Medlemmerne af Folketingets Europaudvalg   og deres stedfortrædere. Bilag Journalnummer 1 400.C.2-0 EUK 16. december 2004 Til underretning for Folketingets Europaudvalg vedlægges note fra Kommissionen vedrørende ”EU Trade policy: Main issues for the 133 Committee in 2005”.

2 133 COMMITTEE MD :   472/04 SOURCE :   Commission FOR :   Information DATE RECEIVED : 06 - 12 - 2004 EU Trade policy: Main issues for the 133 Committee in 2005 Introduction This  document  sets  out  the  areas  on  which  discussions  between  the Commission and the Member States in the 133 Committee are likely to focus during 2005.   In summary, it is expected that considerable attention will continue to be devoted  to  the  Doha  Development  Agenda,  as  well  as  to  the  regular work of the WTO, including WTO accession negotiations and pursuit of EU interests in dispute settlement cases. Sectoral trade policy questions, including in sectors such as textiles and clothing, steel, intellectual pro- perty rights and shipbuilding are also likely to figure prominently on the EU’s  trade  policy  agenda  next  year.  As  regards  trade  defence  instru- ments,  work  will  continue  on  investigating  and  remedying  unfair  trade practices or injurious surges of imports on the Community market, and to  monitoring  and  defending  EU  interests  against  third  country  trade defence actions.   Bilateral  and  regional trade  policy will  also receive a lot of attention in 2005, with preparatory work taking place in preparation for further EU enlargement, for the introduction of a Common Economic Space with Russia and for the European Neighbourhood Policy, as well as further integration   initiatives   with   EuroMed   partners.   Further   afield,   2005 should  see  Mercosur and GCC FTA  negotiations  brought substantially forward progress made in the EPA negotiations with our ACP partners, and  negotiations  on  a  wide  range  of  trade  related  issues  opened  with ASEAN and Canada. A new approach   to strengthen trade and invest- ment relations with the US is also planned, while with Central America and the Andean Community the focus will be on evaluating their regio- nal integration. Trade relations with China and India will also enter into a new phase in 2005.   Finally, the EU’s trade policy in 2005 will continue to reflect sustainable development  goals,  and  at  a  thematic  level  particular  attention  can  be expected  to  issues  such  as  the  link  between  trade  and  social  develop-

3 ment, the introduction of the new GSP scheme and other measures to assist  developing  countries,  measures  to  deal  with  SPS  and  TBT  pro- blems, and other market access and competitiveness questions. 1. Multilateral Trade The WTO Doha Development Agenda negotiations An important priority of DG Trade in 2005 will be to make progress, across the board, on the WTO Doha Round of negotiations. The nego- tiating frameworks adopted in August 2004 put the negotiations on a firm footing and set the overall parameters for the work in 2005. For the EU, we will insist on all negotiating issues being treated in parallel in  line  with  the  notion  of  the  Single  Undertaking,  and  in  particular ensure that, as the year progresses, all issues approach a similar level of  detail,  specificity  and  ambition  as  we  prepare  for  the  Ministerial meeting in Hong Kong. The EU agenda will continue to be fourfold: better  market  access  in  goods  and  services  to  help  our  trade  and growth, and spur development; stronger  WTO  rules  to  secure  that  access,  level  the  playing  field for trade and improve the management of globalisation; measures  to  promote  development,  with  special  attention  being paid  to  the  needs  of  the  more  weak  and  vulnerable  members  of WTO; and  measures  in  WTO  to  promote  sustainable  development,  no- tably  through  addressing  the  relationship  between  trade  policies and other policy areas. The   133   Committee   will   continue   to   be   consulted   systematically throughout  the  year  both  on  the  overall  conduct  and  direction  of  the negotiations and on the specific subjects in the DDA, described in mo- re detail below. After the agreement in July 2004 on the WTO framework, agricultu- re remains a key issue for negotiation. The process to define the agri- cultural  modalities  – subsidisation will stay high on the agenda. In addition, non-trade con- cerns  and  ways  to  better  protect  Geographical  Indications  are  key areas that must be addressed seriously. Alliance building with develo- ping countries on areas of shared interest will be a priority. In additi- on,  preparation  of  the  technical  input  in  particular  on  Market  access during  the  lead  up  to  the  Hong  Kong  Ministerial  meeting  will  be  of

4 the  highest  importance.  The  same  is  true  for  negotiations  concerning NAMA  (for  fish  products)  and  discussions  to  clarify  and  improve WTO disciplines for fisheries subsidies. On  non  agricultural  market access, the EU’s objective is to ensure that  by  the  Hong  Kong  Ministerial  NAMA  negotiations  have  ad- vanced  as  much  as  other  issues  negotiated  under  the  Doha  Develop- ment  Agenda.  The  EU  is  fully  committed  to  further  tariff  and  non- tariff liberalisation in  both developed  and developing  countries.   The EU recognises that  special and differential treatment must be granted to  developing  countries,  bearing  in   mind  that  the   more   advanced amongst  them  should  make  a  substantive  contribution  in  order  to achieve a result that promotes South/South trade, a crucial element for the  development  dimension  of  the  DDA.  The  EU’s  goal  is  a  tariff landscape  where  countries  with  similar  levels  of  development  have similar  tariff  profiles.  The  EU  will  continue  to  lead  negotiations  in 2005  to  achieve  an  ambitious  formula  for  tariff  dismantling,  but  will also pursue additional trade liberalisation through sectoral approaches (including  for  products  of  particular  interest  to  developing  countries and for key EU priority sectors). The EU’s approach to non-tariff bar- riers  will  be  to  identify  areas  for  negotiation  and  seek  their  reward while  recognising  that  some  important  NTB  items  will  need  to  be dealt with in the negotiating group on Trade Facilitation. The EU will also  contribute  to  the  NAMA  negotiations  on  environmental  goods, pursing our double objective of better   market access and support for the  environment.  The  133  Committee  will  be  regularly  consulted  on all key aspects of NAMA, and on future EU submissions to WTO, as negotiations progress. The  launching  of  negotiations  on  Trade  Facilitation  offers  a  unique opportunity  to  agree  stronger  multilateral  rules  in  this  area.  As  with NAMA and other areas, the Commission wishes to ensure that by the time  of  the  HK  Ministerial  meeting  negotiations  have  advanced  as much as other issues negotiated under the Doha Development Agenda. Negotiations  will  focus  on  ensuring  ambitious  and  specific  commit- ments in the areas highlighted in the negotiating modalities, including increasing the transparency of trade regulations; simplifying, standard- ising  and  modernising  import  export  and  customs  procedures;  and improving the conditions for transit. The Commission will where ne- cessary consult the 133 Committee on the detailed commitments to be proposed  in the  WTO.  Work should also address developing  country concerns, including on technical assistance and special and differential treatment, as well as on provisions for effective co-operation between customs   and   other   authorities   on   trade   facilitation   and   customs compliance issues. Both in the 133 Committee and in other fora of the Council  concerned  with  development  policy,  the  trade  related  assi- stance dimension will need to be addressed.

