Europaudvalget 2018
KOM (2018) 0728
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EUROPEAN
COMMISSION
Brussels, 12.11.2018
SWD(2018) 454 final/2
CORRIGENDUM
This document corrects document SWD(2018) 454 final of 31.10.2018.
The sixth bullet point had been omitted by mistake on page 224.
The text shall read as follows:
COMMISSION STAFF WORKING DOCUMENT
Individual reports and info sheets on implementation of EU Free Trade Agreements
Accompanying the document
Report from the Commission to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions
on Implementation of Free Trade Agreements
1 January 2017 - 31 December 2017
{COM(2018) 728 final}
EN
EN
kom (2018) 0728 - Ingen titel
Individual reports and info sheets on implementation of EU Free Trade Agreements
T
ABLE OF
C
ONTENTS
DATA USED FOR THE COMPILATION OF INDIVIDUAL REPORTS AND
INFORMATION SHEETS ...................................................................................................... 14
PART I:
NEW GENERATION FREE TRADE AGREEMENTS ................................... 15
ANNUAL REPORT ON THE IMPLEMENTATION OF THE COMPREHENSIVE
ECONOMIC AND TRADE AGREEMENT (CETA) BETWEEN THE EU AND ITS
MEMBER STATES AND CANADA ..................................................................................... 16
1.
2.
3.
4.
5.
6.
Introduction ...................................................................................................................... 16
Evolution of trade ............................................................................................................. 16
Activities of the implementation bodies........................................................................... 16
Implementation of the provisions on trade and sustainable development ....................... 18
Agriculture ....................................................................................................................... 18
Conclusions and outlook .................................................................................................. 20
ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-SOUTH KOREA FREE
Trade Agreement ...................................................................................................................... 22
1.
2.
Introduction ...................................................................................................................... 22
Evolution of bilateral trade ............................................................................................... 22
2.1.
Trade in Goods .......................................................................................................... 22
Overall Evolution ............................................................................................... 22
Trade in agricultural goods ................................................................................ 24
Preference Utilisation Rates ............................................................................... 25
2.1.1.
2.1.2.
2.1.3.
2.2.
3.
4.
5.
6.
7.
Trade in Services and Foreign Direct Investment (FDI) ........................................... 25
Activities of the implementation bodies........................................................................... 26
Implementation of the provisions on trade and sustainable development ....................... 29
Specific areas subject to reporting or monitoring ............................................................ 31
Progress, main open issues and follow-up actions ........................................................... 33
Conclusions and outlook .................................................................................................. 33
ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-
COLOMBIA/ECUADOR/PERU TRADE AGREEMENT ..................................................... 35
1.
2.
Introduction ...................................................................................................................... 35
Evolution of trade ............................................................................................................. 36
2.1.
Trade in Goods .......................................................................................................... 36
1
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2.2.
2.3.
Trade in agricultural goods ........................................................................................ 40
Trade in Services and development of investment .................................................... 44
Trade in Services ................................................................................................ 44
FDI ..................................................................................................................... 45
2.3.1.
2.3.2.
3.
4.
Activities of the implementation bodies........................................................................... 46
Implementation of the provisions on trade and sustainable development ....................... 49
4.1.
4.2.
Sub-Committee on Trade and Sustainable Development .......................................... 49
Domestic consultation ............................................................................................... 50
Session of the Sub-Committee on TSDwith civil society ......................................... 50
Further work and other activities ............................................................................... 50
4.3.
4.4.
5.
6.
7.
Specific areas subject to reporting or monitoring ............................................................ 51
Progress made, main open issues and follow-up actions ................................................. 53
Conclusions and outlook .................................................................................................. 54
ANNUAL REPORT ON THE IMPLEMENTATION OF PART IV OF THE ASSOCIATION
AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES AND CENTRAL
AMERICA ............................................................................................................................... 57
1.
2.
Introduction ...................................................................................................................... 57
Overall assessment: evolution of bilateral trade............................................................... 57
2.1.
Trade in Goods overall .............................................................................................. 57
Sectoral structure of trade................................................................................... 59
Country-by-Country analysis ............................................................................. 60
2.1.1.
2.1.2.
2.2.
2.3.
2.4.
Trade in agricultural goods ........................................................................................ 62
Preference Utilisation Rates (PURs) ......................................................................... 63
Trade in Services and FDIs ....................................................................................... 63
Trade in Services ................................................................................................ 63
Development of FDIs ......................................................................................... 63
2.4.1.
2.4.2.
3.
3.1.
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
3.8.
4.
5.
6.
Activities of the implementation bodies........................................................................... 64
Association Committee.............................................................................................. 64
Sub-Committee on Market Access for Goods ........................................................... 65
Sub-Committee on Customs Procedures, Trade Facilitation and Rules of Origin .... 65
Sub-Committee on Technical Barriers to Trade (TBT) ............................................. 66
Sub-Committee on SPS Matters ................................................................................ 66
Sub-Committee on Intellectual Property ................................................................... 66
Board on Trade and Sustainable Development ......................................................... 67
Ad hoc meeting on Government Procurement .......................................................... 67
Implementation of the provisions on trade and sustainable development ....................... 67
Specific areas subject to reporting or monitoring ............................................................ 68
Conclusions and outlook .................................................................................................. 69
2
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part ii: ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND
UKRAINE, MOLDOVA AND GEORGIA ............................................................................. 71
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS
MEMBER STATES AND UKRAINE .................................................................................... 72
1.
Evolution of trade ............................................................................................................. 72
1.1.
Trade in goods overall ............................................................................................... 72
Scope of trade liberalisation ............................................................................... 72
Overall evolution of EU-Ukraine trade in goods ............................................... 73
Sectoral structure of EU-Ukraine trade in goods ............................................... 73
Use of TRQs ....................................................................................................... 76
1.1.1.
1.1.2.
1.1.3.
1.2.
1.3.
1.4.
1.5.
1.2.1.
Trade in agricultural goods ........................................................................................ 74
Preference utilisation rate (PUR) ............................................................................... 76
Autonomous trade measures ...................................................................................... 76
Establishment, trade in services and investments ...................................................... 77
Market access related to establishment and trade in services ............................ 77
Trade in services ................................................................................................. 77
FDI ..................................................................................................................... 78
1.5.1.
1.5.2.
1.5.3.
2.
2.1.
2.2.
3.
4.
5.
6.
Activities of the implementation bodies........................................................................... 78
Joint decisions of the Association Bodies ................................................................. 78
Meetings of the Association Bodies .......................................................................... 79
Implementation of the provisions on trade and sustainable development ....................... 80
Progress made, main open issues and follow-up actions ................................................. 80
Eu Support to DCFTA Implementation ........................................................................... 83
Conclusions and outlook .................................................................................................. 84
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS
MEMBER STATES AND GEORGIA .................................................................................... 86
1.
Evolution of trade ............................................................................................................. 86
1.1.
Trade in Goods overall .............................................................................................. 86
The scope of trade liberalization ........................................................................ 86
Overall evolution of EU–Georgia trade in goods ............................................... 87
Sectoral structure of EU-Georgia trade in goods ............................................... 87
1.1.1.
1.1.2.
1.1.3.
1.2.
1.3.
1.4.
1.5.
Trade in agricultural goods ........................................................................................ 88
Use of TRQs (TRQ) .................................................................................................. 88
Preference utilisation rate (PUR) ............................................................................... 88
Establishment, trade in services and investments ...................................................... 89
Market access related to establishment and trade in services ............................ 89
3
1.5.1.
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1.5.2.
1.5.3.
2.
2.1.
2.2.
3.
4.
5.
6.
7.
Trade in services ................................................................................................. 89
FDI ..................................................................................................................... 90
Activities of the implementation bodies .......................................................................... 90
Joint decisions of the Association Bodies ................................................................. 90
Meetings of the Association Bodies .......................................................................... 91
Implementation of the provisions on trade and sustainable development ....................... 93
Specific areas subject to reporting or monitoring ............................................................ 94
Progress made, main open issues and follow-up actions ................................................. 94
E
U
S
UPPORT TO
DCFTA I
MPLEMENTATION
.................................................................. 96
Conclusions and outlook .................................................................................................. 97
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS
MEMBER STATES AND MOLDOVA .................................................................................. 98
1.
Evolution of trade ............................................................................................................. 98
1.1.
Trade in goods overall ............................................................................................... 98
The scope of trade liberalization ........................................................................ 98
Overall evolution of EU-Moldova trade in goods .............................................. 99
Sectoral structure of EU-Moldova trade in goods ............................................ 100
Review clause for agricultural products ........................................................... 102
Anti-circumvention mechanism for agricultural products ............................... 103
Use of TRQs ..................................................................................................... 103
1.1.1.
1.1.2.
1.1.3.
1.2.
1.2.1.
1.2.2.
1.2.3.
1.3.
1.4.
Trade in agricultural goods ...................................................................................... 101
Preference Utilisation rate (PURs) .......................................................................... 104
Establishment, trade in services and investments .................................................... 104
Market access related to establishment and trade in services .......................... 104
Trade in Services .............................................................................................. 104
FDI ................................................................................................................... 104
1.4.1.
1.4.2.
1.4.3.
2.
2.1.
2.2.
3.
4.
5.
6.
Activities of the implementation bodies ........................................................................ 105
Joint decisions of the Association Bodies ............................................................... 105
Meetings of the Association Bodies ........................................................................ 106
Implementation of the provisions on trade and sustainable development ..................... 107
Progress made, main open issues and follow-up actions ............................................... 108
E
U
S
UPPORT TO
DCFTA I
MPLEMENTATION
................................................................ 110
Conclusions and outlook ................................................................................................ 111
PART III: FIRST GENERATION FREE TRADE AGREEMENTS .................................... 113
FIRST GENERATION FREE TRADE AGREEMENTS WITH MEDITERRANEAN
PARTNERS ........................................................................................................................... 114
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ALGERIA
ASSOCIATION AGREEMENT............................................................................................ 115
1.
2.
Introduction .................................................................................................................... 115
Evolution of trade ........................................................................................................... 115
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 115
Trade in agricultural goods ...................................................................................... 116
Preference Utilisation rate ....................................................................................... 117
Trade in Services and Investment ............................................................................ 117
Issues addressed in the Sub-Committee meetings .......................................................... 117
Specific areas of importance .......................................................................................... 118
Progress made, main open issues and follow-up actions ............................................... 119
Conclusions and outlook ................................................................................................ 119
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-EGYPT
ASSOCIATION AGREEMENT............................................................................................ 120
1.
2.
Introduction .................................................................................................................... 120
Evolution of trade ........................................................................................................... 120
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 120
Trade in agricultural goods ...................................................................................... 121
Preference Utilisation rate ....................................................................................... 122
Trade in Services and FDI ....................................................................................... 122
Issues addressed in the Joint Committee meetings ........................................................ 123
Specific areas of importance .......................................................................................... 123
Progress made, main open issues and follow-up actions ............................................... 124
Conclusions and outlook ................................................................................................ 125
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ISRAEL
ASSOCIATION AGREEMENT............................................................................................ 126
1.
2.
Introduction .................................................................................................................... 126
Evolution of trade ........................................................................................................... 126
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 126
Trade in agricultural goods ...................................................................................... 127
Preference Utilisation rate ....................................................................................... 128
Trade in Services and Investment ............................................................................ 129
Issues addressed in the Annual (Joint Committee/Trade Committee) meeting ............. 129
Specific areas of importance .......................................................................................... 130
Progress made, main open issues and follow-up actions ............................................... 130
Conclusions and outlook ................................................................................................ 131
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-JORDAN
ASSOCIATION AGREEMENT............................................................................................ 132
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1.
2.
Introduction .................................................................................................................... 132
Evolution of trade ........................................................................................................... 132
2.1.
2.2.
2.3.
2.4.
Trade in Goods ........................................................................................................ 132
Trade in agricultural goods ...................................................................................... 133
Preference Utilisation rate ....................................................................................... 133
Trade in Services and Investment ............................................................................ 134
3.
4.
5.
6.
Issues addressed in the Annual (Joint Committee/Trade Committee) meetingS ........... 134
Specific areas of importance .......................................................................................... 135
Progress made, main open issues and follow-up actions ............................................... 136
Conclusions and outlook ................................................................................................ 136
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-LEBANON
ASSOCIATION AGREEMENT............................................................................................ 137
1.
2.
Introduction .................................................................................................................... 137
Evolution of trade ........................................................................................................... 137
2.1.
2.2.
2.3.
Trade in Goods ........................................................................................................ 137
Trade in agricultural goods ...................................................................................... 138
Preference Utilisation rate ....................................................................................... 139
Trade in Services and FDI ....................................................................................... 139
2.4.
3.
4.
5.
6.
Issues addressed in the Annual Joint Committee meetings ............................................ 139
Specific areas of importance .......................................................................................... 140
Progress made, main open issues and follow-up actions ............................................... 141
Conclusions and outlook ................................................................................................ 141
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-MOROCCO
ASSOCIATION AGREEMENT............................................................................................ 143
1.
2.
Introduction .................................................................................................................... 143
Evolution of trade ........................................................................................................... 143
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 143
Trade in agricultural goods ...................................................................................... 144
Preference Utilisation rate ....................................................................................... 145
Trade in Services and FDI ....................................................................................... 145
Issues addressed in the Joint Committee meetings ........................................................ 145
Specific areas of importance .......................................................................................... 146
Progress made, main open issues and follow-up actions ............................................... 146
Conclusions and outlook ................................................................................................ 147
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-PALESTINE
INTERIM ASSOCIATION AGREEMENT .......................................................................... 149
1.
2.
Introduction .................................................................................................................... 149
Evolution of trade ........................................................................................................... 149
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2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 149
Trade in agricultural goods ...................................................................................... 150
Preference Utilisation rate ....................................................................................... 151
Trade in Services and FDI ....................................................................................... 151
Issues addressed in the Annual (Joint Committee/Trade Committee) meeting ............. 151
Specific areas of importance .......................................................................................... 152
Progress made, main open issues and follow-up actions ............................................... 152
Conclusions and outlook ................................................................................................ 153
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-TUNISIA
ASSOCIATION AGREEMENT............................................................................................ 154
1.
2.
Introduction .................................................................................................................... 154
Evolution of trade ........................................................................................................... 154
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 154
Trade in agricultural goods ...................................................................................... 155
Preference Utilisation rate ....................................................................................... 156
Trade in Services and Investment ............................................................................ 156
Issues addressed in the Joint Committee meetings ........................................................ 156
Specific areas of importance .......................................................................................... 157
Progress, main open issues and follow-up actions ......................................................... 158
Conclusions and outlook ................................................................................................ 159
FIRST GENERATION FREE TRADE AGREEMENTS WITH THE WESTERN BALKAN
PARTNERS ........................................................................................................................... 160
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF the trade PILLAR OF THE
EU-ALBANIA STABILISATION AND association AGREEMENT .................................. 161
1.
2.
Introduction .................................................................................................................... 161
Evolution of trade ........................................................................................................... 161
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 161
Trade in agricultural goods ...................................................................................... 162
Preference Utilisation rate (PUR) ............................................................................ 163
Trade in Services and FDI ....................................................................................... 164
Issues addressed in the Joint Committee meetings ........................................................ 164
Specific areas of importance .......................................................................................... 165
Main open issues and follow-up actions ........................................................................ 165
Conclusions .................................................................................................................... 165
ANNUAL INFO SHEET ON the IMPLEMENTATION OF THE TRADE PILLAR OF THE
EU-BOSNIA AND HERZEGOVINA STABILISATION AND association AGREEMENT
................................................................................................................................................ 166
1.
Introduction .................................................................................................................... 166
7
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2.
Evolution of trade ........................................................................................................... 166
2.1.
2.2.
2.3.
2.4.
Trade in Goods ........................................................................................................ 166
Trade in agricultural goods ...................................................................................... 167
Preference Utilisation rate ....................................................................................... 168
Trade in Services and FDI ....................................................................................... 168
3.
4.
5.
6.
Issues addressed in the annual Committee meetings ..................................................... 169
Specific areas of importance .......................................................................................... 169
Main open issues and follow-up actions ........................................................................ 170
Conclusions .................................................................................................................... 170
ANNUAL INFO SHEET ON the IMPLEMENTATION OF the trade pillar of the
STABILISATION AND association AGREEMENT between the EU and the former
Yugoslav Republic of Macedonia .......................................................................................... 171
1.
2.
Introduction .................................................................................................................... 171
Evolution of trade ........................................................................................................... 171
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 171
Trade in agricultural goods ...................................................................................... 172
Preference Utilisation rate ....................................................................................... 173
Trade in Services and FDI ....................................................................................... 174
Issues addressed in the annual Committee meetings ..................................................... 174
Specific areas of importance .......................................................................................... 175
Main open issues and follow-up actions ........................................................................ 175
Conclusions .................................................................................................................... 175
ANNUAL INFO SHEET ON the IMPLEMENTATION OF the TRADE PILLAR OF THE
EU-KOSOVO
*
Stabilisation and association AGREEMENT ............................................... 176
1.
2.
Introduction .................................................................................................................... 176
Evolution of trade ........................................................................................................... 176
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 176
Trade in agricultural goods ...................................................................................... 177
Preference Utilisation rate ....................................................................................... 178
Trade in Services and FDI ....................................................................................... 178
Issues addressed in the annual Committee meetings ..................................................... 178
Specific areas of importance .......................................................................................... 179
Main open issues and follow-up actions ........................................................................ 179
Conclusions .................................................................................................................... 179
ANNUAL INFO SHEET ON the IMPLEMENTATION OF the trade pillar of the EU-
MONTENEGRO STABILISATION AND ASSOCIATION AGREEMENT ...................... 180
1.
2.
Introduction .................................................................................................................... 180
Evolution of trade ........................................................................................................... 180
8
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2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 180
Trade in Agricultural Goods .................................................................................... 181
Preference Utilisation rate ....................................................................................... 182
Trade in Services and FDI ....................................................................................... 182
Issues addressed in the annual Committee meetings ..................................................... 183
Specific areas of importance .......................................................................................... 183
Main open issues and follow-up actions ........................................................................ 184
Conclusions .................................................................................................................... 184
ANNUAL INFO SHEET ON the IMPLEMENTATION OF the TRADE PILLAR OF THE
EU-SERBIA STABILISATION AND ASSOCIATION AGREEMENT ............................. 185
1.
2.
Introduction .................................................................................................................... 185
Evolution of trade ........................................................................................................... 185
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 185
Trade in agricultural goods ...................................................................................... 186
Preference Utilisation rate ....................................................................................... 188
Trade in Services and FDI ....................................................................................... 188
Issues addressed in the annual trade committee meeting ............................................... 189
Specific areas of importance .......................................................................................... 189
Main open issues and follow-up actions ........................................................................ 190
Conclusions .................................................................................................................... 190
FIRST GENERATION FREE TRADE AGREEMENTS WITH LATIN AMERICAN
COUNTRIES ......................................................................................................................... 191
ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-
CHILE ASSOCIATION AGREEMENT ............................................................................... 192
1.
2.
Introduction .................................................................................................................... 192
Evolution of trade ........................................................................................................... 193
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
Trade in Goods ........................................................................................................ 193
Trade in agricultural products.................................................................................. 195
Trade in Services and FDI ....................................................................................... 195
Preference Utilisation Rate (PUR) .......................................................................... 196
Annual Trade Coordinators Meeting and Trade-related Sub-committees ..................... 197
progress made, Main open issues and follow-up actions ............................................... 198
Conclusions and outlook ................................................................................................ 199
ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-
MEXICO ASSOCIATION AGREEMENT .......................................................................... 200
1.
2.
Introduction .................................................................................................................... 200
Evolution of trade ........................................................................................................... 200
2.1.
Trade in goods ......................................................................................................... 200
9
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2.2.
2.3.
2.4.
3.
4.
5.
Trade in agricultural goods: ..................................................................................... 201
Preference Utilisation rate (PUR) ............................................................................ 202
Trade in services and FDI ........................................................................................ 203
Issues addressed in the annual joint committee meeting ................................................ 204
Progress made, main open issues and follow-up actions ............................................... 204
Conclusions and outlook ................................................................................................ 205
FIRST GENERATION FREE TRADE AGREEMENTS WITH THE EFTA COUNTRIES
NORWAY AND SWITZERLAND ....................................................................................... 207
ANNUAL INFO SHEET ON IMPLEMENTATION OF the EU-Norway FREE TRADE
AGREEMENT ....................................................................................................................... 208
1.
2.
Introduction .................................................................................................................... 208
Evolution of trade ........................................................................................................... 208
2.1.
2.2.
2.3.
2.4.
3.
4.
5.
Trade in Goods ........................................................................................................ 208
Trade in agricultural goods ...................................................................................... 209
Preference Utilisation rate (PUR) ............................................................................ 210
Trade in Services and FDI ....................................................................................... 210
Issues addressed in the EEA and FTA Joint committees ............................................... 211
Specific areas of importance .......................................................................................... 211
Progress made, main open issues and follow-up actions ............................................... 212
ANNUAL INFO SHEET ON IMPLEMENTATION OF the EU-SWITZERLAND FREE
TRADE AGREEMENT ......................................................................................................... 214
1.
2.
Introduction .................................................................................................................... 214
Evolution of trade ........................................................................................................... 215
2.1.
2.2.
2.3.
Trade in Goods ........................................................................................................ 215
Trade in agricultural goods ...................................................................................... 215
Trade in Services and Investment ............................................................................ 216
Preference Utilisation rate ....................................................................................... 217
2.4.
3.
4.
5.
6.
Issues addressed in the annual joint committee meeting ................................................ 217
Specific areas of importance .......................................................................................... 218
Progress made, main open issues and follow-up actions ............................................... 219
Conclusions and outlook ................................................................................................ 219
THE CUSTOMS UNION WITH TURKEY .......................................................................... 220
ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-TURKEY CUSTOMS
UNION AND TRADE AGREEMENTS .............................................................................. 221
7.
Evolution of trade ........................................................................................................... 221
7.1.
7.2.
7.3.
Trade in Goods ........................................................................................................ 221
Trade in agricultural goods ...................................................................................... 222
Preference Utilisation rate (PUR) ............................................................................ 222
10
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7.4.
8.
9.
10.
11.
Trade in Services and FDI ....................................................................................... 223
Issues addressed in the Customs Union Joint Committee Meeting................................ 223
Specific areas of importance .......................................................................................... 224
Progress made, main open issues and follow-up actions ............................................ 224
Conclusions and outlook ............................................................................................. 225
PART IV: ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENTS (EPAs) WITH AFRICAN, CARRIBEAN AND PACIFIC
COUNTRIES ......................................................................................................................... 226
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND THE SOUTHERN
AFRICAN DEVELOPMENT COMMUNITY (SADC) ....................................................... 227
1.
2.
Introduction .................................................................................................................... 227
Evolution of trade ........................................................................................................... 227
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in goods ......................................................................................................... 227
Trade in services ...................................................................................................... 231
FDI ........................................................................................................................... 231
Issues addressed in the annual EPA Committee meeting............................................... 232
Specific areas of importance .......................................................................................... 232
Progress made, main open issues and follow-up actions ............................................... 233
Conclusions and outlook ................................................................................................ 234
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND COTE D’IVOIRE
..... 236
1.
2.
Introduction .................................................................................................................... 236
Evolution of trade ........................................................................................................... 236
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in goods ......................................................................................................... 236
Trade in services ...................................................................................................... 238
FDI ........................................................................................................................... 238
Issues addressed in the annual EPA Committee meeting............................................... 239
Specific areas of importance .......................................................................................... 239
Progress made, main open issues and follow-up actions ............................................... 240
Conclusions and outlook ................................................................................................ 240
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND GHANA .................... 241
1.
2.
Introduction .................................................................................................................... 241
Evolution of trade ........................................................................................................... 241
2.1.
2.2.
2.3.
3.
Trade in goods ......................................................................................................... 241
Trade in services ...................................................................................................... 243
FDI ........................................................................................................................... 244
Issues addressed in the first meeting of the joint EPA Committee ................................ 244
11
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4.
5.
6.
Specific areas of importance .......................................................................................... 244
Follow-up actions ........................................................................................................... 245
Conclusions and outlook ................................................................................................ 245
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CAMEROON ........... 246
1.
2.
Introduction .................................................................................................................... 246
Evolution of trade ........................................................................................................... 246
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in goods ......................................................................................................... 246
Trade in services ...................................................................................................... 248
FDI ........................................................................................................................... 249
Issues addressed in the annual EPA Committee meeting............................................... 249
Specific areas of importance .......................................................................................... 249
Progress made, main open issues and follow-up actions ............................................... 250
Conclusions and outlook ................................................................................................ 250
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CARIFORUM .......... 251
1.
2.
Introduction .................................................................................................................... 251
Evolution of trade ........................................................................................................... 251
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in goods ......................................................................................................... 251
Trade in services ...................................................................................................... 253
FDI ........................................................................................................................... 254
Issues addressed in the EPA Committee meetings ......................................................... 254
Specific areas of importance .......................................................................................... 255
Progress made, main open issues and follow-up actions ............................................... 256
Conclusions and outlook ................................................................................................ 256
ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND PACIFIC STATES ... 257
1.
2.
Introduction .................................................................................................................... 257
Evolution of trade ........................................................................................................... 257
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in goods ......................................................................................................... 257
Trade in services ...................................................................................................... 259
FDI ........................................................................................................................... 260
Issues addressed in the EPA Committee meetings ......................................................... 260
Specific areas of importance .......................................................................................... 260
Main open issues and follow-up actions ........................................................................ 261
Conclusions and outlook ................................................................................................ 261
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE INTERIM ECONOMIC
PARTNERSHIP AGREEMENT (iEPA) BETWEEN THE EU AND EASTERN AND
SOUTHERN AFRICAN (ESQ) STATES ............................................................................. 262
1.
2.
Introduction .................................................................................................................... 262
Evolution of trade ........................................................................................................... 262
2.1.
2.2.
2.3.
3.
4.
5.
6.
Trade in Goods ........................................................................................................ 262
Trade in Services and Investment ............................................................................ 264
FDI ........................................................................................................................... 265
Issues addressed in the annual EPA Committee meeting............................................... 265
Specific areas of importance .......................................................................................... 265
Progress made, main open issues and follow-up actions ............................................... 266
Conclusions and outlook ................................................................................................ 266
ANNEX
LIST OF ABBREVIATIONS .............................................................................. 267
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DATA USED FOR THE COMPILATION OF INDIVIDUAL REPORTS AND
INFORMATION SHEETS
General trade statistics
used for the Report reflecting the evolution of
trade and investment
flows
rely, except where indicated otherwise, on EUROSTAT data (COMEXT) as was
available on 15 July 2018.
1
For trade in goods the most recent annual data available is for
2017. For services and investment the most recent year available is 2016 (except for
Switzerland, where 2017 is available).
Statistics on
preference utilisation rates (PURs)
2
are based on administrative data collected
by the importing country. PURs show to what extent trade flows make use of preferences
under a trade agreement. The PUR reflects the share of imports entering under trade
preferences as a share of the total value of imports
eligible
for preferences by partner country.
Preference eligible imports exist if the applied preferential tariff is lower than the applied
MFN tariff. Subsequently MFN-duty free trade is not taken into account in the calculations.
The
PUR of EU imports
is based on Eurostat figures. Eurostat merges tariffs and trade flows
to build a dataset from which we extract information on both the treatment a product is
eligible for and the extent to which this eligible treatment is made use of.
The obtained
dataset is harmonised
3
and consistent
and allows for comparison across partner countries
and years.
By contrast, when it comes to
calculating PURs on EU exports
to FTA partners the
Commission has to rely on administrative data collected by the respective importing third
country. Submitted data were used if fulfilling a set of conditions as regards level of detail,
accuracy, completeness and consistency to ensure a minimum level of harmonisation. E.g. to
systematically exclude from PUR calculations all products not benefiting from preferential
treatment (such as products offered duty free on an MFN basis) eligibility has to be
determined but this can only be done with data available at tariff line level ; - import values
need to be comparable with levels found in other sources (e.g. UN Comtrade).
Statistics on PURs for EU exports are not harmonised.
Hence, direct comparisons between
partner countries or with EU imports should merely be seen as indicative.
1
2
3
As regards the Association Agreement with Central America, there are significant differences between
EUROSTAT and Central American statistics; only Eurostat data are therefore used.
Information on preference utilisation rates per partner country can be consulted in Annexes 1 and 2.
However, some margin of error is still possible since the data does not capture certain changes in the
preferential status of imports, such as claims for preferences made by importers after the goods have been
declared to customs and denial of preferences decided by customs after verification post-release of the goods
14
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PART I:
NEW GENERATION FREE TRADE AGREEMENTS
For the purpose of this report "new
generation"
FTAs are comprehensive FTAs negotiated
after 2006 with selected third countries. Of the applied agreements, the ones with Canada,
South Korea, Colombia, Peru, Ecuador and Central America belong to this category. These
agreements typically go beyond tariff cuts and trade in goods and also cover services and
public procurement. The agreement with South Korea and Canada also contain provisions on
heightened investment liberalisation and CETA in addition covers investment protection
(although not yet provisionally applied) and regulatory cooperation. Solid provisions on trade
and sustainable development (TSD) are a core part of all "new generation" trade agreements
concluded since 2010.
15
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ANNUAL REPORT ON THE IMPLEMENTATION OF THE COMPREHENSIVE
ECONOMIC AND TRADE AGREEMENT (CETA) BETWEEN THE EU AND ITS
MEMBER STATES AND CANADA
1.
I
NTRODUCTION
The Comprehensive Economic and Trade Agreement (‘CETA’) was signed on 30 October
2016 and the European Parliament gave its consent to CETA during its Plenary session of 15
February 2017. CETA entered into force provisionally
4
on 21 September 2017.
2.
E
VOLUTION OF TRADE
At the time this report is being drafted the agreement has not been applied for a entire
calendar year so it is too early to draw any meaningful conclusions on its impact on trade
flows of goods and services or the development of FDI. This information will be included in
the next report to be delivered in 2019.
3.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
CETA establishes a number of
institutional bodies
to facilitate the implementation of the
agreement.
The CETA Joint Committee
is meant to supervise and facilitate the
implementation and application of the Agreement. The CETA Joint Committee is co-chaired
by the Minister for International Trade of Canada and the Member of the European
Commission responsible for Trade.
In addition, CETA establishes a number of
specialised committees
and
dialogues
to ensure
overlook the implementation of the Agreement in specific areas, the work of which is
supervised by the CETA Joint Committee. These are the following:
Specialised Committees:
Committee on Trade in Goods
Committee on Agriculture
Committee on Wines and Spirits
Joint Sectoral Group on Pharmaceuticals
Committee on Geographical Indications
Joint Management Committee for Sanitary and Phytosanitary (SPS) Measures
Joint Customs Cooperation Committee
Committee on Government Procurement
Committee on Services and Investment
Joint Committee on Mutual Recognition of Professional Qualifications
Financial Services Committee
Committee on Trade and Sustainable Development
4
In accordance with Article 218(5), following authorisation by the Council, the EU may provisionally apply a
trade agreement or any other international agreement, in whole or in part, between the signature and the entry
into force. Provisional application of treaties reflects a longstanding international treaty practice.
16
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Regulatory Cooperation Forum
Bilateral Dialogues and cooperation:
Bilateral Dialogue on Forest Products
Bilateral Dialogue on Raw Materials
Bilateral Dialogue on Biotech Market Access Issues
Enhanced Cooperation on science, technology, research and innovation.
Dialogue on Electronic Commerce
Bilateral Dialogue on Motor Vehicle Regulations
In line with the Commission's commitment to a more transparent and inclusive trade and
investment policy and to allow all relevant stakeholders to follow and be informed about the
implementation of CETA, the Commission has created a specific "CETA
Meetings and
documents
5
" webpage where the schedules, agendas and reports of all above mentoned
specialised committees and dialogues can be found.
In the course of 2017 the EU and Canada have been working to make operational
the
administrative and institutional provisions
of CETA. This work, which was initiated in
2017, with just over three months of provisional application, continued in 2018 including the
setting up of the various CETA committees and dialogues agreeing on co-chairs and contact
points for the various committees, timelines for the meetings and rules of procedure.
The specialised committees and dialogues did not meet in 2017; the following committees and
dialogues met in the first half of 2018 and the reports of these meetings are available on the
above mentioned webpage:
Committee on Government Procurement (15 March 2018)
Enhanced Cooperation on science, technology, research and innovation (23 March
2018)
Joint Management Committee for SPS Measures (26-27 March 2018)
Bilateral Dialogue on Biotech Market Access Issues (26 April 2018)
Committee on Geographical Indications (17 May 2018)
Bilateral Dialogue on Forest Products (23 may 2018)
Financial Services Committee (19 June 2018)
Joint Customs Cooperation Committee (22 June 2018)
Committee on Wines and Spirits (5 July 2018)
Furthermore, the foundations of the Investment Court System (ICS) are already established in
CETA but further work is required to operationalise the system. The contours of the further
work on the ICS has been agreed between EU and Canada at the time of CETA ratification
and is also reflected in Commission and Council Declaration No 36.
6
In the course of 2018,
the Commission will consult with Member States to establish the EU position before
5
6
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1811
Link to the Council Declaration:
http://data.consilium.europa.eu/doc/document/ST-13463-2016-REV-
1/en/pdf
17
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discussing with Canada about the work that has been committed to during the CETA
ratification process.
4.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
End of 2017, the EU and Canada launched a
review
on how to improve the effectiveness of
the
TSD
provisions in CETA. A first expert level meeting took place on 1 December 2017,
with the objective to inform each other on latest developments and public debate on issues.
The EU’s position on this review has since been informed by the Commission Non-Paper
7
published, summarising
15 action points to strengthen the enforcement of TSD chapters.
The Non-Paper reflects the results of a seven-month EU wide debate with Member States,
European Parliament and with a broad range of civil society organisations and defines the
EUs revamped approach to trade and sustainability in its trade agreements.
CETA establishes a Civil Society Forum
a consultation mechanisms for the TSD chapters
composed of representatives of civil society organisations on both sides. In the EU, in
February 2018, the Commission launched a call for expressions of interest to become an EU
CETA Domestic Advisory Group (DAG) Member. As a result of this call, the EU DAG under
CETA was established and met for the first time on 13 July 2018. The Civil Society Forum
will meet back-to-back with the CETA TSD Committee to be held in the third quarter of
2018.
5.
A
GRICULTURE
CETA opened new opportunities to access the Canadian market for EU exporters of
agricultural and food products. CETA
has eliminated duties on 91% of all agricultural
tariff lines
at the entry into force of the agreement. The Agreement
significantly increases
the quotas for the export of duty free cheese
to Canada to 32 000 tons. It tackles some of
the non-tariff barriers facing the wines and spirits sector and establishes a robust framework
to continue work to address them. In addition under CETA, Canada has agreed to protect 143
distinctive food and drink products from specific towns or regions in the EU. The
Commission has been closely following the implementation of afore mentioned areas in the
field of agriculture.
Increased duty free quota for Cheese
is one of the major gains for the EU in CETA. The
EU therefore pays particular attention to ensure that the administration of this quota by
Canada is in line with the principles agreed in CETA. The EU will continue to closely
monitor the utilisation of the quota in subsequent years (5 900 tons in 2018 and up to 17 700
tons as from 2022). The Commission will continue to raise concerns related to the Canadian
quota management system.
7
http://trade.ec.europa.eu/doclib/docs/2018/february/tradoc_156618.pdf
18
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Table 1. Utilisation of the CETA quota for EU cheese
Tariff
Product
Code
0406
Cheese
of which:
high quality
industrial
Source: Global Affairs Canada.
Quota 2017 (kg) Utilisation 2017 (kg)
824 384
745 299
79 085
765 820
719 521
46 299
Utilisation rate
92.9%
96.5%
58.5%
In relation to
dairy products,
Canada eliminated its tariff on milk protein concentrate. The
EU is following closely the developments in Canadian market and regulations linked to dairy
products and in particular the compositional standard issue, which could affect EU exports of
milk protein concentrates.
Alcoholic beverages, in particular wines and spirits, top the list of EU agricultural exports,
accounting for over 40%. A number of discriminations were maintained against imported
wines and spirits, notably at provincial level. In particular, Ontario and Quebec maintained
ad-valorem cost of service differential fees after the entry into provisional application of
CETA, despite a commitment in the agreement to move to volume-based fees. In addition, the
federal government introduced an automatic yearly escalation of the federal excise duty on
wine, while maintaining the exemption for wine made from 100% Canadian grape. The
Commission is working with the Canadian authorities to seek mutually agreed solutions to the
concerns related to the alcoholic beverages sector.
Since the entry into force of CETA 143 EU food and drink GIs enjoy full protection in
Canada from imitations at a level comparable to that offered by EU law. This means that
Canada will have to prevent (a) the use of a geographic name for products that do not
originate in the place of origin specified for the protected names; (b) the use of any means in
the designation or presentation of a good that indicates or suggests that the good in question
originates in a geographical area other than the true place of origin in a manner which
misleads the public as to the geographical origin of the good; and, (c) any other use which
constitutes an act of unfair competition. Also the use of any of these GI names in Canada is
now prohibited even when the true origin of the product is indicated or in translation or with
an expression such as ‘kind’, ‘type’, ‘style’, ‘imitation’ or the like. For 8 EU GIs, including
some very iconic European GIs such as Asiago, Gorgonzola, Feta, Fontina or Munster, the
use of these protected denominations is prohibited except for companies which already used
the name on the Canadian market (‘grandfathering’ clause). The Commission will insist with
Canada that the protection of these particular GIs is fully enforced and that Canada develops
the means to ensure that companies which continue to use these terms do comply with CETA
requirements.
