R 140847Z APR 09
FM USMISSION GENEVA
TO SECSTATE WASHDC 8296
INFO WORLD TRADE ORGANIZATION COLLECTIVE
DEPT OF AGRICULTURE WASHINGTON DC
USDOC WASHDC
USEU BRUSSELS

UNCLAS GENEVA 000303 
 
 
EEB/TPP/MTAA FOR CRAFT 
PASS USTR FOR ROHDE, STILLMAN 
USDA/FAS/ITP, MTND 
USDOC FOR ITA 
USEU FOR DMULLANEY 
 
E.O. 12958: N/A 
TAGS: ETRD WTRO USTR
SUBJECT:  APRIL 2009 TRADE POLICY REVIEW OF THE EC 
 
¶1.  SUMMARY:  WTO Members conducted the Trade Policy Review of the 
European Communities (EC) on April 6 and 8, 2009.  The head of the 
European delegation, Deputy Director General Peter Balas, said that 
the EC is taking active steps, including fiscal stimulus packages, 
to foster their recovery and thus a global recovery.  He reiterated 
their commitment to completing the Doha Round and pledged to 
continue to play a leadership role in forging consensus.  About 40 
Members made interventions, with many raising deep concerns over the 
EC's agricultural protection (including the reintroduction of dairy 
export subsidies)and its trade-restricting regulatory environment, 
notably technical barriers to trade (TBT) and sanitary and 
phytosanitary requirements.  The EC's regulations on chemicals, 
REACH, was highlighted by no fewer than 10 delegations.  Other 
issues of concern included the EC's extensive use of trade remedies 
and preferential trade arrangements, which some Members viewed as 
discriminatory and limited in scope.  Members praised the EC for 
their leading role in the WTO, the Doha Round, and in Aid for Trade. 
 END SUMMARY. 
 
¶2.  At the onset of the meeting, Balas criticized the accuracy of 
the report prepared by the WTO Secretariat in several areas, 
particularly the notion that the EC's preferential trade 
arrangements are discriminatory.  In the second day opening 
statement, where the country under review addresses issues raised 
during the first day, Balas dismissed the numerous concerns on 
agricultural policies by saying that these can all be addressed by 
completing the Doha Round.  He defended the use of dairy export 
subsidies as being within WTO limits and justified by changes in 
market conditions.  The Discussant noted that the EC seemed to miss 
the point raised by so many Members on the export subsidies and 
warned that this could give rise to similar responses to the global 
economic crisis by developing countries, using the same "strange" 
justification.  Balas engaged in a lively tit-for-tat discussion 
with Members, in which he responded to concerns by pointing out 
areas where they or other Members were deficient. For example, 
Argentina and Balas had several exchanges on agriculture, where 
Balas criticized Argentina's export taxes to counter concerns over 
the EC's export subsidies.  When China asserted the EC's use of 
antidumping was abusive and targeted unfairly against China, Balas 
responded that there are countries that utilize antidumping more 
frequently than the EC (including the US) and that China wouldn't 
have so many cases brought against it if its companies cooperated 
more fully during the investigations. In response to a US question 
on when the EC plans to notify its revised list of government 
procurement entities to the WTO, Balas avoided the question by 
stating how government procurement access in the EC is far different 
from the US market since they don't have any equivalent to "Buy 
American" provisions. 
 
Chairperson's Summary Remarks 
 
¶3.  The Chairman, Ambassador Major of Hungary, summarized the 
meeting as follows: 
 
¶4.  "The ninth Trade Policy Review of the European Communities has 
given us all a better understanding of its trade and related 
policies and their developments since its previous Review in 2007. 
Our dialogue has been thorough and comprehensive, stimulated by the 
full and open participation of Deputy Director General of DG Trade, 
Mr. Peter Balas, and his delegation.  We have also greatly benefited 
from the perceptive remarks by our discussant, Ambassador Peter 
Grey, and the active engagement of many Members." 
 
¶5.   "Members commended the EC on its positive economic performance 
in recent years supported by the continuation of its trade reform. 
Members appreciated the EC's strong commitment to the multilateral 
trading system, including the DDA negotiations where the EC was 
recognized as having played a leadership role in pressing for an 
ambitious conclusion.  The EC was also praised for its technical 
assistance efforts and for its non-reciprocal preferences to 
developing countries." 
 
