Commission seeks to improve market access for European exporters

On 18 April 2007, the Commission adopted a paper on market access for European exporters, entitled Communication Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters. The paper underlines that Europe’s first and clearest priority in maintaining open global markets is through its commitment to the WTO, the multilateral trading system and the Doha Round.

According to the Commission’s paper, while the GATT and the WTO have been quite effective in removing barriers to trade, the nature of barriers to trade in the global economy has changed and there are many areas where WTO rules need to be developed and evolved. Where market access once focused on border tariffs, non-tariff and other “behind the border” barriers in foreign markets are increasingly important. These new types of barriers are more complicated, technically challenging and time consuming to detect, analyse and remove. Trade barriers in the modern global economy include barriers to trade in services and foreign direct investment such as unjustified foreign ownership caps, joint venture obligations and discriminatory treatment. Thus, many EU exporters believe that the Commission’s Market Access Strategy, originally launched ten years ago, needs to be re-visited and renewed in order to increase its effectiveness. Legislation in many WTO Member countries now incorporates most of the WTO requirements on issues such as tariffs, intellectual property (IP) rights and technical barriers to trade. However, the expansion of WTO rules has not fully kept pace with the expanding range of trade barriers. In areas such as export taxation, IP rights protection, product certification, public procurement and investment and services trade regulation, multilateral WTO rules do not fully reflect the complex problems faced by exporters.

Moreover, even where WTO rules do exist the question of enforcement of this legislation remains a very real one in many cases. EU companies report that their problems are now increasingly focused on implementation and enforcement of existing obligations. The issue of IP rights protection is a key area where non-enforcement of existing commitments is a growing problem for EU exporters.

The Commission believes that there should also be a much tougher focus on enforcing existing agreements – not only through formal dispute settlement mechanisms that exist in the WTO and bilateral agreements, but also through the use of instruments such as the EU’s Trade Barriers Regulation; the Commission recently used this to tackle wines and spirits duties in India: a process which is now before the WTO.

The results of the Commission’s evaluation and consultations that it undertook in 2006, make clear that market access is felt to be an area that deserves stronger action at the EU level. EU exporters want a more result-orientated approach to help overcome the concrete problems they face in assessing third country markets with a speed and effectiveness that reflect modern commercial reality.

A clear focus must be maintained on enforcement and in ensuring that third countries comply with their obligations under bilateral and multilateral agreements. To facilitate this, the Commission recommends amending the Trade Barriers Regulation to include complaints against violation of bilateral treaties (which is currently not possible because the Trade Barriers Regulation only applies to multilateral treaties).

Changes to the EU’s customs tariff as GSP Regulation amended

On 2 June 2007, the Official Journal of the EU published Commission Regulation 606/2007 which amends Annex II to the EU’s Council Regulation 980/2005 applying a scheme of generalised tariff preferences (“the GSP Regulation”). As is commonly known among exporters to the EU, the EU has a general system of preferences (the GSP scheme) in force whereby certain developing countries can benefit from lower or zero import duties on a wide range of products. In particular, the GSP Regulation contains the relevant GSP provisions which are applicable from 1 January 2006 to the end of 2008. Annex II to the GSP Regulation provides a list of the products that are included in the GSP scheme. This list covers over 20 pages of the Official Journal, comprising hundreds of products. Included are agricultural items, for example, tea and soya bean oil as well as different kinds of vegetables and fruit such as mushrooms, sour cherries, and sweet corn. The chemical products listed include dyeing extracts, inks, paints and varnishes, photographic or cinematographic goods and plastics. Other products listed include bags, hides and skins, articles of leather, silk, wool, cotton, carpets, textile floor coverings, microwave ovens and certain other electrical goods.

There exist exemptions to these preferential rates, as tariff preferences have been excluded (graduated) in respect of beneficiary countries which are considered to have achieved sufficient competitiveness in relation to specific products. New Regulation 606/2007 contains a full replacement of the original Annex II. Businesses affected should therefore review the replacement annex in order to ensure that they are fully up-to-date. The new Regulation can be viewed at: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2007/l_141/l_14120070602en00040027.pdf  

Other aspects of the GSP Regulation remain unchanged by the new Regulation of 2 June 2007. Therefore, it remains the general rule that the GSP scheme entirely suspends the customs duty on all products listed in Annex II as non-sensitive and decreases by 3.5 percentage points the customs duty on all products which are listed as sensitive.

Progress in the unification of EU customs systems

Importing goods into the EU may soon become much simpler, after a meeting of 25 June 2007 of the EU Council of Ministers ended in an agreement on the next steps to make an EU-wide electronic customs system become a reality. The present Community Customs Code, which codified the existing regulations and directives and harmonised the customs rules of the Member States in force in the 1980s, was adopted in 1992. Since then, only limited changes addressing specific problems have been made which has meant that it has not kept pace with the rapid adoption of electronic data exchange.