SPS measures
The 1st CETA Joint Management Committee (JMC) meeting for SPS measures took place on
March 26-27. The purpose of the meeting was to further expand the existing bilateral dialogue
and cooperation on SPS issues affecting agri-food trade in light of CETA.
19
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With regard to SPS related market access issues, in 2017,
progress was seen on
several SPS EU export files:
Processed animal protein export was authorised
from 7 Member States as a result of a
positive outcome of an audit carried out by Canada and coordinated by the Commission. Two
harmonised EU export certificates (for porcine blood and rendered products of non-animal
origin) were negotiated by the Commission on behalf of the Member States and are used for
export.
The EU and Canada agreed to amend the harmonised export certificate for
ornamental bird
feed
that allows for Member States to export from storage centres located in other provincial
control units than were the manufactures are based.
Exports were unduly restricted by
Lobesia botrana
(European grapevine moths) related
requirements. Since 1 Jan. 2018,
kiwi fruit
(and some other fruits) are no longer covered by
Lobesia
rules.
Under the first SPS JMC meeting both sides identified a path forward to further identify ways
to
continue the important cooperation on animal welfare and antimicrobial resistance.
Several SPS issues are still outstanding
and are being further discussed with Canada
with a view to finding a solution. Some examples are:
Canada is not recognising the EU Member State Meat Inspection Systems despite a positive
follow-up of the Canadian inspection carried out in 2015. As a result of one third of the
Member States do not have access to the Canadian market for
meat,
produced under the EU
control systems and complying with the additional Canadian import requirements.
Export of EU
bovine semen
is limited only to Schmallenberg Virus serologically negative
animals, while no distinction from serological positive and serological negative animals
should be applied. Work on harmonised EU export certificates is slowed down by Canada on
equine semen, porcine semen, hatching eggs, day-old-chicken, poultry meat and its
products.
Export from the EU to Canada is not authorised for
potato mini-tubers and fresh
tomato with vines, stems, and calyces
due to restrictive plant health Canadian import
conditions. Also, for some plant commodities no alternatives are recognised by Canada for the
use of methyl bromide as a pest mitigating measure for trade.
Canada does not accept labelling requirements for the origin of grains used in preparation of
dried pasta introduced by Italy.
6.
C
ONCLUSIONS AND OUTLOOK
CETA is the most ambitious and progressive trade agreement the EU has concluded to date
and the most far reaching, both in terms of market access and trade rules, in particular in
setting new standards for investment rules.
CETA provides for significant savings on customs duties by eliminating duties on 99% of all
tariff lines, of which 98% have been scrapped at entry into force. It opens the Canadian
market for EU agricultural products, in particular for processed agricultural products and
cheeses where the EU has strong economic interests. It also offers the protection of 143
distinctive EU food and drink products labelled with GIs.
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CETA provides for a significant further opening of the Canadian procurement market,
including at provincial and local level, and gives unparalleled services market access for the
EU, including new market access in maritime services, and more globally establishes legal
certainty in all key economic sectors. It also includes provisions to facilitate the movement of
professionals and the recognition of qualifications.
The Commission will continue its work to ensure correct implementation of CETA in all
areas and will collaborate with EU Member States and stakeholders in order to make sure that
EU companies and citizens take full advantages of the benefits created by CETA.
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ANNUAL REPORT ON THE IMPLEMENTATION OF THE
EU-SOUTH KOREA FREE TRADE AGREEMENT
8
1.
I
NTRODUCTION
1 July 2018 marked the 7
th
anniversary of application of the Free Trade Agreement (FTA;
referred to as ‘the Agreement’) between the EU and its Member States and the Republic of
Korea (in this report referred to as "Korea"). The FTA has been provisionally applied since
July 2011. On 13 December 2015 it entered formally into force after ratification by EU
Member States. The Additional Protocol to the FTA to take into account the accession of
Croatia to the EU has been provisionally applied since 26 May 2014 and entered into force on
1 January 2016.
The EU-Korea FTA is the
first of a new generation of comprehensive FTAs
and the EU’s
first trade deal with an Asian country.
This is the 6
th
Annual Report on the implementation of the EU-Korea FTA. It is prepared in
accordance with the provisions of Regulation (EU) No 511/2011 of the European Parliament
and of the Council of 11 May 2011 implementing the bilateral safeguard clause of the Free
Trade Agreement between the European Union and its Member States and the Republic of
Korea
9
. According to Article 13(1) of this Regulation, the Commission shall make public an
annual report on the application and implementation of the Agreement. This report responds
to this requirement (see section 5 below).
On 18 May 2017 the European Parliament adopted a resolution
10
to take stock of the first five
years of implementation of the FTA between the EU and Korea, acknowledging the very
positive economic results of the agreement for the EU, while also expressing concerns on
some outstanding points and in particular as regards labour rights in Korea.
2.
2.1.
E
VOLUTION OF BILATERAL TRADE
Trade in Goods
1.1.1.
Overall Evolution
Overall, Korea was the EU’s 8
th
largest partner in terms of total EU external trade in 2017 and
the 4
th
largest FTA trade partner. Imports from Korea represented 2.6% of total imports into
the EU in 2010, and 2.7% in 2017, making Korea the EU’s 8
th
largest import origin in 2017.
EU exports to Korea represented 2.1% of total EU exports in 2010, and 2.7% in 2017. On the
Korean side, the EU’s share
in total Korean imports increased from 9.1% before the start of
application of the FTA to 12.2% in 2017, making the EU the 2
nd
largest Korean import origin
(after China). Over the same period of time, the EU’s share in total Korean exports declined
8
9
10
OJ L 127 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ:L:2011:127:TOC
OJ L 145, 31.5.2011, p. 19.
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-
0225&language=EN&ring=A8-2017-0123
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from 11.5% to 9.3%%
11
, making the EU the 3
rd
largest Korean export market. The EU was
Korea’s 3
rd
largest partner in terms of total trade (after China and US).
Between 2010 and 2017, EU exports to Korea increased by a significant 77%, from some
EUR 28 billion to EUR 49.5 billion. EU imports from Korea increased by some 27% over the
same period. As illustrated in Graphic 1 below, the initial EU deficit in goods trade with
Korea of EUR 11.5 billion turned into a trade surplus in 2013 but in 2017 Korea again shows
a small surplus of EUR 506 million.
Graph 1: EU Exports to and Imports from Korea, 2010-2017
Table 1: EU-Korea trade in goods, 2010- 2017
EU28 merchandise trade with South Korea (in million euro)
2010
2011
2012
EU imports from South Korea
39,534
36,312
38,014
EU exports to South Korea
27,961
32,515
37,815
trade balance
-11,573
-3,797
-199
Source: Eurostat June 2018
2013
35,837
39,911
4,074
2014
38,780
43,206
4,426
2015
42,370
47,787
5,417
2016
41,654
44,127
2,473
2017
50,026
49,519
-506
Between 2016 and 2017, total EU exports to Korea increased by 12.2% while EU imports
from Korea increased more strongly, by 20.1% supported by the revival of the EU economy
and strong domestic demand on the EU side. Buoyant bilateral trade between the EU and
Korea is in line with the overall strong global trade dynamics observed in the recent past. EU
trade with Korea accelerated more robustly (16% on average) in 2017 compared to overall
external trade of the EU which increased by 8% in 2017 compared to 2016, potentially
indicating i.a. the positive impact of the EU-Korea FTA in place.
Sector wise, the strongest increase of EU exports to Korea was registered i.a. in mineral
products, arms and ammunition and optical and photographic instruments while the strongest
increase in EU imports was in chemical products and transport equipment.
11
The EU's share in total Korean imports refers to Korea's imports from the EU as a share of Korea's imports
from the world. The EU's share in total Korean exports describes Korea's exports to the EU as a share of
Korea's exports to the world.
23
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1.1.2.
Trade in agricultural goods
With respect to trade in
agriculture goods,
last year saw a more dynamic growth in EU-
Korea bilateral flows, compared to the EU overall external trade in this sector.
Between 2016
and 2017,
EU exports to Korea and imports from Korea
in the agri-food sector
increased by
10% and 11% respectively, that is a more robust growth rate than the one observed for EU
agri-food exports and imports across all FTA partners taken together (which corresponded to
4% and 5% respectively). In 2017, the EU registered a surplus of 2.6 billion EUR in agri-food
trade with Korea. Looking at the time period between 2010 and 2017, EU agri-food exports to
Korea have increased by 113%, imports from Korea by 212% (albeit the latter from a very
low value, from 65 to 203 million EUR). Main products exported by the EU are pork (22% of
EU agricultural exports to Korea), followed by beer, cheese, chocolate, confectionery and ice
cream, spirits and liqueurs and wine.
The
main impediments
to expanding trade remained unchanged in 2017: Approvals of EU
beef (due to a Bovine Spongiform Encephalopathy (BSE)-related import ban) are still
pending, for some Member States since 2004, and also for poultry there was no progress in
eliminating market access barriers. Also for pork exports from the EU, the country-wide ban
for pork imposed on Poland due to African Swine Fever (ASF) has not been lifted by Korea.
South -Korea recently filed applications for beef exports to the EU, which might indicate a
stronger trade orientation in the Korean administration.
Table 2. EU-Korea trade in agrifood (2016-2017)
Agrifood trade EU28 with South Korea
South Korea
EU28 imports
EU28 exports
Balance
Total trade
Source Trade G2 Statistics/ISDB
2016
183
2 631
2 448
2 815
2017
203
2 891
2 688
3 094
Growth
mio €
annual %
20
10.9%
260
9.9%
240
279
9.9%
Source: ISDB
For agricultural products that are sensitive, the EU-Korea FTA created specific
tariff rates
quotas (TRQs).
The fill rate of the import quotas applied by Korea to goods originating in the
EU improved for 8 out of 11 product groups. Only in case of oranges the TRQ was not used
in the two reference periods.
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Table 3 EU-Korea FTA TRQ Fill Rates
Source: Korean authorities
1.1.3.
Preference Utilisation Rates
In 2017, the PUR on
exports from the EU to Korea
reached 74.3%,
the highest rate ever.
This compares to 71% in 2016, 68% in 2015, and 65% in 2014.
The PUR on
imports into the EU from Korea
reached 88% in 2017, increasing gradually
from 87% in 2016, 85% in 2015 and 84 % in 2014.
2.2.
Trade in Services and Foreign Direct Investment (FDI)
EU trade in services with Korea represents approximately 1% of extra-EU trade in services.
The EU has a trade surplus in this field of some EUR 6 billion in 2016.
In 2016 EU exports of services amounted to EUR 12.6 billion. This represents an increase of
70% compared to 2010 (though a decrease of 3.6% compared to 2015). In the same year
2016, EU imports of services from Korea amounted to EUR 6.6 billion. This represents an
increase of 38% compared to 2010 (but a 3.3% decrease compared to 2015).
Table 4: EU-Korea trade in total services (million EUR)
Source: Eurostat (BOP)
As regards
FDI,
in 2016, EU outward FDI stocks to Korea were equal to EUR 50.3 billion
and EU inward FDI stocks from Korea totalled EUR 19.3 billion thus the EU stocks in Korea
were about 2.5 times bigger than Korean stocks in the EU. EU inward FDI stocks increased
by 46% and outward FDI stocks increased by 34% between 2010 and 2016.
25
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Table 5: EU-Korea FDI (million EUR)
Source: Europsat (BOP)
3.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
The institutional provisions of the EU-Korea FTA (Article 15) established seven Specialised
Committees, seven Working Groups and an Intellectual Property (IP) Dialogue. The annual
meeting of the Trade Committee at ministerial level plays a supervisory role and ensures that
the FTA operates properly. From January 2017 till May 2018, most meetings of committees
and working groups, including the Trade Committee, took place in the EU, as summarised
below.
The
Trade Committee
met for the 7
th
time on 19 January 2018 in Brussels, co-chaired by
Commissioner for Trade, Ms Malmström, and Korea’s Minister for Trade, Industry and
Energy, Mr. Kim. Taking stock of the last six years of the FTA implementation the EU side
mentioned the more balanced trade flows between the EU and Korea, also pointing to the
EU’s industries perception of a deteriorating business environment in Korea. A trade surplus
in goods on the EU side remains a concern on the Korean side.
As regards FTA amendment discussions, the EU reiterated its interest in amending provisions
of the FTA even in a form of a small amendment package limited to the Rules of Origin
Protocol. Korea would like to see a discussion on implementation of rules of origin issues in
the Customs Committee and of amendments issues in the informal FTA amendment working
group.
The EU reiterated serious concerns on insufficient progress on the ratification and
implementation of International Labour Organization (ILO) conventions and on protection of
labour rights in Korea, pointing to the European Parliament and Civil Society call for a formal
dispute settlement procedure under the TSD chapter of the FTA. The EU also strongly
emphasised the need to allow EU beef exports to Korea. Other issues addressed included:
clarifications on the EU modernisation of Trade Remedy rules; other SPS and customs related
issues, including Korean market access of chicken soup with ginseng, Surimi (fish); IPR
issues including Public Performance Rights and the addition of 46 EU GIs to the list of
protected GIs under the FTA; and services related issues.
Both sides agreed to follow-up the discussed implementation and market access issues in the
context of the respective Specialised Committees and Working Groups.
On 7 April 2017, the
Customs Committee
met in Seoul. It addressed issues related to the
rules of origin, such as the interpretation of primary ingredient of surimi base, origin
verification procedures and the approved exporter system, as well as the technical update of
product specific rules from HS2007 to HS2017. The parties also discussed cooperation on
European Anti-fraud Office (OLAF) investigations on the circumvention of trade defence
measures concerning stainless steel tube and solar panel modules originating in Chin. The EU
26
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provided a general explanation on the legal and practical requirements that need to be fulfilled
for the mutual recognition of Authorised Economic Operators.
The 6
th
meeting of the
Working Group on Pharmaceuticals and Medical Devices
took
place on 12 June 2017. In the area of pharmaceuticals, both sides discussed possibilities to
enhance regulatory cooperation via various channels, both bilaterally and multilaterally via
the ICH (International Council for Harmonisation of Technical Requirements for
Pharmaceuticals) platform. Moreover, upon EU request the Korean side defended their
revised pricing policy for pharmaceuticals, notably with regard to their new so-called
‘7.7
pricing policy’ which amends the conditions to satisfy for selecting “Innovative
Pharmaceutical Companies” (IPCs) to reward innovation for new pharmaceutical products.
Concerning medical devices, the WG offered the opportunity to exchange information and
provide clarification i.a. on new UDI (Unique Device Identifier) rules of both Korea and the
EU.
The
Working Group on Motor Vehicles and Parts
met in Seoul on 13 June 2017 and
addressed environmental issues, technical standards, harmonization, convergence and market
access issues. EU and Korea concluded an agreement on the technical update of Annex 2-C.
During the Working Group, the parties discussed further sharing of information on Real
Driving Emissions and EU clarified aspects of the EU Whole Vehicle type approval
(ECWVTA). Market access issues discussed included, inter alia, truck-tractors, self-
certification and marking of car parts, restricted market access for certain vehicle types,
vehicle width limit, homologation certificates, policies affecting imports of motorbikes and
extended producers responsibility for end of life vehicles .
The
Working Group on Chemicals
met for the 5
th
time on 14 June 2017, following a break
since 2015. Both sides engaged in useful exchanges on chemicals-specific issues of interest to
both sides, including the functioning
of the EU’s REACH regulation and the Korean ‘K-
REACH’ legislation. Furthermore, the Korean side replied to a set of specific EU questions
concerning the planned adoption of the draft K-BPR (Biocidal Products Regulation)
legislation which
in case
it is successfully adopted by Korea’s National Assembly –
is
expected to be implemented as of January 2019. Importantly, the Korean side confirmed that
there will be a 10-year transition period following the entry into force of the K-BPR
legislation, which will allow industry to adapt to the new K-BPR regime.
12
The
Committee on SPS Measures
met in Sejong/Korea on 6 September 2017. The Parties
discussed pending applications for import of EU beef, the recognition of regionalisation
measures for avian influenza and African swine fever, and policies related to the control of
hepatitis E. The EU also raised certification issues related to goods sourced or manufactured
in one EU Member State and shipped to Korea via another Member State as well as the
quantity of sample collection for compliance testing at Korean border controls. Korea
requested to discuss the pending application for export of chicken-ginseng soup to the EU as
well as new applications related to Korean beef and dairy products. The EU informed about
the revised phytosanitary law laid down in Regulation (EU) 2016/2031
13
and offered a one-
12
This is problematic due to its large scope: the draft Korean BPR Act covers even sellers and distributors
whereas under the EU's BPR only manufacturers and importers (or "Only Representatives" designated by
foreign companies) have to comply with the approval and authorisation requirements as regards active
substances and biocidal products.
13
OJ L 317, 23.11.2016
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32016R2031
27
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day seminar to discuss measures related to the prevention and control of BSE that was held in
Seoul on 7 September 2017.
On 14 June 2017, the 6
th
meeting on the
Trade in Goods Committee
took place in Seoul.
Regarding the overall implementation of the FTA both sides assessed it as an exemplary FTA
that realises a high level of comprehensive market opening, playing a significant role as a
useful platform for bilateral economic cooperation. Next, the results of the
Electronics
Dialogue
that took place beforehand were discussed, which covered a wide range of issues
(risk assessment review of Articles 4 and 5 of Annex 2-B of the FTA, extension of the scope
of Annex 2-B to include radio equipment testing, state of play of the implementation of the
EU Eco-design Directive for TV and Display, EU Eco-design regulations implementation,
notification of list of laboratories/acceptance of test reports and EU Energy labelling
regulations implementation). Market access issues of the EU cosmetics industry were raised
again, namely the amendment of Korean law related to the reporting of cosmetic ingredients.
Furthermore, new alcohol labelling requirements in Korea and labelling restrictions on EU
imported foods and livestock products were raised. The EU side also requested more
information on the Korean legislation regarding prohibited subsidies, expressing concerns on
Korean support plans for the local shipbuilding industry. Information was also requested on
safety certification for machinery in Korea. Finally, the Parties discussed preparations of the
Trade Committee.
On 7 July 2017, back-to-back with the International KTC Seoul Forum on Trade Remedies,
the EU and Korea held their annual meeting of the bilateral
Trade Remedy Cooperation
Working Group,
established under the EU-KOR Free-Trade Agreement, in Seoul. The two
sides updated each other on latest developments in domestic trade remedy laws, policies and
practice. The EU side notably informed Korea of the progress on two EU draft legislative
proposals, namely the so-called
‘modernisation of trade defence instruments’ and the ‘new
anti-dumping
methodology’
which entered into force in the meantime.
14
. The two sides shared
statistics on Trade Defence cases and exchanged views on global trends in trade remedy
investigations, and related WTO litigation.
The meeting of the
Working Group on Government Procurement
took place in Seoul on
13 September 2017. The Parties provided information on recent legislative developments,
discussed market access issues, in particular concerning the railway sector, and exchanged
views on cooperation on SME policy now that Korea’s Small and Medium Business
Administration has been transformed into a fully-fledged ministry with policy-issuing
capabilities. Among other issues, the EU inquired about a possible interest from the Korean
side to integrate a machine translation tool for tender notices in its e-procurement portal. The
Parties agreed to further enhance their cooperation.
On 13 April 2018, the
Committee on TSD
met in Seoul. The parties exchanged views on
their respective environmental and labour policies. Chapter 5 below presents these issues in
more detail.
The 5th EU-Korea meeting of the
Cultural Cooperation Committee
was held on 9 April
2018 in Brussels and it was followed by a 2 day study visit to Leuven and Brussels. The
14
OJ L 338/1 2017 and OJ L148 2018
28
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topics discussed were cultural exchange, culture and cities, new developments in the cultural
and creative sectors and the protection of cultural heritage sites and historic monuments.
The
Intellectual Property Dialogue
took place in Brussels on 29 May 2018. Both sides
provided updates on their legislative and policy developments as well as relevant court cases,
in particular on copyright, patents and enforcement. The EU side expressed its concerns about
the lack of implementation of the FTA provisions on public performance rights, pending the
revision by Korea of the Copyright Act, and underlined the economic importance for both the
EU and Korea of this issue.
The 6
th
meeting of the
Working Group on GIs
was held in Brussels, on 30 May 2018. The
extension of the initial list of EU GIs remains a significant irritant with respect to the
implementation of the FTA provisions on protection of intellectual property. With the
approximation of both sides’ positions on the draft rules of procedures of the said Woking
Group, the EU is now expecting Korea to now examine the 2014 EU request to add 46 GIs to
the list of GIs protected under the FTA.
4.
I
MPLEMENTATION
DEVELOPMENT
15
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
The Commission stepped up its engagement with the new Korean administration on
implementing commitments under the TSD Chapter related to labour and environment.
The sixth meeting of
the TSD Committee
was held in Seoul on 13 April 2018, back-to-back
with the sixth
Civil Society Forum.
This allowed the EU and Korea to continue their
dialogue and cooperation on implementing the TSD Chapter.
With regard to the discussion on labour policies, the EU strongly emphasized the need of
ensuring progress in the implementation of the shared labour commitments under TSD
Chapter of the Korea-EU FTA, notably commitment to
‘respect and realise in their laws and
practices’
the ILO fundamental rights, including the freedom of association and the right to
collective bargaining and the commitment to make
‘continued and sustained efforts’
towards
ratifying of outstanding ILO conventions (that is, Convention 87 on freedom of association;
Convention 98 on the right to organize and collective bargaining; Convention 29 on forced
labour; and Convention 105 on abolition of forced labour).
In this context and ahead of the sixth TSD Committee meeting the Commission used a
multitude of other channels to communicate its concerns regarding the labour rights situation
in Korea and to press for further progress. The concerns were raised at the Trade Committee,
in correspondence from the Commissioner for Trade to her Korean counterpart and in
numerous bilateral contacts, including by the EU Delegation in Korea.
In response to a series of detailed EU questions Korea provided information on the domestic
context and the efforts the government is making towards ratification of four outstanding
fundamental ILO conventions on their reforms on freedom of association.
In this context Korea informed that the government established an
Expert Committee with
the task of analysing of differences between national laws and the outstanding
15
For the latest report of the TSD Committee see:
http://trade.ec.europa.eu/doclib/html/157105.htm
29
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fundamental ILO conventions,
and of producing recommendations by July 2018. Based on
these recommendations, the tripartite partners
16
are supposed to discuss specific ways to
improve laws and systems necessary for the ratification of the ILO fundamental conventions.
The Korean government expects that the outcome of these tripartite discussions at the end of
2018 will allow the government to submit a legislative package to the National Assembly at
the earliest possible moment.
The EU welcomed this move and emphasized that it will monitor the process closely and will
react accordingly. The Commission considers that further enhanced bilateral engagement in
this regard as necessary. The EU also provided information on the EU Pillar of Social Rights.
The TSD Committee meeting also discussed
environmental policy issues,
where the EU and
Korea exchanged information on their respective actions on
green growth, circular economy
and climate change.
Korean provided a general overview of the Framework Act on Resource Circulation, which
entered into force as of 1 January 2018. The EU explained its strategy for plastics while
emphasizing the need for a new approach to the management of micro plastics. Both sides
mutually agreed to provide various types of information in the follow-up to the meeting and
deepen cooperation on plastic management.
As regards the climate policies, Korean explained how Paris Agreement is being implemented
in Korea and both parties further discussed ways to strengthen cooperation on climate change.
The EU side mentioned that the cooperation on the Emissions Trading Scheme between the
EU and Korea has been successfully operated so far, yet more profound policy discussions on
carbon pricing would be desired. The EU also referenced to initial discussions on the new
cooperation project on the implementation of the Paris Agreement discussed at the Joint
Committee in Brussels in December 2017 and proposed to advance together this project with
the target of organizing the relevant events in 2019, possibly at the margins of next UNFCCC
National Adaption Plans (NAP) Expo in April 2019. Both sides agreed to share policies and
information on carbon pricing and other relevant areas in the follow-up to this meeting.
The implementation of the TSD Chapter was also supported by an active participation from
civil society through the EU and Korean Domestic Advisory Groups (DAG) which have held
a series of regular meetings and exchanges over last year. The EU DAG was particularly
active in presenting members’ opinions regarding the labour rights situation
in Korea.
The sixth meeting of the
Civil Society Forum,
which brings together the EU and Korean
DAGs, took place on 11 April 2018 in Seoul. It had insightful discussions and made
recommendations to the parties on circular economy, environmental risk factors, gender pay
gap and on labour standards. The Forum issued recommendations in the form of a
Joint
Statement by the Chairs of the Korea DAG and the EU DAG
to the EU and Korea on the
implementation of the TSD Chapter.
16
Government, representatives of the business community and representatives of the workers (trade unions).
30
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5.
S
PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING
In accordance with article 3 (3) of Regulation (EU) No 511/2011 of the European Parliament
and of the Council of 11 May 2011 implementing the bilateral safeguard clause
17
, the
Commission shall present an annual monitoring report to the European Parliament and the
Council on updated statistics on imports from Korea of products in sensitive sectors and those
sectors to which monitoring has been extended. The evolution of
EU imports from Korea in
the sectors covered by the monitoring (cars, textiles, electronics)
and the results of the
specific monitoring on duty drawback and TRQs are presented below.
In order to apply a unified methodology across the Annual Report on FTA Implementation,
the current report data is presented in calendar years and not in July-June intervals unlike in
the previous monitoring reports. Furthermore, for sake of completeness and to get a better
assessment of the situation and trends of exports, this report uses statistical regime 4 of
Eurostat (representing total trade including trade under inward and outward processing
procedures) unlike previous monitoring reports, which were based on statistical regime 1
(normal trade). The comparison under the monitoring exercise is based mainly on quantities
imported from Korea to the EU, i.e. units in the case of cars and 1 000 kg in the case of car
parts, textiles and electronics.
(i) Car sector
EU imports of cars from Korea increased by 16% in 2017 in number of cars, compared to the
previous year. The current level of car imports is significantly higher (by 55%) compared to
2010, the last year before the implementation of the FTA.
Table 6. EU-Korea trade in cars
(ii) Textile sector
The decreasing trend in textile imports observed since 2013 stabilised in 2017. EU imports of
textiles from Korea increased slightly in value terms in the 7
th
year of FTA implementation
compared to 2016 but remained unchanged in terms of volume, hovering at around
2 million kg. on a quantitative basis. Imports in 2017 were lower compared to 2010, the last
year before the implementation of the EU-Korea FTA.
17
OJ L 145, 31.5.2011, p. 19.
31
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Table 6 EU-Korea trade in textiles
(iii) Electronics Sector
EU imports of electronic goods from Korea have been decreasing in quantitative terms for the
last three years. Imports at around 4 million kg in 2017 were lower compared to the previous
year, and significantly below the level of some 9 million kg reached in the reference base year
of 2010.
Table 7 EU-Korea trade in electronics
Source: Comext (to be confirmed by G2)
Duty drawback
In line with the Article 14 of the Rules of Origin Protocol, a specific monitoring has been
carried out on key car parts and electronics.
Source: Comext
32
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In conclusion, there was no significant increase in imports of car components and key
electronics from China and Japan to Korea in 2017 compared to 2016. Based on these trade
statitics, it is not possible to establish a link between the allowance of duty-draw back and the
increase in EU imports of cars from Korea.
6.
P
ROGRESS
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Enforcement of the
TSD
chapter of the FTA, i.e. insufficient progress on the ratification and
implementation of ILO conventions and on protection of
labour rights
in Korea remains a
serious concern to the EU. The Commission stepped up the engagement with Korea in order
to address them, and continue its cooperation with the EU DAG and with the Civil Society
Forum comprised of stakeholders from all sides.
The EU has a particular interest in exporting again
beef
to the Korean market which has been
closed to all EU imports since January 2001. The acceptance of the principle of
regionalisation for animal diseases by Korea is another important topic in the sanitary and
phyto-sanitary area.
In the area of
Intellectual Property,
Korea needs to establish a remuneration system for
public performance rights. It also needs to agree to protect additional GIs and accept the
principles of the regulatory framework for postal services. Other market access and
implementation issues relate inter alia to electronics, cars and machinery.
Korea also needs to accept the
principles of the regulatory framework for postal services.
Other market access and implementation issues relate inter alia to electronics, cars and
machinery.
Improvements in the areas of
customs procedures
could contribute to increase the PUR, and
further facilitate the participation of small and medium sized enterprises (SMEs).
Technological changes, for instance in the area of electronics, will require adaptations.
18
7.
C
ONCLUSIONS AND OUTLOOK
Over the seven years of application, the EU-Korea FTA brought tangible results as illustrated
by the strong and balanced bilateral trade flows. Though some difficulties persist as outlined
in section 7, in the vast majority of areas the implementation works well and strongly supports
economic development on both sides. This was also recognised in the resolution of the
European Parliament which was adopted on 18 May 2017
19
.
Full and correct implementation of the EU-Korea FTA continues to be of key importance, in
order to bring the expected benefits to both sides. The specialised
committees and working
groups
established under the EU-Korea FTA will continue to discuss and seek solutions to
the remaining implementation and market access issues, with the aim to produce tangible
results. They have also proven to be useful fora to discuss current and up-coming regulatory
developments and areas of future cooperation.
18
19
Such is the case of radio equipment given that the use of radio components in electronic products is
exponentially increasing and many devices now use this technology for connection purposes.
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-
0225&language=EN&ring=A8-2017-0123
33
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Furthermore, the Commission will pursue exploratory discussions with Korea on a package of
amendments
to the FTA or its protocols, with the aim of reaching a balanced and mutually
agreeable outcome.
34
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ANNUAL REPORT ON THE IMPLEMENTATION
OF THE EU-COLOMBIA/ECUADOR/PERU TRADE AGREEMENT
20
1.
I
NTRODUCTION
2017 marked the
fifth year of implementation
of the Trade Agreement between the
European Union and its Member States, of the one part, and
Colombia and Peru,
of the other
part
21
, as amended by the Protocol of Accession of
Ecuador
(‘the Agreement’). The
Agreement has been provisionally applied with Peru since March 2013, with Colombia since
August 2013, and with Ecuador since 1 January 2017. Ratification by Member States of both
the Trade Agreement and the Protocol of Accession of Ecuador is ongoing
22
. This is the first
report which accounts for the implementation of the Agreement with all three Andean partner
countries.
The Agreement was also amended through the
Protocol of Accession of Croatia
to the EU.
After completion of the ratification procedure by Peru on 6 April 2017, this Protocol entered
into force with Peru on 1 May 2017. The ratification process by Colombia is ongoing.
This report shows that the
results after almost five years of provisional application
in the
case of Peru and Colombia, and one year in the case of Ecuador,
are positive.
Bilateral trade
in 2017 increased with all three countries, and the Agreement had a stabilising effect in the
context of declining commodity prices which affected the economy of Andean Community
countries. The Agreement offers tariff-free access for virtually all industrial and fishery
products from the three countries, and substantial tariff preferences for the few agricultural
products which were not fully liberalised, with very few exceptions. This improved market
access, more predictable trade and investment relationship and the better rules have helped
partner countries diversify trade and notably Andean Community country exports. Regarding
EU exports, several industrial sectors including pharmaceuticals, machinery and vehicles,
have also strongly benefitted from the improved market access.
The Parties are dedicating important resources to the implementation process through the
work in the bodies under the Agreement, notably the Trade Committee and its eight
specialised Sub-committees. The Trade Committee and its Sub-Committees have met on an
annual basis since the provisional application of the Agreement with Colombia and Peru in
2013. In 2017, Ecuador attended the meetings for the first time. The Trade Agreement with
Colombia, Ecuador and Peru is based on commitments on liberalisation of goods, services and
procurement markets taken bilaterally between the EU and each Andean partner.. The
institutional structure of the Agreement is common and the Trade Committee and the Sub-
committees take place in the presence of all Parties, with an agenda addressing the bilateral
issues that may arise between the EU and each Andean FTA partner country, or between the
EU and the three Andean partner countries, as relevant. In November 2017, the Trade
Committee and Sub-committees met in Lima (Peru). While not all market access issues have
been solved, constructive discussions on issues such as spirits, tariff-rate quotas management
20
21
22
See more information at:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/andean-community/
OJ L 354, 21.12.2012, p. 3.
Trade
Agreement
with
Colombia
and
Peru
(http://www.consilium.europa.eu/en/docuents-
publications/agreements-conventions/agreement/?aid=2011057)
and Protocol of Accession of Ecuador
(http://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2016044).
35
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and vehicles have contributed to facilitating trade in both directions and increasing EU market
access in a concrete manner in all the three Andean markets. In addition, the EU and
Colombia adopted a Decision in the Trade Committee on public procurement clarifying the
coverage in Colombia at sub-central level, which should improve market access for EU
companies.
In accordance with Article 13 of
Regulation (EU) No 19/2013 of the European Parliament
and of the Council of 15 January 2013 implementing the bilateral safeguard clause
and
the stabilisation mechanism for bananas of the Trade Agreement between the European Union
and its Member States, of the one part, and Colombia and Peru, of the other part
23
(‘Regulation’), the Commission committed
to submit an annual report to the European
Parliament and the Council on the application, implementation and fulfilment of obligations
of the Agreement and the Regulation. This report responds to this requirement (see section 5
below).
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The present section focuses on bilateral trade in goods as well as on Non-Agricultural Market
Access (NAMA) products. As per the definition in the WTO Agreement on Agriculture, these
non-agricultural products include industrial goods, manufactured goods, textiles, fuels and
mining products, footwear, jewellery, forestry products, fish and fisheries, and chemicals.
Colombia
Overall evolution
The EU remains Colombia’s second trading partner, after the US but ahead of China.
The
negative trend in bilateral trade in 2015-2016 was reversed in 2017 with a 7% increase. This
positive result is due to increased domestic demand in the EU and a slight recovery of
commodity prices, and despite the fact that Colombia’s economy slowed
markedly in recent
years. Compared to 2012, the year before the application of the Agreement, bilateral trade was
18.2% lower, in line with the decrease of Colombia’s total trade with the rest of the world of
20.8% during the same period. In 2017, the EU accounted for 14% of total merchandise trade
of Colombia, up from 13.2% in 2016.
In 2017, bilateral trade amounted to EUR 11.6 billion, compared to EUR 10.8 billion in 2016.
While historically Colombia ran a trade surplus with the EU, this trend reversed somewhat
and the EU now posts a slight trade surplus of EUR 367 million.
EU exports to Colombia increased by 10.5% in 2017 to EUR 5.9 billion. This increase is
driven by a better export performance of industrial goods, notably machinery products,
plastics, aluminium and steel, as well as paper products. Imports to Colombia from the rest of
the world had an increase of 1.9% during the same period.
EU imports from Colombia amounted to EUR 5.6 billion in 2017, increasing from
EUR 5.4 billion in 2016, representing a 3.5% growth. It is noteworthy that overall exports
23
OJ L 17, 19.1.2013, p. 1.
36
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1960849_0038.png
from Colombia into the EU increased despite a strong decline in Colombia’s exports of
mineral products to the EU.
Figure 1: EU-Colombia bilateral trade in goods 2012-2017 (million EUR)
10.000
8.000
6.000
Imports
4.000
Exports
2.000
Balance
0
-2.000
Source Trade G2
-4.000
Source: Eurostat
16/05/2018
EU-Colombia trade in non-agricultural products
EU exports to Colombia of NAMA products amounted to EUR 5.58 billion in 2017,
increasing by 10.8%. The most important categories in 2017 were:
Machinery and mechanical appliances, representing 19.6% of EU exports, increasing
by 34.6% compared to 2016. Notably, turbojets, turbopropellers and other gas turbines
increased by 747% to EUR 159 million;
Pharmaceutical products, accounting for 12.1% of exports, increasing by 4.1%;
Vehicles and parts, 7.9% of EU exports, increasing by 2%.
EU imports from Colombia of NAMA products amounted to EUR 3.2 billion in 2017,
decreasing by 2.8% compared to the previous year. The main categories in 2017 were:
Minerals, representing 46.1% of EU imports from Colombia, versus 52.1% in 2016;
Machinery and mechanical appliances, representing 1.7% of EU imports, an increase
of 187% compared to 2016.
Semi-precious stones (mainly emeralds and gold); increased by 32.9%, now
representing 1.6% of imports.
Peru
Overall evolution
The EU
is Peru’s third trading partner, after China and the US. In 2017, bilateral trade
increased by 16% compared to 2016, while Peru’s overall trade with the rest of the world
increased by 13% during the same period.
Bilateral trade amounted to EUR 10.2 billion in 2017, a 16% increase compared to 2016, with
the EU’s trade deficit increasing from EUR
1.5 billion to EUR 2 billion.
EU imports from Peru increased by 18.7% compared to 2016, thus growing twice as fast as
Peru’s total exports (9%).
37
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EU exports
to Peru have grown by 12.2% over the same period, while Peru’s total imports
increased by 19%.