¶6.  "The EC's tariff structure has remained largely unchanged since 
its last Review, with the average applied MFN tariff rate having 
decreased slightly from 6.9% in 2006 to 6.7% in 2008.  Members 
commended the EC for maintaining generally low tariff protection for 
non-agricultural products.  With regard to agriculture, Members 
welcomed the fact that the EC was implementing the 2003 Common 
Agricultural Policy centred on the move towards the Single Payment 
Scheme.  However, Members observed that agriculture remains 
protected by a complex tariff structure, with high rates and tariff 
quotas, and benefits from high levels of domestic support and export 
subsidies, including the recent reintroduction of export refunds on 
dairy products which some Members said had sent out a discouraging 
signal at a time of economic crisis and contraction of world trade. 
They encouraged the EC to consider the benefits of a more open 
agriculture sector for consumers and food processors, as well as for 
exporters, especially from developing countries.  The EC referred to 
its agricultural offer under the DDA, the implementation of which 
would provide solution to these concerns." 
 
¶7.  "Some delegations raised concerns about the EC's regime on 
technical barriers to trade in products such as chemicals (REACH), 
and SPS measures; its state aid and export incentive programmes; and 
about the lack of harmonization within the EC in areas, such as 
customs procedures and internal tax rates.  It was noted that the EC 
remains an important user of contingency trade remedies.  Other 
issues of interest to Members included economic prospects and 
planned reforms in the light of the global economic crisis; 
competition regime; protection of intellectual property rights; the 
dismantling of the remaining trade barriers in services at the 
intra-EC level and further liberalisation vis-`-vis third countries; 
and the EC regime on, inter alia, fisheries, energy, financial 
services, telecommunications and postal services, and transport." 
 
¶8.  "Some delegations noted that the EC has continued to build upon 
its wide network of preferential trade agreements (PTAs); the EC was 
exhorted to ensure that its PTAs were complementary to the 
multilateral trading system." 
 
¶9.   "Members appreciated the comprehensive responses provided by 
the EC delegation, and looked forward to receiving written replies 
to any unanswered questions within one month." 
 
¶10.  "In conclusion, the wide interest shown by Members, through the 
depth of the interventions and the large number of advance written 
questions, are commensurate to the role played by the EC in the 
multilateral trading system.  Members recognized the EC's liberal 
trade regime for non-agricultural products, and stressed that 
further reforms, in particular greater liberalization of 
agriculture, would help it to better allocate resources. 
Furthermore, Members urged the EC to continue to resist 
protectionist pressures in this context of the global economic 
downturn.  I invite all Members to abide by this principle." 
 
 
Statement of the United States 
 
¶11. The representative of the United States made the following 
remarks: 
 
¶12.  "Thank you, Chair.  We would like to welcome Deputy Director 
General Peter Bals, Ambassador Eckart Guth, and their entire 
delegation to the ninth review of the trade policies and practices 
of the European Communities.  We thank the EC delegation for its 
thorough submission and for its responses to our questions.  We 
would also like to thank the Secretariat for its informative report, 
and the discussant, Ambassador Peter Grey, for his and thoughtful 
contribution." 
 
¶13.  "As a point of departure, I would like to take a moment to 
reflect on the many valuable attributes of our commercial and trade 
policy relationship with the EC.  Like many other WTO Members, the 
United States has benefitted immensely from its commercial 
relationship between the United States and the EC.  Indeed, EC 
member States are, collectively, our largest trading partner.  Every 
day, nearly $2.7 billion in goods and services originating on one 
side of the Atlantic are delivered on the other side.  U.S. and 
European companies have directly investd nearly $1.5 trillion in 
each other's economies supporting tens of millions of jobs.  The 
growth and technological development generated by these immense 
trade and investment flows have created valuable opportunities for 
exporters all around the world." 
 
¶14.  "The United States and other WTO Members have also benefitted 
from the EC's strong support, over many decades, for a rules-based 
multilateral trading system.  Finally, it is important to note that 
the vast majority of our bilateral trade with the EC proceeds 
without conflict, and the disagreements that we sometimes have on 
bilateral issues or on multilateral issues of common interest do not 
interfere with our cooperation on a wide range of issues." 
 
¶15.  "Precisely because the EC plays such an important role in 
international commerce and in global trade policy deliberations, 
however, we have an obligation to conduct a constructive and 
responsible review of its trade policies.  The Secretariat's 
comprehensive analysis and the European Commission's detailed 
description of its trade regime have given us a lot of valuable 
material with which to work.  These documents - as well as the 
knowledge of EC trade policies that we have acquired through our 
engagement over many years - have prompted a number of our questions 
about the relationship of specific trade policies to the EC's WTO 
obligations.  This review of EC trade policy could not come at a 
more critical time.  With the volume of global trade declining 
significantly for the first time in many years, and with the 
temptation to erect new barriers to imports growing, Members should 
expect that their trade policies will be of great interest to their 
trading partners." 
 
¶16.  "We have concerns about EC policies in several areas.  I would 
briefly like to highlight several of these concerns." 
 