5 The  conclusion  of  the  August  package  has  injected  new  momentum into the services negotiations by setting a date for the submission of revised offers in May 2005. The main priorities for 2005 will be first, to pursue our revised requests and to press for significantly improved offers  from  other  WTO  Members,  whilst  taking  full  account  of  the development dimension of the DDA, and secondly,  to prepare a revi- sed EU services offer in time for the May 2005 deadline.  While work in Geneva seems to be picking up again two particular challenges con- front   these   negotiations.   First,   a   number   of   important   developing countries have still not submitted any offers and there is growing con- cern about what to do about those members that have so far refused to engage. Second, many of the offers lodged so far offer only very mo- dest  or  minimal  improvements.  Some  offers  even  reveal  attempts  to withdraw  existing  commitments  (“backtracking”).  The  EU  must  now build  on  the  August  package  to  try  to  inject  more  ambition  into  the negotiations, including possibly seeking agreement on benchmarks of a more qualitative nature, if the revised offers submitted by May 2005 still show an imbalance and lack ambition. Other priorities will be (a) to continue to ensure an active participation of the EU in the negotia- tions in the rule-making area and (b) to continue work on a number of technical  issues  related  to  the  market  access  negotiations,  including the modalities and the numerical ceilings for the EU’s mode 4 offer. Trade  and  development  will  continue  in  2005  to  be  a  priority  area for  the  Community  in  the  WTO  negotiations  and  elsewhere.  The Commission plans to review the overall approach on special and diffe- rential treatment in early 2005. There will be a revision of the Deve- lopment Policy of the Community and its trade aspects in spring 2005 and this may have implications for the future prioritisation, design and implementation of trade related assistance, including that provided to support  the  DDA  negotiations  and  the  mainstreaming  of  trade  into developing country development plans. DG Trade wants to ensure that trade assistance remains a policy priority and that its coordination and implementation  improves.    The  Trade  and  Development  Experts  In- formal    Group    will    report    periodically    to    the    133    Committee throughout 2005 on the detailed implementation of Trade related assi- stance and related policies. DG Trade will also periodically report on the implementation of the Integrated Framework for LDC’s. Last but not least, the UN Major Event in 2005, which will review the success in  meeting  the  Millennium  Development  Goals,  is  likely  to  involve some evaluation of trade and development policies and will need care- ful preparation in the 133 Committee and other Council groups (see p. 8 below). The  EU  will  continue  to  exercise  leadership  on  all  issues  under  the DDA agenda on trade and environment.  In particular, we will seek substantive progress on environmental goods by defining a list of en-

6 vironmental  goods  for  which  special  tariff  treatment  should  apply.   We  will seek agreement on observer  status for MEA secretariats and UNEP in relevant WTO Committees, and on improved and institutio- nalised MEA/WTO information exchange.  The WTO should continue to pursue other DDA matters, in particular with a successful high level event on sustainable development in  order  to give effect to the over- sight role for the CTE and the CTD. Regional Trade agreements need more transparency as well as clea- rer   and   stronger   disciplines,   taking   account   of   the   EU's   existing agreements  and  ongoing  negotiations,  its  interest  in  access  to  third country  markets, the  needs of developing countries for flexibility  ac- cording to their level of development, and common interest in a well- functioning  multilateral  trading  system.  In  the  course  of  2005,  the Commission intends to discuss in the 133 Committee a submission to the  WTO  covering  both  the  key  questions  on  transparency  and  the substantive  issues  for  the  negotiations,  including  the  definition  of 'substantially all the trade' in the context of RTAs, the criteria for eva- luating  RTAs,  and  the  treatment  of  RTAs  between  and  with  develo- ping countries. In  the  negotiations  on  improvement  and  clarification  of  the  Dispute Settlement  Understanding,  the  Community  will  continue  to  play  an active  role  in  order  to  achieve  a  positive  outcome  in  these  negotia- tions.  Initially,  the  Doha  Ministerial  Declaration  mandated  negotia- tions to be concluded by May 2003. A positive outcome could not be achieved by then, nor within a new deadline (May 2004) agreed by the General Council of the WTO. On the basis of the July 2004 package, the  negotiations  now  continue  without  a  specific  deadline  within  the Doha  Agenda.  It  is  therefore  presently  an  open  question  whether  the results will become part of the final Doha deal (which was initially not foreseen)  or  whether  a  result  ahead  of  that  can  be  achieved.  The  EU continues to be fully  committed to  making the system even  more ef- fective, predictable and transparent. Priorities are: improved rules and procedures   for   panel   composition,   transparency,   solving   the   long- standing  “sequencing ”  issue,  encouraging  compensation,  improving third  parties’  rights,  allowing  a  remand  by  the  Appellate  Body  and facilitating  developing  countries’  participation  in  the  dispute  settle- ment system. Following  the  adoption  of  the  July  2004  package,  investment, com- petition  and  transparency  in  government  procurement  no  longer form  part  of  the  DDA  work  programme,  nor  will  there  be  any  work towards  negotiations  on  the  issues  during  the  duration  of  the  DDA. However, the three issues remain within the WTO’s normal work pro- gramme.  The  three  issues  remain  important  issues  for  the  WTO  and for  improving  both  trade  performance  and  economic  governance  in WTO members, in particular developing countries and emerging eco-