Figure 2: EU-Peru bilateral trade in goods 2012-2017 (million EUR)
Source: Eurostat
EU-Peru trade in non-agricultural products
EU exports to Peru of NAMA products amounted to EUR 3.8 billion in 2017, increasing by
12.9% (from EUR 3.37 billion in 2016). The most important categories in 2017 were:
Machinery and mechanical appliances, notably spare parts, pumps and valves,
representing 24% of EU exports; Electrical machinery and equipment, accounting for
12% of total exports to Peru increased by 31% compared to 2016;
Vehicles and parts, 7% of EU exports, remaining equal compared to 2016;
Pharmaceutical products, accounting for 5% of exports, increasing by 13% compared
to 2016.
EU imports from Peru of NAMA products have increased strongly by 32.9% amounting to
EUR 3.93 billion in 2017 (from EUR 2.96 billion the previous year). The main categories in
2017 were:
Minerals have increased by 41.8% compared to 2016 and represent 29.5% of EU
imports from Peru, versus 24.5% in 2016;
Mineral fuels, representing 11% of EU imports, an increase of 81% compared to 2016
(mainly gas);
Copper articles increased by 20%, now representing 4.5% of imports;
Fish and crustaceans, representing 4.3% of imports, increased by 5% compared to
2016.
Ecuador
Overall evolution
The EU remains Ecuador´s second trading partner, behind the US and ahead of China, and
represents 15% of Ecuador total trade with the world. The results of the first year of
implementation of the Agreement have been very good. Bilateral
trade increased by 20.4%
from EUR 4.36 billon to EUR 5.25 billon over the 2016-2017 period.
The
immediate
elimination of tariffs for most of Ecuador’s exportable supply and the progressive
elimination
of tariffs on EU products have surely been an important factor in this. The elimination of
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safeguards and other unilateral restrictions in Ecuador also helped to encourage trade and sent
a positive signal to investors. Ecuador maintains a trade surplus with the EU
(EUR 803 million).
EU exports to Ecuador increased by 36.2% year-on-year (from EUR 1.64 billion in 2016 to
EUR 2.23 billion in 2017), recovering from the fall observed between 2014 and 2016, but still
under 2012 figures, when EU exports registered a peak.
EU imports from Ecuador also increased but by lower percentage, 10.8% year-on-year (from
EUR 2.72 billion in 2016 to EUR 3 billion in 2017), reaching a record high.
Figure 3: EU-Ecuador bilateral trade in goods 2012-2017 (million EUR)
Source: Eurostat
EU-Ecuador trade in non-agricultural products
EU exports to Ecuador of NAMA products amounted to EUR 2.1 billion in 2017, increasing
by 36.6%. The most important categories in 2017 were:
Machinery and mechanical appliances representing 18.2% of total EU exports,
increasing by 10.7% compared to 2016; Electrical machinery represented 6.3% of
exports, increasing by 10.3%;
Mineral fuels exports accounted 17.6% of the market share, increasing significantly by
119.8%;
Pharmaceutical products represented 6.9% of total exports, however exports decreased
by 2%;
Other products such as ceramics and vehicles also recorded significant increases in
2017 (110% and 138% respectively) as a result of tariff dismantling and the
elimination of domestic fees or quotas.
At the same time, EU imports of NAMA products from Ecuador amounted to
EUR 1.45 billion, or 48.1% of total EU imports from Ecuador, increasing by 17.2% compared
to 2016. The key categories in 2017 were:
Fish and crustaceans (shrimps) registered a small increase of 2.2%, accounting for
22.4% of Ecuador’s total exports to the EU;
Preparations of meat and fish (tuna) registered a strong increase of 45.2% accounting
for 22.1% of total EU imports from Ecuador;
Mineral products increased by 514.7% in 2017, but account for only 0.6% of
Ecuador’s exports to the EU.
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Preference Utilisation Rates for EU-Colombia, Ecuador, Peru
In the context of the Sub-committee on Market Access, the Parties agreed in 2015 to
exchange on an annual basis data on PUR. The EU stressed the need to have reliable data to
get a better overview of the effect of the Agreement so far and explore means to assist
economic operators, in particular SMEs, to make better use of its opportunities.
For 2017, EU statistics
indicate that approximately 97% of Colombia’s and Ecuador’s exports
to the EU are made using the tariff preferences established by the Agreement, while 96% of
Peru’s exports make use of these preferences. The PUR on exports from the EU to Colombia
for 2017 was 68%, a slight decrease from 71% in 2016. For Peru, PUR of EU exports have
been rising over the past three years, albeit from a rather low level (28% in 2015; 47% in
2016 and 52% in 2017). The PUR on exports from the EU to Ecuador in the first year of the
application of the agreement was 42%.
2.2.
Trade in agricultural goods
This section focuses on agricultural products as defined by Article 2 of the WTO Agreement
on Agriculture and as listed in Annex 1 of the same agreement.
Colombia
EU exports to Colombia of agricultural products increased by 6% in 2017, and were
dominated by:
Beverages and spirits (HS22) at EUR 88 million, or 22% of EU exports of agricultural
products to Colombia;
Preparations of a kind used in animal feeding (HS2309) increased by 48 times, now
representing 0.9% of EU exports;
Preparations of cereals, flour, starch (HS19) and vegetables, fruits, nuts & plants
(HS20) account for 0.6% of exports each.
EU imports of agricultural products from Colombia increased by 13% from 2016 to 2017,
reaching a total of EUR 2.4 billion. The most important categories in 2017 were:
Fruits (HS08), accounted for 19.4% of total imports, up by 12% compared to 2016.
Bananas represent 84.3% of all fruits exported, followed by avocados with 5.4%.
From 2016 to 2017 there was a strong increase in exports of bananas (10%), plantains
(10.1%), dried pineapples (56.5%), avocados (40.2%), guavas, mangoes and
mangosteens (26.7%), oranges (80.3%), and lime (54.1%);
Coffee (HS09), increasing by 4%, represents 10.8% of EU imports;
Crude palm oil (HS151110), 5.17% of imports, and crude palm kernel, 1% of imports,
posted increases by 75.5% and 6.7% respectively.
Total EU imports of agricultural products from Colombia increased by 55.3% since 2012, and
now account for 42.7% of Colombian exports to the EU, versus 17.8% in 2012.
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Peru
EU exports to Peru of agricultural products increased by 4% in 2017. The most important
categories in 2017 were:
Beverages and spirits (HS22), accounting for 25% of total EU exports of agricultural
products to Peru;
Preparations of vegetables (HS20), increased by 32% compared to 2016;
Dairy products (HS04), posting a strong 51% increase compared to 2016 thanks to the
introduction of a harmonized import certificate.
EU imports of agricultural products from Peru decreased by 2.1% from 2016 to 2017. The
most important categories in 2017 were:
Fruits (HS08), accounted for 16.3% of total imports, up 9% compared to 2016;
Avocados accounted for 38% of all fruits exported, a 21% increase, followed by
mangos with 15% (-0.4%), fresh grapes for 14% (-3%), fresh cranberries for 9% (-
7.6%), fresh bananas for 9% (+1.7%);
Coffee (HS09) now represent 6.6% of total Peruvian exports to the EU;
Total EU imports of agricultural products from Peru increased by 39.5% since 2012.
Agricultural products now account for 35.2% of Peruvian exports to the EU, versus 24.4% in
2012.
Ecuador
EU exports of agricultural products to Ecuador grew by 34% year-on-year. This should
hopefully further increase once the SPS chapter of the Agreement has been fully
implemented, and that certain barriers to imports on the Ecuadorian side are eliminated. Key
EU exports of agricultural products were:
Miscellaneous edible preparations exports (HS21) grew by 19% corresponding to a
0.86% of total exports;
Beverages and spirits (HS22) exports increased substantially by 262% and occupied
0.8% of EU total exports.
EU imports of agricultural products from Ecuador reached a total of EUR 1.57 billion. The
EU consolidated its position as the first trading partner for Ecuadorian non-oil exports.
The
most important categories were:
Fruits (HS08) grew by 17% year-on year, and represented 31.5% of total EU imports,
with banana imports accounting for almost 94% and growing by 17% in 2017. Other
fruits grew as well: pineapple by 27% and tamarind by 49%;
Live trees and other plants (mainly fresh cut flowers) (HS06), remained stable and
accounted for 6.2% of Ecuador’s exports to the EU;
Cocoa and cocoa preparations (HS18) decreased by 13%, and account for 6.1% of
total EU imports.
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Ecuador exports of agricultural to the EU increased by 5% in 2017 compared to 2016; and
represent 55% of total Ecuadorian exports to the EU.
Use of Tariff-rate quotas
The Agreement provides for TRQs (TRQs) which grant the other Party preferential tariff
treatment up to the quota’s quantitative threshold, above which imports are subject to the
applicable Most-Favoured Nation tariff.
Colombia
Colombia’s use of the TRQ for cane or beet sugar and chemically pure sucrose has
increased
from 88.4% in 2013 to 94.8% in 2017. Other TRQs are hardly or not utilised.
Table 1: Rate of utilisation of EU TRQs by Colombia
2013
Cane sugar and chemically pure sucrose 88.4%
Other sugar confectionery
1.4%
Source: TAXUD, Surveillance Database
2014
2015 2016
85.7% 93.8% 96.2%
1.3% 1.2% 1.5%
2017
94.8%
1.5%
The EU is fully using the TRQs established for mushrooms, preparations for infant use and
sweetcorn, to a somewhat lesser extent TRQ on yogurt, ice cream (though increasingly
through a better implementation of the Agreement), and barely its TRQs on cheese (possibly
due to a slowdown in domestic demand in Colombia) and on sugar confectionery (less than
4% in 2017).
Table 2: Rate
of utilisation
of Colombia
TRQs by the
EU
Mushrooms
Milk and
cream in
powder
Whey
Preparations
for infant use
Yogurt
Sweetcorn
Ice cream
Cheese
Sugar
confectionary
2013
2014
2015
2016
2017
1.6%
0%
57.6%
40.4%
0%
0.42%
5.26%
9%
1.8%
5%
34.9%
50%
67.5%
0.5%
54.2%
13.4%
8%
3.4%
100%
100%
92.9%
99.1%
0.8%
100%
7.4%
8.2%
3.1%
100%
100%
No more
TRQ
100%
100%
100%
25.9%
7.9%
3.8%
100%
82.6%
No more
TRQ
100%
99%
100%
45.7%
3.1%
3.9%
Source: DIAN (Dirección de Impuestos y Aduanas Nacionales)
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Peru
TRQ for cane sugar has been almost fully utilised by Peru. TRQ for corn has also a high rate
of utilisation. Peru is starting to take advantage of the TRQ on garlic. Other TRQs have very
low utilisation rate.
Table 3: Rate of utilisation of EU TRQs by Peru
Cane sugar
Sweetcorn
Garlic
Rum
Maize (corn)
Sugar
confectionery
2013
100%
21%
0%
0%
0.7%
0.02%
2014
100%
76%
0%
0%
2.9%
0.01%
2015
3.5%
83.2%
2.4%
0%
1.8%
0.16%
2016
99.8%
87.3%
53.8%
7%
6.1%
0.1%
2017
100%
35.4%
54.2%
0%
1.7%
0.2%
Source: TAXUD, Surveillance Database
The EU is fully using the TRQ established by Peru for milk powder and almost fully for ice
cream and butter thanks to the harmonized certificate for dairy products. Other TRQs are
barely used.
Table 4: Rate of utilisation of Peru TRQs by the EU
Butter
Cheese
Ice cream
Milk powder
Milk for babies
Chewing gum
Sugar
Rum
2013
0%
0%
58.6%
0%
0%
0.3%
0%
3.5%
2014
0%
0%
89.6%
4.1%
0%
0%
0%
0.0%
2015
96.0%
0%
98.5%
99.7%
0%
0.1%
0%
3.5%
2016
100%
4.3%
95.6%
100%
29.9%
2.20%
0.8%
5.8%
2017
82%
5.4%
94.2%
100%
0.0%
3.4%
0.0%
4.2%
Source: SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria)
Ecuador
Few of the EU’s TRQs for Ecuador’s exports have been used during the first year of
implementation of the Agreement.
Only TRQs that were used are mentioned.
Table 5: Rate of utilisation of EU TRQs by Ecuador in 2017
Products
Sweet corn and other vegetables
Sugar cane
Confectionary products (high
sugar
content):
Juices,
Chocolate, Coffee, Tea, others
Source: TAXUD, Surveillance Database
Size of the quota
(tons)
300
15000
10000
Fill rate (%)
3.28%
4.3%
1.59%
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The
limited use of TRQs by the EU is partly due to
the still pending implementation of the
pre-listing
system of Member States’ establishments allowed to export animal products to
Ecuador, including some covered by TRQs.
Some Ecuador TRQs have been used by the EU,
due to the fact that these products have historically been imported and consequently trade
flows have not been interrupted. Furthermore, the delay in the opening by Ecuador of its
TRQs for the EU, as well as its complex management is also likely to have played a role in
the non-use of TRQs by the EU.
Table 6: Rate of utilisation of Ecuador TRQs by the EU in 2017
Products
Preparations for animal feeding
Dairy products: Powder milk, butter
milk serum, whey
Dairy products: Evaporated milk;
condensed milk
Dairy products: Yoghourt, cheeses:
grated or powdered, melted, others
Dairy products: Blue-veined cheese,
mature cheese
Processed sweet corn: Sweet corn:
Frozen, canned
Porcine products: Cured ham, Bellies
(streaky), Sausages and similar meat
products
Confectionary products (high sugar
content): Juices, Chocolate, Coffee,
Tea, others
Source: Ministry of Agriculture of Ecuador
Size of the
quota (tons)
800
400
600
500
1 000
400
800
Fill rate 2017
6.13%
12.50%
1.02%
2.74%
3.93%
21.85%
5.65%
750
0.90%
2.3.
Trade in Services and development of investment
1.1.4.
Trade in Services
Bilateral trade in services between the EU and
Colombia
increased by 0.7% in 2016
compared to 2015, totalling EUR 4.25 billion. While EU exports increased by 4%, Colombian
exports decreased by 5.6% over this period. According to Colombian statistics (DANE), EU
share in Colombia’s total trade in services represented
18% in 2017.
Table 7: EU-Colombia bilateral trade in services 2011-2016 (million EUR)
2011
EU28 imports
EU28 exports
Balance
Total trade
Source: Eurostat
2012
2013
2014
2015
2016
1 347
2 638
1 290
3 985
1 446
2 855
1 409
4 300
1 440
2 564
1 124
4 004
1 529
2 416
888
3 945
1 429
2 793
1 365
4 222
1 349
2 906
1 557
4 254
For
Peru,
bilateral trade in services decreased by 6% in 2016 compared to 2015. Based on
Peru’s statistics,
EU share
in Peru’s total trade in services represented almost
30%
in 2016.
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Table 8: EU-Peru bilateral trade in services 2011-2016 (million EUR)
EU28 imports
EU28 exports
Balance
Total trade
Source: Eurostat
2011
846
1 094
248
1 940
2012
855
1 509
654
2 364
2013
835
1 707
872
2 542
2014
897
1 999
1 101
2 896
2015
894
1 669
775
2 563
2016
862
1 541
679
2 403
EU bilateral trade in services with
Ecuador
increased significantly by 56.5% in 2016 to a
record high of EUR 2.24 billion. As in the case of Colombia and Peru, the EU posts a
substantial surplus in the trade in services. The
EU share
in Ecuador´s total trade in services
represented almost
79.7%
in 2016.
Table 9: EU-Ecuador bilateral trade in services 2011-2016 (million EUR)
2011
EU28 imports
EU28 exports
Balance
Total trade
Source: Eurostat
2012
2013
2014
2015
2016
423
1 055
632
1 478
405
1 152
747
1 557
375
1 148
733
1 523
406
1 268
862
1 674
374
1 060
686
1 434
454
1 790
1 337
2 244
1.1.5.
FDI
For the third year in a row, the EU remains the
first foreign investor in Colombia,
totalling
EUR 14.7 billion of FDI stocks in 2016. According to Colombian statistics, EU FDI
accounted for 36% of the total FDI in flows to Colombia in 2017 with an amount of
EUR 5.4 billion. Colombian FDI stocks in the EU decreased by 18.4% since 2015, totalling
EUR 2.7 billion in 2016, and according to Colombian statistics, 30.8% of its outward flows
went to the EU in 2017.
Table 10: EU-Colombia investment flows and stocks 2014-2016 (million EUR)
Inward
2014
2015
3 828
3 379
-214.3 1 885.7
2016
2 757
-373.3
Outward
2014
2015
2016
16 566 16 957 14 731
45.4
587.6 -985.5
Stocks
Flows
Source: Eurostat
The EU is the
first foreign investor in Peru.
EU FDI stocks in Peru increased by 30%
between 2015 and 2016, totalling EUR 13.2
billion in 2016. Peru’s FDI stocks in the EU
increased to EUR 2 billion in 2016, a 1139% increase compared to 2014.
Table 11: EU-Peru investment flows and stocks 2014-2016 (million EUR)
2014
Inward
2015
2016
2014
Outward
2015
2016
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Stocks
Flows
Inward
2014
2015
159
1 493
-362
563
2016
1 971
449
Outward
2014
2015
2016
9 384 10 146 13 150
-1 516
1 366
3 702
Source: Eurostat
EU FDI stocks in Ecuador have remained almost constant in 2016 year-on year, at around
6 billion EUR. Ecuador´s FDI stocks in the EU experienced a 45% decline over the 2014-
2016 period and reached EUR 300 million in 2016.
According to the Central Bank of Ecuador,
EU FDI accounted for 21% of total FDI inflows
in 2017
(EUR 116 million), a sharp contraction compared to 72% in 2016. Ways to increase
EU investment in Ecuador could include less complex regulations for businesses, a better
judicial enforcement of contracts and streamlined legal procedures.
Table 12: EU-Ecuador investment flows and stocks 2014-2016 (million EUR)
Inward
2014
2015
538
351
-233
-141
2016
298
-109
Outward
2014
2015
5 265
6 001
2
865
2016
5 929
-99
Stocks
Flows
Source: Eurostat
3.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
The fourth meeting of the
Trade Committee
took place on 24 November 2017 in Lima, Peru.
It was preceded by meetings of all
eight Sub-committees
under the Agreement. The main
conclusions of the Trade Committee and Sub-committees can be summarised as follows:
a) Trade Committee
The EU and Colombia signed a
Decision to modify Colombia’s public procurement
market access schedules
at sub-central level
24
. The modification will result in a clarification
of coverage of certain municipal entities.
The Trade Committee was able to take stock of progress achieved in the Sub-committees. The
EU reiterated some of its main concerns, including most notably: change in the provision
defining direct transport to allow for the splitting of consignments for products transiting a
third country, continued discrimination of imported spirits in Peru, lack of enforcement for
GIs (Oporto and Feta) in Peru, obligation for imported beers to attach strip stamps in some
departments in Colombia, exploitation charge levied on spirits introduced in the Colombian
departments, the anti-dumping investigation against frozen potatoes from Belgium, Germany
and the Netherlands in Colombia, the service tax for customs control in Ecuador. Colombia,
24
Decision No 1/2017 of the EU-Colombia-Peru Trade Committee of 24 November 2017 amending Appendix
1 of Annex XII (‘Government Procurement’) to the Trade Agreement between the European Union and its
Member States, of the one part, and Colombia and Peru, of the other part. OJ L 1, 4.1.2018, p.1 (https://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22018D0001&from=EN).
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Peru and Ecuador raised concerns about the potential impact of some EU SPS measures on
their exports of agricultural products.
The EU gave an update on the state of ratification process by the Member States of both the
Agreement and the Protocol of Accession of Ecuador. Colombia and Peru informed about the
ratification process regarding the Protocol to the Agreement to take account of the accession
of the Republic of Croatia to the European Union. The Parties welcomed the provisional
application of the Protocol of Accession of Ecuador to the Trade Agreement as from 1
January 2017 and completion of the ratification process by both Colombia and Peru.
b) Customs, Trade Facilitation and Rules of Origin
The Sub-committee discussed the interpretation of the provision defining direct transport to
allow the splitting of consignments for products transiting a third country, but without any
conclusive outcome. Colombia, Ecuador and Peru expressed interest in receiving help and
assistance from the EU on a wide variety of issues, including Authorised Economic Operators
(AEO) and customs laboratories. In this context, the EU underlined the importance of
advancing on the issue of direct transport. With Ecuador, the EU mentioned issues of
reclassification of goods.
c) Government Procurement
In 2017, good progress was made with Colombia to address a problem of interpretation in
relation to market access in government procurement at sub-central level. The solution
consisted in modifying the chapter on government procurement by including a clarification of
the coverage of certain municipal entities. With Peru, the EU continued exchanging views on
the use of international standards and obligations in respect of technical specifications in
government procurement. Given that it is the first time Ecuador undertakes international
commitments on government procurement, Ecuador provided information on the activities
undertaken to implement the government procurement chapter, including awareness-raising
activities to the procuring entities on the obligations arising from the Agreement and required
amendments of specific laws and regulations.
d) Technical Barriers to Trade (TBT)
With regard to Colombia, the EU raised the issue of recognition of EU testing and
certification in Colombia, and Colombia confirmed that test results issued in the country of
origin are accepted provided that the results originate from an accredited laboratory and the
accreditation entity forms part of an international accreditation body. With Ecuador, the EU
raised the issue of prohibition of labelling of alcoholic beverages at destination. In the case of
Peru, the EU reiterated its interest regarding the recognition of Member States as having
‘strong health monitoring’, as it facilitates the recognition of their certification
for
pharmaceutical and medical devices products to be exported to Peru.
e) SPS Matters
The EU discussed with Colombia, Peru and Ecuador their respective advance towards
implementing the provisions of the SPS chapter of the Agreement to ensure better market
access for EU products. With Peru, the EU welcomed the positive impact of the harmonised
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certificate for dairy products by which all EU establishments have access to the Peruvian
market (pending registration in their system). Progress remains to be done with the approval
of a harmonised certificate for the import of meat products. The EU also welcomed the lifting
of trade restrictions related to avian influenza. With Colombia, the EU noted considerable
advance since the implementation of a single procedure for market access of EU exports of
animal-based products, where pre-listing is applied. There is still progress to be made with the
adoption of harmonised certificates on dairy products and on cooked meat products. There is
progress towards the approval of fruits and vegetables although at a slower pace as
phytosanitary import conditions in Colombia imply a lengthy process. With Ecuador, there is
a continued dialogue to ensure the full implementation of the provisions of the SPS chapter.
In 2017, the EU and Ecuador discussed constructively on a procedure for the approval of
exports of products from Member States, including prelisting for animal products (procedure
which was agreed in February 2018 but is yet to be implemented by Member States).
Colombia, Ecuador and Peru raised concerns related to some EU legislation on certain
maximum residue levels for some pesticides, maximum levels of cadmium in cacao-based
products, endocrine disruptors, and novel food.
f) Agriculture
The Parties took stock of trade flows and utilisation of quotas during the four years of
implementation of the Agreement and welcomed the increase of exports of agricultural
products on both sides. The EU and Ecuador reviewed trends in bilateral trade of agricultural
products for the first nine months of 2017. The Parties discussed the bilateral safeguard clause
and the stabilisation mechanism for bananas, as well as the implementation of the spirits’
fiscal reform in Colombia (in particular the EU took issue with the exploitation charge that is
levied solely on products introduced in the departments). The EU raised its concerns
regarding the discrimination against EU spirits in Peru and the issues of TRQ management
and rejection of EU imports of agricultural products in the case of Ecuador.
g) TSD
The Parties held the meetings of the institutions in charge of monitoring the implementation
of the TSD provisions of the Agreement (see section 4 below).
h) Intellectual Property
The Parties addressed specific issues regarding the protection and enforcement of a number of
GIs, including matters relating to the addition of new GIs to be protected. With Colombia, the
EU informed of work under way to protect nine additional Colombian GIs and welcomed the
start of an investigation in Colombia regarding the usurpation of EU cheese GIs. With Peru,
the EU referred to the usurpation of GIs names (Oporto and Feta). Peru referred to the
protection of Pisco in the EU in relation to registration of trademarks. With Colombia, the EU
welcomed the start of an investigation regarding the usurpation of EU GIs on cheese but
stressed the importance of an effective and timely solution to ensure the protection of EU GIs.
The EU informed of the internal procedures under way to register nine additional Colombian
GIs. Peru expressed concerns about what it considers as inadequate protection of Pisco in the
EU given the registration of trademarks (TM) containing the name Pisco.
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Other issues discussed included the overall enforcement of intellectual property rights,
patentability of medicines in Colombia, exceptions to copyright and related rights as well as
plant variety rights in Ecuador, and possible cooperation projects.
i) Market Access
The Parties exchanged statistics on trade flows, including use of preferences and tariff rates
quotas. With Colombia, the EU raised its concerns regarding truck scrappage, vehicle
taxation, the implementation of the spirits law, an ongoing anti-dumping case against EU
frozen potatoes, and discrimination against imported beers. In relation to Peru, the EU raised
concerns about the application of the duty drawback in Peru, which appears to be a subsidy.
With Ecuador, discussions focused on discriminatory treatment against imported spirits and
the service tax for customs control, implemented in November 2017. It should, however, be
noted that the service tax was discontinued in June 2018.
4.
4.1.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
Sub-Committee on Trade and Sustainable Development
The fourth meeting of the
Sub-Committee on TSD
was held in Lima on 22 and 23
November 2017. While discussions on labour and environmental issues were constructive, it
was clear that a number of critical issues require follow-up and further action and that more
dialogue on priority TSD issues is needed. To step up monitoring the Parties agreed to engage
more regularly on this on the basis of questions submitted by the EU in early 2018.
On
labour,
important issues of concern with all three countries remain in relation to freedom
of association and collective bargaining, the high levels of informality and the inadequate
labour inspection capacities. Peru and Colombia informed about their plans to increase the
human and material resources to strengthen labour inspection. They also informed they have
started the process to ratify the Protocol to the ILO Convention 29 on forced labour. Concerns
about the persistence of high levels of child labour were also highlighted by the EU, in
particular in Peru. Ecuador participated for the first time, and showed constructive
engagement to achieve implementation of this Chapter. It informed about the preparation of
the labour law reform and advances in occupational health and safety, among others.
On
environment,
the focus was on: measures taken by Colombia to control exports of brown
caiman
Caiman crocodilus fuscus
skins to implement the CITES convention, the tools and
measures in Colombia and Ecuador to monitor deforestation, and the strategies of Colombia
and Peru to combat trade of illegal timber. Peru's simplification of administrative procedures
for licensing on the environmental sector was also highlighted as an important issue to follow
as well as the use of mercury in gold mining in the region.
The EU and Peru touched upon the submission in October 2017 by a group of European and
Peruvian civil society organisations of a report to the European Commission challenging
Peru's compliance with the labour and environment provisions of the TSD chapter. The
European Commission has since been assessing the allegations made therein while consulting
the relevant authorities in Peru, the civil society organisations responsible for the submission
and the ILO.
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4.2.
Domestic consultation
Since its establishment, the EU civil society consultation mechanism (‘domestic
advisory
group’) has met regulary, with the European Economic and Social Committee providing three
members as well as the Secretariat. As part of its work, it submits opinions and makes
recommendations on the implementation of the TSD chapter of the Agreement.
A main advance in terms of the institutional set up for the participation of civil society in TSD
issues came from Colombia who announced the creation of a DAG to complement its existing
consultative mechanisms. This initiative responds to repeated demands by civil society in
Colombia, which the EU consistently echoed.
Ecuador, at this early stage of implementation informed of its decision to use existing
domestic mechanisms, while indicating that civil society will have the freedom to determine
the agenda.
4.3.
Session of the Sub-Committee on TSD with civil society
In line with Article 282 of the Agreement, the Sub-Committee on TSD held an open session
with civil society organisations and the public on 23 November 2017 in Lima, to carry out a
dialogue on matters related to the implementation of the TSD chapter. Around 50
representatives of civil society were present either in the room (mostly from Peru, Ecuador
and the EU) or via videoconference from Colombia and Ecuador. The views expressed on the
results achieved in Peru and Colombia were generally critical. An important point of
discussion was how to better ensure civil society consultation in the area of labour and
environment and on how to improve channels of communication to discuss TSD-related
issues. The most vocal interventions came from Peru’s civil society who alleged insufficient
dialogue with the government and inadequate functioning of the domestic mechanisms in
place. Participants welcomed Colombia's proposal to create a dedicated domestic advisory
group to discuss TSD issues of relevance to the Agreement.
4.4.
Further work and other activities
In 2017, there was good progress on cooperation activities aimed to assist Colombia and Peru
in the implementation of various facets of the TSD chapter and to promote higher levels of
social and environmental standards. .
In Colombia, the following activities took place: a circular economy business mission aimed
at strengthening ties between EU and Colombian institutions in the field of environment, a
workshop on business development topics such as Corporate Social Responsibility, organic
production and fair trade, as well as a TAIEX-funded mission on international trade in brown
caimans aimed to improve conservation efforts. It was also agreed with Colombia to pursue
new actions on labour inspection as well as responsible supply chains in the mining sector.
In Peru, several financing instruments were mobilised for projects in the area of labour: a
TAIEX-financed workshop took place on labour conflicts resolution and several technical
assistance projects on labour inspection and labour formalisation financed via Eurosocial+
and Socieux+. There were also activities to support Peru in implementing multilateral
environmental agreements and policies: a TAIEF-funded workshop on conservation of the
vicuña addressing regulatory measures and climate change challenges as well as EU expert
mission to support capacity building and exchange of experiences with site investigations,
remediation techniques and sustainable management of sites contaminated by hydrocarbons.
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With Ecuador, actions were put in place throughout the year to raise awareness and build
capacity to prepare the initial stages of implementation of the TSD chapter in the country. In
addition, other areas of common interest were identified with Ecuador notably in field of both
the environmental law and labour law reforms.
5.
S
PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING
Implementation of Regulation (EU) No 19/2013
In 2017, Regulation (EU) No 19/2013 implementing the above mentioned bilateral safeguard
clause and the stabilisation mechanism for bananas was amended by Regulation 2017/540 to
reflect the accession of Ecuador to the Agreement
25
. The amended Regulation provides for the
possibility to initiate a safeguard investigation or to introduce prior surveillance measures
under certain conditions. In accordance with Articles 3 and 13 of the Regulation, the
Commission has been monitoring the evolution of imports of fresh bananas (HS code
08039010) from Colombia, Peru and Ecuador.
Figure 4: 2016 EU imports of fresh bananas from Colombia and Peru (in tons)
114 775
421 869
1 308 355
Colombia
Source: Eurostat
Peru
Unused quota
25
Regulation (EU) 2017/540 of the European Parliament and of the Council of 15 March 2017, Regulation
(EU) 2017/540 of the European Parliament and of the Council of 15 March 2017 amending Regulation (EU)
No 19/2013 implementing the bilateral safeguard clause and the stabilization mechanism for bananas of the
Trade Agreement between the European Union and its Member States, of the one part, and Colombia and
Peru, of the other part, and amending Regulation (EU) No 20/2013 implementing the bilateral safeguard
clause and the stabilization mechanism for bananas of the Agreement establishing an Association between
the European Union and its Member States, on the one hand, and Central America on the other (O.J. L 88,
31.03.2018, p.1).
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Figure 5: 2017 EU imports of fresh bananas from Colombia, Ecuador and Peru
(in tons)
1 391 328
117 221
829 769
1 379 718
Colombia
Source: Eurostat
Ecuador
Peru
Unused quota
In 2017,
EU imports of fresh bananas from Peru reached
117 221 metric tons, a 7%
increase compared to 2016. The
trigger volume
established in the Agreement (93 750 metric
tons) was reached in October 2017. In line with Article 15(3) of the Regulation, the
Commission examined the impact on the EU market taking into account
inter alia
the effects
on price level, developments of imports from other sources and the overall stability of the EU
market.
As a result, the Commission concluded that the
suspension of the preferential duty on fresh
bananas originating in Peru was not appropriate
26
: (1) imports from Peru represent only
2.25% of total EU imports of fresh bananas, (2) imports from large exporting countries,
notably Colombia, Ecuador and Costa Rica, amounted to about 60% each of their respective
thresholds under the stabilization mechanism, and the ‘unused’ quantities (approximately
2.3 million metric tons) are significantly higher than the total imports from Peru, (3) import
from Peru did not have a downward effect on the import price of bananas of all origins and
finally, (4) there were no indications of a negative effect for the stability of the EU market,
EU producers, or the EU outermost regions.
Imports of fresh bananas from
Colombia
amounted to 1 379 718 metric tons in 2017. In
2017, Colombia remained below the trigger volume of 1 822 500 metric tons established by
the Agreement.
In 2017,
Ecuador
exported 1 391 328 metric tons of fresh bananas to the EU, with imports
remaining 22% below the trigger level established for Ecuador in the Agreement for 2017 at
1 801 788 metric tons.
26
Commission Implementing Decision (EU) 2017/2277 of 8 December 2017 determining that a temporary
suspension of the preferential customs duty pursuant to Article 15 of Regulation (EU) No 19/2013 of the
European Parliament and of the Council is not appropriate for imports of bananas originating in Peru ( OJ
L 326, 09.12.2017, p.53).
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6.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
In the fifth year of provisional application of the Trade Agreement with Colombia and Peru,
important progress has been made with regard to a number of implementation issues.
In 2017, and after the EU brought a challenge against Colombian measures at the WTO, the
modification of fiscal system for spirits entered into force
in Colombia. The new law also
eliminated certain market access restrictions that distorted competition in the market to the
detriment of EU spirits. Colombia also modified its laws to create a level playing field for
imported heavy trucks, although these commitments are still to be implemented. In addition,
last year Colombia clarified its commitments under the government procurement annex of the
Agreement, which should improve access for EU companies for tenders at the local level.
Work will be needed to reduce technical barriers to trade such as sanitary registrations, and as
well as to further facilitate trade.
More specifically on
SPS
issues, substantial progress has been obtained with Colombia since
the implementation of a
single procedure for market access of EU products
in 2015. There
is smoother procedure for exports of animal-based products, where pre-listing is applied.
Several Member States and products now benefit from pre-listing: a total of 1080 EU
establishments exporting products of animal origin have been approved by Colombia without
prior individual inspection. For example, in
2017, Colombia opened its market for fresh pig
meat from Spain with pre-listing.
Some of the pending activities on the animal side are the
conclusion of harmonised certificates on dairy products and on cooked meat products. On
both cases, the EU has already submitted counterproposals to Colombia. On fruits and
vegetables, although there is progress (e.g. pears from Portugal), this comes at a slower pace,
as phytosanitary import conditions are cumbersome.
Furthermore, there are certain systemic issues where the Trade Agreement framework has
brought added value to EU exports both in Colombia and Peru. To name some of the main
examples: i) the issue of the ‘born and raised’ clause has been or is being overcome (with
Colombia and Peru accepting that animals and their products may move throughout the EU,
and are eligible to export, whereas previously they insisted that these products should
originate from animals "born and raised " in only one EU Member State); ii) the issue of
regionalisation has seen much progress (with Colombia and Peru now accepting in their
import conditions that products may originate from a free zone in a Member State, without the
absolute obligation of the whole Member State being totally free of certain diseases); and iii)
Audit costs are now borne by the importing Party, hence removing a constraint for Member
States and producers.
With
Peru,
the main success on
SPS issues
has been a
nearly full market access for EU
dairy products.
In the past, Peru required in its dairy products certificate certain conditions
that were not justified from an animal health and food safety point of view and were
considered as unnecessarily trade restrictive due to the harmonised SPS framework in place in
the whole EU. In 2017, after the negotiation of a harmonised certificate and associated
conditions, all EU establishments have market access to Peru (pending registration in their
system). Several products from different Member States have been approved by Peru (e.g.
genetic material, plant products). At the same time, progress needs to be made with the
approval of a harmonised certificate for the import of meat products which is still pending.
The Trade Agreement context has also been conducive to faster solving country wide bans as
that imposed to France over certain outbreaks of avian influenza.
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At the same time,
progress remains limited on trade irritants such as the proper
protection of EU GIs in Peru,
the
tax discrimination
of imported spirits if compared to
Pisco which has been magnified in May 2018 by a sudden and steep increase in the excise tax
that does not affect Pisco, or the approval of harmonized certificate for the import of meat
products.
The
first year of implementation of the Agreement with Ecuador
has seen
an important
increase of trade in both directions.
At the same time, some internal procedures have not
yet been brought in line with the provisions of the Agreement. For instance, agri-food exports
still face restrictions through cumbersome obligatory import licenses and arbitrary limits on
TRQs. All issues have been raised and some solved through bilateral dialogue, including in
the Trade Committee, while others, notably the prior licensing system to use TRQs, remain
unresolved. A discriminatory customs service charge was introduced in November 2017, but
was scrapped in June 2018. It needs to be noted though that the implementation of the Trade
Agreement with Ecuador is still in its initial stages, that the commitment of Ecuador seems
strong and that the bilateral dialogue remains very constructive. On SPS issues,
a continued
dialogue has led to the agreement of a procedure for approving exports of products from
Member States, including prelisting for animal products. This procedure will involve
inter
alia
certain questionnaires that should be now filled-in by interested Member States. There is
still work to be done to ensure full implementation. The regular dialogue in place will offer a
better framework to tackle any export difficulty. As an example, this dialogue has facilitated
the approval of exports of Italian ham, although this process was outside of the Trade
Agreement provisions.
