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Proposal for new enforcement framework for international trade rules

European Commission - MEMO/12/1006   18/12/2012

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European Commission

MEMO

Brussels, 18 December 2012

Proposal for new enforcement framework for international trade rules

On 18 December 2012, the European Commission proposed a new framework to streamline the EU's ability to enforce its rights in the international trading system.

Why is enforcement important?

The EU is committed to defend and enforce its legitimate rights and interests vis-à-vis its trading partners in order to ensure fair competition and respect of international trade rules.

The proper and efficient enforcement of trade rules is an indispensable pillar of trade policy: it ensures that trade agreements on paper can be translated into concrete results for people and companies on the ground.

Under WTO and bilateral dispute settlement rules as well as multilateral and bilateral safeguard measures, the EU may be required to take unilateral measures in order to act against unfair trading practices.

The EU's response to third countries' unfair trading practices requires swift action in compliance with the relevant international rules and in order to function as an effective tool to induce compliance. Therefore, the EU needs a mechanism within the existing legal framework provided by the EU Treaty for rapid, efficient and flexible decision-making.

What was the situation until now?

Up to now, the EU followed a case by case approach on the basis of the provisions on the common commercial policy. In each case, proposals were made by the Commission to the Council, which adopted appropriate measures, for instance:

  • Council Regulation (EC) No 673/2005 on trade sanctions on US goods in the so-called "Byrd" dispute1. Sanctions are renewed annually since 2005 and the procedure for adoption of such renewal measures takes about 2 to 3 months.

  • Council Regulation (EC) No 728/2006 of 15 May 2006 which suspended sanctions in the so-called Foreign Sales Corporation (FSC) dispute settlement case against the US. The Regulation took 3 days to be adopted.

However, prior to the Treaty of Lisbon, the distinction between legislative and executive functions was not clearly defined and, therefore, the allocation of responsibilities to the EU institutions was not as balanced as today. Moreover, there was no single framework to refer to when the EU was called to take action to defend its trade rights and interests.

Why is the proposal necessary?

With the entry into force of the Treaty of Lisbon, it is for the Council and the European Parliament to establish a clear and stable framework for the implementation of the common commercial policy. This includes creating a basis for the quick and efficient adoption of executive measures to enforce the EU's rights.

The status quo is not an alternative. The implementation of the common commercial policy is a Commission's responsibility, but the Commission's actions must be framed. The ordinary legislative procedure will be used to set up the required framework. On the other hand, the legislative procedure cannot be used when it comes to adopting specific acts that are not legislative in nature, as it is the case of the type of targeted measures foreseen in the current proposal, which require a fast and flexible approach.

The proposal would therefore bring in a single set of rules that allows the EU to react quickly and in a flexible manner and that avoids potential conflicts with the binding international trade timelines. It preserves the EU interests as well as its credibility and its relations with third countries by ensuring swifter, more efficient implementation and simplification.

What does the proposal cover?

The proposal would empower the Commission to take certain measures foreseen under international trade rules, namely:

1. EU trade sanctions when a country does not comply with an arbitration ruling under multilateral or bilateral dispute settlement rules.

This means that where a WTO member or a Party to an agreement with the EU fails to implement a dispute settlement Panel ruling or an arbitration procedure outcome, and where no settlement or satisfactory compensation is agreed, the EU may respond with defensive temporary measures against the offending country.

The defensive temporary measures may take the form of increased customs duties, restrictions on the volume of imports or exports, or restrictions concerning access to government procurement markets.

2. Action to defend EU interests when third countries adopt bilateral/regional safeguard measures unduly restricting EU trade.

Countries can take safeguard measures in the form of increased import duties in certain cases to give an industry some breathing space from an unexpected increase in imports. But there are specific conditions for this.

Where the EU is adversely affected by a safeguard measure and if the country does not provide adequate compensation, then the EU may take defensive measures unilaterally under very short timelines and specific conditions.

These measures may take the form of increased duties, or volume restrictions such as quotas on a temporary basis and which are equivalent to the negative impact of the safeguard.

3. Suspending trade benefits granted to a WTO Member that modifies its concessions to the EU under Article XXVIII GATT 1994 and fails to provide compensation to the EU.

In this case, when third countries diminish the benefits they committed to grant to EU goods in the WTO, the EU can take reciprocal action which has to be implemented within no later than 6 months.

What will be the impact of the Regulation?

The impact of the regulation is more efficient implementation, simplification and improved credibility vis-à-vis third countries.

Next steps

The proposal will be debated by the Council and the European Parliament under the ordinary legislative procedure.

Further information

WTO dispute settlement:

http://ec.europa.eu/trade/tackling-unfair-trade/dispute-settlement/

1 :

Commission proposal of 31 March 2005; Council Regulation 673/2005 of 25 April 2005 imposing retaliation against the US


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