7 nomies. A more transparent and non discriminatory international envi- ronment in respect of these policy areas also carries important market access benefits for our traders and investors. Discussion will be needed at the appropriate time in the 133 commit- tee  on  how  to  ensure  that  constructive  exchanges  may  take  place within the WTO so as to increase understanding of the issues of com- petition, investment and transparency in government procurement, and their role in the multilateral trading system.  The Commission will in parallel  evaluate  how  best  to  continue  work  on  the  three  issues  and that can contribute to demonstrating the importance of improving the regulatory environment in all three areas On  Geographical  Indications,  the  EU  will  continue  to  work  on  the establishment  of  the  wines  and  spirits’  register  as  mandated  in  the TRIPS  Agreement  and  confirmed  in  Doha.  Renewed  efforts  will  be made in the area of extension of GI protection to products other than wines  and  spirits.  On  biodiversity,  further  discussions  on  the  issues previously raised by developing countries will take place in the TRIPS Council. As   an   integral   part   of   its   DDA   strategy,   the   Commission   will throughout  2005  intensify  its  bilateral  dialogue  with  WTO  partners, including  the  US,  China,  India,  Brazil,  the  ACP  countries,  ASEAN and  others,  in  order  to  pursue  areas  of  common  interest  in  the  DDA and  make  progress.  The  Commission  will  keep  the  133  Committee informed of these contacts and some – a- de Ministers’ meetings – WTO regular Work programme In  parallel  to  the  work  conducted  pursuant  to  the  Doha  Ministerial Declaration, the Commission will continue throughout 2005 to participa- te  actively  and  to  defend  the  Community’s  interests  and  policies  in  all regular Councils and Committees of the WTO, including the Gene- ral Council, the Council on Trade in Goods and its numerous Subsidiary bodies, the Council on Services, the TRIPS Council, and the Trade Poli- cy Review Body.. Work in the 133 Committee on the WTO accession processes of Rus- sia,   Ukraine,   Saudi   Arabia,   Vietnam,   Algeria,   several   LDCs   and others  will  continue  in  2005.  As  regards  Russia,  Ukraine,  and  Viet- nam,  now  that  in  each  case  the  bilateral  market  access  negotiations with the EU are done, the focus will be on the continued implementa- tion of their bilateral commitments to the EU, and on the multilateral working party processes in Geneva, where we will be active in ensu- ring  that  the  countries  in  question  make  clear  commitments  prior  to accession. As regards Saudi Arabia, we will work to ensure that some

8 difficult  questions  remaining  from  our  bilateral  agreement  are  resol- ved. As regards Algeria, we expect to see – – momentum from their side. We will seek to conclude a bilateral mar- ket access deal in 2005 if Algeria is ready to make progress. In all the accession  negotiations  the  EU  will  play  a  key  role,  one  aim  being  to be in a position to welcome at least some of these trading partners as WTO members in 2005 at the Hong Kong Ministerial. In early 2004 the EC notified the WTO of the enlargement of the Eu- ropean  Communities  and  provided  to  WTO  the  necessary  data  and information required, in respect of both goods and services, pursuant to  enlargement.  Consultations  to  establish  possible  compensatory  ad- justments in both goods and services were opened towards the end of 2004. Following agreement in the WTO to extend the negotiation pe- riod  to  April  2005,  consultations  with  affected  WTO  partners  will continue into early 2005 and, we expect, be concluded in the first half of the year. The processes for goods and services will continue to be conducted separately in view of the specificities of each area. The 133 Committee will continue to be consulted regularly on progress. In 2005 the EU will bring to completion work on the third review of the “Pharmaceutical Tariff Elimination Agreement”, a non-binding arrangement  between  the  most  important  pharmaceutical  producing countries  to  reduce  to  zero  their  WTO  bindings  of  duties  on  certain pharmaceutical products, including active ingredients and intermedia- te products. The review will consist in an increase of product coverage comparable to the second review implemented in 1999. As  regards  the  regular  work  under  the  Government  Procurement Agreement, 2005 will aim at finalising the current GPA review (regu- latory  part),  and  at  kicking  off  the  negotiations  on  expanded  market access. Two new members might finalise their accession negotiations: Taiwan and Jordan. WTO functioning and transparency: Despite  the  fact  that  the  Doha  Ministerial  and  the  July  package  il- lustrated  that  the  WTO  is  capable  of  producing  substantive  results, Seattle  and  Cancun  served  to  highlight  a  number  of  areas  where  at least some shorter-term institutional improvements could be initiated. Such improvements would not entail a radical overhaul of the organi- sation,  but  would  e.g.  rather  ensure  a  timelier  organisation  and  con- duct of preparations for Ministerials and  the  Ministerials themselves, as  well  as  aim  at  improving  the  direct  involvement  of  developing countries  in  the  working  of  the  WTO.  Whereas  such  improvements relate to the internal functioning of the organisation, Members should also continue to pay attention to further potential improvements rela- ting to  the external transparency  of the organisation, including dialo- gue with civil society.

9 The EU has a clear interest in such improvements and should continue to  work  towards  their  realisation,  taking  account  of  the  work  of  the “Sutherland Group” appointed by the WTO DG. DG Trade will co  n- sult  the  133  Committee  on  its  further  ideas  on  WTO  functioning  in 2005. Appointment of the new Director General of the WTO The 133 Committee will need in early 2005 to discuss the candidatu- res for the new DG of WTO, applying the criteria for selection that the Commission and Member States have decided upon in 2004. It would be  important,  for  the  EU’s  international  credibility,  to  concur  on  a single candidate. The process of selection will begin in January 2005 and is to be completed by the end of May. WTO dispute settlement The effective management of trade disputes under the WTO will conti- nue to be a high priority. This includes the use of the Trade Barriers Re- gulation as an important instrument of access to export markets for the European industry in case of WTO violations. At the end of 2004, the EU was actively involved in  27 WTO dispu- tes: in  15 of them the EU was the complaining party. In a number of these cases Panel/Appelate Body reports will be delivered in 2005 as explained below. In   2005,   particular   priorities   would   be   as   follows:   (1)   Ensuring implementation  of  WTO  rulings  by  our  partners  (in  particular  in  the Byrd amendment and  FSC cases);  in both cases non-compliance will necessitate  the  application  or  reintroduction  respectively  of  counter- measures  against  the  US.  (2)  Safeguarding  EU  laws  and  policies  in Panel and Appellate Body proceedings. The cases against the EU con- cerning   genetically   modified   organisms   (Panel   report   expected   in 2005),  the  offensive  and  the  defensive  disputes  on  aircraft  subsidies (currently  at  consultations  stage)  and  the  EU's  sugar  regime  (AB  re- port expected in 2005) are of obvious considerable political, economic and systemic relevance; (3) Enforcing EU’s rights by means of offen- sive cases such as in the Hormone dispute (challenge of illegal US and Canadian countermeasures), in the dispute concerning Mexican coun- tervailing measures on olive oil from the EU, in the dispute on Korean shipbuilding  subsidies  and  in  a  number  of  disputes  on  US  trade  de- fence  measures  (Panel  reports  on  the  Privatisation  and  zeroing  cases against the US are due in 2005). OECD, UN and UN Agencies, other International Organisa- tions The OECD provides an important forum for the analysis of trade poli- cy questions. The EU will continue to participate actively in its work