The EU will continue to seek a solution with the three Andean partners with regard to the
acceptance of
splitting of consignments
for originating products transiting a third country.
The implementation of the Agreement also shows a very
positive impact on SMEs in
Colombia.
According to Colombian statistics, a total of 1 155 Colombian companies
exported products not related to mining to the EU. These exporting companies include 328
SMEs and 582 are microenterprises. In Colombia, SMEs are defined as companies exporting
between USD 500 000 and USD 5 million, while micro-enterprises export less than
USD 500 000 in total. SMEs and exporting microenterprises accounted for 11.3% of the total
non-minerals exports to the EU in 2017.
According to
Peru’s
Export and Tourism Promotion Board, since the entry into force of the
Agreement, 2 328 new companies have exported to the EU, of which 1 381 were from the
agro-industrial sector and 635 from metalurgical, textile and fishing sectors. More than 90%
of these new exporting companies are SMEs.
Ecuadorian
statistics indicate that
450 companies have either started to export or resumed
their exports to the EU. Half of these companies are micro and small enterprises. According to
the same source, Ecuador exported 200 new products to the EU which include: treated bovine
hides, ceramic tiles, mango jam, fine steel fish, lemon juice, strawberry pulp, among others.
7.
C
ONCLUSIONS AND OUTLOOK
The Trade Agreement with Colombia, Peru and Ecuador
functions well and has created
important business opportunities,
which are being increasingly seized by both businesses
and exporters from both sides. The negative trend in trade flows linked to the decline of
commodity prices and slow growth of domestic demand in the EU have been reversed during
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the reporting period, with all three partners reporting an increase in bilateral trade with the EU
6.8% for Colombia, 15.7% for Peru, and an impressive 20% in the first year of
implementation with Ecuador.
In the case of Colombia, the Agreement contributed to an important diversification of the
country’s exports, notably in favour of the agricultural sector, thus creating regional
employment opportunities positive for the implementation of the country's peace agreement.
In the case of Peru, the Agreement has contributed to a significant increase in the volume and
variety of Peruvian exports to the EU, helping Peru to diversify its export base and its
economy beyond its strong dependence on mineral commodities, and has thereby offered
opportunities to capture higher layers of added value. Fresh agricultural products, fishery
products and metallurgical products are the Peruvian products which have benefited most
from increased opportunities. This trend of increased exports of agri-food products has had a
positive impact on Peruvian SMEs. EU exports have also generally improved, notably for
products such as machinery, electrical appliances, vehicles, pharmaceuticals and medical
devices.
EU imports from Ecuador are at a record high, while EU exports to Ecuador have increased
by an impressive 36% in 2017. The
Agreement has already shown benefits for Ecuadorian
SMEs.
Alike its Andean neighbors, the Agreement provides Ecuador a potential for growth
and diversification.
Full implementation of the Agreement remains a priority
for the EU. It is a positive point
that the institutions under the Agreement work well. The discussions with the three partner
countries in the Trade Committee and specialised Sub-committees have been constructive and
have helped solve a significant amount of issues. The Decision adopted by Trade Committee
with regard to public procurement in Colombia should effectively improve EU market access.
As reported earlier, Colombia reformed its market for domestic and imported spirits. While
this creates a more level playing field, challenges remain and some measures are questionable
from a national treatment perspective. Several sectors continue to need to be monitored
closely, most importantly SPS measures, market access for EU spirits, Intellectual Property
Rights and pharmaceuticals, and measures related to imported cars and trucks. In the case of
Peru, SPS market access remains restricted despite progress achieved. Remaining trade
barriers are mainly in the spirits sector or in the form of non-tariff and regulatory barriers. In
the case of Ecuador, discussions regarding discriminatory measures in the pharmaceutical
sectors were fruitful, and resulted in better protection of EU intellectual property. In 2017, the
EU and Ecuador agreed on a single procedure for agri-food imports, which in the future
should yield some positive results. Besides, early 2018, both sides finally concluded
outstanding discussions leading to the approval of imports of Italian ham. At the same time,
the low percentage of EU use of agricultural TRQs in Ecuador shows that more work needs to
be done to improve EU market access.
The implementation of the TSDchapter has progressed and there has been an increasingly
open and inclusive dialogue on labour and environmental matters. It is for example
noteworthy that Colombia and Peru are increasing their financial and material resources to
enhance their labour inspection capacities, but close follow up will be needed as important
challenges remain in that regard. In the case of Peru, the submission to the EU by a group of
civil society organisations with allegations of non-compliance by Peru of its labour and
environmental commitments under the TSD Chapter illustrates the strong interest of civil
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society in the effective implementation of the Agreement and the importance of effective
mechanisms for the consultation of civil society.
Overall, there is significant scope for
improvement from Peru, with regard to both the consultative mechanism setup and the
implementation of substantive obligations, and on which it is important to progress rapidly.
With Ecuador, there has been a constructive engagement in the first year of discussions on the
implementation of the TSD chapter and work will now focus on concrete points of action and
progress. It is therefore clear that important challenges remain for all three Andean partner
countries in this area and that this will need to remain an important focus of the
implementation work.
Regarding the stabilization mechanism for bananas, there is no indication that the stability of
the EU market or the situation of the EU producers have been affected by the level of
Peruvian exports. Nevertheless, the Commission will continue its reinforced monitoring of
banana imports and evaluate the market situation.
In conclusion, the Agreement creates important benefits for business, consumers and civil
society in general on both sides. The Commission will continue its efforts to promote the
Agreement and to work with Colombia, Ecuador and Peru to ensure the full implementation
of the Agreement in all its aspects. The Commission will continue to keep EU Member States
and the European Parliament fully informed.
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ANNUAL REPORT ON THE IMPLEMENTATION OF PART IV OF THE
ASSOCIATION AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES
AND CENTRAL AMERICA
27
1.
I
NTRODUCTION
2018 is the fifth year of implementation of the Trade Pillar (Part IV) of the European Union -
Central America (CA) Association Agreement establishing an Association between the EU
and its Member States, on the one hand, and the six countries of CA on the other (hereinafter,
“the Agreement”)
28
.
Under Article 13 of Regulation (EU) No 20/2013 of the European Parliament and of the
Council of 15 January 2013 implementing the bilateral safeguard clause and the stabilisation
mechanism for bananas of the Agreement establishing an Association between the European
Union and its Member States, on the one hand, and Central America on the other
29
, the
Commission committed to submit an annual report to the European Parliament and the
Council on the application, implementation and fulfilment of obligations of the Agreement
and the Regulation. This report responds to this requirement.
2.
2.1.
O
VERALL ASSESSMENT
:
EVOLUTION OF BILATERAL TRADE
Trade in Goods overall
In a change to the methodology used in previous reports on the implementation of the
Agreement
30
, the present report only uses Eurostat data on trade flows between the EU and
CA. Eurostat and Central American trade statistics register significant differences in their
respective figures. The effect of the Free Trade Zone (FTZ) of Panama, one of the largest in
the world, may be significant in this regard, as Eurostat counts EU goods transitting through
the FTZ as exports to Panama, while CA statistics count them as direct imports of their
country of final destination when in CA. The need to have consolidated and comparable data
in a timely fashion and with an adequate level of detail requires reverting to the exclusive use
of Eurostat data for this and subsequent reports.
2017 data confirmed that
CA continued to enjoy an overall surplus with the EU
(EUR 638 million, 5.5% of total trade). It should, however, be recalled that the bulk of this
surplus is with Costa Rica and Honduras, while Panama and Salvador have deficits.
Overall,
EU imports from the region have seen a very solid upward trend
in five of the
six countries in the region
with double figure growth in the case of four of them. The
outliers are Panama with a fall of 14% in its exports to the EU and Honduras with exports
27
28
29
30
More information can be found at:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/central-
america/
OJ L 346, 15.12.2012, p. 3. Additional information on EU
Central America trade relations can be found at
http://ec.europa.eu/trade/policy/countries-and-regions/regions/central-america/.
OJ L 17, 19.1.2013, p. 13.
COM (2017) 160 final.
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growing by almost 22% year-on-year. The
evolution of EU exports to CA has been more
modest,
with a slight decrease in the case of Honduras, but rising overall and reversing the
decrease of 2016.
EU trade flows worldwide recovered in 2017, growing by 8% after having suffered a fall of
1.8% in 2016. This overall rise in trade flows of the EU with the rest of the world was
reflected in its trade with CA, which grew by 7.2% year-on-year, but with a more vigorous
growth of EU imports from the CA region (up 11.5%) than in exports from the EU to the
region, which nevertheless grew by almost 3% in 2017 after falling by 7.4% in 2016.
As we reach the fifth anniversary of the provisional entry into force of the trade pillar of the
Association Agreement,
EU imports of Central American goods in 2017 remain almost
11% below their level of five years before.
This is mainly due to the steep reduction in
exports of computer parts from Costa Rica (after the rellocation to Asia of the international
company producing the IT components). In 2012 Computer parts represented 38.6%
(EUR 2 627 million) of all Central American exports to the EU, while in 2017 the figure was
less than 0.1% (EUR 3.6 million). This is an important element to take into account because if
one were to disregard trade in this category, EU imports would in fact have grown by almost
45% - when EU import growth from the rest of the world for the same period was just 3.2%.
EU exports to CA increased by 2.5% between 2012 and 2017,
which is significantly below
the 11.5% increase the EU reached with the rest of the world as a whole. This
modest
increase
is mainly due to a
severe drop in EU exports of aircraft and ships to the region,
which are high unit value items that can have a distorting effect on trade trends in a small
market. The year 2012 happened to be a record one for these exports
representing 19%
(EUR 1 028 million) of all EU exports to CA that year, while the corresponding amounts were
very modest in 2017 (2.2%, EUR 120 million). Not counting these two chapters, EU exports
would in fact have risen by 24% between 2012-17, more than double the rate with the rest of
the world for the same time period.
Table 1. Trade flows between EU and CA and annual growth in 2017 (million EUR)
Country
EU Exports
(*)
EU Imports
(*)
Balance Total flow
Costa Rica
1 097
4.3%
2 649
12.3%
-1 552
3 746
Guatemala
992
9.5%
1 033
13.9%
-41
2 025
Honduras
437
-3.3%
1 265
21.8%
-828
1 702
Nicaragua
244
3.4%
376
9.3%
-132
620
Panama
2 195
1%
512
-14%
1 683
2 707
El Salvador
481
2%
249
16%
232
730
TOTAL
5 447
2.9%
6 085
11.5%
-638
11 530
* Source: EUROSTAT
32.5%
17.6%
14.8%
5.4%
23.4%
6.3%
100%
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1.1.6.
Sectoral structure of trade
CA continues to rely on a handful of key agri-food products for its exports to the EU. Five
main product categories
31
accounted for nearly 64% of total exports from the region to the EU
in 2017, with exports from the whole agri-food sector reaching 74%. Nevertheless, exports
from two non-agricultural sectors also saw significant growth: Medical devices and
instruments, up almost 23% year-on-year and 242% over 5 years to 10.6% of all EU imports
from CA, and knitted clothing up 28% in 2017 (62% over 5 years) at 2.3% of all EU imports
from CA. The main import product categories from CA (by HS chapter) for 2017 were: Fruits
30.8%, Coffee and Tea 16%, Optical and Medical instruments and devices 10.6%, Fats and
Oils 9.6% and Fish & Crustaceans 5%.
In particular, significant changes in value of Central American exports to the EU in 2017 were
identified for the following products:
Fruit
a traditional export from the region, 2017 saw record exports with an annual
20% rise lifting the sector to almost 31% of total exports to the EU. The main products
are bananas and pineapples, and Costa Rica is the main exporter of fruit with 76% of
the region’s exports to the EU.
Coffee
imports from CA suffered a significant decline in 2016 (-14.5%) but
recovered in 2017 rising almost 18% (from EUR 830 to EUR 977 million) to the best
year since 2012, now representing 16% of total EU’s imports from the region.
Honduras was the star coffee exporter to the EU in 2017 with 65% of CA’s coffee
exports.
Medical instruments and devices
EU imports continued their impressive trajectory
rising by a further 23% in 2017 to stand at EUR 648 million (more than three times the
figure of 2012) and representing 10.6% of total EU imports from CA. Costa Rica is
the source of 99.5% of the region’s exports under this heading to the EU.
As for the EU, the range of exported products is rather more diverse with the five main
product categories representing little more than 46% of all EU exports to the region.
Mechanical machinery represents 18.2% of all EU exports to CA and rised 8.2% in 2017 to
EUR 990 million and almost 20% over the 2012-17 period. Electrical machinery also rose by
5.4% in 2017 (and by almost 31% over five years) to EUR 446 million representing 8.2% of
CA’s imports from the EU. Other significant categories are: Pharmaceuticals, down
4.2% to
EUR 550 million (10% of EU exports) although up 24% over a five year period; Vehicles,
down 7.7% to EUR 303 million (5.6% of exports) and +3.3% over five years; Perfumes &
Cosmetics, down by 5.7% to EUR 239 million (4.4% of exports) and -7.7% over five years;
Medical instruments and devices fell marginally (-2.3%) to EUR 221m but grew 42%
between 2012 and 2017.
31
Fresh fruit (mainly bananas and pineapples), coffee, fats and oils (mainly crude palm oil), fish & shrimp, and
sugar.
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1.1.7.
Country-by-Country analysis
On a national breakdown, following Eurostat figures, the main destination for
EU exports to
CA
in 2017 is Panama (40%) followed by Costa Rica and Guatemala (20% and 18%
respectively), then El Salvador (9%), Honduras (8%) and Nicaragua (5%). The main source of
EU imports from CA continues to be Costa Rica by a wide margin (44%) followed by
Honduras (21%), Guatemala (17%), Panama (8%), Nicaragua (6%) and El Salvador (4%).
EU trade with
Costa Rica
rose by almost 10% between 2016 and 2017 consolidating the
country’s position as the main commercial partner in the region. EU exports to Costa Rica
continued the positive trend of previous years (up 4.3%), while EU imports from the country
jumped by 12.3% to EUR 2 649 million.
Costa Rica mainly exports to the EU fruits (bananas and pineapples) which grew 11% to
EUR 1 439 million, and prepared vegetables and fruits which have grown 157% to
EUR 192 million over the last five years. Following the collapse in 2014 of the main export
item of the country (computer parts), exports of medical devices and instruments have risen at
a rapid pace (a 247% rise since 2012) reaching EUR 644 million and 24% of EU imports from
the country.
EU exports to Costa Rica rose 4.2% to EUR 1 097 million but had mixed performances in
2017. Mechanical machinery remained the main category at 15% of exports
EUR 165 million
but fell 13%; Electrical machinery rose 11% to EUR 86 million. Vehicles
is the second most important export (12.3%) but equally fell 9% to EUR 135 million. Plastics
and alcoholic beverages are other significant exports.
Panama
continues to be the main gateway for EU goods into the region with EU exports
totaling EUR 2 195 million, or 40% of all exports to CA. Although overall annual growth has
been below 1%, certain segments have seen significant growth or simply represent a large
percent of all EU exports to the region as a whole.
Pharmaceutical products is the largest export segment at EUR 365 million and although
growth has been marginally negative year on year (-1.7%) Panama still absorbs 66% of all EU
exports to the region under this heading. Other important products include beverages at
EUR 123 million, having fallen 8% in 2017 but still accounting for 74% of EU exports to CA,
perfumes & cosmetics down 22% to EUR 168 million
70% of all EU exports to the region
and jewelery up 10% to EUR 72.5 million, accounting for 95% of EU exports to CA.
Mechanical machinery jumped 21.4% to EUR 321 million, while ships, traditionally a
significant EU export to the country, fell to an historic low of EUR 96 million in 2017.
EU imports from Panama fell 14% in 2017 to EUR 512 million and were heavily concentrated
in fruits at EUR 251 million, mainly bananas, and fish & crustaceans, which together with
EUR 52 million of new tyres) account for 70% of EU imports from Panama in 2017.
Guatemala’s
exports to the EU grew by 14% from EUR 908 million in 2016 to
EUR 1 033 million in 2017. Significant growth took place for a number of products. Palm Oil
has become the top export growing by 20% in 2017 to EUR 224 million, with a tenfold
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increase over the 2012-17 period. Export of bananas rose by 9% to EUR 64.6 million
26
times higher than in 2012
and frozen fish jumped 82% in 2017 to EUR 28 millon, as did
iron & steel 122% up on the year to EUR 60 million. Sugar, a traditional export, fell 4% to
EUR 44 million but still represents 44% of all sugar imported by the EU from CA. Finally
coffee, another staple export, rose 11% to EUR 142 million, although still 30% below the
value exported to the EU in 2012.
Guatemala’s imports from the EU in 2017 grew at the fastest rate of any country in CA, up
9.5% on the year to EUR 1 033 million. Aluminium shot up 238% to EUR 47.6 million
15
times its level in 2012
–,
electrical machinery was up 54% to EUR 77 million, and mechanical
machinery managed a significant rise of 11% to EUR 212 million.
Trade flows between
Honduras
and the EU saw the highest overall percentage increase at
14% in 2017 but exclusively due to the very significant rise of Honduran exports to the EU
which jumped by almost 22% in the year (from EUR 1 039 million in 2016 to
EUR 1 265 million), while EU exports were down -3.3%.
Export concentration is very high, with coffee accounting for over 50% of total exports to the
EU, having risen 19% in 2017 to EUR 636 million and representing 65% of all coffee
exported by CA to the EU. Palm oil and kernel rose 34% and 19% respectively, to
EUR 299 million equivalent to 51% of CA exports of these products to the EU, fruits rose
17% to EUR 59 million, and knitted apparel and clothing also grew by 21% to
EUR 58 million. In short, these four categories represented over 90% of EU imports from
Honduras in 2017.
EU exports to Honduras were almost three times smaller than its imports and represented 8%
of its total exports to CA in 2017. The main headings are electrical and mechanical
machinery, pharmaceutical products and plastics.
EU trade flows with
El Salvador
rose by 6.4% over 2017 to EUR 730 million, with a 16%
rise in EU imports, which concentrate in a few key sectors: prepared fish and frozen fish
accounted for EUR 100 million of exports to the EU and rose by 33% over 2017; electrical
capacitors grew 35% to EUR 46 million and knitted apparel clothing climbed 78% to
EUR 16 million. Export values of more traditional exports such as sugar (EUR 31 million)
and coffee (EUR 27 million) remained essentially unchanged. These five headings
represented almost 90% of EU imports from El Salvador in 2017.
El Salvador is the fourth market for EU exports in CA at EUR 481 million, at just 9% of all
exports to the region. In 2017 these grew by 2%, with double-digit growth in mechanical
machinery (EUR 116 million) and plastics (EUR 16 million), but a 12% fall for electrical
machinery.
Nicaragua’s
overall trade with the EU increased in 2017 (almost 7%) although EU imports
grew at almost three times the rate (9.3%) of EU exports to the country (3.4%). It is the
smallest EU trade partner within the region, with bilateral trade representing 5.4% of total
trade with the region.
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Coffee regained its traditional positon as the main export product of Nicaragua to the EU,
with a growth in 2017 of 30% to EUR 100 million. On the other hand, EU imports of frozen
seafood
mainly crustaceans
fell 8% to EUR 85 million in 2017, but still 40% above their
level in 2012. These now traditional products were supplemented by fast growing areas such
as bananas, groundnuts, or T-shirts.
EU exports to the country reached a modest EUR 244 million. The main segments remain
mechanical machinery (EUR 55 million, 23% of imports) and electrical machinery
(EUR 44 million, 18% of imports), but other areas showed significant growth:
pharmaceuticals, medical instruments and devices, and vehicles.
2.2.
Trade in agricultural goods
The Agreement defines a number of TRQs with parties granting each other a preferential
tariff treatment up to the quota’s quantitative threshold. Imports
over this threshold are subject
to the applicable Most-Favoured Nation (MFN) tariff.
The Association Agreement grants eight TRQs in favour of CA on products that did not enjoy
preferential access to the EU market prior to the entry into force of the Agreement. In 2017 as
in previous years, TRQs for products originating in CA were used for only two of the eight
categories available (cane sugar and rum).
Table 2: TRQs granted by the EU to CA
Utilisation in 2017
Origin
Products
Garlic
Rice
Bovine meat
Mushroom
Manioc starch
Sweetcorn
Sugar
Rum in container > 2 l
Unit
TRQ
volume
550
24 000
11 400
275
5 000
1 920
168 000
8 200
EU
Import
0
0
0
0
0
0
167 686
8 200
Utilisation
rate
0%
0%
0%
0%
0%
0%
100%
100%
CA
Tons
CA except
Panama
hl pure alcohol
Source: European Commission
CA granted the EU TRQs on four products. EU exporters continued to make use of the
opportunities offered by these TRQs, with 2017 seeing a marked improvement in the rate of
utilisation jumping to 91% for powdered milk (from 56% in 2016) and 56% in the case of
cheese (slightly above the 48% the previous year). Thus, although a margin of growth in these
products remains, there has been an improvement in their use in 2017.
Table 3: TRQs granted by CA to the EU
Utilisation in 2017
Products
Cured hams
Powdered milk
Cheese
Prepared swine meat
Quota (tons)
1 080
1 335
2 495
1 080
Annual Volume Utilisation
increase (tons)
rate
65
363
34%
95
1 218
91%
150
1 401
56%
65
77
7%
Source: Data collected at national level in the six CA countries
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2.3.
Preference Utilisation Rates (PURs)
The PUR on imports into the EU from Central America was again high with an average of
95%. While it is above 90% for 5 of the 6 countries, it remains at 82% for Panama.
As in previous years, CA has informed the EU that the databases managed by their respective
customs authorities are not currently adapted for a regular exchange of detailed statistics that
can enable such an analysis of the tariff preference to take place for imports from the EU.
This was again discussed at the Association Committee meeting in June 2018.
2.4.
Trade in Services and FDIs
1.1.8.
Trade in Services
Trade in services between the two regions continued to increase in absolute and relative terms
and in 2016 represented almost 40% of the value of total trade in goods and services.
Total
trade in services
in that year amounted to EUR 6 857 million, an
increase of almost 9%
concentrated in the
two main markets
Panama and Costa Rica
which grew by 14% and
19%, respectively. Panama alone accounts for around 60% of EU trade in services with CA.
Table 4: Trade in services between the EU and CA in 2016 (million EUR)
Country
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panama
Total
Source: Eurostat
2015
EU Exports EU Imports
586
526
268
105
337
177
171
1 743
3 282
293
106
85
1 949
3 064
Total
1 112
325
630
283
256
3 692
6 298
2016
EU Exports EU Imports
757
566
252
93
275
174
64
2 155
3 677
249
94
88
2 061
3 151
Total
1 323
374
524
268
152
4 216
6 857
Total
19%
5.5%
7.5%
4%
2%
62%
100%
As the trade in services becomes increasingly important, combining the EU
CA trade
figures for goods and services in 2016 reveals certain patterns as regards total trade between
both regions. Three countries concentrate about 80% of total trade, with Panama accounting
for 37.7%, Costa Rica 27.7% and Guatemala 13.9%. The case of Panama is particularly
relevant from the EU perspective in so far as it is the destination for over 40% of EU exports
to the region and over 60% of total trade in services (which is relatively balanced in terms of
imports and exports of the same).
1.1.9.
Development of FDI
In 2016, three countries (Panama, Guatemala and Costa Rica) concentrated 97% of all EU
FDI in the region. FDI stocks increased by 4% for the whole region with higher rates of
increase in the case of Costa Rica (16%) and Guatemala (6.5%).
Table 5: EU
CA FDI (2016, million EUR)
Country
2015
Inward
Outward
Inward
2016
Outward
Total
Total
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Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panama
Total
1 114
268
2 916
26
83
2 071
6 478
2 537
105
2 098
498
305
23 479
29 022
1 347
252
2 840
23
91
6 560
11 113
2 899
93
2 501
461
331
19 541
25 826
4 246
345
5 341
484
422
26 101
36 939
11.5%
1%
15%
1%
1%
70.5%
100%
Whilst the level of importance of FDI originating from the EU is extremely varied depending
on the the CA country in question, the overall level of investment in the region is relatively
high. In 2016 EU FDI stocks in CA were double or more those in Colombia or Peru, with
similar or lower trade values, and were closer to those with Argentina which in 2016 had a
50% higher trade flow with the EU.
3.
3.1.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
Association Committee
On 14 June 2018, the Association Committee held its fourth meeting to review the work
carried out by the different subcommittees (see in more detail further below 3.2-3.8) and to
discuss other trade related issues.
The Parties reached an agreement on the
incorporation of Croatia to the Association
Agreement,
including the offer of compensation covering bananas as submitted earlier by the
EU. They shall start the administrative and institutional procedures to adopt the relevant
Protocol, the text of which has been agreed with the exception of the precise compensations
related to bananas, which will be added to the final decision before initiating legal
proceedings.
The
EU stressed the need to have reliable data on the use of tariff preferences
to get a
better overview of the effect of the agreement so far and explore means to assist economic
operators, in particular SMEs, to make better use of its opportunities. It was agreed that the
Market Access subcommittee would work on this issue, with a view to identifying the reasons
for the lack of data and possible solutions, including the possibility of establishing
cooperation programmes.
The EU equally noted the
importance of effectively implementing the sustainable
development chapter
in the Agreement. The EU will therefore be requesting regular bilateral
monitoring on specific issues with certain countries, as it has already been doing in some
cases.
The EU noted that there was a delay in the compliance with the commitment to adopt a
competition law by Guatemala. The latter explained that the preparation of the law had been
more difficult than originally expected, but that the aim of adopting it was maintained,
although it was not in a position provide a date.
CA pointed out the importance of swift progress with the preparation and adoption of several
procedural decisions pending in the area of customs and rules of origin.
CA also insisted on the need to establish clear and workable procedures for cumulation of
origin with other countries of Latin America.
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Other issues of interest to either of the parties were discussed more in detail at the meetings of
the subcommittees (see below).
It was agreed that the next meeting of the institutions of the Association Agreement would
take place in June 2019 in Guatemala.
3.2.
Sub-Committee on Market Access for Goods
On 7 and 8 June 2018, during the fourth meeting of this sub-committee, the Parties reviewed
pending issues of interest to either party.
CA main requests were:
Systematic control by European customs of export certificates issued by the authorities
of CA regarding the use of quotas, as provided for in the Agreement, in order to allow
an adequate follow-up of such use by the Central American countries.
Request by Costa Rica for the redistribution of products within the quota applied to
the textile sector.
The establishment of clear and applicable procedures for cumulation of origin, in
particular with Mexico and Chile regarding tuna.
The main outstanding market access issue for the EU refers to the taxes on beers and spirits in
Costa Rica which the EU considers discriminatory and in contradiction to the Joint Statement
attached to the Agreement. The EU also reminded Nicaragua of the longstanding problem
with scanner fees at customs.
The parties also shared information and their analyses on the recent evolution of trade flows
and on the use of tariff preferences and quotas.
3.3.
Sub-Committee on Customs Procedures, Trade Facilitation and Rules of Origin
The fourth meeting of the sub-committee took place on 4 and 5 June 2018, and the main
following issues were discussed.
After detailed discussions, the parties came close to agreeing the text of decisions on
the Explanatory Notes and Filling Instructions of the EUR.1 certificates, on guidance
relating to Annex II (rules of origin) of the Agreement, and regarding the transposition
of rules of origin to the VI Amendment of the Harmonised System. It was agreed that
once finalised these decisions will be adopted through written procedure.
CA reiterated the importance it attaches to clarifying the conditions for the possible
cumulation of origin with other countries in Latin America, as provided for in the
Agreement. The EU noted that cumulation of origin is subject in particular to adequate
administrative cooperation arrangements between the parties concerned.
The EU insisted on its interest in relation to the proposed amendment to the text of the
Agreement with regard to direct transport. CA is in the process of defining a common
position on how best to address this issue, which shall be notified to the EU.
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The parties also exchanged information on recent developments of their customs legislation
and procedures, on customs related aspects of their ongoing trade negotiations, and on the
current state of play of regional integration commitments of CA.
3.4.
Sub-Committee on Technical Barriers to Trade (TBT)
On 6 June 2018, the sub-committee on TBT reviewed the following topics:
CA requested an update on the ongoing modifications of EU legislation on the
promotion of the use of energy from renewable sources and in particular as to its
potential effects on the export of palm oil from CA.
Nicaragua enquired about the practical effects for exporting countries following the
establishment of a traceability system for tobacco products in the EU.
The EU raised specific trade concerns on registration processes in CA, internal
processes of technical harmonisation, and on the implementation of CA commitments
on regional economic integration.
Sub-Committee on SPS Matters
3.5.
The fourth meeting of the sub-committee on SPS, held on 4-5 June 208, delivered positive
outcomes and consolidated progress made to date. The EU highlighted the following issues:
The importance for CA to fulfil procedures established in the Association Agreement
to ensure that market access requests are handled in a timely and transparent manner,
including the approval of lists of establishments and verifications, among others.
The importance of complying with standards, guidelines and recommendations of the
international standard setting organisations.
Sub-Committee on Intellectual Property
3.6.
On 6 June 2018, the fourth meeting of the sub-committee on Intellectual Property Rights
(IPR) took place via video-conference to review in particular the following issues.
The Parties reviewed the state of play concerning future Geographic Indications (GIs) of CA
countries as included in the Joint Declaration of the Association Agreement as well as
registration and protection of EU GIs (all registered in the six countries, except parmigiano
reggiano in Guatemala).
The EU indicated its concerns with several pending cases, in particular on Parmigiano in
Guatemala, Manchego in Costa Rica and the publication of a list of generic terms in
Honduras. Guatemala explained that in the Parmigiano case a court decision is pending. Costa
Rica indicated that the existence of certain local manchegos preceded the Agreement and
would therefore be covered by Article 246 of the AA. However,
it took note of the EU’s
concerns and indicated that it would follow-up, particularly on possible cases of evocation of
the region of La Mancha. Honduras confirmed its availability to discuss in detail the list of
generics and requested additional documentation from the EU.
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The parties agreed to continue the discussions on the EU proposal for simplified procedures
for registration of new GIs. El Salvador stated its interest in registering within a short period
of time seven new GIs and requested information
on the EU’s registration process.
3.7.
Board on Trade and Sustainable Development
From 11-12 June 2018, the EU and CA held the meetings of the institutions in charge of
monitoring the implementation of the TSDprovisions of the Agreement (see part 4 below).
3.8.
Ad hoc meeting on Government Procurement
Following the Parties’ agreement to create a temporary technical ad hoc working group on
government procurement in 2016, this group met again on 7 June 2018 via videoconference.
The EU requested information on the status of the single point of access and stressed
the importance of the single point of access for EU operators to access information in
the region.
The EU addressed the importance of disseminating information regarding the
commitments in the Government Procurement Title of the AA to public entities, in
order to make them aware of the obligations stemming from the chapter if different
from national legislation.
Information on recent developments in the field of government procurement was
exchanged between the parties, who also confirmed the usefulness for this group to
continue meeting annually.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
4.
Important challenges remain in the implementation of labour provisions, particularly related
to freedom of association and collective bargaining in some CA countries. Guatemala has
made some progress by creating the national tripartite body, Honduras informed about the
preparation of the labour law reform and El Salvador showed some efforts to re-establish the
High Labour Council. However, stronger cooperation among the social partners is needed as
well as more efforts to address the violence against trade unionists. Panama informed about
the measures on gender equality in employment and Costa Rica on the new formalisation
strategy. The EU also highlighted the issue of child labour in CA countries.
Following a recommendation of the 2016 TSD Board meeting the
EU funded two events on
responsible business conduct / corporate social responsibility
(RBC/CSR) in the region.
The first was held in San José, Costa Rica in May 2017, with an emphasis on responsible
global value chains. The second was held in Guatemala City, Guatemala, in May 2018 and
focussed on decent work. Speakers from the International Labour Organisation (ILO) and the
OECD as well as the business network CSR Europe spoke at both events, which also involved
participants from CA countries and were held in partnership with national organisations
promoting responsible business conduct.
Civil society advisory mechanisms under the TSD chapter are now established in all
Central American countries.
These mechanisms have an important role to inform and
involve civil society groups in the application of the TSD chapter.
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Furthermore,
funding was provided by the EU to the ILO Regional Office
to support the
effective implementation of ILO fundamental conventions in El Salvador and Guatemala
a
key obligation under the TSD chapter. Bilateral exchanges were held with both countries to
follow up on specific issues identified by the ILO ahead of meetings of the ILO in Geneva.
Last but not least, in 2018 the EU launched a new project with the Netherlands’ Centre for the
Promotion of Imports (CBI)
32
to promote agricultural and fishery product exports from CA to
Europe, with a strong emphasis on corporate social responsibility and decent work in value
chains.
5.
S
PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING
The Agreement provides a
preferential customs duty on bananas
under heading 0803.00.19
(fresh bananas), progressively reduced since the date of entry of the Agreement until the year
2020 (following the schedule indicated in a tariff reduction table). This special treatment is
linked to a
stabilisation clause that sets out an annual trigger volume for imports
from
each Central American country during the transition period. If as a result of the reduction of
customs duties the level of imports of bananas is such as to cause or threaten to cause serious
injury to the EU banana sector, the Regulation establishes the appropriate procedures to be
adopted to avoid serious harm to this sector.
The Commission has been monitoring the evolution of imports of bananas from Central
American countries (as per Articles 3 and 13 of the Regulation) to assess whether the
conditions set out in the Regulation are met so as to initiate a safeguard investigation or
introduce prior surveillance measures. In 2017 Central American countries as a whole did
again not come close to reaching their trigger level under the stabilisation mechanism. At the
end of the year the overall total volume that had benefitted from preferential treatment in CA
was 74.4% of the established annual limit. These imports, very close to the 75% reached the
previous year, did not threaten the EU banana sector as a result of the tariff reduction.
Nevertheless, banana imports from both Guatemala and Nicaragua exceeded their
trigger level for 2017,
as they did the previous year, by 61% and 277% respectively.
Notwithstanding these individual countries’ level of exports, the
Commission did not
initiate, nor receive requests to initiate, any safeguard investigation
or introduction of
prior surveillance measures.
2017 import of bananas under the stabilisation mechanism (in kg)
Country
GUATEMALA
HONDURAS
NICARAGUA
PANAMA
COSTA RICA
EL SALVADOR
TOTAL
Used Volume
108 878 512
13 934 652
50 940 735
250 962 430
1 093 186 696
0
1 517 903 025
Trigger Level
67 500 000
67 500 000
13 500 000
506 250 000
1 383 750 000
2 600 000
2 039 100 000
%
161
21
377
47
79
0
74.4
32
https://www.cbi.eu/projects/connecting-central-america/
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6.
C
ONCLUSIONS AND OUTLOOK
Five years after its entry into force,
the Association Agreement between the EU and CA
has seen a
new vitality in the evolution of trade flows.
In 2017 EU trade flows with Central
Amercia grew by 7.2%, at a
similar pace as the EU’s trade with the rest of the world (i.e.,
8%). This growth has been particularly remarkable as far as exports from the region to the EU
are concerned, which have been growing at an average of 8% annually since 2015.
CA exports use the Agreement to a very high degree, with an average PUR of 95%. By
contrast, there continues to be no available data on the use of tariff preferences by EU
exporters; the EU side has raised this issue in the Association Committee and it was agreed
that the Market Access subcommittee would work on it, with a view to identifying the reasons
for the lack of data and possible solutions.
The use of TRQs improved for both regions,
although for CA this use remains centred on
sugar and bulk rum (both at 100%) while other quotas are not utilised. EU exporters improved
their use of available TRQs, particularly in the case of powered milk (at 91%), but fluctuated
in relation to the other products where opportunities for further growth continue to exist.
With regard to
bananas,
total imports from CA increased to just under 75% of the established
trigger levels (almost unchanged from 2016), with Guatemala and Nicaragua exceeding again
their annual trigger levels by significant margins, 61% in the case of Guatemala and 277% for
Nicaragua. However, these two countries’ absolute
levels of exports remain modest and
therefore did not have any significant impact
on the overall import figure from the region
or on the EU banana market. It was therefore not deemed appropriate to apply the safeguard
and suspend preferential duties.
EU exports of agri-food products have increased since the provisional application
of the
Agreement, rising from 471 M € in 2013 to 638 in 2017.
They have benefitted from the
facilitation of some SPS measures, particularly in the case of Costa Rica and Panama, with the
pre-listing system correctly applied for several EU Member States/commodities. Since March
2017 export to Costa Rica of Pork meat products (cured) and Dairy products is taking place
with no problems on certificates. For fruits and vegetables, there are also some success
stories, like the approval by Costa Rica of apples from Poland, or barley seeds from Spain.
The tools under the Agreement were very useful to get Nicaragua lifting the country wide ban
imposed to Spain over certain avian influenza outbreaks. The regular contacts facilitate
obtaining updated information and tackling irritants, as for example in the June 2018 SPS
Subcommittee.