The new customs code, which is part of the Commission’s global reform aimed at creating a new electronic customs environment, will simplify customs legislation and streamline customs processes and procedures while, at the same time, the electronic customs initiative will provide for more convergence between the IT systems of the 27 customs administrations. As a result, traders will save money and time in their business transactions with customs. According to the European Commissioner for Taxation and Customs, Laszlo Kovacs, the new EU-wide system “will facilitate communications between traders and customs and allow for faster and better exchange of information between European customs authorities,” ultimately “increas[ing] the competitiveness of companies doing business in Europe [and] reduc[ing] compliance costs”.

Concretely, the modernised Customs Code will: 

  • introduce the electronic lodging of customs declarations and accompanying documents as the rule; 
  • provide for the exchange of electronic information between the national customs and other competent authorities; 
  • promote the concept of “centralised clearance”, under which authorised traders will be able to declare goods electronically and pay their customs duties at the place where they are established, irrespective of the Member State through which the goods will be brought in or out of the EU customs territory or in which they will be consumed; 
  • offer a basis for the development of the “Single Window” and “One-Stop-Shop” concepts; under the “Single Window” concept, economic operators give information on goods to only one contact point, even if the data is destined for different administrations/agencies, so that controls on them for various purposes (customs, sanitary,...) are performed at the same time and at the same place (“One-Stop-Shop” concept).

The Council’s agreement must now be confirmed by the European Parliament, which is scheduled to consider the matter within the next few months. The new code is expected to become law by early next year. Once in place, it should represent an important development for traders active within the EU.

EU begins negotiations for Free Trade Areas with India, South Korea, and ASEAN

In addition to the WTO’s multilateral negotiations, the EU concludes bilateral agreements and devises specific trading policies with other countries. Bilateral agreements are agreements between two political entities (states or groups of states), thus binding these two territories only. On 23 April 2007, the Commission welcomed the formal adoption by the EU Member States of negotiating mandates for a new generation of Free Trade Agreements (FTAs) with India, South Korea, and ASEAN. In the initial stages of such negotiations both sides exchange their wish-lists, broadly listing the items they would like the agreement to cover. The proposed EU FTAs with India, ASEAN and South Korea aim to create significant new trade for businesses on all sides and give a valuable boost to global trade, especially in services.

EU-India: On 28 June 2007, the EU and India held the first round of negotiations on a new bilateral trade and investment agreement. In October 2006, EU Trade Commissioner Peter Mandelson and Indian Commerce Minister Kamal Nath had agreed to work on a new bilateral agreement that would complement WTO agreements and go beyond WTO rules in areas of mutual interest. EU Member States had agreed a negotiating mandate for the European Commission in April 2007. EU-South Korea: On 6 May 2007, EU Trade Commissioner Peter Mandelson and the South Korean Trade Minister Kim Hyun Chong launched the EU-South Korea FTA negotiations in Seoul. A first round of FTA negotiations took place from 7 to 11 May 2007. It included plenary meetings and expert sessions in all four main areas for negotiation, namely trade in goods, services and establishment, rules, and legal and institutional issues. Further negotiation rounds are scheduled for July and September.

South Korea considers the proposed FTA a chance to become East Asia’s free trade hub linking Europe, Asia and the US. EU companies, on the other hand, are keen for any agreement to redress some of the difficulties they face with respect to accessing and operating in the South-Korean market as South-Korean requirements for products and services often create barriers to trade. For South Korea, a key aim of the free-trade deal would be to help its major exports, such as cars, textiles and electronics, in the European market, where these goods currently enter with tariffs of up to 14%. Commissioner Mandelson said he hoped to see more European cars, pharmaceuticals, machinery and cosmetics in South Korea. EU-ASEAN: On 5 June 2007, Portuguese President Gloria Macapagal-Arroyo expressed confidence that the long-awaited FTA between the EU and the 10-member Association of Southeast Asian Nations (ASEAN, comprising Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Burma/Myanmar, Philippines, Singapore, Thailand and Vietnam) can be concluded during the ASEAN Summit in November, during the EU presidency of Portugal. Singapore will host the next ASEAN Summit in November, marking the 40th anniversary of ASEAN.

The key challenge for the relations between the EU and ASEAN is to promote region-to-region economic relations,particularly by addressing non-tariff barriers through regulatory cooperation using the framework of TREATI (the Trans-Regional EUASEAN Trade Initiative), and to lay the foundations for a preferential regional trade agreement. The priority areas for cooperation under TREATI are closely linked to ASEAN’s own drive for economic integration and comprise: i) sanitary and phytosanitary standards in agro-food and fisheries products; ii) industrial product standards and technical barriers to trade; and iii) forestry and wood-based products. Trade facilitation and cooperation on investment are also expected to be tackled.