10 in  2005.    Work will  focus,  inter  alia,  on  the  review  of  the  Organisa- tion's  policy  on  enlargement  and  outreach,  where  the  OECD  will  be encouraged to substantially strengthen its dialogue and outreach with both non-Members and with civil society organisations, and on work that  could  be  performed  by  the  Organisation  in  support  of  the  DDA negotiations. As regards the all important question of OECD enlarge- ment,  while  this  is  not  an  issue  exclusively  for  consideration  by  the 133 Committee, the Committee will need to  be kept abreast of deve- lopments  in  this  area.  The  Commission  expects  by  the  beginning  of 2005 to have reached agreement with the Council on ensuring that the six EU Member States not  yet OECD Members join the organisation as  early  as  possible,  and  that  in  the  meantime  the  Commission  and Presidency  ensure  that  in  all  areas  of  OECD  work  their  interests  are reflected. The Commission and Member States will play a key role in preparing and participating in the OECD Economic Ministers’ Meeting, to take place   in   the   spring   2005.      Discussions   in   the   133   Committee throughout  2005  on  the  OECD’s  trade  related  activities,  and  in  ap- propriate  Council  bodies  on  enlargement  and  outreach  can  be  expec- ted.  2005  will  mark  the  five  year  point  after  the  2000  review  of  the OECD  Guidelines  for  Multinational  Enterprises,  and  will  thus  provide an opportunity for stocktaking with Member States.   The  Commission  has  reflected  on  the  request  by  several  non-EU OECD  members  for  a  review  in  the  OECD  Economic  Development Review  Committee  ("EDRC")  of  EU  policies  as  they  apply  to  all  25 EU member States and have an impact on macroeconomic performan- ce. Currently, only the policies applicable to the euro area are subject to EDRC review. The Commission is open to the idea of such a wider review and will consult the 133 Committee and other relevant Council groups on the matter during the course of 2005. Within the UN trade policies are likely to be addressed as part of the Major Event of 2005 to mark inter alia the progress made in achieving the Millennium Development Goals. The Commission will consult the 133 Committee in the preparatory process for this Major Event, with a view  to  ensuring  a  well  coordinated  Community  position  in  the  UN process that will ensure our trade and development policies and assi- stance  efforts  are  properly  reflected  in  its  outcome.  In  parallel  the Commission  intends  in  the  course  of  2005  to  revisit  the  trade  policy agenda of the World Bank and the IMF so as to seek maximum cohe- rence between those policies and those in the WTO. At UNESCO, the Commission is negotiating a Convention on cultural diversity,  in  consultation  with  the  Cultural  Affairs  Committee.  The Commission will consult the 133  Committee on trade-related aspects of  this  negotiation.  Several  negotiating  sessions  are  planned to  take

11 place at UNESCO: a meeting of the intergovernmental Expert Group is  scheduled  from  31  January  to  12  February  and  a  subsequent  one might  be  convened  upon  decision  of  UNESCO’s  Executive  Board  in May or June. The objective is to submit to UNESCO’s General Confe- rence in September 2005, for adoption, a final draft of the Convention on cultural diversity.

12 2. Sectoral questions 1. Access to medicines The Decision of the WTO General Council of 30 August 2003 on pa- ragraph 6 of the Doha Declaration on the TRIPs Agreement and Pub- lic  Health  requires  further  implementation.  First,  the  Decision  speci- fies  that  it  shall  be  replaced  by  an  amendment  of  the  TRIPs  Agree- ment  by  mid-2004.  WTO  Members  failed  to  meet  this  deadline  and they  agreed  to  extend  the  target  date  to  end  March  2005.  Given  its pro-active role in the process leading to the adoption of the 30 August Decision  and  its  position  in  favour  of  an  amendment,  the  EU  should work  to  make  sure  that  this  new  deadline  is  met.    Furthermore,  as  a follow-up  at  EU  level  to  enable  all  WTO  Members  to  participate  in the  mechanism as potential exporters the Commission adopted on  29 October a proposal for a regulation on compulsory licensing of patents relating to the manufacturing of pharmaceutical products for export to countries  with  public  health  problems  and  which  lack  manufacturing capacities. The Commission will do its utmost to ensure that the legis- lative process in the framework of the co-decision procedure will mo- ve rapidly in 2005 so that this new  mechanism can be operational as soon as possible. 2. Intellectual property rights The  main priority for  2005 in the field  of Intellectual  property  rights (IPR) will be to implement the recently adopted Enforcement Strategy which  aims  at  addressing  IPR  violations  in  third  countries.  This  is  a multi-annual objective. The 2005 actions to be undertaken consist in particular in identifying the countries where efforts should be concentrated, launching IPR ini- tiatives  at  multilateral  and  bilateral  level,  supporting  the  creation  of public/private partnership in third countries and in developing  aware- ness  raising  activities.  In  this  context  specific  attention  will  be  given to the enforcement of IPR for the textiles sector.  The EU will also in- tensify its efforts to use WTO accessions as another useful way of at- tempting  to  obtain  an  increased  level  of  protection  for  Geographical Indications. 3. Textiles Taking the necessary steps to ensure a smooth transition to the libera- lisation of quotas that will take place on 1.1.05 will be a major chal- lenge. This will require establishing a system to carry out a very close monitoring of the evolution of imports of the products liberalised from