The correct functioning of the institutions created by the Agreement is necessary for its proper
implementation. The meetings of the Association Committee and its Subcommittees took
place in June 2018, after having skipped the previous year due to agenda difficulties on both
sides. Following a long and arduous process, the Association Committee in 2018 agreed on a
mutually satisfactory solution of principle that should pave the way for the full incorporation
of Croatia into the Agreement, which will follow the necessary legal steps to become
effective.
Building upon the positive cooperation now established with CA is an ongoing priority for the
EU, so as to continue contributing to the common aim of achieving a complete and correct
implementation of the Agreement by all relevant actors. This has allowed economic operators,
consumers and civil society from both regions to take advantage of numerous opportunities
provided by the Agreement.
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As in previous years, the Commission continues to engage in discussing with CA any
concerns raised by stakeholders on the implementation of the Agreement. The Commission
reiterates its call on EU Member States and Members of the European Parliament to continue
to actively contribute in this process and voice their opinion accordingly.
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PART II: ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN
THE EU AND UKRAINE, MOLDOVA AND GEORGIA
The DCFTAs with Ukraine, Moldova and Georgia provide for
deepening of political
association and gradual economic integration
between the EU and its three partners, based
on shared values and principles i.e. democracy and the rule of law, good governance, respect
for human rights and fundamental freedoms, as well as a free market economy which would
facilitate the participation in EU policies.
The DCFTAs cover two main components:
1.
Gradual, reciprocal market opening
(elimination/reduction of tariffs and elimination of
non-tariff barriers to trade) by both Partners with a timeline asymmetry benefiting our
DCFTA partners;
2.
Far-reaching and dynamic regulatory approximation
to the EU law, notably in trade-
related areas, which should stimulate competition, create new predictable environment for
business cooperation, development of trade and attracting foreign investments, and hence
contribute to economic
restructuring and modernization of the our partners’ economies.
Our partner countries have to ensure the effective implementation and enforcement of the
approximated domestic law and undertake any action necessary to reflect the development in
the EU acquis in its legislation. Annexes to the Association Agreement which include the lists
of EU laws, as well as the deadlines for approximation agreed by Ukraine, Moldova and
Georgia are regularly amended with the aim to bringing them up to date with the EU
legislation.
The
main body under the institutional framework of the EU-DCFTAs is the Association
Council
(at ministerial level), which is supported by the Association Committee (at senior
civil servant level) in supervising and monitoring the application and implementation of AA.
For Title V - Trade and Trade-Related Matters - a dedicated Association Committee in Trade
configuration (ACTC) has been established. The ACTC is assisted by 4 specialised Sub-
Committees at experts’ level: (1) the SPS Sub-Committee;
(2) the Customs Sub-Committee;
(3) the GIs Sub-Committee; and (4) the TSD Sub-Committee. Civil society is involved in the
monitoring of the implementation of the TSD Chapter of the DCFTA through the respective
Domestic Advisory Groups (DAGs) foreseen in the TSD chapter and the Joint Civil Society
Dialogue Forum (JCSDF), which involves civil society at large.
The upcoming
fourth Macro Financial Assistance (MFA) program
of EUR 1 billion is not
only a token of continued political support from the EU and recognition of reforms already
undertaken but also an encouragement for continued reforms aimed at strengthening a market-
oriented economy in our DCFTA partners, where the rule of law and fight against corruption
are in the centre of authorities' attention for the sake of creating transparent and predictable
policy framework for business operators and investors.
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ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN
THE EU AND ITS MEMBER STATES AND UKRAINE
33
The DCFTA with Ukraine entered fully into force on 1 September 2017 after being applied
provisionally since 1 January 2016. In general, implementation of the Agreement and
approximation of legislation are advancing at reasonable pace. EU-Ukraine trade has grown
substantially in 2017 with both import and exports increasing in both directions. The
Autonomous Trade Measures adopted in 2017 for a period of 3 years have also been a
contributing factor (see section 1.1.6).
The Joint Government - Parliament Legislative
Road Map for the Implementation of the Association Agreement
34
presented by Ukraine
in February 2018 complementing the
Governmental Association Agreement Action Plan,
adopted in October 2017, are important and welcome steps to ensure speedy implementation
of the DCFTA.
1.
1.1.
E
VOLUTION OF TRADE
Trade in goods overall
1.1.10. Scope of trade liberalisation
The elimination and reduction of customs duties are taking place over a transitional period
which in the case of Ukraine runs until 2026 and will ultimately result in market opening for
96.5% of tariff lines for products imported from the EU (97.7% in terms of import value). The
EU will open its market earlier than Ukraine, implementing its liberalisation commitments by
2023 for 95.8% of tariff lines (97.9% in value) for products imported from Ukraine.
The reduction and elimination of customs duties are taking place in different staging
categories depending on the specific product. Certain products are subject to annual duty-free
TRQs applied indefinitely by both sides which include annual increases for some product over
a five year transition period. A supplementing Annex I-A to Chapter 1 of Title IV (Trade and
Trade-related Matters) which sets out in detail the staging of liberalisation will be formally
added to the Association Agreement.
35
A review clause related to trade in goods may be requested by either Party 5 years after the
entry into force of the Agreement whereby both sides may consider accelerating and
broadening the scope of the elimination of tariffs on trade between themselves.
33
See the following website to find more information on Ukraine:
http://ec.europa.eu/trade/policy/countries-
and-regions/countries/ukraine/
Council Decision (EU) 2018/156 of 22 January 2018 determines the EU position in the Association Council.
The EU-Ukraine Association Council will adopt a formal decision to that effect in 2018.
35
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1.1.11. Overall evolution of EU-Ukraine trade in goods
EU-Ukraine trade in goods increased significantly in 2017 and the positive economic growth
seems to have settled after the crisis in 2014 and 2015. GDP growth in 2016 was 2.4%, a
positive trend which continued in 2017 when GDP grew by 2.5%. The EU reinforced its
position as Ukraine’s most important trading partner.
In 2017, the EU remained Ukraine’s first trading partner with 42% of its total trade. Russia
was the second partner of Ukraine with 12%, followed by China (8%), Belarus (5%) and
Turkey (4%). The EU has been Ukraine’s top trading partner since 2013 when the share was
around 31%. Ukraine is the 25
th
trade partner of the EU with around 1% of its total trade.
Ukraine’s total trade in
goods with the EU increased by more than 24% in 2017, reaching
EUR 37 billion, up from EUR 30
billion in 2016. Ukraine’s total trade with the world also
increased from EUR 68.2 billion in 2016 to EUR 80 billion in 2017 confirming a consistent
evolution in trade globally, following a steep decline in overall trade in 2015 and 2016.
Table 1: EU trade in goods with Ukraine, 2013-2017 (million EUR)
2013
13 882
23 899
37 781
10 017
2014
13 734
16 988
30 722
3 255
2015
12 844
14 033
26 877
1 190
2016
13 159
16 565
29 725
3 406
2017
16 740
20 217
36 957
3 478
EU imports
EU exports
EU-UA total trade
EU-UA trade balance
Source: Eurostat
1.1.12. Sectoral structure of EU-Ukraine trade in goods
The EU continues to have a trade surplus with Ukraine as a result of the trade structure
characterized by growing share of goods with higher value added. The main product
categories
36
exported by the EU to Ukraine in 2017 were machinery and appliances, chemical
products, transport equipment, mineral products, plastics, rubber and articles thereof, textiles
and textile articles. Looking at the
sectoral split,
the main
increase in EU exports from
2016 and 2017 was recorded for mineral products
increasing by 49% from EUR 1.1 billion
to EUR 1.6 billion. Transport equipment and machinery and appliances rose by respectively
33% and 21.5%. Live animals and animal products increased by 21% although from a lower
level from EUR 250 million to EUR 304 million. Exports of foodstuffs, beverages and
tobacco increased by 19.5% to EUR 940 million while vegetables saw an increase of 13.4% to
EUR 537 million hence an increasing appetite for EU agricultural produce.
The traditional driving forces in
imports from Ukraine to the EU
are the sectors
of raw
materials and semi-finished products
mainly from the agro-food sector and metallurgical
industry, while exports have increased in most sectors, although in some from relatively low
levels. Looking at the sectors concerned, the main products Ukraine exported to the EU in
36
By Sections of the Harmonized System Nomenclature (HS).
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2017 were base metals, mineral products vegetable products, machinery and appliances,
animal or vegetable fats and oils and wood, charcoal and cork and articles thereof.
From the categories of products most widely imported from Ukraine, machinery and
appliances increased by 25% from 2016 indicating that the significant increase from the 2015
may be a lasting trend and a positive sign as it represents higher added value goods compared
to the large portion of the other imported products.
Table 2: EU trade with Ukraine by HS Sections (million EUR and % growth)
HS Section
EU imports
2016
Total Goods
I Live animals; animal products
II Vegetable products
III Animal or vegetable fats and oils
IV Foodstuffs, beverages, tobacco
V Mineral products
VI Products of the chemical or allied industries
VII Plastics, rubber and articles thereof
VIII Raw hides and skins, and saddlery
IX Wood, charcoal and cork and articles thereof
X Pulp of wood, paper and paperboard
XI Textiles and textile articles
XII Footwear, hats and other headgear
XIII Articles of stone, glass and ceramics
XIV Pearls, precious metals and articles thereof
XV Base metals and articles thereof
XVI Machinery and appliances
XVII Transport equipment
XVIII Optical and photographic instruments etc.
XIX Arms and ammunition
XX Miscellaneous manufactured articles
XXI Works of art and antiques
Other
13.159
153
2.103
1.117
703
1.708
364
110
98
860
88
383
90
111
14
2.891
1.509
82
22
24
284
0
444
2017
16.740
238
2.978
1.418
813
2.532
404
151
121
881
102
427
97
141
20
3.496
1.886
108
37
3
386
1
502
Annual %
27%
55%
42%
27%
16%
48%
11%
37%
23%
2%
16%
11%
8%
26%
43%
21%
25%
32%
67%
-86%
36%
110%
13%
EU exports
2016
16.565
250
505
41
787
1.088
2.764
1.179
169
119
530
951
138
230
26
789
4.335
1.762
354
20
345
2
181
2017
20.217
304
573
42
940
1.620
3.243
1.333
211
138
537
1.093
156
238
23
950
5.265
2.344
476
13
404
2
310
Annual %
22%
21%
13%
2%
19%
49%
17%
13%
25%
16%
1%
15%
14%
4%
-9%
20%
21%
33%
34%
-34%
17%
-17%
71%
Source: COMEXT
1.2.
Trade in agricultural goods
Ukraine is a large producer and exporter of agricultural products which is reflected in its trade
with the EU. In 2017, EU imports and exports of agricultural products from / to Ukraine
increased by 32% and 17% respectively since 2016.
Ukraine became the EU’s
4
th
biggest
supplier of agricultural products in 2017,
and the first supplier among our FTA partners.
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Table 3: EU trade in goods with Ukraine, split by AG and NAMA 2015-2017 (million EUR)
EU28 imports
product category
2015
Total Goods
Agricultural products
Non-agricultural products
Fishery products
Industrial products
12.844
4.063
8.780
10
8.770
2016
13.159
4.116
9.043
12
9.032
2017
16.757
5.517
11.240
21
11.219
17/16
27,3%
34,0%
24,3%
80,5%
24,2%
2015
14.033
1.355
12.678
53
12.625
2016
16.565
1.546
15.020
82
14.938
2017
20.223
1.814
18.409
97
18.312
17/16
22,1%
17,4%
22,6%
18,5%
22,6%
2016
3.406
-2.570
5.976
70
5.906
2017
3.466
-3.703
7.169
76
7.094
EU28 exports
EU28 trade balance
Source: Eurostat COMEXT.
The traditional products such as cereals, oil seeds, animal or vegetable fats and oils still
dominate overall Ukraine exports to the EU. A closer look at trade data reveal overall
increases for most products indicating that the trade preferences provided for under the
DCFTA are starting to
be noticed and being better exploited. For example, Ukraine’s exports
of dairy products increased by 30% from 2016 to 2017 while edible fruits and edible
vegetables increased by respectably 44.6% and 51.8% over the same period. Cereals, oilseeds,
fish, meat and edible meat offal exports also increased significantly. Similarly, important
growth in EU’s export to Ukraine was registered for meat and edible offal, dairy products,
cereals, cocoa products, beverages and tobacco products.
Table 4: EU trade with Ukraine in agricultural goods (million EUR)
HS Chapter
Total Goods
01 Live Animals
02 Meat and edible meat offal
03 Fish and crustaceans
04 Dairy produce
05 Products of animal origin
06 Live trees and other plants
07 Edible vegetables, roots & tubers
08 Edible fruits & nuts
09 Coffee, tea, mate & spices
10 Cereals
11 Products of the milling industry
12 Oil seeds & oleaginous fruits
13 Lacs, gums, resins & other veg. saps
14 Vegetable products n.e.s.
15 Animal or vegetable fats & oils
16 Preparations of meat
17 Sugars & sugar confectionery
18 Cocoa & cocoa preparations
19 Preps. of cereals, flour, starch, etc.
20 Preps. of vegetables, fruits, nuts & plants
21 Miscellaneous edible preparations
22 Beverages, spirits & vinegar
23 Residues and waste from food industry
24 Tobacco & tobacco products
EU imports
2.016
2.017
13.159
16.740
1
1
63
112
11
21
75
98
3
6
1
1
21
32
103
149
3
3
1.360
1.759
14
15
568
992
0
0
33
26
1.117
1.418
5
2
37
45
24
35
45
65
76
86
26
33
20
24
470
523
0
0
import growth
total M€
annual %
3.580
27%
-
0
-2%
49
79%
10
87%
23
30%
3
77%
0
5%
11
52%
46
45%
1
24%
399
29%
1
6%
424
75%
-
0
-3%
-
7
-20%
301
27%
-
3
-59%
9
23%
11
44%
20
45%
10
13%
7
26%
4
19%
53
11%
0
1%
EU exports
2.016
2.017
16.565
20.217
54
50
72
98
65
78
50
71
9
6
38
40
22
23
76
90
69
83
96
118
10
11
180
194
15
13
0
0
41
42
22
27
21
29
124
150
57
74
58
72
165
177
137
176
107
118
96
116
export growth
total M€
annual %
3.652
22%
-
4
-7%
26
36%
13
19%
21
43%
-
3
-35%
2
5%
1
5%
14
18%
14
20%
22
23%
1
12%
14
8%
-
1
-8%
0
41%
1
2%
5
21%
8
41%
26
21%
18
31%
14
24%
12
7%
39
28%
12
11%
20
21%
Source: COMEXT
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1.1.13. Use of TRQs
For products which have not been completely liberalised under the DCFTA, TRQs are in
place.
Ukraine is starting to make better use of the quotas
granted by the EU, as the
country diversifies its exports. While 12 out of the 36 TRQs in place are fully used, fill rates
also increased for garlic, glucose and fructose, starches, dextrins and glues, milk powder, eggs
and albumins. Still other quotas remain unused such as for example sheep, pork and beef meat
(due to non-compliance with EU SPS regimes), and buttermilk, dairy spreads, sweetcorn,
food preparations and flavoured syrup.
Ukraine grants five quotas to the EU for imports of agricultural goods (two quotas for pork,
two quotas for poultry meat and one quota for sugars). One poultry quota is fully utilised
while the other quotas had a relatively low to very low utilisation rate in 2017.
Table 5: Tariff rates quotas for EU exports to Ukraine in 2017
Product
Pork
Pork
additional for:
0203 11 (10)
0203 12 (19)
0203 19 (11-15-59)
0203 21 (10)
0203 22 (19)
0203 29 (11-15-59)
Poultry meat
Poultry meat
additional for:
0207 12
Sugars
Source: Ukrainian authorities
Quantity (tons)
10 000
10 000
Utilisation rate
38.7%
9.7%
8 400
10 000
99.5%
0.2%
32 000
1.9%
1.3.
Preference utilisation rate (PUR)
The
PUR on EU imports from Ukraine
reached
87%
in 2017 slightly down from 89% in
2016. Data to calculate the PURs on EU exports were not available from Ukraine.
1.4.
Autonomous trade measures
In view of the difficult economic and political situation in Ukraine the EU granted temporary
autonomous trade measures (ATMs) for certain agricultural and industrial products for a
period of three years, starting on 1 October 2017. This is in addition to the trade concessions
available under the DCFTA and means that tariff elimination for 22 industrial products
(ammonium sulphate and nitrate, fertilisers, footwear, aluminium and certain electrical
machinery) will be accelerated and additional TRQs will be granted for 8 agricultural
products (common wheat, maize, barley, barley groats and pellets, oats, natural honey,
processed tomatoes and grape juice). The quotas for natural honey, common wheat, maize and
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processed tomatoes have already been fully used, while utilisation for the other quotas can
only be determined by the end of 2018.
1.5.
Establishment, trade in services and investments
1.1.14. Market access related to establishment and trade in services
The DCFTA contains the necessary arrangements for the progressive reciprocal liberalization
of establishment and cross-border trade in services and for cooperation in electronic
commerce. This includes the freedom of establishment by granting each other national
treatment and most favoured-nation treatment (subject to several reservations specified by EU
Member States and Ukraine) as well as liberalization of cross-border supply of services (by
granting each other national treatment) with several limitations and reservations on both
sides). In four services sectors (postal and courier services, telecommunication, financial
services and international maritime transport services) both Parties recognized the importance
of gradual approximation to the EU legislation. The internal market treatment may be
envisaged for those four sectors once Ukraine effectively implements the EU acquis (foreseen
within 2 to 7 years after the entry into force of the Agreement) and ensures adequate
administrative capacity to implement and enforce it. Ukraine was notified of amendments to
EU legislation in those sectors in early 2018.
The EU and Ukraine agreed on a review clause with a view of liberalizing establishment
(regular review), cross-border supply of services (regular review) and capital movement (by
end 2021, the fifth year following the date of entry into force of the DCFTA). This review
shall take into account,
inter alia,
the process of gradual approximation foreseen in the
Agreements and its impact on the elimination of remaining obstacles to cross border supply of
services between the parties.
1.1.15. Trade in services
After the decline in 2014 for similar reasons as trade in goods, the
total bilateral trade in
services between the EU and Ukraine continued its increasing trend
started in 2015 and
rose to around EUR 10 billion in 2016. This is an increase of 4% from 2015 and above 7%
from 2014.
Table 6: EU services trade with Ukraine (million EUR)
EU 28 imports
EU28 exports
Total
2014
2 691
4 716
9 421
2015
2 737
5 006
9 759
2016
2 678
5 467
10 161
Source: European Commission, DG Trade.
EU exports of services grew in that period by 6.3% (to EUR 5.0 billion) compared to 2014
(EUR 4.7 billion). EU imports increased in the same time by 3% (from EUR 2.6 billion to
2.7 billion).
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1.1.16. FDI
After a deep economic crisis in 2014 and 2015 with GDP decline of respectively 6.6% and
9.9%, Ukraine’s economy progressively recovered in 2016 (GDP growth of +2.3%) and 2017
(+2.5%). However, the 2017 recovery was hampered, inter alia, by the cargo blockade
introduced vis-à-vis the non-government-controlled areas (following the confiscation of
Ukrainian companies by Russia-backed separatists), while the forecasts for 2018 suggest an
acceleration of GDP growth to 3.2-3.5%. EU Foreign Direct Investment (FDI) in the country
remains at a very low level as seen in table 7.
A number of key reforms were introduced in Ukraine in the recent years to improve the
business climate and attract investors. Ukraine ranks 76 in the 2018 World Bank Doing
Business Index. It considerably improved its position over the last years since it ranked 112 in
2014, but is still doing worse than its peers in the region. Ukrainian authorities have to make
further efforts to address the long-standing barriers that affect negatively the process of
attracting foreign investors who are preoccupied with corruption, lack of trust in judiciary and
unpredictable regulatory changes. This would also stimulate investment by small and medium
sized enterprises in Ukraine itself.
Table 7: EU FDI with Ukraine, 2015-2016 (million EUR)
FDI stocks
Ukraine in EU28 (inward)
EU28 in Ukraine (outward)
Net investment stocks
FDI flows
Ukraine EU28 (inward)
EU28 into Ukraine (outward)
Net investment flows
Source: Eurostat.
2015
456
12700
12244
2015
200
500
300
2016
175
9900
9725
2016
60
-600
-540
2.
2.1.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
Joint decisions of the Association Bodies
Resulting from preparatory work in 2017 the following two decisions were adopted in 2018
(date) by the Association Committee in Trade configuration:
Public Procurement:
Decision 1/2018 of the EU-Ukraine Association Committee in
Trade configuration updating Annex XXI to Chapter 8 on
Public Procurement
of
Title IV to the Association Agreement and giving a favourable opinion regarding the
comprehensive roadmap on public procurement
37
of 14 May 2018. This is a first step
37
Council Decision (EU) 2017/43 of 12 December 2016.
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in obtaining market access to the public procurement market as provided for in the
DCFTA.
Export duties, safeguards:
Decision 2/2018 of the EU-Ukraine Association
Committee in Trade configuration recalculating the schedule of
export duty
elimination and safeguard measures
for export duties set out in Annex I-C and
Annex I-D to Chapter 1 of Title IV of the Association Agreement
38
of 14 May 2018.
The following decision includes a new appendix that clarifies the staging categories
for the reduction of customs duties.
A third decision containing a new appendix clarifying the reduction to the base rate of
customs duties to be applied for staging category will also be adopted by the Association
Council in 2018 via written procedure:
Customs duties:
Decision of the EU-Ukraine Association Council as regards
supplementing Annex I-A to Chapter 1 of Title IV of the Association Agreement
39
2.2.
Meetings of the Association Bodies
The
2
nd
Association Committee in Trade configuration (ACTC)
met in Brussels on 28-29
September 2017. Both sides exchanged information on trade data, trade policies and took
stock of the situation in all DCFTA chapters: competition, public procurement, intellectual
property rights (including GIs), SPS issues, trade in services, trade related energy, trade and
sustainable development. Discussions included also the wood export ban maintained by
Ukraine, implementation of autonomous trade measures, business and investment climate and
support to SMEs. Both sides also exchanged list of individuals to serve as arbitrators in
dispute settlement proceedings (while the Ukrainian list remains incomplete, May 2018).
Ukraine gave an overview of progress in the approximation of legislation and on the
institutional capacity building in several areas, often supported by EU technical assistance.
The operational conclusions from the ACTC guide work in monitoring commitments and
implementation on both sides.
The
2
nd
EU-Ukraine High Level Industrial and Regulatory Dialogue
was held on the 27
March 2018 with the participation of Commissioner Bieńkowska. The main objectives were
to 1) To strengthen EU-Ukraine industrial cooperation, 2) To encourage the reforms launched
by the government to modernize the Ukrainian economy 3) To provide EU support to Ukraine
in implementing its reform agenda. On this occasion five working groups held meetings - the
Dialogue on Technical Barriers to Trade
(as provided by the Article of 55 of the
Association Agreement) as well as
Public Procurement Dialogue,
working groups on
SMEs, Space,
and
Industrial cooperation in Automotive.
38
39
Council Decision (EU) 2018/156 of 22 January 2018.
Council Decision (EU) 2018/156 of 22 January 2018.
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The four sub-committees
on GIs, customs, SPS and TSD held their first meetings in 2017
and reports from these meetings were included in the FTA Implementation Report of 2017.
Three of the sub-committees have met since. The SPS sub-committee held its second meeting
on the 19 October 2017 in Kiev. The main topics concerned the new import requirements of
Ukraine, bilateral veterinary certificates for EU exports to Ukraine. Ukraine also provided an
update on the animal health situation. Bilateral trade issues focussed in particular on the
recognition of the regionalization principles on highly pathogenic avian influenza (HPAI) and
the possibility of beef export to EU. The SPS strategy was also discussed. The GI Sub-
committee held its second meeting on the 12 June 2018 in Brussels with discussions focussing
on legislative developments in relation to GIs, the update of the list of GIs protected in the
Association Agreement (AA), various enforcement issues and possible misuse of Asti and
Prosecco respectively a protected and not protected GI under the Agreement. Both sides took
stock of the work of the GIs technical assistance project financed by the EU. The 2
nd
Customs
Sub-Committee held its meeting on 2 July 2018 in Brussels. The main topics discussed were
(i) fostering Ukraine's efforts in the implementation of the Customs Chapter of the AA, and in
particular advancing the preparation to accede to the Convention on a common transit; (ii)
achieving initial accord on the draft texts of the new Annex XV and the new Protocol I; (iii)
taking tangible measures by the Ukrainian Customs to more effectively combat tobacco
smuggling and corruption
3.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
The first and only meeting of the TSD Sub-committee took place in May 2017 and the second
meeting is foreseen in October 2018. Ukraine has still not appointed its members to the joint
Group of Experts, a group the parties agreed to consult on TSD matters if there is a need.
Neither has the Ukraine appointed its members of the Advisory Group consisting of
representatives of different groups of Ukrainian civil society. It is expected that these groups
will be established in 2018 following the establishment in June 2018 of the Council on TSDin
Ukraine
4.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
SPS aspects
The Comprehensive Strategy on alignment with EU legislation on SPS and animal welfare is
expected to be formally adopted in 2018 following amendments and technical adjustments to
the initial Union position on the SPS Strategy from 2017. Ukraine’s effort to align its
legislation is ongoing. Ukraine still needs to step up efforts in lifting the remaining trade
irritants (notably the recognition of regionalisation for African Swine Fever (ASF) as well as
the one related to the draft Order 71 on adoption of requirements for importing (sending) into
the customs territory of Ukraine of live animals, their reproductive material, food products of
animal origin and products not intended for human consumption). Several video conferences
and bilateral meetings including SPS Sub-Committee have taken place to make progress and
we expect this to be finalised 2018 or early 2019.
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In 2017, following EU SPS market access issues were solved: for poultry and poultry
products, in January 2017, an agreement was reached on reciprocal recognition of
regionalisation when outbreaks of avian influenza occur; for milk and dairy products, a
harmonised veterinary certificate is in force as of mid
–September
2017 (Born and raised
clause has been eliminated); the temporary ban on EU eggs, poultry meat and offal due to
fipronil contamination in the Netherlands, Belgium, Germany and France has been lifted in
September 2017.
There is an on-going negotiation of other export certificates to Ukraine. Ukraine is interested
in red meat export. So far, the relevant EU import requirements are not met.
Public procurement
After much preparatory work in 2017, a
comprehensive roadmap on public procurement
was formally adopted by Ukraine on the 14 May 2018
(see Decision No 1/2018 of the
ACTC on updating Annex XXI to Chapter 8 on Public Procurement to the Association
Agreement). Ukraine has progressed towards building a transparent, non-discriminatory,
competitive and open public procurement system and has introduced compulsory e-
procurement in the public sector, which proves to be effective in enhancing efficiency and
reducing corruption. Despite these solid reforms there have been attempts by certain members
of the Parliament of Ukraine to amend the law by including discriminatory local content
requirements which, if adopted, would violate both the provisions of the DCFTA and the
revised WTO Government Procurement Agreement that Ukraine joined in 2016. The
Commission has on several occasions expressed its concern and continues to work closely
with the Government of Ukraine to avoid these amendments from being adopted.
Intellectual property rights
Ukraine made ambitious commitments in the DCFTA on alignment of its system of protection
and enforcement of intellectual property rights (IPRs). Progress is monitored at technical level
within the IPR Dialogue established under the DCFTA. Throughout 2017 the EU provided
input and comments to several draft laws, including the draft patent law, the draft law on
trademark and design and the draft law on copyright and related rights, among other things.
There are still problems in relation to collective right management organisations
and an
analysis by the Commission of the law on collective right management adopted in 2018 is
ongoing. Ukraine needs to step up efforts against counterfeiting and piracy, especially at its
border. It should be noted that Ukraine improved its legal system of fighting against internet
piracy. The adopted Law on Cinematography introduces better controls to prevent illegal
content being shown on websites based in Ukraine, and the activities of the cyber-police to
enforce the law in good cooperation with international bodies is very encouraging. Since its
adoption, the law has not been properly enforced due to the lack of the IP inspectors. The
importance of these aspects has been made clear to Ukraine and was raised again during the
Intellectual Property Rights dialogue that took place in Ukraine the 20 June 2018. The
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Commission is following this closely and are in a constructive dialogue with the Ukrainian
authorities.
Ukraine’s accession to the Regional Convention on pan-Euro-Mediterranean
preferential
rules of origin
On 13
th
December 2017 the instrument of Ukraine’s accession to the Regional Convention on
pan-Euro-Mediterranean preferential rules of origin (PEM Convention) was deposited at the
General Secretariat of the Council of the EU. Ukraine acceded to the Convention on 1
st
February 2018. The Customs Sub-Committee will take a decision to replace Protocol I of the
DCFTA by a new protocol which refers to the PEM Convention. This would make effective
the cumulation of rules of origin between the EU and Ukraine under the PEM Convention.
One sentence to explain what this means, pls.
Export ban on raw wood
The export ban on raw wood continues to be of concern to the EU since 2015. The
Commission repeatedly raised this issue in meetings, including in the Association Committee
in Trade configuration, and in writing, reminding Ukraine of its obligation under the DCFTA.
In September 2017 the EU handed over a non-paper suggesting a number of initiatives
surrounding the lifting of Ukraine’s export ban on wood. The non-paper
covers a possible
communication campaign to increase knowledge among relevant stakeholders and help ensure
a fact-based discussion. Furthermore, the EU offered technical assistance to implement the
forestry roadmap 2020 and support a number of other activities, including the improvement
and implementation of systems for wood certification/traceability and the improvement of
facilities and equipment (GIS/IT databases) for effective forest monitoring and
inspection/control. An important areas addressed in the non-paper also concerning the
strengthening of cooperation with international organisations including INTERPOL and
customs and law-enforcement agencies of timber importing countries, in particular EU
Member States and TAIEX study visits by the Ukrainian authorities to EU Member States
that have successfully addressed illegal logging. These have not materialised. The
constructive approach by the Commission
and Ukraine’s reluctance to progress means that the
Commission is now considering addressing this trade irritant through the dispute settlement
mechanism provided for under the DCFTA.
Poultry imports
In 2017 the EU observed a large increase of imports of specific poultry cuts from Ukraine.
The product in question is a traditional breast cap with the humerus bones of the wings
attached, which is systematically deboned after import, turning it into traditional poultry
breast. The bone-in
cuts are classified under the tariff line ‘other cuts’, which is duty free
under the DCFTA. The EU had limited its concessions under the DCFTA for poultry breast to
the opening of a zero-duty tariff-rate quota explicitly because of the sensitivity of poultry
breasts for the EU market. This situation may lead to potentially unlimited imports of poultry
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breast from Ukraine, which is of concern to the EU. The Commission has acted swiftly to
address the issue and is in contact with Ukraine to find a solution agreeable to both sides.
5.
E
U
S
UPPORT TO
DCFTA I
MPLEMENTATION
EU Support to DCFTA-related reforms
EU assistance to the implementation of the DCFTA is embedded in a comprehensive support
programme to systemic reforms, drawn up in response to the 2014 events as well as in view of
the AA/DCFTA implementation. This so far notably includes a a substantive package on good
governance with Public Administration Reform, decentralisation reform and the rule of law
including the fight against corruption in the focus; private sector development; fostering of
energy efficiency; support to the conflict-affected areas in Eastern Ukraine; skills
development and people-to-people contacts. With an annual budget of up to 200 million euro,
965 million euro has been allocated bilaterally under the European Neighbourhood Instrument
so far.
In the area of economic reform, including implementation of the DCFTA and the related
approximation of Ukrainian legislation to EU acquis, EU support covers a wide range of
sectors, including technical barriers to trade, customs, intellectual property rights,
competition, financial services, food safety, sanitary and phyto-sanitary measures, and others.
Most significat EU support operations to DCFTA-related reforms currently take place in the
areas of customs, food safety and fiancial services. Ukraine benefits from EU support projects
provided through a whole set of assistance modalities, including technical assistance,
twinning and TAIEX projects.
Legal approximation of Ukraine's customs legislation with EU acquis is about to be supported
under the EU public finance management support programme. The technical assistance
project aims to support customs reforms in order to facilitate mutual trade. In addition, an
ongoing EU twinning project focuses on reinforcing integrated border management elements
in the area of customs.
The EU provides assistance to Ukraine in the sector of food safety, sanitary and phyto-
sanitary measures in order to align Ukrainian standards to those of the EU. The EU supports
Ukraine through a technical assistance project on improvement of food safety control system
and a twinning project on approximation of Ukrainian legislation with the EU in the field of
plant protection and plant health.
The EU supports reforms in financial services in Ukraine with a technical project in financial
sector priority areas, which focuses on financial transparency, stability and better supervision.
A further technical assistance project works towards strengthening the regulation and
supervision of the non-bank financial market.
The EU supports alignment of the Ukrainian quality infrastructure system with that of the EU
in order to remove technical barriers to trade. An EU technical assistance project works
towards further regulatory harmonisation between the EU and Ukraine in the area of technical
barriers to trade.
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Alignment of Ukraine's national competition legislation with EU standards is being supported
with a twinning project. In the perspective of the effective entry into force of the state aid
control in Ukraine, a further technical assistance project started aiming to build institutional
capacities with the state aid control bodies.
EU Support for SMEs
SMEs in Ukraine are benefitting from the EU support under the DCFTA Facility for SMEs
which aims at increasing SMEs competitiveness, easing their access to finance, helping them
to seize new trade opportunities and comply with new food safety, technical and quality
standards, as well as with environmental protection measures implied by the DCFTA
implementation.
The DCFTA Facility consists of a set of programmes implemented principally by EBRD and
EIB. SMEs are benefiting from the EU support through four types of instruments:
1) risk sharing mechanisms (mostly first loss portfolio guarantees for local banks);
2) currency hedging (interest rate subsidies for loans in local currency);
3) investment incentives (grants provided to SMEs combined with investment loans to
upgrade machinery or production processes in line with the EU standards) and
4) technical assistance (business advice to SMEs and local banks, assessment of the
compliance with the EU standards, capacity building for local banks).
EU also supports private sector in Ukraine, in particular SMEs through capacity building and
by facilitating access to markets. A flagship project is "EU4Business: Network of Business
Support Centres in Ukraine" implemented by EBRD. It offers advisory support to SMEs
(creation of 15 regional Business Support Centres, business advice to SMEs by
local/international consultants) and investment preparation. Another relevant initiative is
“Eastern Partnership: Ready to Trade (International Trade Centre)”. The EU provides also
technical assistance to authorities on SME policy and better regulation: FORBIZ including the
Better Regulation Delivery Office (BRDO), and EU4Business: From Policies to Action
(OECD).
6.
C
ONCLUSIONS AND OUTLOOK
The
economic situation in Ukraine has been stabilised
after the economic crisis of 2014-
2015 when the illegal annexation of Crimea and Sevastopol and the conflict in the east of the
country provoked by Russia's destabilising actions, coupled with an unfavourable global
economic environment and measures introduced by Russia
40
resulted in an overall decline by
40
As from 1 January 2016 Russia suspended (indefinitely) the application of the Russia-Ukraine
Commonwealth of Independent States FTA i.e. reintroduced MFN tariffs on imports from Ukraine (as a
direct response to the start of provisional application of the EU-Ukraine DCFTA
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over 17% of GDP, having a negative impact on foreign trade, including with the EU. All these
aspects strongly contributed to the drop in overall exports from Ukraine to the world, and in
particular to the Russian Federation. The reversal of the negative trend in exports from
Ukraine to the EU indicates the gradual reorientation of its exports towards the EU and an
improvement of Ukraine’s export performance overall.
The dynamic regulatory approximation and alignment are advancing and are being monitored
closely. The
Joint Government - Parliament Legislative Road Map for the
Implementation of the Association Agreement
adopted in February 2018 should speed up
the process in 2018 while reforms in trade-related areas, financially and technically supported
by the EU start to bring tangible effects. Ukraine should take full advantage of the financial
incentives provided by the EU to strengthen the small and medium sized enterprises which are
also important for job creation and economic growth.
Ukraine still needs to make
further efforts in IPR reforms and in institutional aspects
for
the implementation of TSD Chapter. It also needs to better prepare for discussing the
implementation of the labour provisions under the TSD chapter. Furthermore, policies and
reforms related to
strengthening the rule of law and the business and investment climate
need to advance for the benefit of foreign and domestic investors alike. Capacities to enforce
labour standards and rights need to be further enhanced. EU support to this effect has started.
Getting rid of trade irritants such as the export ban on raw wood, which might be linked to the
vested interests, and avoiding the adoption of discriminatory legislation as regards public
procurement are very important.
Ukraine has made substantive progress in trade-related reforms under difficult circumstances
over a short period of time and this important momentum has to be sustained.
). Furthermore, Russia introduced an embargo (extended until the end of 2018) on imports from Ukraine of
agricultural products in the follow-up to Ukraine's adherence to EU sanctions against Russia as well as
started to apply the road and railway transit restrictions on exports from Ukraine to Central Asia.
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ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN
THE EU AND ITS MEMBER STATES AND GEORGIA
41
The DCFTA (DCFTA) of the EU-Georgia Association Agreemen (AA)
42
entered into force on
1 July 2016 after being applied on provisional basis since 1 September 2014.
43
This is the
second report on the implementation of the EU-Georgia DCFTA. It responds also to the
requirements of the Regulation implementing the anti-circumvention mechanism provided for
in the EU-Georgia Association Agreement.
