Trade Policy Review Lauds EU for Resisting Protectionism, Marks Areas for Improvement

13 July 2011

WTO Members gathered last week to review a report from the trade body's Secretariat on the EU's trade policies over the last two years; the review praised the 27-member bloc for "restrain[ing] from tightening restrictions on imports in response to the crisis" - a decision that had a "stabilising effect on the multilateral trading system." However, the Trade Policy Review (TPR) found that the EU still has room for improvement in the areas of intellectual property, anti-dumping measures, agricultural support and tariff policies, and regulatory practices.

The 6 and 8 July meeting marked the first time that EU policies have come under review since the Treaty of Lisbon came into force on 1 December 2009, which altered the way that the EU adopts trade policy decisions and included foreign direct investment in the bloc's common commercial policy.

The on-going EU debt crisis acted as a backdrop to the WTO discussions; Chairperson Mario Matus, who is also Chile's Ambassador to the global trade body, noted in his closing remarks that various delegations wish the EU to continue with initiatives to cut back on crisis-related support, with the aim of reducing the distortions that these cause to trade and international investments.

Discussant Fernando de Mateo, Mexico's WTO Ambassador, acknowledged in his comments that the EU did what it had to with regards to government spending and providing help to the financial sector in order to avoid another Great Depression. However, he emphasised that "the EU and its Member States also authorised subsidies destined toward specific sectors. These types of subsidies are the least efficient and, in particular, the most trade-distorting."

The struggling Doha Round of negotiations also featured in the discussions. de Mateo urged the EU to "take on a position of greater leadership [in the talks]," while recognising the EU's active participation in the trade negotiations to date.

In a statement, the EU stressed that "the WTO and the multilateral trading system are the focus of the EU trade policy, as we strongly believe that a system of global rules and multilaterally bound, non-discriminatory market access commitments provide the best way to keep international trade open, ensuring that prosperity can be widely shared."

Agriculture tariffs, total support levels remain high

The TPR report found that the role of the EU's Common Agricultural Policy (CAP) - the system of production targets and market mechanisms designed to manage agricultural trade within the EU and with its external trading partners - has been reduced. Notably, the CAP "Health Check" has also led to an increase in decoupled support.

However, the report also determined that total support over the last two years was "considerable in both absolute and relative terms and market price support continues to represent a large, though declining, portion of transfers to producers." Levels of support for 2009, according to figures from the Organisation for Economic Co-operation and Development, made up nearly a third of total agricultural production value during that year.

The report also noted that CAP reforms have been primarily directed toward cuts in export subsidies and trade-distorting domestic support, while leaving MFN tariffs "relatively high."

Various members reiterated these concerns at the meeting, with China and the US both stressing the tariff level issue. While the average applied MFN tariff rate for agriculture dropped from 17.9 percent in 2008 to 15.2 percent in 2011, the report attributed this decrease to the rise of world commodity prices, which led to a drop in ad valorem equivalent rates.

The US also criticised the EU for issuing sanitary and phytosanitary measures on food and animal feed products "that have been safely consumed in the United States for decades, and that the United States exports to dozens of other members."

In particular, the US cited the EU's restrictions on importing and marketing certain agricultural biotechnology products, and preventing the use of certain pathogen reduction treatments on food, which "the EU's own scientists have concluded pose no risk to human, animal, and plant life or health."

Costa Rica stated that, like others, "we are concerned about the trade impact of the EU's technical regulations, along with the weight that the CAP continues to have, hence our interest in learning about the steps being taken toward its reform."

Ecuador also acknowledged EU's efforts toward decoupling support to European farmers, while noting that total support levels remain high "and dissuade farmers in developing countries from productive activity, by excluding them from the possibility of competing in an egalitarian market."

Regulatory practices criticised

Various delegations spoke out about the EU's regulatory practices, such as the WTO finding that the EU comment period for new regulations is often less than the standard 60 days. In the case of individual member state notifications, for instance, the period between notification and adoption of the regulation was less than 60 days in 17 percent of cases.

de Mateo noted that this shortened time makes it difficult for some WTO members to issue comments, for reasons such as limited institutional capacity. The notifications are also often released at the point where deliberations among EU members are "too far advanced for the opinions of WTO Members to be considered appropriately." The US added that some of these measures have "enormous trade implications."

Between October 2008 and January 2011, the EU notified the global trade body of 146 technical regulations and procedures of evaluating conformity; individual member states notified the WTO of an additional 140 regulations.

The report did find, however, that the EU has adopted various measures to remove regulatory obstacles to intra-EU trade in goods, along with legislation that minimises the chance of EU members restricting goods marketing that does not comply with their national technical standards in cases when another EU member state has placed those same goods on the market.

China stressed that the EU's technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures were "persistent causes of concern" in terms of causing barriers to trade - a matter raised by various delegations. China added that the TBT and SPS issues both came up in the last review, and have not been improved, noting that some EU member states "fail to notify TBT/SPS measures at the national level in line with WTO rules."

Anti-dumping, intellectual property

The use of anti-dumping measures, which are designed to counteract the selling of products on foreign markets at prices lower than what an exporter charges in its home market, also came under fire at the WTO meeting. The secretariat report noted that, even though the "number of anti-dumping measures in force and the rate at which these are adopted have decreased since 2008" the EU still "remains an important user of anti-dumping measures. Almost 45 percent of these measures are applied to a single WTO Member (China)."

In response to this finding, China stressed that it was "firmly opposed to the abuse of trade remedy measures and the practice to convert them into a form of handy trade protectionist tool."

The EU's work toward establishing an intellectual property regime also featured in the review; the report found that, since the last TPR, the EU has lowered the costs for registering European Community trademarks, while improving the enforcement of intellectual property rights and working toward major copyright and patent reforms. However, the report also cited the EU's inability to create a unitary EU patent and a unified patent court.

The last review of the EU was in April 2009, when the bloc was still referred to at the global trade body as the European Communities; WTO rules require that the four largest traders - i.e. China, the EU, Japan, and the US - undergo reviews of their trade policies every two years, with other countries having longer lag times between reviews.

ICTSD reporting.

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