13 the major suppliers, in terms and quantities and average prices, in or- der to be able to react in a proportionate and WTO-compatible manner in case of serious market disruption. DG  Trade  will  also  take  steps  to  adopt  a  number  of  trade  measures identified in the Commission Communication of 13 October 2004 on the report of the Textiles High Level Group, in order to deal with cer- tain  important  trade  matters  of  concerns  to  industry  and  trade.  These include the improvement of access to third country markets, including the  establishment  of  a  task  force  to  identify  priorities  and  means  of action, and the adoption of measures to promote goods manufactured under sustainable development conditions. Bilateral market access agreements with some countries (in particular Serbia and Montenegro to liberalise trade, and Belarus) will also have to be negotiated. 4. Steel The   discussions   in   the   OECD   on   elements   of   an   agreement   to strengthen disciplines on subsidies granted by all levels of government failed  to  produce  immediate  results  in  June  2004  and  have  entered  a stage   of   informal   consultations.   It   is   expected   that   by   mid-2005 another High-Level Meeting will assess the situation and the chances for a successful conclusion of the talks. In this context, the impact of trade  remedies  on  world  trade  in  steel  should  also  be  raised.  In  the meantime,  in  January,  the  OECD  is  organising  a  conference  on  steel issues to which representatives of governments, from OECD and non- member countries, and business are invited. The Commission intends to play an active role. Negotiations with Ukraine and Kazakhstan are soon to be launched on the basis of the mandate adopted by the Council. Agreements covering 2005  and  2006  (but  limited  to  the  date  of  WTO  membership  of  the countries  concerned)  are  envisaged.  Ratification  and  implementation will be decided by the Council, on a proposal by the Commission, du- ring the first months of 2005. . Concerning coke (China), ferrous scrap (Ukraine, Russia) and iron ore (Ukraine), all of which  are essential inputs for the EU steel industry, the Commission will continue to be active to improve the situation for European importers in terms of their availability. 5. Shipbuilding The EU will continue to seek to eliminate market distorting factors in the  world  shipbuilding  industry,  in  particular  government  and  other official or semi-official support measures, and unfair pricing practices.

14 The aim is to restore normal competitive conditions. This will require intensifying   negotiations   for   a   new   plurilateral   agreement   in   the OECD  in  2005  with  a  view  to  a  successful conclusion  by  the  end  of the  year.  The  main  players  in  world  shipbuilding  participate  in  the negotiations  (Korea,  Japan,  China  and  the  EC;  the  US  is  not  taking part). In parallel, the Community will continue its dispute settlement action in the WTO, in which the Community has challenged the consistency of   certain   subsidies   with   Korea’s   obligations   under   the   Subsidies Agreement. The report of the WTO panel is expected in early 2005. It will also defend the case of the Temporary Defence Mechanism in the Panel requested by Korea. 6. Waste In 2005  DG  Trade  will  review  the  arrangements  covering  shipments of non-hazardous waste for recovery purposes to non-OECD countries in  order  to  simplify  control  procedures  so  as  to  facilitate  sustainable trade whilst fully respecting environmental standards.

15 3. Trade defence instruments General Work  will  continue  throughout  2005  to  remedy  the  effects  of  unfair trade  practices  or  injurious  surges  of  imports  on  the  Community  in- dustry. This objective will be achieved not only through the impartial, transparent  and  effective  carrying  out  of  TDI  investigations,  but  also through the effective monitoring of measures in force and by ensuring the development and improvement of TDI policy in general. On  the  substance,  certain  elements  might  have  a  defining  role  in  the way TDI will be implemented in 2005 and therefore merit being high- lighted.  First,  in  order  to  better  support  the  Community’s  small  and medium-sized producers vis-à- vis the use and implementation of trade defence  instruments,  special  efforts  will  be  undertaken,  inter  alia,  in the form of increased and tailored information. Secondly, continued efforts will be necessary in 2005 in order to: continue  respecting  the  strict  deadlines  applicable  to  TDI  investi- gations  and  complete  swifter  expiry  reviews,  which  have  been   subject to mandatory deadlines since March 2004, and follow-up vigilantly the impact of the translation problems arising from the lack of translators in the nine new languages, in view of the time constraints applicable to TDI investigations. Investigations Trade  remedies  consist  of  anti-dumping,  anti-subsidy  and  safeguard measures  (including  the  special  safeguards  mechanism  regarding  im- ports  from  China)  as  well  as  the  new  airlines  instrument.    Recent trends in requests for action suggest that in 2005 these activities may lead  to  the  opening  of  around  75  TDI  investigations  (new  cases  and reviews), i.e. about the same level as in 2004. As always in the past, investigations will be  carried out  on the basis of verified facts, ensu- ring respect for the rights of defence, and will lead to the swift imposi- tion  of  measures  when  warranted,  all  within  the  statutory  deadlines applicable. According  to  experience,  these  trade  remedy  measures  are  likely  to concern mainly the chemical, steel, textile and electronics sectors. The newly-introduced instrument concerning unfairly priced or subsi- dised  airline  services  will  provide  a  remedy  against  such  practices from  non-EU  countries  and  is  modelled  on  the  basis  of  the  anti- subsidy instrument in the trade in goods area. A methodology is being defined in order to take into account the specificities of the air service sector. Monitoring of measures

16 The Commission will ensure, in the framework of existing legislation, that the roughly 180 anti-dumping, anti-subsidy and safeguard measu- res  currently  in  force  are  enforced  coherently  and  effectively  across the Community. The Commission will continue to ensure the effective monitoring of the roughly 50 undertakings in force and will take ini- tiatives  to  further  improve  the  monitoring  system  in  place  (e.g.  by improving  the  information  systems  used  for  monitoring).  In  this  re- gard,  particular  attention  will  be  paid  to  the  “special  transitional  un- dertakings” accepted from certain third countries exporters in the fra- mework of enlargement. Third country action The Commission will monitor trade defence  actions of third countries and, whenever necessary, ensure prompt follow-up action of measures targeting imports originating in the EU. The Commission will defend the  rights  of  Community  operators  either  by  bilateral  contacts,  ensu- ring  that  other  WTO  members  comply  with  the  relevant  multilateral obligations, or by WTO dispute settlement actions. There will be an increase in this area in 2005 due to more frequent use of trade defence instruments. Around 200 such measures are in force in 2004 against EU exports. An increase of activity is expected in the area of safeguards in particular. In 2005, around 40 measures are ex- pected  against  the  EU  and/or  its  Member  States.  As  a  consequence, the Commission will have to focus its intervention on the most impor- tant cases, from an economic and systemic point of view. Enlargement  may  have  a  serious  effect  on  the  repartition  and  impor- tance of third country actions in 2005 in two ways. First, it will bring into  the  limelight  markets  that  were  considered  of  lesser  importance for the EU15 but are strategically important for the EU10. Second, the number  and  diversity  of  exporters  that  will  have  to  be  consulted  for each case will increase significantly. Others Ukraine’s and China’s reque sts for o  market economy  status are still under  active  review.  In  2004  problematic  areas  preventing  such  gra- duation were identified in both cases. Any progress achieved by these countries in this respect will be assessed and appropriate action (gran- ting or refusal of graduation) will be taken. In the meantime, requests have  also  been  lodged  by  Vietnam,  Kazakhstan  as  well  as  Mongolia and are expected from Armenia and Georgia. Double pricing of raw materials has been a recurring issue with regard to  a  number  of  countries,  in  particular  Russia  and  Saudi  Arabia.  In 2005 further work will be done on tackling this trade distortive practi- ce through existing and possible new trade defence mechanisms on the bilateral and multilateral level.