44
To highlight that the Government of Georgia adopted in November 2017 an
Action Plan for
the implementation of the DCFTA 2018-2020
45
. It is a continuation of the Action Plan for
2014-2017, outlining the priorities of the Association Agenda, planned activities related to
each priority with indicators, responsible implementing institutions and timeframe for
implementation.
1.
1.1.
E
VOLUTION OF TRADE
Trade in Goods overall
1.1.17. The scope of trade liberalization
At the start of provisional application of the DCFTA on 1 September 2014
both partners
eliminated import duties for all goods with a few exceptions on the European Union side,
related to sensitive agriculture products. Nevertheless market access for these products has
been improved. To this end the EU has granted a duty-free TRQs for garlic originating from
Georgia and, for 28 agricultural products (including fruits and vegetables) that are subject to
entry prices,
the EU has eliminated the
ad valorem
component of the import duty.
An
anti-circumvention mechanism
applies to several agricultural goods i.e. beef, pork,
sheep and poultry meat, dairy products, eggs and albumins, mushrooms, cereals, malt,
41
42
43
44
45
See the following website to find more information on Georgia: http://ec.europa.eu/trade/policy/countries-
and-regions/countries/georgia/
The EU-Georgia Association Agreement was published in OJ L 261, 30.08.2014.
http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:261:FULL&from=EN
When it comes to DCFTA application to breakaway regions Abkhazia and South-Ossetia, the EU gives its
full support to Georgia's territorial integrity, however, in accordance with Article 429 (Territorial application)
of the Association Agreement, conditions enabling effective implementation of the DCFTA, and notably de
facto government control over those territories, would need to be created in either Abkhazia or South
Ossetia, which is not the case at present.
Regulation (EU) 2016/401 of the European Parliament and of the Council of 9 March 2016 implementing the
anti-circumvention mechanism provided for in the Association Agreement between the European Union and
the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other
part (OJ L 77/2016). According to its Article 4, the Commission shall submit annual report on
implementation of this Regulation and Title IV (DCFTA) of the Association Agreement. The report shall,
inter alia, include information about the application of the anti-circumvention mechanism and set out a
summary of the statistics and the evolution of trade with Georgia.
See
http://www.dcfta.gov.ge/en/implementation
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starches and sugars as well as to processed agricultural products such as: sweetcorn,
processed sugars and cereals and cigarettes.
Both Parties agreed on a
review clause,
i.e. that after five years from the entry into force of
the DCFTA, they would consult (if there is a request from either party) to consider
broadening the scope of the liberalization of customs duties in bilateral trade.
1.1.18. Overall evolution of EU–Georgia trade in goods
In accordance with 2017 Eurostat data, the
EU is the most important trade partner of
Georgia with 27% share
in its overall trade (24% in total export and 28% imports) and is
followed by Turkey (15%), Russia 11%), China (9%) and Azerbaijan (8%).
Georgia is the
EU’s 73
rd
trade partner
and accounts for only 0.1% of its total trade.
In 2017 the overall trade between the EU and Georgia increased on year-on-year-basis by 6%
and amounted to EUR 2.66 billion.
EU exports to Georgia increased
in that time by 1.4%
while
EU imports from Georgia noted an increaseof 23%
compared to 2016. Mineral
fuels, nuts, fertilizers , and mining products account for over 63% of total Georgian export to
the EU.
In the analysed period
the surplus in EU trade with Georgia
has decreased from
EUR 1.41 billion to 1.32 billion.
Table 1: EU trade in goods with Georgia, 2015-2017 (million EUR)
EU trade with
2015
2016
% change
2017
Georgia
2016/2015
EU Exports
1 840
1 960
6.5
1 989
EU Imports
736
543
-26.2
667
Total trade
2 576
2 500
-3
2 656
Trade balance
+1 104
+1 417
-
+1 322
% change
2017/2016
1.4
22.8
6.2
-
% change
2017/2015
8
-9.3
3.1
19.7
Source: Eurostat COMEXT.
1.1.19. Sectoral structure of EU-Georgia trade in goods
As concerns the
structure of EU exports to Georgia
in 2017, the most important product
categories (by Sections of the Harmonized System Nomenclature
HS) were:
machinery
and appliances, mineral and chemical products.
The observed shares and dynamics in
2017 in comparison to 2016 were as follows: machinery and appliances amounted to 18.8% of
overall EU exports to Georgia and decreased by 12.6%; mineral products
18.8%, increase
by 3%; products of chemical or allied industries - 18%, increase by 6% (pharmaceutical
products represented the largest proportion of EU exports to Georgia in this category,
accounting for 12.5%). Other products categories that showed an increase in EU exports are
transport equipment and prepared foodstuffs.
In terms of
structure of EU imports from Georgia
in 2017, the most important product
categories were:
mineral products, fruits and vegetables (notably nuts), base metals and
chemical goods.
The following shares and dynamics in 2017 comparing to 2016 were
observed: mineral products accounted for almost 46% of the total EU imports from Georgia
and increased by 110% (due to a sharp increase in EU imports of ores, slag and ash);
vegetable products
11.4%; a decrease by 61% (by far the largest sub-categories of imported
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products were edible fruits and nuts accounting for 11.3% of the total EU imports from
Georgia); base metals and articles thereof
10%; prepared foodstuffs, beverages, spirits and
vinegar
7.9%; products of chemical or allied industries
6.8%; other categories of products
that have shown an increase in EU imports from Georgia are textiles and textile articles,
optical equipment..
Table 2: EU trade with Georgia by HS section (million EUR)
1.2.
Trade in agricultural goods
In 2017, EU imports of agricultural products from Georgia have decreased by 36% since
2016. Fruit & nuts accounted for 42% of the EU's agri-food imports from Georgia in 2017,
followed by wine and spirits (almost 30%). EU exports of agricultural products to Georgia
have increased by 12% over the same period. The EU's key agri-food exports to Georgia
consisted of spirits and liqueurs (15%), beet and cane sugar (10%) and food preparations,
chocolate, confectionery & ice cream (10%).
Throughout the first three years of DCFTA implementation Georgia started to export some
new products to the EU e.g. kiwi and blue berries. This shows a potential of the DCFTA to
attract new product categories to be commercialized on the markets of both Parties.
Table 3: EU trade in goods with Georgia, split by AG and NAMA (million EUR)
Agrifood trade EU28 w ith Georgia
Grow th
Georgia
2016
2017
m io €
annual %
EU28 imports
183
118
-65
-35.7%
EU28 exports
221
248
27
12.0%
Balance
38
130
92
Total trade
405
366
-39
-9.6%
Source Trade G2 Statistics/ISDB
NAMA trade EU28 w ith Georgia
Georgia
EU28 imports
EU28 exports
Balance
Total trade
Source Trade G2 Statistics/ISDB
2016
360
1,739
1,379
2,098
2017
549
1,741
1,192
2,291
Grow th
m io €
annual %
190
52.8%
2
0.1%
-188
192
9.2%
1.3.
Use of TRQs (TRQ)
In 2017 the EU annual duty-free TRQ of 220 tons for Georgian garlic was not used at all, mainly due
to the lack of marketing for these products on the EU market.
1.4.
Preference utilisation rate (PUR)
The preference utilization rate (PUR) on imports into the EU from Georgia amounted to 77%
in 2017, down from 80% in 2016. At HS Section level, the highest overall PURs are found in
animal and vegetable fats and oils at 100%, vegetable products at 98%, wood and wood
products, prepared foodstuffs, beverages, spirits and vinegar at 95% and articles of stone,
plaster, cement, asbestos at 95%. PURs for EU exports to Georgia increased from 71.3% in
2016 to 76.9% in 2017.
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1.5.
Establishment, trade in services and investments
1.1.20. Market access related to establishment and trade in services
In the DCFTA the EU and Georgia laid down the necessary arrangements for the progressive
reciprocal liberalization of establishment and trade in services and for cooperation on
electronic commerce. Both Partners committed to freedom of
establishment
as from the start
of the DCFTA’s provisional application, by granting each other national treatment and most
favoured-nation treatment (subject to several reservations specified by EU Member States and
a few reservations by Georgia).
Cross-border supply of services
was also liberalised (EU
and Georgia granted each other national treatment with several limitations and reservations on
both sides).
In four services sectors (postal
and courier services, telecommunication, financial services
and international maritime transport services)
Georgia recognized the importance of
gradual approximation (over a period of 4 and 8 years
pls specify which time period applied
to which sector) of its existing and future legislation to the list of the EU
acquis
(in case of
financial services Georgia also committed to the international best practice and standards).
Further market opening in those sectors is conditioned upon Georgia fulfilling its
commitments of gradual approximation up to 2022.
The EU and Georgia also agreed on a
review clause
with a view to liberalizing establishment,
cross-border supply of services (regular review) and capital movement (by the end of the fifth
year following the date of the entry into force of the DCFTA). This review shall take into
account, inter alia, the process of gradual approximation foreseen in the DCFTA and its
impact on the elimination of remaining obstacles to cross border supply of services between
the parties.
1.1.21. Trade in services
In general, trade in services between the EU and Georgia has more than doubled between
2006 and 2016, both in terms of imports and exports. In 2014-2016 the total trade in services
between both Partners decreased from EUR 862 to 684 million.
Table 2: EU trade in services with Georgia, 2014-2016 (million EUR)
EU trade with Georgia
EU exports
EU imports
Total trade
Trade balance
2014
591
271
862
320
2015
547
290
837
257
% change
2015/2014
-7
7
-3
-20
2016
393
291
684
102
% change
2016/2015
-32
0.0
-18
-60
Source: European Commission, DG Trade.
The structure of exports of services by Georgia to the world is dominated by travel and
transport services, in imports the most important sectors are transport, travel, insurance and
pension services as well other business services.
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1.1.22. FDI
In 2016 FDIs (FDIs) stocks
in Georgia originating from the EU accounted for
EUR 1.6 billion (a sharp decrease compared to 2015). Top EU Member States investing in
Georgia are: the Netherlands, United Kingdom, France, Germany and the Czech Republic.
Inward FDIs flows in that year amounted to EUR 25 million and were also considerably lower
level than in 2015 when they reached EUR 123 million.
Table 3: EU FDI with Georgia, 2015-2016 (million EUR)
FDI stocks
Georgia in EU28 (inward)
EU28 in Georgia (outward)
Stocks: balance
FDI flows)
Georgia into EU28 (inward)
EU28 into Georgia (outward)
Flows: balance
Source: European Commission, DG Trade.
2014
90
3 922
3 832
2014
4
203
199
2015
123
3 884
3 761
2015
-30
142
172
2016
25
1 589
1 564
2016
-82
-1 351
-1 269
According to the data provided both by the EU and Georgia, the main sectors chosen by EU
investors are: telecommunications, transport, infrastructure and manufacturing.
The above statistics show that positive impact of the DCFTA on attracting more investments
from the EU is still ahead for Georgia. Georgia performs very well in international rankings in
terms of business climate. According to the 2018 World Bank Doing Business Index 2018
Georgia is on 9th position amongst 190 countries. In the 2017 Transparency International
Corruption Perception Index Georgia appeared on 44th position among 176 countries.
2.
2.1.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
46
Joint decisions of the Association Bodies
In 2017, the following
amendments/updates
have been introduced in the Association
Agreement:
Agriculture:
List of EU agricultural products and foodstuffs other than wine
and spirits to be protected in Georgia (Annex XVII-C) and the List of spirit
drinks of the EU to be protected in Georgia (part B of Annex XVII-D);
47
SPS:
List of the EU SPS and animal welfare acquis (Annex XI-B) to which
Georgia intends to approximate its domestic legislation.
48
This jointly agreed
46
47
Official Journals of the EU where the decisions on the Rules of Procedure for the EU-Georgia Association
bodies were published: of the Association Council and those of the Association Committee and of Sub-
Committees (OJ L 321, 5.12.2015); of the Customs Sub-Committee (OJ L 114, 5.5.2015); of the Sanitary
and Phytosanitary Sub-Committee (OJ L 123, 23.05.2017); of the Trade and Sustainable Development Sub-
Committee (publication pending); of the GIs Sub-Committee (OJ L 134, 23.05.2017).
OJ L 100, 19.4.2018.
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2.2.
SPS roadmap
is to serve as a reference document for the implementation of
SPS Chapter of the DCFTA.
Dispute Settlement:
Establishing the list of arbitrators for bilateral trade
dispute settlement mechanism
49
;
Rules of Origin:
Replacement of Protocol I
concerning the definition of the
concept of ‘originating products’ and methods of administrative
cooperation,
by a new protocol which refers to the Regional Convention on pan-Euro-
Mediterranean preferential rules of origin (PEM Convention)
50
;
Standardisation:
Annex III (rules applicable to standardisation, accreditation,
conformity assessment, technical regulation and metrology); procedure is
ongoing, and should be finalized before the report is published.
Public Procurement:
Annex XVI (public procurement); procedure is ongoing,
and should be finalized before the report is published.
Meetings of the Association Bodies
The 4
th
meeting of the EU-Georgia
Association Committee in Trade configuration
was
held on 6 December 2017 in Tbilisi. The meeting provided an opportunity to review all issues
related to the comprehensive, timely and inclusive implementation of the EU-Georgia
DCFTA. Both Parties reviewed progress made in all DCFTA Chapters, including trade in
goods, SPS measures, intellectual property rights, customs and trade facilitation, technical
barriers to trade, public procurement, establishment, trade in services and electronic
commerce, trade-related energy, competition, trade and sustainable development. The
Committee assessed the development of bilateral trade after three years of implementation of
the DCFTA. The Georgian side expressed concerns about their trade deficit with the EU.
Both Partners raised their respective concerns related to the implementation of the
commitments on approximation with the EU law in particular in the area of SPS measures,
technical barriers to trade, public procurement, intellectual property rights, TSD and
instructed the specialized Sub-Committees to continue to seek solutions. Both sides
underlined the importance of EU financial and technical assistance in the implementation of
the DCFTA, notably projects aimed at supporting both the Georgian administration and the
48
49
50
Decision No 1/2017 of the EU-Georgia Sanitary and Phytosanitary Sub-Committee of 7 March 2017
modifying Annex XI-B to the Association Agreement OJ L 98, 11.04.2017 http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:22017D0683&from=EN
Decision No 1/2017 of the EU-Georgia Association Committee in Trade configuration of 6 December 2017
establishing the list of arbitrators referred to in Article 268(1) of the Association Agreement between the
European Union and the European Atomic Energy Community and their Member States, of the one part, and
Georgia,
of
the
other
part,
OJ
L 1,
4.01.2018,
http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:22018D0002
Council Decision (EU) 2017/2433 of 18 December 2017 on the position to be adopted on behalf of the
European Union within the Customs Sub-Committee established by the Association Agreement between the
European Union and the European Atomic Energy Community and their Member States, of the one part, and
Georgia, of the other part, as regards the replacement of Protocol I to that Agreement, concerning the
definition of the concept of ‘originating products’ and methods of administrative cooperation, by a new
protocol which refers to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin, OJ
L 344, 23.12.2017; http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017D2433
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small and medium-sized enterprises (SMEs) to align with the
acquis
and reap the benefits
from the Agreement.
The 2nd meeting of the EU-Georgia Sub-Committee on Economic and Other Sector
Cooperation
Cluster V "Agriculture and Rural Development, Fisheries and Maritime
Governance, Regional Development, Cross-Border and Regional Level Cooperation" took
place 16 March 2017. The discussions highlighted the implementation of the "Strategy for
Agricultural Development in Georgia, 2015-2020" and the adoption of the first Rural
Development Strategy of Georgia (2017-2020). The EU committed to continue providing
assistance to Georgia, in particular through the European neighbourhood programme for
agriculture and rural development.
The 3
rd
Customs Sub-Committee
met in Brussels on 17 May 2017. The discussion focused
on: the legislative and policy developments, including Georgia’s progress report on the
implementation of DCFTA customs provisions, information about initiatives in strengthening
customs enforcement of intellectual property rights (IPR) to be shared by the Parties; strategic
framework for EU-Georgia
Customs Cooperation; Georgia’s prospects for accession to the
Convention on a Common Transit Procedure;
prefe’s replies to a questionnaire related to the
Authorized Economic Operator program; risk management and fight against fraud; rules of
origin. Georgia requested the relevant joint decision adopted with a view to reflecting the
linkage of the EU-Georgia rules of origin to the PEM Convention.
51
The 3
rd
SPS Sub-Committee
met in Brussels on 9 October 2017. Both Parties discussed the
approximation list in Annex XI-B which serves as a reference document for the
implementation of Chapter 4 SPS Measures of Title IV of the Association Agreement. The
discussion also focused on: progress in reforms in the SPS area and a timeframe for legislative
approximation submitted by Georgian authorities (including analysis of the tables of
correspondence for already approximated legislation prepared by Georgia); improvement in
the food safety control system and animal health situation, in particular the strengthening the
role of the National Food Agency (NFA) in ensuring overall food safety; as well as on a
potential of Georgia in exports of goods to foreign markets.
The 3
rd
GIs Sub-Committee
took place in Tbilisi on 14 March 2018. The Sub-Committee
discussed updates of the lists of EU for agricultural products and foodstuffs, wines, spirit
drinks and aromatized wines. During the meeting the Parties adopted a Decision amending
Annex XVII-C (list of EU agricultural products and foodstuffs other than wine and spirits to
be protected in Georgia) and part B of Annex XVII-D (list of spirit drinks of the EU to be
protected in Georgia) of the DCFTA. The provisions on exchange of information on all the
51
The joint Decision on the linkage of the rules of origin in bilateral trade to the Protocol of PEM Convention
was adopted during the 4
th
Customs Sub-Committee which took place in Brussels on 20 March 2018. The
abovementioned amendments envisage diagonal cumulation to come into force between the EU, Georgia and
the Republic of Turkey after the Turkish side has ratified respective amendments to the Free Trade
Agreement (FTA) between Georgia and the Republic of Turkey (Georgia has already finalized ratification
process).
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updates on EU as well as Georgian GIs (new ones, removals from the list, modifications)
were also discussed in view of the need for each Party to have the possibility to run objection
procedures for the new names and for any other procedures necessary for the next update of
GI Annexes to the DCFTA.
For the 2
nd
TSD Sub-Committee
see section 5 below.
3.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
The 2
nd
TSD Sub-Committee
took place on 20 March 2018. The discussions highlighted the
importance of the TSD chapter implementation, notably due to a growing political and public
awareness of the importance of the environmental and labour provisions in trade policy. The
meeting was also an occasion to discuss Georgia’s progress in implementing the fundamental
International Labour Organisation (ILO) conventions, to welcome cooperation by both Parties
on sustainable development, and in particular on environmental aspectsand to discuss the TSD
joint work plan. The main priority areas identified in the work plan are illegal wildlife trade,
sustainable forest management, effective implementation of UNFCCC, effective
implementation of core labour standards including strengthening the Labour Inspection
system and the operational framework regarding child labour and enhancing non-
discrimination in the workplace as well as promoting equal pay for equal work.
At the same time discussions were held with the Civil Society Forum and between the
Domestic Advisory Groups.
Both Parties noted some progress in implementing the fundamental International Labour
Organization (ILO) conventions but it was underlined that in a number of specific areas more
efforts need to be undertaken to effectively implement them, notably with regard to the
establishment of a fully flegded labour inspection system, preventing child labour and
ensuring freedom of association and collective bargaining. Tripartite discussions on labour
policy enforcement, labour inspections and occupation and health and safety need to be
strengthened.
The EU welcomed the cooperation on environmental aspects of the TSD Chapter, applauded
Georgia for adopting the Environmental Assessment Code
52
. This Code regulates matters
related to strategic documents and public or private activities which may have significant
effects on the environment, human life and/or health. The procedures for environmental
impact assessment, strategic environmental assessment, transboundary environmental impact
assessment, and public participation in decision-making, as well as the conduct of expert
examinations, fall within the scope of this Code), and for the ratification of the Paris
Agreement on Climate Change in force as of 7 June 2017. The EU encouraged Georgia to
implement the Paris Agreement, while acknowledging the challenges in its application.
52
https://matsne.gov.ge/en/document/view/3691981
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The representatives of Georgia underlined the developments in the forestry sector. A Final
draft of the Forestry Code elaborated by the Government, was submitted to the Parliament in
2017. Sustainable forestry management and risk assessment are being developed along with
wildlife trade and other biodiversity aspects. The draft law on biodiversity was prepared in
2016 and will undergo public hearings before adoption in 2018.
4.
S
PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING
Entry price system and anti-circumvention mechanism
In 2017 there was no overshooting for products subject to the entry price (Annex II-B of the
Association Agreement). When it comes to agricultural products subject to anti-circumvention
mechanism, none of the trigger levels were exceeded in 2017, due to the low trade levels for
those products. It is worth noting, that in the analysed period there were no imports of
products to be potentially affected by anti-circumvention mechanism with exception of
cereals.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The
approximation
commitments for 2015-2017 have not been completed to date. These
concerned the submission (6 months after the entry into force of the Agreement) of a list of
the EU SPS, animal welfare and other legislative measures that Georgia should be
approximating its laws to; the completion of the first phase of the Public Procurement
Roadmap (pending); as well as the approximation of Georgian law to EU legal acts on anti-
money laundering and the Regulation on customs enforcement of IPR (pending). It should be
noted that the timeline for approximation of Georgian legislation was back-loaded by Georgia
in the negotiation process to the extent that approximation intensifies in 2018 and will
continue e.g. until 2022 in TBT area or even until 2027 as concerns certain veterinary
measures, plant protection and food safety.
The Government of Georgia adopted in November 2017 an
Action Plan for the
implementation of the DCFTA 2018-2020.
It is a continuation of the Action Plan for 2014-
2017, outlining the priorities for implementation of the DCFTA in different sectors (including
for example Technical Barriers to Trade, SPS measures, customs or IPR) as well as the
planned activities related to each priority, indicating the responsible implementing institutions
and timeframe for implementation.
SPS aspects
The list of the EU
SPS
acquis that Georgia will approximate was submitted to the EU in
December 2015 and formally adopted by the EU-Georgia SPS Sub-Committee on 7 March
2017. Deadlines committed by Georgia to achieve compliance with the EU SPS system are
rather long, to the extent that about 45% of the legal acts will be subject to approximation
only after 2020 (in concrete terms, 35 legal acts in case of veterinary measures, 41 on food
safety and 46 in case of plant protection). The institutional capacity in terms of food safety
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1960849_0096.png
control still needs to be enhanced. A number of
Georgian establishments are authorised to
export fruits, vegetables, honey
and
fishery products (from the Black Sea)
to the EU.
Technical Barriers to Trade
In terms of
technical barriers to trade (TBT),
Georgia has committed to approximate by the
end of 2018 its legislation on horizontal quality infrastructure to that of the EU as well as to
several EU New and Global Approach Directives. In this field reform efforts should be
intensified. The situation has improved as concerns the adoption of technical standards (over
95% of the existing Georgian Standards are International or European Standards). The
Georgian market surveillance system needs strengthening. As concerns institutional capacity
building Georgia needs to speed up the enhancement of certification/accreditation
infrastructure.
Public Procurement
The institutional part in
public procurement
approximation has been accomplished.
53
Discussions are ongoing for both Parties to formally adopt a roadmap developed by the
Government and State Procurement Agency (GSPA). The roadmap will be a point of
reference and facilitate the implementation of the Public Procurement Chapter of the DCFTA,
including on alignment of the Georgian legislation to the EU acquis in this area. The
institutional capacity needs to be built within the GSPA and the contracting authorities.
Intellectual Property
The implementation of the IPR Chapter of the DCFTA has started and Georgia has brought
the majority of its laws in compliance with the DFTA. Still the exhaustion regime of Georgia
is not line with the DCFTA and some copyright related provisions need to be improved,
including the collective right management system.
Rules of Origin
On 1 July 2017 Georgia joined the
Convention on pan-Euro-Mediterranean preferential
rules of origin
54
. The joint Decision on the linkage of the rules of origin in bilateral trade to
the Protocol of PEM Convention
55
was adopted during the 4
th
Customs Sub-Committee which
took place in Brussels on 20 March 2018 and the linkage entered into force on 1 June 2018.
53
54
55
In accordance with the Association Agreement the first approximation stage relates to the setting up the
institutional framework: executive body at central government level to be responsible for coherent policy in
all areas related to public procurement and an impartial, the independent body tasked with the review of
decisions taken by the contracting authorities and entities as well as introduction of basic standards
regulating the award of contracts.
The Decision of the Joint Committee of the PEM Convention on Georgia accession was published in OJ
L 329, 3.12.2016
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:22016D2126
Council Decision (EU) 2017/2433 of 18 December 2017 on the position to be adopted on behalf of the
European Union within the Customs Sub-Committee; OJ L 344, 23.12.2017, p. 21.
95
kom (2018) 0728 - Ingen titel
(report published on 6 June 2018). This allows Georgia to benefit from diagonal cumulation
of origin with the EU and Turkey as of 1 June 2018, and be better integrated in regional trade
flows.
Energy
Georgia officially became a Contracting Party to the
Energy Community Treaty
on 1 July
2017. The
Protocol of Accession to the Energy Community Treaty
commits Georgia to
approximate its legislation to key energy and energy-related EU acquis between 2017 and
2020.
Trade Facilitation
On 4 January 2016,
Georgia ratified the WTO Trade Facilitation Agreement which is in
force since February 2017
and contains commitments on simplifying border procedures and
modernization of
customs
techniques and instruments and customs control. An unresolved
issue for the time being is the application of the DCFTA to the breakaway territories of
Abkhazia and Southern Ossetia. According to Article 429 (Territorial application) of the
Association Agreement, conditions enabling effective implementation of the DCFTA need to
be created in either Abkhazia or South Ossetia for the AA/DCFTA to be able to be applied in
those areas.
2.
E
U
S
UPPORT TO
DCFTA I
MPLEMENTATION
EU Support to DCFTA-related reforms
The EU is supporting the implementation of the DCFTA through technical and financial
assistance. A Sector Reform Contract focusing on the transposition of relevant EU acquis
(particularly in the area of SPS, TBT, public procurement), capacity building of relevant
institutions to implement the DCFFTA (such as the Competition Authority or the Market
Surveillance Authority) and support to SME development to increase exports has been put in
place. This is complemented by technical assistance focusing on cluster and value chain
development and support to the SME regulatory/institutional framework as well as Twinnings
by Member States to share their experience in the transposition of EU law.
EU Support for SMEs
SMEs in Georgia are benefitting from the EU support under the DCFTA Facility for SMEs,
which aims at increasing SMEs competitiveness, easing their access to finance, helping them
to seize new trade opportunities and comply with new food safety, technical and quality
standards, as well as with environmental protection measures implied by the DCFTA
implementation.
The DCFTA Facility consists of a set of programmes implemented principally by EBRD and
EIB. SMEs are benefiting from the EU support through four types of instruments:
96
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1) risk sharing mechanisms (mostly first loss portfolio guarantees for local banks);
2) currency hedging (interest rate subsidies for loans in local currency);
3) investment incentives (grants provided to SMEs combined with investment loans to
upgrade machinery or production processes in line with the EU standards) and
4) technical assistance (business advice to SMEs and local banks, assessment of the
compliance with the EU standards, capacity building for local banks).
7.
C
ONCLUSIONS AND OUTLOOK
After three years of the DCFTA implementation by both Partners, it should be underlined that
external trade and FDIs remain key for the
overall economic growth of a small open
economy like Georgia.
Economic uncertainty in some key trading partners in the region
(Russia, Turkey, and Azerbaijan) and the recovery from the recession the EU faced in the
previous years created a relatively fragile but positive external environment for Georgia’s
trade in 2017.
The
EU is constantly encouraging and assisting Georgia
to accelerate the necessary
reforms, notably in the SPS area, as they would not only enhance food safety in the country
but also facilitate and allow further access for Georgian agricultural products to the EU
market. In the medium term, the benefits from approximation to the EU
acquis
should
translate into an increase of bilateral
trade, and especially growth in Georgia’s exports to the
EU. Georgia has an untapped trade potential not only in relation to trade in goods, but also
services and public procurement. The DCFTA will help Georgia to diversify its economy and
enhance regional trade with its neighbours and the broader paneuromed region.
The
continuation of the DCFTA implementation,
notably through legal approximation (that
has a dynamic character due to developments of EU
acquis)
and institutional capacity
building will require continuous efforts by Georgian authorities as well as on the EU side in
terms of assisting Georgia in this process. To this end the Association Committee in Trade
configuration as well as the specialised Sub-Committees established under DCFTA remain
the main fora for discussions and comprehensive evaluation of that progress. Simultaneously,
in order to effectively enhance exports from Georgia, the EU delivers financial and technical
support to the reforms and administrative capacity building in trade-related areas like TBT
(e.g. standardization and metrology infrastructure; accreditation and surveillance system),
SPS (notably in institutional capacity building in food safety control) as well as in promotion
of producers organizations, value chain optimization and the SMEs development. Improving
the enforcement and governnace of labour standards and working conditions is an important
factor for georgia to fully reap the benefits of the DCFTA and of the AA.
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1960849_0099.png
ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND
COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS
MEMBER STATES AND MOLDOVA
56
The DCFTA (DCFTA) between the EU and Moldova as the main economic pillar of the
Association Agreement (AA)
57
has been provisionally applied since 1 September 2014 and
fully entered into force on 1 July 2016. The trade facilitation measures which allow to keep
the EU market open to goods from the breakaway region Transnistria have been reviewed and
extended twice since January 2016; on this basis the EU-Moldova DCFTA’s
provisions have
been applied on the entire territory of Moldova.
This second report on the implementation of the EU-Moldova DCFTA has been prepared in
accordance with the provisions of the Regulation implementing the safeguard clause and the
anti-circumvention mechanism.
58
In addition to providing an overview of the evolution of
EU-Moldova trade, information about the application of trade defence measures and the anti-
circumvention mechanism has been included.
1.
1.1.
E
VOLUTION OF TRADE
Trade in goods overall
2.1.1.
The scope of trade liberalization
At the start of the DCFTA provisional application on 1 September 2014, the European Union
eliminated all customs duties on goods imported from Moldova except six agricultural
products i.e. apples, table grapes, plums, grape juice, garlic and tomatoes, that are subject to
annual duty-free TRQs (TRQs). Further to that, the EU has eliminated the
ad valorem
component of the import duty for twenty agricultural products (fruits and vegetables). Import
of 14 groups of agricultural and processed agricultural products (pig meat, poultry, dairy
products and processed dairy products, cereals, cigarettes, sugar processed goods and sweet
corn) is duty-free but monitored under
anti-circumvention mechanism
(if the imports to the
56
57
58
See the following website to find more information on Moldova:
http://ec.europa.eu/trade/policy/countries-
and-regions/countries/moldova/
The EU-Republic Moldova Association Agreement was published in OJ L 260, 30.08.2014.
http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:260:FULL&from=EN
Regulation (EU) No 2016/400 of the European Parliament and of the Council of 9 March 2016 implementing
the safeguard clause and the anti-circumvention mechanism provided for in the Association Agreement
between the European Union and the European Atomic Energy Community and their Member States, of the
one part, and the Republic of Moldova, of the other part (OJ L 77, 23.03.2016). According to Article 14 of
the Regulation, the Commission shall submit an annual report to the European Parliament and to the Council
on the application and implementation of this Regulation and Title V of the Agreement. Furthermore, the
report shall, inter alia, include information about the application provisional and definitive safeguard
measures, prior surveillance measures, the termination of investigations and proceedings without measures,
and the application of the anti-circumvention mechanism. The report shall also set out a summary of the
statistics and the evolution of trade with Moldova.
98
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1960849_0100.png
EU reaches certain agreed levels and Moldova fails proving the origin of these imports, the
EU may temporarily suspend the preferential treatment of the products concerned).
Moldova liberalised import duties on 93.6% of tariff lines for goods imported from the EU at
the start of provisional application of the DCFTA. One per cent of tariff lines (for agricultural
products) are covered by preferential TRQs. Customs duties on 4.8% of products in terms of
tariff lines are to be liberalised in stages (3, 5, 7 or 10 years; the longest liberalisation period
applies to agrifood products). This schedule of tariff elimination reflects an asymmetric
market opening for the benefit of Moldova.
2.1.2.
Overall evolution of EU-Moldova trade in goods
According to Eurostat data for
2017, the EU is a key trade partner of Moldova, accounting
for 56% of its total trade
(64% of total exports and 51% of Moldova’s total imports). In
terms of the share in overall Moldovan exports, the EU is followed by Russia (14%) and
Ukraine (5%).
Moldova
is EU’s 63
rd
trade partner
and accounts for 0.1% of the EU’s total
trade.
In 2017, the
total trade
between the EU and Moldova grew by 20% compared to 2016 to
slighlty over
EUR 4 billion.
EU exports have increased by 19% from EUR 2.05 billion to
EUR 2.44 billion while EU imports from Moldova have increased by 23% from EUR 1.31 to
EUR 1.61 billion in that period. This has been driven by economic growth as well as a better
export performance of Moldovan companies as concerns machinery, foodstuffs, certain
agricultural and textiles products.
Table 1: EU trade in goods with Moldova, 2016-2017 (million EUR)
2016
EU Exports
EU Imports
Total trade
Trade balance
2 057
1 318
3 375
+739
2017
2 445
1 616
4 061
+829
% change
2017/2016
18.9
22.7
20.4
-
value change
2017/2016
388
298
686
-
Source: Eurostat COMEXT.
In 2017, the
EU maintained a trade surplus with Moldova which
increased to
EUR 0.82 billion.
The EU’s share in total Moldovan exports has been steadily increasing
since the start of the provisional application of the DCFTA, and has reached 64% in 2017.
The EU’s share in total Moldovan imports has increased from 49% in 2016 to 51% in 2017.
The EU’s share in the total trade of Moldova has similarly increased from 55% to 56% in that
period.
In addition, the number of companies involved in trade with the EU has continued to increase,
with approximately 1748 Moldovan companies exporting to the EU in 2017 up from 1360
firms engaged in exporting to the EU in 2016.
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2.1.3.
Sectoral structure of EU-Moldova trade in goods
The
main product categories
(according to the Sections of the Harmonized System
Nomenclature
HS)
exported by the EU to Moldova
in 2017 were
machinery and
appliances, mineral products, chemical products and transport equipment.
Amongst
these, the main increase in exports from 2016 and 2017 was for base metals which increased
by 37% from EUR 120 million to EUR 165 million. Machinery and appliances and mineral
products rose by respectively 15% and 20%. Exports of chemical products increased by 22%
to EUR 276 million while transport equipment exports saw an increase of 30% to
EUR 235 million. The signs of recovery in EU exports witnessed in 2016 (after a general
decline of EU exports in certain key sectors in 2014-2015 due in large part to the weak
performance of the Moldovan economy) were therefore confirmed and sustained in 2017.
This is evidenced both by the general 19% increase in EU exports to Moldova in 2017
(following a 2% decrease in 2016) as well as by the increase of EU exports across all the main
HS product categories.
The main product categories in EU imports from Moldova in 2017 were
vegetable products,
machinery and appliances, textiles and textile articles and foodstuffs, beverages,
tobacco.
Machinery accounted for a large part
of Moldova’s export growth to the EU due to
the trade and investment opportunities in specific sectors such as the manufacuring of wiring
harnesses. From the categories of products most widely imported from Moldova, the highest
increase in imports was for animal products (+65%) although remaining at a low level of
EUR 12 million.
Bilateral trade in non-agricultural products has experienced an increase of 19% (to
EUR 3.15 billion) in 2017, with EU imports of non-agricultural goods growing by 20% (to
EUR 981 million) and EU exports of such goods increasing by 19% (to EUR 2.2 billion).
Trade has grown considerably in plastics, textiles, metals, machinery but also ceramics and
toys. Similarly, the EU has become a major market for Moldova’s Information and
Communication Technology services.
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Table 2: EU trade with Moldova by HS section (million EUR)
EU28 m erchandise trade by HS section w ith Moldova (m illion Euro)
EU im ports
im port grow th
EU exports
export grow th
HS Section
2016
2017
total M€
annual %
2016
2017
total M€
annual %
Total Goods
2,635
3,233
598
22.7%
4,113
4,891
778
18.9%
I Live animals; animal products
7
12
5
64.9%
62
76
15
23.6%
II Vegetable products
303
409
106
34.9%
75
88
14
18.4%
III Animal or vegetable fats and oils
37
48
12
31.3%
4
5
0
9.3%
IV Foodstuffs, beverages, tobacco
146
160
14
9.9%
106
118
12
11.4%
V Mineral products
8
8
1
11.3%
328
392
64
19.4%
VI Products of the chemical or allied indu trie 5
6
1
16.7%
226
276
50
21.9%
VII Plastics, rubber and articles thereof
10
13
3
26.4%
125
144
19
15.2%
VIII Raw hides and skins, and saddler
20
18
-3
-12.8%
47
53
6
12.8%
IX Wood, charcoal and cork and article thereof
7
7
0
-0.2%
28
35
7
26.9%
X Pulp of w ood, paper and paperboard
4
4
1
27.8%
33
36
3
9.0%
XI Textiles and textile articles
230
257
27
11.6%
184
201
17
9.4%
XII Footw ear, hats and other headgear
52
53
0
0.9%
11
12
1
12.5%
XIII Articles of stone, glass and cerami
35
31
-4
-10.8%
34
39
5
14.6%
XIV Pearls, precious metals and article thereof
0
0
0
23.7%
2
2
0
2.6%
XV Base metals and articles thereof
83
142
59
70.4%
121
165
44
36.9%
XVI Machinery and appliances
231
296
65
28.0%
387
445
57
14.8%
XVII Transport equipment
7
6
-1
-19.7%
182
235
53
29.2%
XVIII Optical and photographic instrument et 18
.