¶17.  "With respect to agriculture, tariff protection continues to be 
high in the EC.  Agricultural and food products that the United 
States safely consumes at home and exports to dozens of other 
Members have been excluded from the EC market by SPS measures that 
appear to lack sufficient scientific justification.  In some cases, 
the EC has imposed SPS barriers on products that the EC's own 
scientists have concluded pose no risk to human, animal, and plant 
life or health.  Because of SPS and other barriers, U.S. 
agricultural exporters have been unable to access fully the EC's 
post-Uruguay Round market." 
 
¶18.  "In the area of technical barriers to trade, the EC is 
attempting to transform an essentially EC regional standard on olive 
oil into a Codex standard.  Although the EC has not been explicit 
about the reasons behind its position on linolenic acid, we are 
concerned that the effect of this position would be to unjustly 
preclude extra virgin olive oil produced outside the EC from bearing 
the extra virgin label.  The United States also continues to have 
concerns regarding EC measures that severely restrict the ability of 
non-EC wine to use common or descriptive and commercially valuable 
terms, on the grounds that those terms are traditional to European 
wines.  This is particularly disturbing when some of these terms do 
not have a common definition across all member States, we are aware 
of no effort to monitor or limit the use of these terms within the 
EC, and these terms have been used in the EC market on U.S. wines 
for many years with no apparent problems." 
 
¶19.  "EC standards, testing, and certification rules and EC 
regulatory practices have become increasingly important determinants 
of market access for firms around the world.  Unfortunately, we have 
found that by the time the EC issues public notices on regulatory 
proposals - some with enormous trade implications - deliberations 
among EC member States have progressed too far to allow for 
meaningful consideration of the views of trading partners.  As we 
have for several years, we continue to urge the EC to offer WTO 
Members and their private sector stakeholders meaningful 
opportunities to comment on regulatory proposals and assurances that 
those comments will be taken into consideration before a final 
regulation is promulgated and enforced." 
 
¶20.  "Some major EC regulatory initiatives, such as REACH, the new 
regulatory regime for chemicals, have proven to be extraordinarily - 
and needlessly - burdensome to exporters.  In the case of REACH - 
which has as one of its objectives increasing the competitiveness of 
the European chemical industry - the United States has raised 
several concerns in TBT Committee meetings.  These include REACH's 
disproportionate impact on SMEs; its Only Representative provision; 
and the continued failure of the EC to remedy discrimination in the 
treatment of certain "phase in substances," particularly substances 
in imported cosmetics.  We have also expressed concern about the 
operation of the Substance Information Exchange Fora; the lack of 
uniform enforcement and interpretation of REACH across the member 
States; and the analytical methods supporting decisions to place 
substances on the authorization candidate list and the EC's failure 
to clarify the legal status of substances placed on the list.  We 
have urged the EC to give careful consideration to the expressions 
of concern that have been registered by its trading partners and 
other interested parties on REACH, and to offer a meaningful 
opportunity to reflect the views of non-EC governments and 
stakeholders in the implementation process." 
 
¶21.  "Both in the area of SPS regulations and with respect to the 
standards applied to manufactured products, we continue to be 
concerned that some measures maintained by the EC on the grounds of 
food safety or environmental protection may not be appropriately 
supported by science-based risk assessments. 
 
More generally, inconsistent implementation of internal market rules 
and burdensome regulatory requirements hinder trade for EC and 
foreign producers alike.  We applaud the European Commission's 
efforts to address lingering internal barriers to the free flow of 
goods, and look forward to hearing how the Commission intends to 
address remaining barriers, including those that are not 
scientifically substantiated, to the free flow of goods at the EC 
and member State levels." 
 
¶22.  "The United States notes the Secretariat's recognition of the 
EC's status as a key player in the WTO and a major force behind the 
Doha Development Agenda (DDA) negotiations.  Now more than ever we 
must work together to minimize barriers to trade and find ways to 
increase trade as a means to reverse the economic downturn.  A 
strong, market-opening agreement for both goods and services in the 
Doha Round negotiations would be an important step towards fighting 
the threat of protectionism and a major contribution to addressing 
the global economic crisis, as part of the effort to restore trade's 
role in leading economic growth and development.  We look forward to 
continuing our work with the EC and other Members to reach an 
ambitious and balanced result in the Doha Round." 
 
¶23.  "We would like to thank the EC again for providing answers to 
our written questions.  We plan to review the responses carefully, 
provide substantive comments and request clarifications as necessary 
on Wednesday." 
 
¶24.  "In closing, the United States welcomes this opportunity to 
learn more about EC trade policies and practices.  We are hopeful 
that our exchanges during this TPR will give the EC and its trading 
partners guidance on ways that the EC trade policy regime can be 
improved, increasing the gains we have all made from our commercial 
relationship with the countries of the European Communities.  Thank 
you." 
 
ALLGEIER