17 In mid-2005 it is intended on the one hand to take stock of and assess the 2004 enlargement with respect to trade defence together with new Member  States  and  their  economic  operators.  On  the  other  hand,  the first steps to prepare the programmed enlargement to Bulgaria and Ro- mania will take place, notably through the organisation of TDI seminars.

18 4. Bilateral trade 1. Europe Preparations for enlargement Romania and Bulgaria’s progress towards accession will continue to be  monitored  closely.  Specific  priorities  include  issues  related  to  the trade commitments adopted by these two countries during their acces- sion negotiations, in particular the re-negotiation/denouncing of Trade and  Bilateral  Investment  Treaties  that  conflict  with  the  acquis.  After the  successful  re-negotiation  of  the  bilateral  investment  treaties  bet- ween  these  two  countries  and  the  US,  other  international  agreements need  to  be  brought  into  conformity  with  the  acquis,  such  as  all  trade agreements, and investment agreements with Canada and Japan. Accession negotiations with Croatia are expected to start in the spring 2005. These will entail a comprehensive screening of Croatia’s trade- related legislation and international agreements with a view to ensure that  Croatia  can  take  over  the  EU’s  trade  policy  upon  its  accession. Work on enlargement issues will also entail contributing to the Com- mission’s opinion on FYRoM’s EU membership application. Should the Council endorse the Commission’s recommendations with regard  to  Turkey,  accession  negotiations  with  this  country  may  start in 2005. In this respect, in addition to the comprehensive screening of legislation, a key objective will be to make progress in the resolution of   long   lasting   trade   irritants   arising   from   Turkey’s   insufficient compliance  with  certain  of  its  obligations  under  the  Customs  Union. This country should also be further encouraged to complete its align- ment to the EU’s GSP, after the good progress made in 2004. Indeed, respect of these obligations would be a prerequisite for the opening of negotiations on the relevant chapters of the acquis. Actions  to  deepen  trade  ties  with  Turkey  will  continue,  notably  the ongoing discussions on the extension of the Customs Union to public procurement,  services  and  agriculture  and  efforts  will  be  pursued  to ensure  that  both  existing  and  future  partners  with  whom  the  EU  has concluded    preferential    trade    agreements,    conclude    similar    trade agreements with Turkey. Further to the conclusion of bilateral WTO market access negotiations with Russia on 21 May, the  multilateral work will continue with the objective of welcoming Russia as a WTO member as soon as possible. The  follow  up  and/or  implementation  of  the  bilateral  aspects  of  the deal of 21 May will be a priority in 2005, and may be dealt with in the context  of  the  future  EU-Russia  Common  Economic  Space.  Discus- sions on this initiative will continue upon adoption of the Action Plan on  the  Common  Economic  Space,  the  focus  of  our  work  in  2005 should  be  the  implementation  of  the  trade-related  aspects  of  the  Ac-

19 tion  Plan,  notably  regulatory  convergence  on  trade-related  areas,  in- vestment  and  trade  facilitation  issues.  Discussions  will  also  continue on the follow up to trade-related effects of EU enlargement on Russia. Management   of   the   Partnership   and   Co-operation   Agreement   and work on the resolution of bilateral irritants will also continue as nee- ded. Within  the  European  Neighbourhood  Policy  (ENP),  the  focus  for Ukraine and Moldova will be the implementation of the trade-related aspects of the Action Plans.  For Ukraine this will include the review of the feasibility study on establishing an FTA, as well as the new fo- cus  on  encouraging  regulatory  convergence.    For  Moldova,  this  may include  the  development  of  a  proposal  for  wide  ranging  autonomous trade  preferences.  Multilateral  work  will  continue  with  the  objective of welcoming Ukraine as a WTO member as soon as possible. Mana- gement  of  the  Partnership  and  Co-operation  Agreement  and  work  on the  resolution  of  bilateral  trade  irritants  will  continue  as  needed.  For the countries of the Southern Caucasus (Georgia, Armenia and Azer- baijan), country reports will be finalised and work is likely to begin on developing Action Plans for each country." Work will continue on the trade policy aspects of the Stabilisation and Association process with the Western Balkan countries. In addition to  the  WTO  accession  negotiations  and  the  further  development  of  a regional free trade area among the countries themselves, the main in- struments of EU trade policy towards these countries are the Stabilisa- tion   and   Association   Agreements   (SAA).   Two   SAAs   have   been concluded (Croatia and FYROM) and work will entail monitoring the implementation  of  both  countries’  commitments  under  the  Agree- ments.  Negotiations  will  continue  on  the  trade  part  of  a  Stabilisation and Association Agreement with Albania. The Commission will con- tinue  to  assess  Bosnia  and  Herzegovina’s  progress  in  fulfilling  the priority actions identified in the ‘feasibility study’ published in 2004, with a view to deciding on the presentation to the Council of a nego- tiating mandate on an SAA with this country. Finally, the Commission will  publish  a  ‘feasibility  report’  on  Serbia  and  Montenegro’s  read i- ness to negotiate an SAA, including its trade aspects. Switzerland: The agreements of the Bilateral II – package (signed on 26 October 2004) will have to be ratified in time in order to meet the dead- line for implementation (1 July 2005).   Other subjects of bilateral discussions will be:   government procurement; adjustments in the coal and steel sector; fine-tuning  of  the  agreement  concerning  products  of  the  clock and watch industry;