18
0
-2.7%
34
47
13
39.7%
XIX Arms and ammunition
0
0
0
1
1
0
62.5%
XX Miscellaneous manufactured article
112
127
15
13.4%
56
62
6
10.6%
XXI Works of art and antiques
0
0
0
-35.1%
0
0
0
269.4%
Other
1,319
1,618
299
22.6%
2,068
2,458
390
18.9%
Source Trade G2 Statistics/ISDB from Eurostat COM EXT
EU balance
1.2.
Trade in agricultural goods
In 2017, agricultural goods accounted for 22% (EUR 908 million) of total bilateral trade with
Moldova while non agricultural products represented 78% (EUR 3.1 billion). In terms of EU
imports from Moldova in 2017, the share of agricultural goods stood at 39% while non
agricultural goods represented 61% of imports. Agricultural goods constituted 11% of EU
exports to Moldova, with 89% of EU exports being non-agricultural. The trade balance in
agricultural products (in particular nuts, cereals, sunflower seeds, wine) has also improved
considerably in favour of Moldova. Moldovan exports of vegetable products to the EU almost
doubled in 2016-2017 (from EUR 240 million to EUR 409 million).
Table 3: EU trade in goods with Moldova, split by AG and NAMA (million EUR)
Agrifood trade EU28 w ith Moldova
Grow th
Moldova
2016
2017
m io €
annual %
EU28 imports
499
635
137
27.5%
EU28 exports
230
272
42
18.0%
Balance
-268
-363
-95
Total trade
729
908
178
24.5%
NAMA trade EU28 w ith Moldova
Grow th
Moldova
2016
2017
m io €
annual %
EU28 imports
819
981
162
19.8%
EU28 exports
1,826
2,173
348
19.0%
Balance
1,007
1,192
185
Total trade
2,644
3,154
510
19.3%
Source Trade G2 Statistics/ISDB
101
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Trade in
agri-food products
with Moldova has been gradually increasing for the past years to
the benefit of both sides. In 2017, agrifood trade between the EU and Moldova increased by
25% since 2016 and amounted to EUR 908 million. EU imports of agricultural products from
Moldova have increased by 27% (EUR 635 million) while EU exports have increased by 18%
(EUR 272 million).
The main EU agricultural exports to Moldova included oils seeds, pork, spirits and liqueurs,
dairy and tropical fruits and nuts. Key EU imports from Moldova included oil seeds, wheat,
tropical fruits and nuts, other cereals and other vegetable oils. Imports of all these products
increased in 2017 compared to 2016, ranging from an increase of 23% for oil seeds to 8% for
vegetable oils.
Table 3: EU trade with Moldova in agricultural goods (million EUR)
EU28 Agrifood trade by HS chapter w ith Moldova (m illion euro)
EU im ports
im port grow th
EU exports
export grow th
HS Section
2016
2017
total M€
annual %
2016
2017
total M€
annual %
Total Agrifood
499
635
137
27.4%
231
272
42
18.0%
01 Live Animals
0
0
0
7
7
0
4.6%
02 Meat and edible meat offal
0
0
0
-97.0%
18
28
10
52.6%
04 Dairy produce
7
12
5
65.2%
20
24
4
21.4%
05 Products of animal origin
0
0
0
389.1%
4
4
1
14.4%
06 Live trees and other plants
0
0
0
18.9%
7
9
2
36.5%
07 Edible vegetables, roots & tubers
2
5
3
135.3%
5
8
3
62.5%
08 Edible fruits & nuts
79
99
20
25.2%
17
19
1
7.9%
09 Coffee, tea, mate & spices
0
0
0
-19.2%
6
7
1
16.3%
10 Cereals
120
152
33
27.2%
10
12
2
15.6%
11 Products of the milling industry
1
1
-1
-50.5%
3
3
0
-5.5%
12 Oil seeds & oleaginous fruits
101
152
51
50.7%
24
29
4
17.5%
13 Lacs, gums, resins & other veg. sap
0
0
0
-98.0%
1
1
0
-16.1%
14 Vegetable products n.e.s.
0
0
0
71.2%
0
0
0
-50.5%
15 Animal or vegetable fats & oils
37
48
12
31.3%
4
5
0
9.4%
16 Preparations of meat
0
0
0
2
3
1
40.1%
17 Sugars & sugar confectionery
40
23
-17
-41.5%
8
7
-1
-7.1%
18 Cocoa & cocoa preparations
3
4
1
23.2%
10
10
0
1.0%
19 Preps. of cereals, flour, starch, etc.
11
11
0
-1.2%
8
10
2
21.9%
20 Preps. of vegetables, fruits, nuts & plant 27
53
26
97.9%
8
11
2
27.5%
21 Miscellaneous edible preparations
1
1
0
6.4%
18
19
2
10.7%
22 Beverages, spirits & vinegar
51
57
7
13.7%
25
27
1
4.3%
23 Residues and w aste from food indu tr
10
10
0
1.9%
17
20
3
20.1%
24 Tobacco & tobacco products
4
1
-3
-84.3%
6
7
2
31.4%
Other
6
6
0
6.7%
2
2
0
8.1%
Source Trade G2 Statistics/ISDB
EU balance
2.1.4.
Review clause for agricultural products
The EU and Moldova have agreed on a
review clause
which stipulates that after the entry into
force of the DCFTA, the Parties may consider accelerating and broadening the scope of the
elimination of customs duties on their bilateral trade. During the third year after the entry into
force of the Agreement, the Parties shall assess the situation, taking account of the pattern of
trade in agricultural products, the particular sensitivities of such products and the development
of agricultural policy on both sides. They shall examine, in the Association Committee in
Trade configuration (ACTC), on an appropriate reciprocal basis, the opportunities for granting
each other further concessions with a view to improving liberalisation of trade in agricultural
products, in particular those subject to duty-free TRQs.
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2.1.5.
Anti-circumvention mechanism for agricultural products
Fourteen product categories of agricultural and processed agricultural products included in
Annex XV-C can be imported duty-free from Moldova into the EU; their imports are
monitored under anti-circumvention mechanism (the EU may temporarily suspend the
preferential treatment of the products concerned if the imports into the EU reach certain
trigger volumes. If those imports reach 100% without justification, the EU may temporarily
suspend the preferential treatment. In 2017 those levels were exceeded for wheat, barley,
maize and processed cereals (ethanol). The information provided about the increased
production in Moldova in that period was accepted by the European Commission therefore
exports exceeding those trigger volumes could continue to benefit from preferential treatment
by the EU.
2.1.6.
Use of TRQs
In accordance with Annex XV-B of the Association Agreement the EU applies annual duty-
free TRQs for 6 agricultural product categories imported from Moldova: tomatoes, garlic,
table grapes, apples, plums and grape juice. In 2017, only the TRQs for table grapes and
plums were used (with a 100% utilisation for both products).
Moldova has made a request to increase the volumes for TRQs and the anti-circumvention
thresholds under the DCFTA for certain agricultural products at the meeting of the
Association Committee in Trade configuration in October 2017. This request, after having
been examined by the relevant Commission services, will be subject to talks with the
Moldovan side and may result in the modification of Annex XV of the Agreement through a
joint Decision of the Association Committee in Trade configuration. The representatives of
Moldova officially requested to review the EU duty-free TRQs for certain products in line
with the review clause foreseen in the DCFTA, and to raise the thresholds under the anti-
circumvention mechanism for cereals and sugar. Moldova grants six duty-free TRQs for
agricultural products from the EU (pork and poultry meat, dairy, processed meat, sugar and
sweeteners). Apart from processed meat and sweeteners, EU exports were in excess of the
quota amount in 2017.
Table 4: Utilisation of TRQs for EU exports to Moldova in 2017
Pork
Poultry meat
Dairy
Processed meat
Sugar
Sweeteners
Quantity (tons)
4 000
4 000
1 000
1 700
5 400
640
EU exports (tons)
7 607
8 621
19 799
694
13 863
476
Source: European Commission
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1.3.
Preference Utilisation rate (PURs)
The
PUR on imports into the EU from Moldova
amounted to
85%
in 2017, a slight
decrease from 2016 when it stood at 88%. Data to calculate the PURs on EU exports were not
available from Moldova.
1.4.
Establishment, trade in services and investments
2.1.7.
Market access related to establishment and trade in services
Approximation to the EU acquis is foreseen in four services sectors (postal and courier
services, telecommunication services, financial services and international maritime transport
services). Moldova recognized the importance of gradual (lasting between 3 and 8 years)
approximation of its existing and future legislation to the list of the EU acquis (in case of
financial services also to the international best practice and standards).
2.1.8.
Trade in Services
The total trade in services between the EU and Moldova has increased by 9% in 2016
compared to 2015. In that time period,
EU exports of services to Moldova
have decreased by
16% (from EUR 587 million to 491 million) while EU imports have increased by 34.5%
(from EUR 567 million to EUR 763 million).
Table 5: EU trade in services with Moldova, 2015-2016 (million EUR)
EU trade with
Moldova
EU Exports
EU Imports
Total trade
Trade Balance
Source: Eurostat COMEXT.
2015
587
567
1 154
20
2016
491
763
1 254
-273
% change 2016/2015
-16.0
34.5
8.6
-
While import and export values have been evolving mostly in tandem with a slight surplus for
the EU, this has been reversed in 2016, where the value of imports from Moldova into the EU
was higher than the value of exports from the EU to Moldova. To be noted that 2015 is the
first full year for which there is data on services since the provisional application of the
DCFTA, and as such it is still early to draw any conclusion on the effect of the DCFTA in
services trade. The main sub-sectors of services exported by Moldova to the world remain
transport, travel, ICT and other business services as well as manufacturing services on
physical inputs owned by others. In terms of imports, the most important sub-sectors belong
to transport and travel-related services.
2.1.9.
FDI
In terms of FDIs (FDIs) in 2016, the EU FDI stocks have remained at similar levels to
previous years and amounted to around EUR 1 billion with the EU ranking as a major foreign
investor in the country (over 60% of overall FDI stocks). EU companies are present in many
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sectors (including for example energy, financial sector, industry, retail trade, agriculture and
services). According to data provided by Moldova, 5 658 active companies with foreign
investments coming from the EU are registered in Moldova. These are mainly from Romania
(1731), Italy (1385), Germany (429), Cyprus (305) and France (237).
Table 6: EU FDIs with Moldova, 2016-2015 (million EUR)
FDI stocks
Moldova in EU28 (inward)
EU28 in Moldova (outward)
Net investment stocks
FDI flows
Moldova into EU28 (inward)
EU28 into Moldova (outward)
Net investment flows
Source: Eurostat.
2015
94
912
818
2015
11
29
18
2016
86
991
905
2016
-5
82
77
Direct investment flows from the EU have increased to EUR 82 million in 2016 following a
decrease in 2015 and 2014 as a result of the banking fraud scandal.
2.
2.1.
A
CTIVITIES OF THE IMPLEMENTATION BODIES
59
Joint decisions of the Association Bodies
In 2017, the
following amendments/updates
have been adopted or are to be adopted by the
Association bodies in 2018:
Customs:
Annex XXVI on approximation of customs legislation
60
Services:
Annex XXVIII-A (Rules applicable to financial services), Annex XXVIII-B
(Rules applicable to telecommunication services), and Annex XXVIII-D (Rules
applicable to international maritime transport)
61
59
60
61
Official Journal of the EU where the decisions on the Rules of Procedure for the EU-Moldova Association
bodies were published: of the Association Council and those of the Association Committee and of Sub-
Committees (OJ L 110, 29.4.2015); of the Customs Sub-Committee (OJ L 185, 14.7.2015); of the Sanitary
and Phytosanitary Sub-Committee (OJ L 178, 2.07.2016); of the Trade and Sustainable Development Sub-
Committee (OJ L 264, 9.10.2015); of the GIs Sub-Committee (OJ L 335, 9.12.2016).
Council Decision (EU) 2017/1364 of 17 July 2017 on the position to be adopted on behalf of the European
Union within the EU-Republic of Moldova Association Council as regards the amendment of Annex XXVI
to the Association Agreement between the European Union and the European Atomic Energy Community
and their Member States, of the one part, and the Republic of Moldova, of the other part, OJ L 191,
22.07.2017.
https://publications.europa.eu/en/publication-detail/-/publication/cbf814bf-6e88-11e7-b2f2-
01aa75ed71a1/language-en/format-PDFA1A
Council Decision (EU) 2017/0338 of 9 February 2018 on the position to be taken on behalf of the European
Union, in the Association Committee meeting in Trade configuration established by the Association
Agreement between the European Union and the European Atomic Energy Community and their Member
States, of the one part, and the Republic of Moldova, of the other concerning the update of Annex XXVIII-A
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Public Procurement:
Decision giving a favorable opinion regarding Moldova’s
comprehensive roadmap on public procurement
62
2.2.
Meetings of the Association Bodies
The following section contains an overview of the
most important meetings
of the
implementation bodies in 2017.
The
4
th
Association Committee in Trade Configuration
met on 18 October 2017. Both
Parties reviewed progress made in all DCFTA chapters, including trade in goods, SPS
measures, intellectual property rights, customs and trade facilitation, technical barriers to
trade, public procurement, establishment, trade in services and electronic commerce, trade-
related energy, competition, trade and sustainable development. The Committee also assessed
trade performance, trade policy aspects and business climate issues in bilateral trade relations.
The
Moldovan authorities
presented the progress achieved in the approximation of the
domestic legislation to that of the EU in all relevant chapters. The Moldovan side referred to
its accession to the WTO Trade Facilitation Agreement and the WTO Government
Procurement Agreement (GPA) in 2016, the approval of the National Strategy for Investment
and Export Promotion, the initiation of the modernization of laboratories for food safety
controls, and advancement in the process of accession to international institutions as regards
quality infrastructure as the main achievements to date.
The
EU side
welcomed the achievements but raised strong concerns with regards to the
usurpation of the EU PDO
(Protected Designation of Origin) ‘Prosecco’ by Moldovan
companies, as well as the impact of the measures taken by the energy regulator ANRE on the
company Gas Natural Fenosa (see both further explained in section 4 below).. The EU also
expressed its concerns with the
draft legislation on internal trade
which could affect free
competition as well as the free access of EU products to the Moldovan market. In general, the
EU underlined the need for Moldovan authorities to focus on implementation and
enforcement of legislation and programming documents and their translation into concrete
results for the benefit of businesses and citizens.
Both sides underlined the importance of EU financial assistance for the implementation of the
DCFTA which aims at supporting both the Moldovan administration and the companies
(notably SMEs) in aligning with the
acquis
and reaping the benefits of the Association
Agreement.
The
3
rd
Sub-Committee on SPS measures
(SPS Sub-Committee), met on 22 June 2017.
During the meeting, the Moldovan authorities presented progress in the implementation of the
62
(Rules applicable to financial services), Annex XXVIII-B (Rules applicable to telecommunication services)
and Annex XXVIII-D (Rules applicable to international maritime transport) to the Agreement.
Decision No 1/2018 of the EU-Moldova Association Committee in Trade configuration of 16 April 2018
giving a favourable opinion regarding the comprehensive roadmap on public procurement [2018/955],, OJ
L 168/10, 5.7.2018.
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operational conclusions from the previous Sub-Committee meeting of June 2016 and updates
as regards the implementation of the DCFTA SPS Chapter and institutional capacity of the
Food Safety Agency (ANSA). The EU underlined the importance for Moldovan authorities to
meet the deadlines foreseen in Annex XXIV-B of the DCFTA ranging from 2014-2019, and
to allocate human resources in order to meet this priority. Discussions also touched upon the
need for the laboratory network to be strengthened and extended and to have more monitoring
and exchange of data between the two sides on African Swine Fever (ASF).
The
4
th
Sub-Committee on Customs and Trade Facilitation
took place on 16 November
2017. The Parties discussed the ongoing approximation of domestic legislation to the Union
Customs Code and the EU recommended the creation of a working group on the drafting of
secondary legislation related to the implementation of the new Customs Code of Moldova.
The Roadmap on Authorized Economic Operator (AEO) mutual recognition as well as the
extension of the AEO pilot project at the Leuseni-Albita border crossing point were approved.
The update of Annex XXVI by the Association Council to update the reference to the
Customs Code was also discussed, as was the EU twinning project launched in November
2017 to assist Moldova with its preparatory actions in order to adhere to the Convention on a
common transit procedure and set up a single window environment for customs formalities
The
4
th
GIs Sub-Committee,
which met on 17 October 2017, discussed the enforcement of
the protection of GIs by customs, the latest developments
as regards the ‘Prosecco’ Court
case on the usurpation of the EU Protected Designation of Origin ‘Prosecco’ by Moldovan
companies producing sparkling wine as well as the update of the GIs lists. The EU reiterated
the importance for Moldova to protect the EU GIs under the Association Agreement. Areas of
cooperation and technical assistance as well as progress made by Moldova as regards the
alignment to the EU acquis were also discussed.
As regards the
3
rd
TSD Sub-Committee
meeting
-see
section 3 below.
3.
I
MPLEMENTATION
DEVELOPMENT
OF
THE
PROVISIONS
ON
TRADE
AND
SUSTAINABLE
The
TSD Sub-Committee
which has been established under the TSD Chapter of the AA met
for the third time on 16 October 2017 in Chisinau. During that meeting both Parties agreed to
focus dialogue and cooperation on five priorities: labour inspection (including operational
safety and health), child labour, EU Eco-label scheme, the Convention on International Trade
of Endangered Species (CITES) and climate change. Those priorities were shared and
discussed with civil society at the Joint Civil Society Dialogue Forum held in Chisinau on 17
October 2017. A work programme operationalizing the priorities still need to be agreed.
During these meetings, the EU voiced its expectation for civil society in Moldova to play an
active role in overseeing the implementation of the DCFTA (e.g. the good application of food
safety standards, as this affects the daily life of citizens) and signalling areas where
improvements are required. The EU also expressed concern regarding the situation of the
State Labour Inspectorate which continues to appear highly problematic in view of the
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implementation of the International Labour Organization (ILO) standards. Finally, the EU
presented its support to facilitate the functioning of the DAGs in all trade agreements,
including the ones under the Moldova DCFTA, through a EUR 3 million project funded by
the Partnership Instrument.
4.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
SPS aspects
In terms of
SPS measures,
the administrative capacity of the Food Safety Agency in
verifying animal health and animal welfare rules has been strengthened however it still needs
to be enhanced. The SPS strategy was adopted by the Government in December 2017 and is
currently under implementation. Signficiant improvement is needed as regards laboratory
diagnostic capacity for monitoring and surveillance of animal diseases as part of official
controls in order for Moldova to receive more authorisations for export of for e.g. fish, eggs
and egg products to the EU. As from October 2017, Moldova has received authorizations to
export by processing plants (32 companies) and by other facilities for the collection or
handling animal by-products (i.e. unprocessed/untreated materials) as from March 2018 (16
companies). Furthermore, Moldova has requested to authorise poultry meat and table egg
export. So far, the EU import requirements are not met by Moldova.
Technical Barriers to Trade
On
technical barriers to trade,
as a follow-up to earlier progress, Moldova adopted
secondary horizontal legislation in September 2017. Outstanding discrepancies with regard to
specific product legislation should be removed. In late 2016 the Moldovan government
adopted a
Roadmap for initiating the negotiations of the Agreement on Conformity
Assessment and Acceptance of Industrial Products
(ACAA) which serves as a valuable tool in
the process leading to the start of ACAA negotiations.
Customs and Trade Facilitation
On
customs and trade facilitation,
Moldova approved amendments to customs regulations
to align with the EU Authorised Economic Operator (AEO) requirements and Approved
Exporter conditions, which entered into force in July 2017. The
Trade Facilitation Action
Plan for the period 2018-2020
was approved in December 2017. The new Customs Code has
been developed for approximation with the provisions of the Union Customs Code and
presented for public consultation. It is expected to be adopted in 2018. Preparatory work on
accession to the
Convention on a common transit procedure
with EU assistance should
continue. Finally, the Convention on Pan Euro Mediterranean preferential rules of origin
entered into application for Moldova in December 2016.
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Energy
With regards to
trade-related energy,
Moldova has pursued alignment with the EU acquis
however concerns remain as regards the independence of the energy regulator ANRE and the
transparency of the electricity procurement process. In this regard, the recommendations made
by the Group of Observers for the 2018 Electricity Procurement in Moldova should be taken
into account to improve the next procurement exercise. Full independence and impartiality of
the energy regulator is crucial to the ensure proper functioning of the energy market,
including proper implementation of the Third EU Energy Package and secondary legislation.
It is equally important for Moldova to pursue work on the new distribution tariff methodology
for electricity in consultation with all concerned stakeholders and the Energy Community
Secretariat and comply with the settlement agreement reached with the company Gas Natural
Fenosa in 2016.
Competition policy
With regards to
competition policy
Moldova should pursue the implementation of the
National Program on Competition and State Aid for 2017-2020.
There are serious concerns
with certain provisions contained in Moldova’s law on Domestic Trade which may limit free
competition on the market. These relate in particular to limitations of discounts between
traders and producers and an obligation for retailers to have at least 50% of local products on
their shelves, contrary to DCFTA and WTO provisions on national treatment of goods. If
implemented, these provisions will severely affect the ability of European economic operators
to conduct their business in Moldova.
Intellectual Property Rights
In the field of
intellectual property rights
(IPRs) progress has been registered in particular
with regards to the usurpation of the EU GI
‘Prosseco’.
In December 2017 and April 2018,
the Moldovan Supreme Court of Justice has issued a final and irrevocable decision as a result
of which Moldovan companies now have a ban on the production and placing on the market
of sparkling wine under the name ‘Prosecco’ and the corresponding international trademark is
protected in Moldova. Besides, some copyright related provisions need to be improved in
Moldova (i.e. terms of protection for music recordings and the collective right management).
Services
On
services,
in international maritime transport services the main concerns relate to
Moldova’s continued presence on the ‘black list’ of the Paris Memorandum of Understanding
on Port State Control for which Moldova has developed an Action Plan to exit the ‘black list’.
Moldova is planning to set up a naval agency expected to be fully operational in 2018.
Moldova has made progress in reforming its postal services in line with the EU acquis (next
steps foreseen in 2019), as well as in telecommunications services with the adoption of a law
on electronic communications. Moldova has also aligned with the 4
th
Anti-Money Laundering
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Directive. An update of Annex XXVIII-A (Rules applicable to financial services with regards
to anti-money laundering), Annex XXVIII-B (Rules applicable to telecommunication
services) and Annex XXVIII-D (Rules applicable to international maritime transport) has
been prepared in 2017 and will be adopted in 2018.
Public Procurement
Reforms in
public procurement
were pursued according to the National Reform Plan for
Public Procurement for 2016-2020 including approximation of the legal framework to the EU
acquis, the reform of the Public Procurement Agency and progressive introduction of e-
procurement for which an EU-funded pilot project is ongoing. The newly established
Complaint Settlement Agency playing the role of the public procurement review body started
to operate in 2017 with some delays. The appointment of the management of the Agency
lacked transparency.
3.
E
U
S
UPPORT TO
DCFTA I
MPLEMENTATION
EU Support to DCFTA-related reforms
EU financial assistance is being provided to Moldova for the implementation of the DCFTA:
it aims at supporting both the Moldovan administration and the companies (notably SMEs) in
aligning with the acquis (i.e. norms for food products and non-food products) and reaping the
benefits of the Agreement. Furthermore, the EU is supporting the implementation of structural
reforms in Moldova, including in the financial and the public administration sectors, with a
view to improving the business environment and facilitating trade. The EU is also providing
assistance for the development of value chains (e.g. textile) and of economic clusters in
Moldova.
EU Support for SMEs
SMEs in Moldova are benefitting from the EU support under the DCFTA Facility for SMEs,
which aims at increasing SMEs competitiveness, easing their access to finance, helping them
to seize new trade opportunities and comply with new food safety, technical and quality
standards, as well as with environmental protection measures implied by the DCFTA
implementation.
The DCFTA Facility consists of a set of programmes implemented principally by EBRD and
EIB. SMEs are benefiting from the EU support through four types of instruments:
1) risk sharing mechanisms (mostly first loss portfolio guarantees for local banks);
2) currency hedging (interest rate subsidies for loans in local currency);
3) investment incentives (grants provided to SMEs combined with investment loans to
upgrade machinery or production processes in line with the EU standards) and
4) technical assistance (business advice to SMEs and local banks, assessment of the
compliance with the EU standards, capacity building for local banks).
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6.
C
ONCLUSIONS AND OUTLOOK
Moldova has
adopted ambitious legal approximation commitments
under the DCFTA with
extensive work required in the first three years of implementation. After three years of
implementation of the trade and trade-related part of the Association Agreement, good
progress has been observed in terms of regulatory approximation, despite political and
economic turbulence. With extensive support from the EU, Moldova has adopted a number of
trade-related programs,
including for example a
plan for SPS reform,
roadmaps for the
approximation of legislation in
TBT
and
public procurement
and Moldova has also taken
steps in preparing to adopt a
new Customs Code
to align with the one of the EU.
Furthermore, the comprehensive reform of the public administration completed in 2017
should enhance the capacity and functioning of key regulatory bodies such as the National
Food Safety Agency (ANSA), National Energy Regulator (ANRE), National Regulator in
Telecommunications (ANRCETI).
The DCFTA has helped Moldova to gradually enter into integrated and predictable
international value chains, and engage into a structural transformation of its trade patterns
towards a more sustainable model. Examples of successful companies testify to the benefits of
free trade with the EU both in the agricultural sector, producing wine, nuts, juices, fruit
conserves and alcohol, and in the industrial sector, making electrical cables, apparel, shoes
and smart electricity meters.
The EU has been supporting Moldova to
align with and implement European norms for
food products and non-food products
with a view to ensuring higher standards for the
Moldovan consumers and workers and facilitating international trade. Furthermore, the EU is
delivering financial and technical assistance in the implementation of structural reforms in
Moldova, including in the financial and the public administration sectors, with a view to
improving the business environment. The EU has also
strengthened the export capacity
of a
number of Moldovan companies and facilitated their access to finance: over 2009-2017 in
Moldova, it has provided financial support for 5 000 enterprises, supported 56 000 jobs in
SMEs,
and created at least 1 735 new jobs. The EU is also providing assistance for the
development of value chains (e.g. textile) and of economic clusters in Moldova.
However,
further reform efforts are needed
to ensure the respect of the rule of law, to step
up the fight against corruption, including high-level corruption, and to improve the business
environment. Implementation and enforcement of new laws and strengthening of
administrative capacity and relevant institutions should be the focus of attention. In particular,
concrete progress is needed in the SPS (SPS) area in meeting EU import requirements.
Besides food safety reform, focus in 2018 should remain on technical regulations and
standards (TBT), reform of the customs code and implementation of the public procurement
strategy.
Moldova should refrain from adopting any trade measures incompatible with the provisions of
the Association Agreement/DCFTA. In this regard, the specialised Sub-Committees
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established to implement the DCFTA will continue to discuss and seek solutions to the
implementation and market access issues, with the aim to produce tangible results.
In addition, for the DCFTA to deliver its full benefits, it is crucial for Moldova to
improve
working conditions, the business and investment climate,
strengthen the rule of law and
ensure a level-playing field for all businesses and citizens alike. There is untapped potential in
the level of FDI in Moldova, which is needed to modernize and diversify the economy.
Pursuing the fight against corruption
63
, ensuring policy stability and predictability, and
improving access to finance as well as governance of labour rights and standards is crucial to
attract more investors and reap the full benefits of the DCFTA.
63
According to the 2018 World Bank Doing Business Index, Moldova ranks as 44th out of 190 countries (no
change to the previous index). Corruption is widely spread which has been reflected by Transparency
International in its 2017 Corruption Perceptions Index where Moldova has been ranked as 122nd - out of 180
countries (+1 position in comparison to the previous index) - with the score 31 (score 0 means highly
corrupted and 100 very clean).
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PART III: FIRST GENERATION FREE TRADE AGREEMENTS
For the purpose of this report, "first generation" FTAs are agreements negotiated before the
2006 "Global Europe" Communication" and Stabilisation and Association Agreements
(SAAs) with Western Balkan countries concluded between 2009 and 2016. Of the applied
agreements, the report covers the following
64
:
FTAs with Switzerland and Norway
65
, dating from the 1970s
FTAs with the EU's Mediterranean partners
66
as part of Association Agreements
concluded in the 1990's
FTAs with Mexico and Chile (dating from 2000 and 2003)
Customs Union with Turkey (1995),
SAAs with five Western Balkan countries (concluded between 2001 and 2016).
The "first generation" FTAs do not have a structure of implementation bodies as elaborate as
the most recent FTAs, but an annual meeting to take stock of developments is planned and
usually takes place.Issues that were raised in these meetings are very diverse, reflecting the
specific situation of each partner country. Common topics addressed include lengthy customs
procedures, restrictions to trade in agricultural products, pharmaceutical products, government
procurement, and restrictions on FDI.
64
65
The agreements with Iceland and the Faroe Islands are not covered by this report. The FTA with South Africa
has been superseded by the EPA with SADC.
The European Economic Area (EEA) agreement of 1992 with Iceland, Liechtenstein and Norway enhanced
the free movement of goods, services, investment and people across that area. It is not subject to this Report.
Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestine, and Tunisia.
66
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FIRST GENERATION FREE TRADE AGREEMENTS WITH MEDITERRANEAN
PARTNERS
The EU has concluded ‘first generation’ free trade agreements (FTAs) as part of Association
Agreements (AA) in the 1990s with eight of its Mediterranean partners: Algeria, Egypt,
Israel, Jordan, Lebanon, Morocco, Palestine
67
and Tunisia. These FTAs typically covered
only trade in goods, and even agricultural products were often only added to their scope at a
later stage.
The existing FTAs with Mediterranean countries provide for
reciprocal liberalisation
of all
trade in industrial goods and, to different degrees, of trade in agricultural, processed
agricultural and fisheries products. These FTAs typically include
elements of asymmetry
in
favour of our Mediteranean partners, for example, long transitional periods and/or less far-
reaching liberalisation of agricultural trade. This benefits Mediterranean partners and is
primarily aimed to promote economic development of the region and closer integration with
the EU internal market.
67
This designation shall not be construed as recognition of a State of Palestine and is without prejudice to the
individual positions of Member States on this issue.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-ALGERIA ASSOCIATION AGREEMENT
68
1.
I
NTRODUCTION
The EU and Algeria established a free trade area under the EU-Algeria Association
Agreement, signed in 2002, which entered into force on 1 September 2005 (hereinafter called
‘the Agreement’). The Agreement provides
for a reciprocal liberalisation of trade in goods,
with elements of asymmetry in favour of Algeria, such as a 12 years’ transitional period for
dismantling tariffs of industrial goods and a selective liberalisation on agriculture. In 2012,
the EU and Algeria agreed to review the timetable of tariff dismantling set forth in the
Association Agreement for certain products (steel, textile, electronics, and automobiles),
extending the transitional period from 12 to 15 years. Complete dismantling of tariffs and thus
completion of the EU-Algeria free trade area is now scheduled for September 2020. Market
opening for agricultural products so far only concerns a limited number of tariff lines subject
to full liberalisation, TRQs or a reduction of MFN rates on both sides. The Agreement also
features provisions on investment and services, although less far-reaching than those on
goods. So far, no additional negotiations have been opened on a Dispute Settlement Protocol.
Algeria is a member of the Regional Convention on pan-Euro-Mediterranean preferential
rules of origin, which it signed in 2012 and notified the EU of ratification in January 2017.
The main objective of the Convention is to provide a more unified framework for origin
protocols.
Algeria had started negotiating its accession to the WTO with the Accession Working Party
established in 1987. The negotiation process has, however, stalled since 2014.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU was Algeria’s first partner for merchandise trade in
2017, accounting for 50% of
Algeria’s total trade, before China (11%), the United States (6%), and Brazil (4%). The EU is
Algeria’s first export market: 59% of Algerian exports were directed towards the EU in 2017,
followed by the United States (9%), and Brazil
(6%). The EU is also Algeria’s first source of
imports, with 44% of Algerian imports originating from the EU.
Algeria is the EU’s second trading partner amongst all Euromed countries, after Morocco: in
2017, in the Euromed area 28% of EU imports originated from Algeria and 17% of EU
exports to the Euromed went to Algeria. This privileged position is mainly due to the
prevalence of hydrocarbons in EU-Algeria trade flows.
Trade in goods between the EU and Algeria has intensified within the progressive free-trade
area established by the Association Agreement: in 2017, the total two-way trade amounted to
EUR 37.4 billion, an increase of 50.8% from its 2004 value of EUR 24.8 billion, the year
preceding the entry into force of the Association Agreement. Two-way trade peaked in 2012
at EUR 53.9 billion.
68
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/algeria/
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EU exports to Algeria grew by 97.9% between 2004 and 2017, from EUR 9.5 billion to
EUR 18.8 billion. EU exports, however, decreased (-7%) between 2016 and 2017, with
exports standing at EUR 18.7 billion in 2017 compared to EUR 20.3 billion in 2016. In 2017,
EU exports to Algeria were mainly made in the sectors of machinery and transport equipment
(35.6%), chemicals (12.8%) and agricultural and food products (12.9%). The four biggest EU
exporters to Algeria were: France, Italy, Germany and Spain.
EU imports from Algeria are dominated by trade in the sectors of oil and gas (mineral fuels
amount to 95.7% of the total exports
69
to the EU) which has a significant impact on overall
volumes. EU imports from Algeria rose 21.7% between 2004 and 2017, from
EUR 15.2 billion to EUR 18.5 billion (with a peak of EUR 32.7 billion in 2012, which
represented a 115.1% increase compared to 2004). EU imports increased (12%) between 2016
and 2017, with imports reaching EUR 18.5 billion in 2017 compared to EUR 16.5 billion in
2016. The three biggest EU importers for Algeria in 2017 were: Italy, Spain, and France.
Since 2012, the sharp decline of oil prices has led to a sharp fall in the value of Algeria’s
exports to the EU. After many years of surplus, Algeria registered limited trade deficits with
the EU in 2015 and 2016, of EUR 1.3 billion and EUR 3.9 billion respectively. In 2017,
Algeria’s trade deficit returned to merely EUR
0.2 billion with the icrease in oil prices.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Algeria increased by 135% between
2003 and 2017, from EUR 1.0 billion in 2003 to EUR 2.4 billion in 2017. Between 2016 and
2017, EU agricultural exports decreased (-6%) going from EUR 2.5 billion in 2016 to EUR
2.4 billion in 2017. EU imports, on the other hand, increased (14%) from EUR 0.09 billion in
2016 to EUR 0.1 billion in 2017. In 2017, among our Euromed partners, Algeria was the EU's
most important destination for exports of agri-food products. The EU exported mainly wheat
(27%), milk powders & whey (18%), infant food and other cereals, flour, starch or milk
preparations (6%) to Algeria. EU agricultural imports from Algeria were dominated by beet
and cane sugar (46%) followed by fruits and nuts (34%).
69
Despite what the above graph suggests, mineral fuels continuously accounted for more than 90% of Algerian
exports since the entry into force of the Agreement. The discrepancy between the lines ‘EU imports’ and ‘EU
imports of mineral fuels’ prior to 2009 is presumably due to
a change in the reporting methods.
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Regarding agricultural TRQ, Algeria’s 2017 fill rate was low for a limited number of products
such as couscous (26%), olive oil or seed potatoes (less than 5%) and remained nil or close to
zero for the majority of products, such as tomato juice, fruit juices, yogurt, apricots,
strawberries or wine.
2.3.
Preference Utilisation rate
Algeria had an average utilisation rate of preferences of 97% in 2017, across all goods,
including agricultural and non-agricultural products. Data was not available to calculate the
PURs on EU exports to Algeria.
2.4.
Trade in Services and Investment
70
The total
trade in services
between the EU and Algeria remained stable from 2010 to 2016,
going from EUR 4.6 billion to EUR 5.1 billion. In 2016, Algeria exported EUR 1.7 billion in
services to the EU and imported EUR 3.5 billion from the EU.
FDI EU28 with Algeria (million EUR)
Inward
2014
2015
1 878
2 069
222
299
2016
2 287
162
Outward
2014
2015
14 106
14 820
768
2 741
2016
14 623
333
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
FDI
flows between the EU and Algeria remained volatile between 2013 and 2016, with most
investments coming from the EU to Algeria (EUR 0.3 billion in 2016, for the total stock of
EU FDI of EUR 14.6 billion). The weakness of EU-Algeria FDI flows is mainly due to
investors’ concerns regarding the business climate in the country. In 2017, Algeria modified
its Investment Code in an attempt to attract more investments; nevertheless the country
currently ranks 166
th
out of 190 in the Wold Bank ranking Doing Business 2018, with a
distance to frontier (DTF)
71
score of 46.7 out of 100
a decrease of 0.01 in DTF score
compared to 2017.
