanding is the proposal to harmonize legislation for patents on software (computer-implemented inventions).
44. On enforcement, customs authorities reported an increase of one third in seizures from 1999 to 2000 under legislation implementing the TRIPS Agreement at the border. The trend continued in 2001 with a further increase of 27% in the number of cases. The Commission has attributed the rising trend to (a) an increased focus of customs authorities, better targeting and sharing of information; and (b) an increase in and expanded range of counterfeit and pirated goods that are traded. In 2002, the Commission intends to propose a harmonizing directive on enforcement of IPRs, which is said to be stricter than the minimum standards required by the TRIPS Agreement.
(7) Developments in Selected Sectors
(i) Agriculture
45. Since its last Review in mid 2000, the EU has implemented the Agenda 2000 reforms to the CAP agreed in Berlin in March 1999; the opportunity to reform the milk quota or sugar quota regimes was not seized, with extensions adopted instead. Pressures to adapt the CAP to new requirements are arising from enlargement, where the Commission has proposed a progressive introduction of direct payments. Other pressures to adapt the CAP are arising in the context of the ongoing WTO negotiations on agriculture, where the EU has submitted a proposal. Also of potential significance is the decline in consumer confidence in the CAP due to a number of food safety crises, which the Community is addressing, notably by a new framework for food safety law, as noted above.
46. According to the latest publicly available OECD figures, support to producers declined to € 97.9 billion in 2000 from € 107.6 billion in 1999, mainly due to world market prices rising faster than domestic prices, as well as currency movements, rather than significant changes in policy.
(ii) Fisheries
47. Since its last Review in mid-2000, the EU has been moving towards consideration of possible revisions to the Common Fisheries Policy (CFP), to apply as from 2003, although no concrete proposals had been made as of 1 May 2002. Negotiations on subsidies to fisheries are on the DDA.
48. The Commission’s Green Paper issued in 2001 on the operation of the CFP to date notes the difficulty of reconciling objectives in the sector – supporting fishing activity in regions and areas of the Community where it is of social and economic importance, while attempting to protect increasingly fragile fishery resources. A number of measures were taken by the Community in 2000 and 2001 to address fishery conservation concerns, including lower catches for 2002 to prevent further deterioration of certain stocks. Reaching political agreement on a new fleet management policy has been more difficult, although Commission estimates point to significant excess capacity as one of the causes of resource depletion.
(iii) Financial services
49. Completion of the FSAP occupies a central role in the Lisbon strategy to lower costs of capital and foster a more entrepreneurial culture. Financial market integration is among the key potential benefits of the euro. Between 2000 and March 2002, the EU adopted 15 legislative measures, including to complete the regulatory frameworks for the banking and insurance sectors through provisions on reorganization and bankruptcy, money laundering, and reducing the cost of cross-border payments in euros. A new "Lamfalussy" approach to securities-market legislation was agreed with the Council and European Parliament to focus legislation on core principles and delegate implementing powers to the European Securities Committee (ESC), chaired by the Commission, and advised by a Committee of European Securities Regulators (CESR).
50. A large number of legislative proposals are under consideration for adoption. The Barcelona European Council agreed in March 2002 that priority attention should be given in 2002 by the Council and the European Parliament to adoption of the proposed Directives on collateral, market abuse, insurance intermediaries, the distance marketing of financial services, financial conglomerates, prospectuses, occupational pension funds, and the IAS Regulation. The Commission also intends to issue a revised proposal for a Takeover Bids Directive (rejected by the European Parliament in mid 2001).
(iv) Telecommunications and information society
51. Fostering the "information society" is a central plank of the Lisbon strategy. Under the eEurope Action Plan, the local loop unbundling (LLU) regulation was in place as from January 2001, a revised legislative package for electronic communications was adopted in February 2002, to be transposed by May 2003, and the legislative framework for e-commerce was substantially advanced to build trust and confidence in the Internet.
52. For the future, the Commission sees substantial benefits for the European economy from extensive use by consumers of high-speed Internet connections and wireless 3G technologies. Although the EU is among the world leaders in mobile communications, household use of the Internet lags that of other OECD countries, although business use is comparable. A new eEurope Action Plan for 2005 is to be adopted at the Sevilla European Council in June 2002.
53. As from January 2000, all Member States were required to have initiated the process of LLU to foster infrastructure-based competition on the local access network and thereby accelerate the supply of broadband connections. Incumbent telecom operators were required to provide competitors with physical access to local loops, but progress is conceded to have been slow. The new electronic communications package contains changes intended to bring about more competitive licensing conditions and fee structures orientated to cover administrative costs. In addition, a progressive alignment with competition policy is to be achieved in market segments where effective competition has been achieved.
54. A proposed privacy directive is under consideration. It would require providers of public telecommunication services and
networks to guarantee the security of their networks, to ensure the confidentiality of communications and to delete traffic data. Under current legislation, transfers of personal data to a non-EU third country are only permitted when "adequate" protection is determined, or under limited conditions. The Commission has progressively extended the scope for such transfers by recognizing the adequacy of the data protection regimes of Hungarian, Swiss, and U.S. companies participating in the "safe harbour" arrangement, and certain data transfers to Canada.
55. The e-Commerce Directive, which entered into force on 17 January 2002, establishes that contracts concluded by electronic means are recognized as such, and legal barriers to their conclusion are removed, complementing the e-signatures Directive. In addition, a new regulation on jurisdiction and the enforcement of judgments in civil and commercial matters gives EU consumers the right to sue foreign Internet providers of goods and services in the consumers' local court rather than in the foreign jurisdiction.
56. In February 2002, the EU adopted a new policy on the value-added taxation of electronic deliveries of information society services (e.g., software, music, video) to consumers in the EU from service providers established outside the EU, which are currently not assessed VAT.