20 revisions  of the agreement on trade in agricultural products and Protocol No. 2 of the Free Trade Agreement. 2. Mediterranean and the middle East With regard to the trade part of the Barcelona Process, DG Trade will make  proposals    to  implement  the  conclusions  of  the  Istanbul  Trade Ministerial  Conference  of  July  2004,  namely  on  PanEuroMed  origin rules, liberalisation of services and approximation in the field of tech- nical  legislation,  standards  and  conformity  assessment.  The  regional groundwork  accomplished  so  far  will  be  pursued  more  bilaterally  in the context of the ENP policy framework and along the lines of speci- fic Action Plans agreed, or to be agreed upon with each Med partner. DG  Trade  will  assess  the  progress  in  these  sectors  for  the  5th  Euro- med  Trade  Ministerial  Conference,  due  to  take  place  at  the  end  of 2005. At  bilateral  level,  DG  Trade  efforts  will  concentrate  on  ensuring  the proper implementation of the trade aspects of the Association Agree- ments in force through i.e. the meetings of the sub Committees on In- dustry,  Trade  and  Services  (Morocco,  Tunisia),  or  the  activation  of these sub committees (Egypt, Jordan, and perhaps Israel). The Associ- ation  Agreement  with  Syria  has  been  initialled  in  the  second  half  of 2004,  and  certain  trade-related  activities,  such  as  tariff  dismantling, will start in 2005 with that country and Egypt, Lebanon,  Algeria, and the Palestinian Authority. Improving trade relations with the Middle East will remain important both  politically  and  economically,  given  the  need  the  need  to  bring stability   and   economic   prosperity   to   the   region.   The   Gulf   Co- operation  Council,  our  fifth  export  market,  (Saudi  Arabia,  Oman, Qatar, Bahrain, UAE, Kuwait) is one of the key actors to that end. The conclusion   of   a   comprehensive   FTA   with   the   Gulf   Co-operation Council will thus remain one of the Union’s important regional obje c- tives for 2005. Continuation  of  negotiations  for  a  Trade  and  Cooperation  Agreement with  Iran  will  depend  on  developments  on  the  political  side.  In  the meantime the Commission will continue to follow developments related to Iran’s economic reform and trade policy.   On  Iraq,  political  and  security  developments  will  seriously  influence actions  which  the  Commission  might  envisage.  Technical  assistance might  be  provided  both  bilaterally  and  through  the  International  Re- construction Fund Facility for Iraq to support the setting up of an ope- rational Customs Service and to develop a trade policy in conformity with  general  multilateral  principles.  GSP  preferences  will  become

21 operational  as  soon  as  an  operational  Customs  Service  exists  which can be responsible for administrative cooperation. 3. North America The 2004 EU-US Summit in Dromoland castle has set the agenda for our bilateral trade and investment relations with the US in 2005.   On the basis of widespread consultations with interested parties to be carried out on both sides of the Atlantic, the Commission and the US administration  will  develop  a  strategy  to  improve  the  transatlantic partnership and present its recommendations to the 2005 Summit. The strategy  will  build  on  experience  of  previous  co-operative  schemes such  as  the  TEP  action  plan  and  the  Positive  Economic  Agenda  as much  as  on  concrete  proposals  and  ideas  stemming  from  interested parties to design an innovative approach to our bilateral co-operation. In the meantime, the Commission will continue to work closely  with the  US  on  the  multilateral  negotiations,  and  co-operate  on  pending bilateral matters such as regulatory co-operation and the conclusion of an agreement on trade in wine. The  Commission  will  also  continue  actively  to  promote  EU  interests in  the  various  disputes  with  the  US  in  the  WTO  -  notably  GMOs, customs  and  aircraft,  while  seeking  US  compliance  in  the  remaining cases   (Byrd,   FSC,   1916   Act,   Irish   Music,   Havana   Club)   where Congressional action is needed for the US to respect WTO rulings. It will also pursue the lifting of US sanctions on beef hormones and re- main vigilant with respect to US practices in antidumping. Against the background of a change in political leadership in Canada, the EU objective will be to secure   Canada’s continued commitment to the work on a bilateral Trade and Investment Enhancement Agree- ment.  Building  on  exploratory  discussions  with  Canada  in  2004,  the Commission  seeks  substantive  negotiations  in  the  course  of  2005. Areas of particular EU interest are government procurement, intellec- tual  property,  regulatory  cooperation  and  sustainable  development. Other  issues  include  full  implementation  of  bilateral  agreements  (in particular   wines   and   spirits)   and   the   managing   of   WTO   disputes (GMOs,  GIs,  Beef  Hormones).  Finally,  the  Commission  will  follow closely the bringing into conformity of the Foreign Investment Protec- tion Agreements (FIPAs) of certain MS that conflict with the acquis. 4. LATIN AMERICA EU-Mercosur negotiations progressed in 2004, but it was not possible to conclude them. The EU objective remains to reach a comprehensi- ve,  ambitious  and  balanced  agreement  where  no  sector  would  be  ex-

22 cluded,  whilst  taking  account  of  the  sensitivities  of  certain  products.   A  final  agreement  will  include  elements  of  special  and  differential treatment where appropriate, notably through the application of longer transition periods to reflect Mercosur’s lower level of development. Provided  improved  offers  are  submitted  by  Mercosur  to  reflect  the above ambitious objectives of the FTA our aim should be to conclude this inter-regional Association Agreement in 2005. With Mexico & Chile work will focus on the renegotiation of existing FTA  agreements  following  their  built-in  agendas.  With  Mexico,  the entire chapter on services, other than financial, will have to be nego- tiated  while  all  remaining  discrimination  on  financial  services  will have  to  be  eliminated.  Negotiations  have  already  started  and  are  ex- pected  to  conclude  by  the  end  of  April  2005.  The  agriculture  review clause  will  also  be  tackled  and  further  reflection  on  the  investment review clause will continue. In terms of disputes the EU will continue to challenge Mexican countervailing measures on olive oil. The activi- ties in relation to Chile will mostly concern the preparation and nego- tiation of the agriculture review clause.  Monitoring of the entry into force at the beginning of 2005 of the services’ and investments’ cha p- ters,      following  the  FTA’s  ratification  from  Member  States  national parliaments, will be necessary. Finally, for simplification and efficien- cy purposes, GSP preferences still applicable to Mexico and Chile will be consolidated within the respective FTAs. Relations will  the Andean Community and Central America will re- volve around the Joint Assessment on Economic Integration, due to be launched   before   the   end   of   2004.   The   aim   of   this   process   is   to establish whether a high degree of regional integration will be created in  each  of  the  respective  regions  to  sustain  a  future  bi-regional  FTA with  the  EU.  A  favourable  assessment  is  a  pre-requisite  for  the  laun- ching   of   Association   Agreement   negotiations,   together   with   the completion of the DDA. Special attention will also be paid to the new EU GSP system with regard to these regions.   5. Asia and Australasia a) East Asia In 2005 DG Trade will continue to monitor closely the implementation by  China  of  its  WTO  commitments  in  particular  through  the  annual Trade Review Mechanism.  We will also seek a constructive participa- tion of China in the international trading system.  In the context of the 30th  anniversary  of  EU-China  diplomatic  relations,  efforts  will  be made  to  develop  a  partnership  with  China  by  deepening  the  broad range of dialogues established on various issues, and in particular the development of the high level bilateral Trade Policy dialogue.

23 Priority issues relate to Chinese export quotas, automobile policy, tex- tiles, the financial sector, telecommunications, IPR, the establishment of  new  NTBs  and  horizontal  legislation  (e.g.  trading  rights regarding Taiwan,  we  will  continue  to  monitor  implementation  of  its  WTO commitments.  We will give priority to areas such as IPR, government procurement, standards and certification, and customs co-operation Priorities with Japan include consolidating  existing  bilateral  dialogues (government  procurement,  intellectual  property,  access  to  medicines, aviation),  to  implementing  the  2004  Joint  Initiative  for  the  Enforce- ment of Intellectual Property Rights in Asia and specific actions in the area of bilateral investments, as well as to continue and reinforce dia- logue on the DDA process and on other WTO issues of common inte- rest. The EU and Japan have also a dialogue on GIs. Furthermore, the EU has proposed of a new dialogue between the respective services in charge  of  forward  looking  studies  and  analysis  on  current  and  future developments in trade policy, such as on regional economic integrati- on  and  globalisation.  It  is  also  important  to  continue  to  promoting constructive contacts in important regulatory areas such as standards, SPS,  services  competition  and  transparency  in  government  procure- ment, via the ongoing regulatory reform dialogue, as well as in other bilateral and multilateral fora. Particular attention will be dedicated to the  bringing  into  conformity  with  the  acquis  of  the  friendship,  com- merce  and  navigation  agreements  concluded  by  certain  new  Member States with Japan. b) South East Asia, Korea and ASEM The  priorities  for  EU-ASEAN  trade  relations  in  2005  reflect  recent economic  developments  in  South  East  Asia.  Closer  co-operation  on ASEAN's own regional economic integration, concentrating at first on priority  sectors,  will  be  carried  out  under  the  Trans-Regional  EU- ASEAN  Trade  Initiative  (TREATI),  drawing  on  EU  experience  in creating  a  common  market  to  facilitate  intra-ASEAN  trade  in  areas which  also  benefit  EU  trading  interests.  We  will  also  try  to    identify and evaluate the impact of ASEAN's existing and future trade agree- ments  on  EU  commercial  interests  in  the  region,  in  order  to  identify better our own interests  and exploit new opportunities, both at regio- nal  level  and  with  individual  countries.  .  In  addition,  efforts  will  be made  to  develop  relations  via  the  trade  and  investment  co-operation content of the bilateral Cooperation and Partnership Agreements being negotiated  with  individual  ASEAN  countries  such  as  Singapore  and Thailand. With  Korea,  the  priority  remains  to  improve  our  market  access  and influence those Korean economic and regulatory reforms with an im- pact  on  EU  market  access;  to  monitor  the  impact  of  Korean  policies on  free  trade  agreements,  notably  with  Japan  and  China,  to  consider

24 adjustments to EU policy in order not to endanger EU exports to Ko- rea and lastly to continue addressing subsidisation in the shipbuilding sector before the WTO and the OECD.. For  ASEM,  the  objective  in  2005  will  be  to  demonstrate  our  conti- nuing commitment to the Economic Pillar by ensuring that a success- ful  Economic  Ministers  Meeting  (EMM  6)  takes  place  as  rapidly  as possible,  building  on  the  results  of  the  Economic  Pillar  review,  the declaration of the ASEM 5 Summit, and the recommendations of the Task Force on a Closer Economic Partnership. c) South Asia The  EU  should  encourage  South  Asian  regional  cooperation,  and  in particular invite SAARC to co-operate on trade and  economic integra- tion.   With  regard  to  India,  after  the  adoption  of  the  Communication  on  a Strategic Partnership, and in line with their objective of boosting trade and  investment,  the  EU  and  India  will  need  to  set  up  a  “Joint  Study Group  of  Officials”,  with  close  involvement  of  business  and  acad e- mia. We should also help creating a “Business Leaders” Round Table to that effect.  These initiatives should help preparing an Action Plan, with  a  trade  and  investment  chapter,  to  be  endorsed  at  the  6th  EU- India Summit in 2005. d) Australasia For  Australia  and  New  Zealand  the  priority  will  be  for  the  EU  to maintain  a  healthy  trading  relationship,  particularly  through  effective handling of largely agricultural issues that arise, and to promote trade and investment where possible.  For Australia this includes managing current  dispute  settlement  cases  and  tackling  Australia’s  restrictive approach    to    quarantine/sanitary    and    phytosanitary    measures,    to improve EU access to the market.  With the conclusion of wine nego- tiations  with  Australia,  negotiations  should  start  on  a  new  or  revised Wine  Agreement  with  New  Zealand  Co-operation  should  continue with both countries on the DDA. 6. Africa, Caribbean and Pacific Following  the  conclusion  of  the  1st  phase  of  negotiations  at  all  ACP level  in  October  2003,  regional  negotiations  were  opened  with  all ACP regions, i.e. Central Africa (CEMAC and Sao Tome and Princi- pe) and Western Africa (ECOWAS and Mauritania) in October 2003, a  group  of  16  countries  in  Eastern  and  Southern  Africa  in  February 2004, the Caribbean ACP region in April 2004, a group of 7 countries in Southern Africa in  July 2004 (SADC)  and finally  with the  Pacific ACP region in September 2004.