3.
I
SSUES ADDRESSED IN THE
S
UB
-C
OMMITTEE MEETINGS
The last
Sub-Committee on Trade, Industry, and Services
was held in October 2017.
Major trade irritants addressed included chiefly the quantitative restrictions under a non-
automatic licensing regime in force since January 2016 (see in more detail section 5). Legal
restrictions to foreign investments were also addressed, such as the so-called
‘49/51 Law’,
which sets a 49% cap for foreign ownership of any company established in Algeria, regardless
of the sector of activity. Other long-standing issues were also mentioned, such as restrictions
to imports of medicines or vehicles and the issue of ship-owners’
disbursement accounts.
Notwithstanding these issues, the EU recalled its commitment to support Algeria’s accession
to the WTO.
The last
Sub-Committee on Agricultural and Fisheries Products
was held back-to-back in
October 2017. Several technical assistance programmes were discussed, as well as potential
70
71
Statistics can be found here http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111616.pdf
The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory
performance in economies over time.
117
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ways to reinforce EU technical assistance to Algeria in the field of conformity assessment.
Algeria mentioned the will to request for more concessions within the Association
Agreement, despite its inability to fulfill the current quotas at any meaningful level.
On the same day, during the EU-Algeria
Sub-Committee on Customs Cooperation
the
parties discussed the development of their respective customs legislation and procedures, the
revision of the PEM convention on Preferential Rules of Origin and the Algerian request to
share information on the value of goods at customs level for taxation purposes.
More significant meetings were held during the first half of 2018, with consultations at senior
official level occurring in January, February and May, in an effort to tackle the several market
access barriers that Algeria has been imposing on trade with the EU, especially from 2016. If
Algeria agrees, these efforts will continue in the second half of 2018 and according to the
Association Council conclusion of May 2018
72
, should lead to a negotiated solution to the
existing trade irritants by the end of 2018.
4.
S
PECIFIC AREAS OF IMPORTANCE
The recent fall in oil prices has significantly impacted Algeria's finances. Algerian authorities
have resorted to administrative measures to restrict imports, with a view to reducing trade
deficits and countering shrinking foreign currency reserves. The EU has reacted forcefully to
these trade-restrictive measures and has repeatedly requested full compliance with the
provisions of the Association Agreement. Algeria has argued that the present economic
conjuncture justifies exceptional measures; she has also recognised the need for economic
reforms in order to encourage greater economic diversification and to foster investment.
The
Partnership Priorities
adopted by the EU and Algeria at the Association Council of 13
March 2017
73
mention cooperation for the socio-economic development of Algeria, including
trade and access to the European single market. The EU and Algeria also conducted a
joint
evaluation of the Association Agreement in 2016-17.
The findings of the evaluation are that
Algerian efforts and EU assistance should focus on the following areas: diversification and
competitiveness of the Algerian economy, improvement of the business climate, and
facilitation of investments. A number of trade related reforms were discussed and Algeria was
encouraged to commit to the improvement of business climate, new financing mechanisms for
SMEs, a fine-tuning of subsidies, and the reduction of red tape.
The
EU is providing support to Algeria through various trade-related assistance
programmes
such as DIVECO I, II (Programme
d’appui à la diversification de l’économie),
P3A I and II (Programme
d’appui à la mise en oeuvre de l’Accord d’Association),
or
PADICA (Programme
d’appui à la diversification industrielle et à l’amélioration du climat
des affaires),
implemented in partnership with the Algerian authority for trade promotion
(ALGEX)
74
. Such programmes aim to strengthen export competitiveness, to modernise the
legal framework, to diversify the economy, and to improve the business climate in Algeria.
This support will continue under the 2018-20 programming period. The EU is also supporting
Algeria in preparation of negotiations on an Agreement on Conformity Assessment and
Acceptance of industrial products (ACAA), in sectors identified as key priorities by Algerian
72
73
74
For more information see
http://www.consilium.europa.eu/en/meetings/international-ministerial-
meetings/2018/05/14/algeria/
They can be downloaded here:
https://eeas.europa.eu/delegations/algeria/31985/les-nouvelles-priorites-du-
partenariat-ue-algerie_en
See DG DEVCO for more information https://ec.europa.eu/europeaid/home_en
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authorities such as construction materials, domestic appliances and low voltage electric goods.
This work has been conducted since 2013 through TAIEX missions, resulting for instance in
twinning programmes involving the Algerian authority for certification and accreditation
(ALGERAC). Additional programmes, such as PASSEM (Programme
d’appui spécifique à la
surveillance et à l’encadrement du marché),
focus on specific areas, such as market
surveillance and consumer protection.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Several market access issues remain in Algeria. The most relevant in 2016 and 2017 was the
non-automatic licensing regime for imports,
imposed on an increasing number of products,
among which:
automobile vehicles, steel rebar and iron rod
(since 2016). In April 2017,
the import licence scheme was extended to a new set of products, bringing the total to 22 sets
of products including
wood, ceramic and several foodstuffs.
In December 2017, Algerian
authorities declared that as from January 2018, the licence scheme would apply only to cars.
At the same time,
new measures designed to curb imports
have been put in place, notably
an import ban on a list of currently 877 products (across all sectors of the economy), the
increase of custom duties for another 129 products (including agricultural) as well as
additional administrative hurdles for exporters.
Other trade-related issues include: a
ban on imports of medicines
for which exists a locally-
produced equivalent; technical standards; particularly stringent mandatory security devices for
vehicles, coupled with
obligatory inspections.
The EU has engaged in an active political and
technical dialogue with Algerian authorities on these measures, to ensure they are brought in
to line with the Association Agreement.
Another long-standing issue is the
business climate
in Algeria, and the reluctance to relax
restrictions on foreign investment.
Numerous obstacles to foreign investment remain
and
most notably the horizontal ‘49%/51%’ cap that applies across the board to all sectors. The
Algerian government has recently shown some willingness to consider changes, notably
through the adoption of a
new Investment Code,
which was vocally advertised. At the same
time, the problematic rules still remain enshrined in the Budget Law 2009 and 2012, and this
may render it easier for the Algerian government to reintroduce restrictions through amending
the Code in the future. Such a blanket foreign equity cap enshrined in domestic legislation
sends negative signals to potential investors and further delays Algeria’s prospects
of
accession to the WTO. The EU has routinely raised the issue with Algerian authorities,
suggesting a more limited scope of application of the rule still enshrined in the Budget Law.
6.
C
ONCLUSIONS AND OUTLOOK
There has been a
positive overall trend in EU-Algeria trade
since entry into force of the
Association Agreement, although
Algeria’s heavy dependency on hydro-carbons
has held
back any significant diversification of its exports, The country registered its first negative
trade balance with the EU in 2015, at a time when oil prices were considerably low. In 2017
however trade has become balanced again as oil prices improved, while EU exports faced an
increasing number of trade restrictions. EU therefore continues to offer its support to the
Algerian government to diversify its economy. At the same time, the Commission has
engaged Algerian authorities with the aim to end the trade restrictive measures and ensure that
any temporary measures be brought in line with the Association Agreement.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-EGYPT ASSOCIATION AGREEMENT
75
1.
I
NTRODUCTION
The EU and Egypt established a free trade area as part of the EU-Egypt Association
Agreement, signed in 2001 (hereinafter referred to as ‘the Agreement’). The Agreement was
provisionally applied from 21 December 2003 and officially entered into force on 1 June
2004. It provides for reciprocal liberalisation of trade in goods, with elements of asymmetry
in favour of Egypt: all industrial products covered by the Agreement could be exported by
Egypt to the EU tariff-free from the day of entry into force of the Agreement, while Egypt
benefited from a transitional period of 3 to 15 years to dismantle tariffs, depending on the
product. The Commission received a Council mandate authorising it to negotiate a
Deep and
Comprehensive FreeTrade Area
(DCFTA) with Egypt in November 2011, but Egypt has
shown limited interest so far.
Today, tariffs applied to most industrial products have been dismantled by Egypt, with the
exception of certain automotive imports, for which the transitional period will run until
January 2019. This agreement, which already included preferential arrangements on
agricultural, processed agricultural and fisheries products, was complemented by an
agreement on additional liberalisation in agricultural, processed agricultural and fisheries
products signed in October 2008 that entered into force on 1 June 2010. For agricultural
goods, 80% of trade is now covered by duty-free treatment. In November 2010, the EU and
Egypt signed a protocol establishing a Dispute Settlement Mechanism (DSM), for which the
ratification process is still pending. Negotiations were launched on liberalisation of trade in
services, but have been halted.
Egypt also signed the Regional Convention on pan-Euro-Mediterranean preferential rules of
origin on 9 October 2013 and notified it on 1 June 2014. The main objective of the
Convention is to provide a more unified framework for origin protocols.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
In 2017, the EU remains Egypt’s main trading partner, accounting for 29.7% of the total
Egyptian trade, before UAE (6.8%), China (5.8%) and the United States (5.3). The EU is
Egypt’s first export market: 34.1% of Egyptian exports were directed
towards the EU in 2017,
followed by UAE (10.9%), United States (7.4%) and Turkey (4.4%). The EU is also Egypts
first source of imports, with 27.9% of Egyptian imports originating from the EU.
Trade in goods between the EU and Egypt has increased significantly over the period since
the FTA entered into force: total trade between the EU and Egypt increased by 176% in 15
years, from EUR 10.1 billion in 2002 (the year preceding the provisional entry into force of
the Association Agreement) to EUR 27.9 billion in 2017 (record year so far for total bilateral
trade value).
75
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/egypt/
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EU exports increased 193% between 2002 and 2017, from EUR 6.7 billion in 2002 to
EUR 19.8 billion in 2017. Between 2016 and 2017, EU exports decreased (-3%), with exports
standing at EUR 19.8 billion in 2017 compared to EUR 20.6 billion in 2016. In 2017, the EU
mainly exported goods in the sectors machinery and transport equipment (35%), chemicals
(13.2%), fuels and mining products (9.8%), and agricultural products (6.9%) to Egypt. The
three biggest EU exporters to Egypt were Germany, France, and Italy.
EU imports increased by 142% between 2002 and 2017, from EUR 3.3 billion in 2002 to
EUR 8.1 billion in 2017. Between 2016 and 2017, EU imports increased (20%), going from
EUR 6.7 billion in 2016 to EUR 8.1 billion in 2017. In 2017, EU imports were principally in
the sectors of fuel and mining products (34.8%), chemicals (11.7%), and textiles and clothing
(10.4%). The three biggest importers of Egyptian products in the EU were: Italy, Germany
and Spain. EU imports of agricultural and food products and in non-fuel industrial products
remained stable since 2011, increasing during 2017
most notably agricultural and food
imports increased by 10.5%.
A reduction in Egyptian exports from 2011 onwards, coupled with significant increase of
imports from the EU, has resulted in a widening trade imbalance between the EU and Egypt.
The decrease in Egyptian exports is largely imputable to the fall of oil prices and growing
internal demand for energy in Egypt (fuels accounted for one third of Egyptian exports to the
EU in 2017, while they used to constitute almost half). 2017 suggests an upwards trend in
Egyptian exports to the EU, having increased 20.5% from 2016, while imports slightly
dipped. This is mainly the result of devaluation of the local currency carried out in November
2016, coupled with government policy aimed at import reduction.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Egypt increased by 170% between
2003 and 2017, from EUR 0.8 billion in 2003 to EUR 2.3 billion in 2017. EU agricultural
exports decreased (-25%), going from EUR 1.8 billion in 2016 to EUR 1.3 billion in 2017.
EU imports increased (10%), from EUR 0.9 billion in 2016 to EUR 1.0 billion in 2017.
In 2017, Egypt was the EU’s second biggest supplier of agri-food
products among our
Euromed-partners. The EU imported mainly fruit, including citrus fruit, (35%) and vegetables
(33%) from Egypt. EU agricultural exports to Egypt were dominated by wheat (21%),
vegetables (11%) and milk powders & whey (7%).
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Regarding agricultural TRQs, Egypt’s 2017 fill rate was high for a limited number of products
such as garlic (88%), sweet oranges (88%) or strawberries (88%), but remained nil or close to
zero for the majority of products, such as cucumbers, brown rice, cereal preparations, etc. It is
worth mentioning that, apart from 18 products under TRQ, other agricultural exports from
Egypt to the EU enter duty-free on the European market. So far, Egypt has made little use of
its TRQs and has requested assistance on SPS issues to fully benefit from existing provisions
of the FTA.
2.3.
Preference Utilisation rate
Egypt had an average PUR of 96.7% in 2017. For EU exporters to Egypt, the PUR was 44%
in 2017.
2.4.
Trade in Services and FDI
76
After a period of instability from 2011 to 2014, the
total trade in services
between the EU
and Egypt had fully recovered its pre-2011 level in 2015, amounting to EUR 10.0 billion
(EUR 10.2 billion in 2010). In 2016, however, Egypt witnessed a significant reduction in the
export of services, due to the reduced inflow of tourists, aggravated by the crash of a Russian
airliner in November 2015 over the Sinai, and slightly lower revenues of the Suez Canal due
to reduced global trade. In 2016, total trade in services amounted to EUR 8.6 billion, a 14%
decrease from 2015 levels.
FDI EU28 with Egypt (million EUR)
Inward
2014
2015
835
184
74
265
2016
476
64
Outward
2014
2015
49 474
42 049
1 526
-2 584
2016
42 758
1 346
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
As regards
FDI,
the EU remains the biggest investor in Egypt but EU foreign investment in
Egypt remains highly volatile, with divestments exceeding investments by EUR 1.6 billion in
2015. In 2016, EU foreign investment in Egypt improved, amounting to EUR 1.3 billion, for a
remaining total stock of EUR 42.7 billion.
Overall, Egypt underperforms as regards its business climate, only ranking 128
nd
out of 190 in
the World Bank ranking Doing Business 2018 with a distance to frontier (DTF)
77
score of
56.2 out of 100 - an increase of 0.1 in DTF score compared to 2017. FDI remains to be
concentrated in the oil&gas sector, with renewable energy on the rise (wind and solar). To
improve this situation, on 1 June 2017, a new Investment Law entered into effect in Egypt. In
November 2017, the Egyptian Government also launched an online "Investment Map", a
dedicated website that displays the details of investment opportunities across the country.
76
77
Full statistics available here
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122000.pdf
The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory
performance in economies over time.
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3.
I
SSUES ADDRESSED IN THE
J
OINT
C
OMMITTEE MEETINGS
The latest
Sub-Committee on Industry, Trade, Services, and Investment
met in November
2017 in Brussels. Bilateral
issues discussed included Egypt’s delay in the dismantling of
tariffs for passenger vehicles under the schedule in the Association Agreement, and the draft
tax incentive scheme targeting the automotive industry. Egypt was also invited to ratify the
Protocol on the Dispute Settlement Mechanism. Discussions also covered various trade
irritants
see in more detail section 5. Other issues covered included the progress on a
potential Agreement on Conformity Assessment and Acceptance (ACAA), the need for time
to adapt Egyptian SPS legislation to EU requirements, and the continued possibility of a
DCFTA in the long-term.
During the last
Sub-Committee on Agricultural and Fisheries products
(November 2017),
several issues were discussed, among them the agri-food trade developments with the recent
increase of Egyptian agri-food exports to the EU market, the recent developments in the
agricultural policies of both EU and Egypt, possible future cooperation on organic farming
and GIs, and a review of the impact of the EU technical assistance provided to Egypt in the
sector of agriculture and rural development.
The last
Sub-Committee on Customs Cooperation
was held in Brussels in November 2017.
The EU side and Egypt agreed to reinforce their cooperation through organisation of a TAIEX
workshop on rules of origin, and a workshop dedicated to tackle fraud (value, customs, forged
documents).
4.
S
PECIFIC AREAS OF IMPORTANCE
Since 2015, the Egyptian economic slowdown and currency
crisis have had serious
consequences on trade.
Faced with growing trade deficits and a shortage of foreign
exchange, the Egyptian government implemented a series of administrative measures aimed at
restricting imports in 2015 and 2016. In November 2016 the Egyptian authorities liberalized
the exchange rate and adopted an economic reform programme supported by a three-year
USD 12 billion IMF loan programme - the Extended Fund Facility (EFF). Although
challenging in the short term, bold economic measures were taken to address fiscal and
external unbalance: flotation of the currency, energy subsidy reform, VAT introduction, wage
restraint.
Overall, the
economy is showing signs of stabilization,
with a GDP growth (4.1% in 2017)
accelerating, inflation and unemployment on a declining path, fiscal consolidation on track,
and international currency reserves at the highest level since 2011. Fiscal efforts still need to
be further pursued but have contributed to the reduction of the primary and the current
account deficits, recently benefitting from increased tourism and gas sector revenues and a
reduction of energy imports. Going forward, the government’s reform agenda is focused on
public finance management, financial sector, energy sector, business climate, competition,
social protection and encouraging female participation in the labour force. While the principal
objective of the reforms is macroeconomic stability, a longer term objective is to foster more
participation of the private sector in the economy by creating a more business friendly
environment. However, while the
Egyptian government
seems to be committed to reforming
legislation directly related to investments, it
does not focus to a sufficient extent on trade
facilitation measures;
on the contrary, it has been observed to direct its efforts at reducing its
trade deficit in goods by adopting measures aimed at making imports more difficult. Although
the reforms have brought foreign reserves back to comfortable levels, the policy of import
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substitution is still prevalent. In addition, the business environment is hindered by excessive
bureaucracy, and lack of transparency and predictability of regulations affecting economic
operators.
In the light of the revised
European Neighbourhood Policy, Partnership Priorities
78
were
jointly agreed between the EU and Egypt and adopted at the Ministerial Association Council
on 25 July 2017. These priorities will further guide future relations, for three years with an
annual review, and will also set the priorities for European Union support under the European
Neighbourhood Instrument (ENI). Trade-related assistance in Egypt has been conducted
mainly under the EUR 20 million Trade and Domestic Market Enhancement Programme
(TDMEP)
79
, structured around two components i) foreign trade and trade agreements and ii)
industrial policy and quality infrastructure. The
programme has delivered significant
results,
such as the creation of a policy unit within the trade ministry and the adoption of a
trade and industrial development strategies. The TDMEP has also assisted Egypt on the
establishment of a
proper regulatory environment,
including National Quality Policy,
market surveillance strategy, horizontal and sector legislation, and supporting the alignment
of quality infrastructure bodies.
These improvements will be essential in order for the country to pursue an ACAA of
industrial products with the EU.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
EU-Egypt trade is currently being affected by
two significant technical barriers to trade
(TBTs):
a
registration scheme
and
pre-shipment inspections
imposed on entities importing
certain goods to Egypt. These measures apply to 25 categories of manufactured goods since
the beginning of 2016. The measures have been discussed in the WTO Technical Barriers to
Trade (TBT) Committee and in the WTO Council for Trade in Goods (CTG) several times,
and Commissioner Malmström has written to the Egyptian Minister of Trade raising concerns.
The Commission also raised this issue twice at meetings in 2017, insisting on more
transparency, rapidity, and streamlining of the administrative process, in order to facilitate
registration from a practical point of view.
At the end of 2017
Egypt
stated that it
would not apply the staged reduction in tariffs on
certain motor vehicles
under the terms of its obligations under the FTA. The EU has
formally notified Egypt that this unilateral decision goes against the provisions of the
Association Agreement, which require prior consultation of the Association Committee. The
EU has asked Egypt to cancel its decision and indicated it will be put on the agenda of the
next Association Committee where Egypt is expected to substantiate the difficulties in the
automotive sector that would justify
in Egypt’s view such exceptional measures.
Other trade irritants that remain include the following: arbitrary customs valuations by the
Egyptian authorities, problems with acceptance of origin declarations by importers, restrictive
labelling requirements, mainly affecting the textile and ceramic tiles sectors, a prohibition on
the import of certain motorcycles, a ‘reference list’ of countries authorised to export milk
formula that includes some -but not all- EU MS, and SPS issues, mainly affecting wheat and
78
79
See
http://www.consilium.europa.eu/media/23942/eu-egypt.pdf
This programme will end in 2020.
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beef/live cattle importers. The EU is also closely following the drafting of a future tax
incentives scheme targeting the automobile sector. The draft text of the legislation has yet to
be disclosed by the Egyptian government, but several aspects of the future scheme may be at
odds with Egypt’s commitments under the WTO and the Association Agreement, notably in
terms of discrimination against imports and trade-related investment measures.
Egypt yet has to ratify the protocol establishing a Dispute Settlement Mechanism signed in
November 2010.
6.
C
ONCLUSIONS AND OUTLOOK
Two-way trade has grown significantly since the entry into force of the FTA, although a
mixture of political and economic factors have impeded Egyptian exporters from fully
benefitting from the opportunities it created. The EU is therefore engaged in several trade-
related assistance projects with Egypt in order to create the conditions in which the FTA can
deliver.
Discussion on implementation focusses on the abovementioned trade irritants. The EU and
Egypt are engaged in an
active dialogue
to address these, both at the political and technical
level.
Facilitating trade has been made one of the priorities under the
Partnership Priorities
adopted by the EU and Egypt in 2017
80
, which should cover issues such as reduction of
trade barriers as well as technical assistance on SPS issues and ACAA-related fields.
Negotiating a DCFTA remains a medium-long term objective to be followed when Egypt will
be ready for it.
80
See:
http://www.consilium.europa.eu/media/23942/eu-egypt.pdf
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-ISRAEL ASSOCIATION AGREEMENT
81
1.
I
NTRODUCTION
The EU and Israel have an Association Agreement (AA), creating a Free Trade Area,
hereinafter called ‘the Agreement’, provisionally applied since 1996, which fully entered into
force on 1 June 2000. The Association Agreement liberalised two-way trade in industrial
goods. The liberalisation process was asymmetrical with the EU eliminating tariffs from the
first day of the agreement, while Israel enjoyed a 12 year transition period which ended in
2013. The Association Agreement included selected arrangements on agri-food trade. The EU
and Israel however subsequently upgraded the Free Trade Area with further liberalisation of
agricultural, processed agricultural and fish products, in force since 2010. Israel is a member
of the Regional Convention on Pan-Euro-Mediterranean preferential rules of origin (PEM
Convention) which it signed in 2013 and notified the EU of its ratification and entry into force
in 2014. The main objective of the Convention is to provide a more unified framework for
origin protocols.
The EU and Israel also have an
Agreement on Conformity Assessment and Agreement
(ACAA) on pharmaceuticals
82
, in force since January 2013, which facilitates trade on both
sides, as it recognises each partners certification of conformity of pharmaceutical products,
without the need for re-testing at import.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
In 2017, the EU was Israel’s first trading partner, representing 36% of Israeli trade. Israel is
the
EU’s 26
th
largest trading partner and the 3
rd
largest one in the Euro-Mediterranean region
after Algeria and Morocco. The EU was the largest exporter into Israel holding a 41% market
share, ahead of the US (12%) and China (9%). The EU was Israel’s largest
export market in
2017 receiving 30% of Israeli exports, with the USA slightly behind with 29%.
It should be noted that the value of EU exports to Israel has increased more than in the other
direction. The EU’s annual trade surplus with Israel has therefore
increased over the same
period. The annual trade balance in the EU’s favour was EUR
4.8 billion in 2002 compared to
EUR 6.7 billion in 2017.
81
82
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/israel/
See
https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32013D0001
126
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Since the Association Agreement came into force, the value of imports and exports between
the EU and Israel has increased in both directions. In 2002, the first year in which data is
available, the value of trade in goods was EUR 23.1 billion and by 2017 it was
EUR 36.1 billion representing an increase of 56.7%.
The value of EU exports to Israel has risen by 54% from EUR 13.9 billion in 2002 to
EUR 21.3 billion in 2017. EU exports between 2016 and 2017 increased (1%), going from
EUR 21.1 billion in 2016 to EUR 21.3 billlion in 2017. With the exception of 2009 (financial
crash), EU exports to Israel have demonstrated fairly consistent growth, reaching an all-time
high of EUR 21.3 billion in 2017. In 2017, the most important groups for export by value
were machinery and transport equipment (43%), and chemicals (13.8%), and other semi
manufactured products (10%). The four largest exporters to Israel from the EU were
Germany, the Netherlands, Italy and Belgium.
The value of EU imports from Israel has risen from EUR 9.1 billion in 2002 to
EUR 14.8 billion in 2017, representing a 62% rise. EU imports between 2016 and 2017
increased (11%), going from EUR 13.2 billion in 2016 to EUR 14.8 billion in 2017. Imports
from Israel have been steady with an overall upward trend, the only year in which imports fell
heavily was 2009 (financial crash). In 2017 the most important groups for import by value
were chemicals (38.4%), machinery and transport equipment (18.5%), and other and other
manufactured goods (10.5%). In 2017, the four largest importers from Israel within the EU
were the Netherlands, Belgium, Germany and the United Kingdom.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Israel increased by 92% between
2003 and 2017, from EUR 1.4 billion in 2003 to EUR 2.7 billion in 2017. EU agricultural
exports increased (5%), going from EUR 1.7 billion in 2016 to EUR 1.8 billion in 2017. EU
imports did not fluctuate much between between 2016 and 2017 and stood at
EUR 0.98 billion in 2017, a slight decrease (-1%) from EUR 0.99 in 2016. In 2017, among
our Euromed partners, Israel was the EU's second most important destination for exports of
agri-food products; in the same year it was the EU's third biggest supplier of agri-food
products. 55% of the EU's agricultural imports from Israel were fruit and vegetables; the EU
mainly exported beverages, spirits & vinegar (13.5%), followed by preparations of cereals,
flour, starch (11.2%) and live animals (8.7%) to Israel.
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Israel has made good use of a part of its access under TRQs. In 2017 Israel used 100% of its
TRQ on new potatoes, sweet peppers, fresh clementines/mandarins/wilkings, glues based on
starches and wine of fresh grapes for all other TRQs, the rate of use was below 40% and in
many of them 0%.
Israel grants 113 TRQs for agricultural products from the EU; the majority of them is duty-
free. For 13 quotas, Israel provided information of the utilisation at the 12th EU-Israel
Subcommittee Meeting on Agriculture and Fisheries on 23 May 2018. Most of these 13
quotas were fully or almost fully utilised, except the quota for dried prunes.
Utilisation of TRQs for EU exports to Israel in 2017
Product
Quota 2017 (tons, Utilisation
2017 Utilisation rate
unless
indicated (tons,
unless
otherwise)
indicated otherwise)
230
3 280
2 140
380
2 300
180
300
120
8 million pieces
6 380
730
1 610
1 150
230
3
235
2 135
317
100%
99%
100%
83%
100%
100%
100%
92%
87.6%
100%
10%
95%
99%
Garlic
Apples
Pears
Quinces
Onion
Honey (< 1.5 kg)
Honey (> 1.5 kg)
Dried grapes
Eggs
Potatoes
Dried prunes
Pet food
Dogs and cats' food
Source: Israeli authorities
2.3.
Preference Utilisation rate
2 300
180
299
110
7 008 000 pieces
6 380
71
1 535
1 141
In 2017 Israel’s use of the preferential utilisation rates was 91%. The EU’s preferential
utilisation rate was 89% in 2016 and 86% in 2017.
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2.4.
Trade in Services and Investment
83
In 2016
trade in services
between the EU and Israel was worth EUR 11.3 billion. In the last 6
years, there has been an overall increase in the value of services imported from Israel from
EUR 3.2 billion in 2010 to EUR 4.8 billion in 2016. In the same period there has been an
increase in EU export of service to Israel from EUR 3.8 billion in 2010 to EUR 6.6 billion in
2016.
FDI EU28 with Israel (million EUR)
Inward
2014
2015
40 883 40 345
7 096
2 191
2016
62 101
11 651
Outward
2014
2015
14 389
17 318
1 862
769
2016
24 673
1 225
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
On
FDI flows
there is no consistent image either on volume or on partner country. Figures
show fluctuations every year and no trend can be identified. Despite the lack of consistency, it
can be seen that FDI flows between the US and Israel clearly exceed those between the EU
and Israel. However, EU FDI in both stocks and flows both in and out of Israel have grown
continuously since 2001. The EU accounts for a substantial 40% of all outgoing Israeli
investments, followed by the US with 20%. For incoming investments into Israel, the share of
the EU is 20% which is similar to that of the US.
84
According to The World Bank Doing Business Index 2018 which ranks 190 countries, Israel,
an OECD member, was ranked 54
th
in the world with a distance to frontrier (DTF)
85
score of
71.4 out of 100
an increase of 0.05 in DTF score compared to 2017.
3.
I
SSUES
ADDRESSED IN THE
MEETING
A
NNUAL
(J
OINT
C
OMMITTEE
/T
RADE
C
OMMITTEE
)
Two recent meetings of the
EU-Israeli Sub-committees on Industry, Trade and Services
were held in December 2016 and 24 May 2018. A range of bilateral issues were discussed
including the state of EU-Israeli trade under the Association Agreement and the experience of
the ACAA on Pharmaceuticals already concluded. Regarding trade barriers, the recent
removal of a distinction
between ‘new’ and ‘old’ Member States (pre and post-2004)
for
import of pharmaceuticals into Israel was welcomed. The EU stressed the need to resolve a
similar distinction still existent for medical devices. A number of IPR issues were also raised,
including related to the protection of biological medicines. Both parties provided an update on
their ongoing bilateral and multilateral trade negotiations.
The
EU-Israeli Sub-Committee on Agriculture and Fisheries
also met in December 2016.
A range of issues were discussed, including the current trade in agricultural products between
the two partners and related issues, such as SPS regulations in both directions. On agricultural
issues, Israel provided an update on changes to its agricultural policy and the EU stressed the
importance of GIs. Parties also discussed the ongoing process of reviewing the EU regulation
83
84
85
See statistics
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111672.pdf
Both Eurostat and IMF data was used for investment figures.
The DTF score is a measurement used by the World Bank to assess the absolute score of regulatory
performance in economies over time.
129
kom (2018) 0728 - Ingen titel
on organic farming. Israel sought reassurance that there would be no gaps between the EU’s
new regulation on organic farming and the current bilateral relationship
the EU reassured
Israel that the five year transition period from 2020 would allow for any necessary
adjustments in bilateral exchanges. Israel also expressed its request to extend the current
arrangement to aquaculture products to which the EU clarified that any modification of
current arrangements would have to be done through a bilateral agreement. On fisheries, there
was discussion on sustainable Mediterranean fisheries and the EU provided an update on its
Maritime Spatial Planning. Israel signalled its intention to request EU technical support in
several areas, such as the sustainable use of pesticides and flood risk prevention, while Israel
also offered technical support to the EU on tackling lumpy skin disease. The next Sub-
committee on Agriculture and Fisheries will meet on 23 May 2018.
The latest
EU-Israel Customs Cooperation and Taxation Subcommittee
took place in
November 2017. Parties informed each other of the development of their customs legislations,
on the enforcement by customs of IPR, on the implementation of the Protocol on mutual
assistance between administrative authorities in customs matters and on the Pan euro-
Mediterranean (PEM) Convention on Rules of Origin.
4.
S
PECIFIC AREAS OF IMPORTANCE
The Israeli economy stayed on its path of steady growth, low fiscal deficit, low
unemployment and solid external position. The Shekel has been on an appreciation trend
against all major currencies since 2015, with an impact of the price competitiveness of Israel's
exports. The discovery of natural gas fields in Israel's exclusive economic zone and the future
export plans might bring related risks but also opportunitites to the economy.
The EU and Israel continue to work together on the
implementation of the ACAA on
pharmaceuticals.
This is important because it allows seamless trade without the need for re-
testing products that have been alredy certified by the exporting side. Following this success,
Israel is considering additional areas
on which to focus. To this end, the Israeli authorities
have made an increasing number of requests for technical assistance from the EU in the form
of TAIEX workshops and Twining programmes
the only type of capacity building
assistance the EU provides to Israel being a developed country. In a wide range of areas
(including environment, energy, statistics and agriculture) EU regulatory practice (norms,
standards and procedures) is shared with the Israeli authorities to help specific policy
formulation and implementation. For trade, it is particularly important to continue to provide
support for ongoing market reforms, in particular those that relate to the opening of the Israeli
domestic market
such as in the areas of agricultural policy, accreditation, import
authorization procedures, conformity assessments and standard setting etc.
as this could also
improve market access conditions for EU operators.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
No significant roll back of commitments in the Association Agreement has been recorded;
however there are a
number of persistent trade irritants.
These include the discriminatory
treatment of Member States, who joined since 2004 and of Luxembourg, with particular
reference to restrictions on import authorization of medical devices. Other technical barriers
to trade include the lack of data protection (IPR) on biological medicines, the rigid regime of
kosher certification of slaughtered meat as well as restrictions to the import of live animals. A
number of technical meetings are taking place to look into these issues.
130
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In the context of the wish expressed by the Israeli government to fight the high cost of living
and enhance competitiveness on the market, the
EU is supporting Israel’s ongoing market
reforms
by sharing its best practices on issues such as standards, import procedures,
conformity assessments, agricultural support policy, etc. In particular, in 2017 the EU has
been closely following the development of Israel’s regulatory policies of nutritional labelling
and on cosmetics, advocating for rules that are aligned with international and, possibly, EU
standards. An important result was achieved when, following EU requests in that sense,
Israeli authorities decided on a transitional period of two years for the full implementation of
the new rules on nutrional labelling.
6.
C
ONCLUSIONS AND OUTLOOK
Overall the value of trade
between the EU and Israel
has increased
during the period of
implementation of the Association Agreement and this is true in both directions. Goods
continue to account for the majority of trade, although services and foreign investment are
also noteworthy. Trade fell in both directions in 2009 due to the financial crisis; it should be
noted, however, that it has since recovered and exceeded pre-crash levels in both directions,
and has remained strong despite wider regional instability.
There have been
some recent successes in resolving trade irritants
(e.g. for
pharmaceuticals), which is a path that the EU aims to continue on to further strengthen trade
relations; the deepening of such relations is also facilitated by a continuous dialogue in many
areas, such as in the regulatory field, where Israel considers the EU as an international
reference. The EU and Israel
continue to cooperate in bilateral and multilateral trade
talks.
Discussions between the EU and Israel on a
Dispute Settlement Agreement
under the
Association Agreement are still
to be finalised.
Israel has expressed some limited interest in
using the Agreement’s review clause on services.
The
EU will continue to support Israel’s ongoing market reforms
and will continue in
2018 working with Israel on nutritional labelling, cosmetics and in other areas, advocating for
rules that are aligned with international and, possibly, EU standards.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-JORDAN ASSOCIATION AGREEMENT
86
1.
I
NTRODUCTION
The Association Agreement (AA) creating a Free Trade Area between the EU and Jordan
(hereinafter referred to as ‘the Agreement’) was signed on 24 November 1997 and entered
into force on 1 May 2002. It liberalised two-way trade in goods, with asymmetrical transition
periods in favour of Jordan, which allowed Jordan to phase in tariff reductions over a 12 year
period. Tariff dismantling has been completed. The EU and Jordan upgraded the Agreement
in 2006 concluding an additional agreement on trade in agricultural and processed agricultural
products. Today all Jordanian agricultural products can enter the EU duty free with the
exception of virgin olive oil and cut flowers, which are under TRQs, while agricultural
liberalisation on the Jordanian side is substantial, but not complete. A protocol establishing a
bilateral Dispute Settlement Mechanism was added to the Agreement in 2011.
Jordan is a member of the Regional Convention on pan-Euro-Mediterranean preferential rules
of origin (PEM Convention) which it signed in 2011 and notified the EU of its ratification in
2013.
The Convention’s main objective is to
provide a more unified framework for origin
protocols.
In 2011 the EU Council adopted negotiating directives to further enhance the trade
relationship through a
DCFTA
(DCFTA) with Jordan, but negotiations have not yet started.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
In 2017 the EU was Jordan’s largest trade partner, representing 17% of its total trade. The EU
was the largest importer into Jordan with a 22% market share. It was however only Jordan’s
7
th
largest export market behind the US, India and regional players including Saudi Arabia,
Iraq and the UAE. The value of trade between the EU and Jordan has increased in both
86
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/jordan/
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directions since the Association Agreement came into force. Since 2002, the first year for
which data is available and also the year the Agreement came into force, there has been an
overall growth in trade in goods in both directions. In 2002 the value of trade in goods was
EUR 2.4 billion and in 2017 it was EUR 4.5 billion - a growth of 87.5%.
The value of EU exports in goods to Jordan has increased more than in the other direction.
Jordan’s trade deficit with the EU has grown over the period 2002-2017.
This is broadly
consistent with Jordan’s overall trade pattern. As the largest supplier to
Jordan, the EU is also
the trading partner with which it has its largest trade deficit
EUR 3.7 billion (35%) of its
EUR 10.3 billion total deficit.
The value of EU exports to Jordan has risen by 100% from EUR 2 billion in 2002 to
EUR 4.1 billion in 2017. Exports to Jordan have risen year-on-year with the exception of
2009 (financial crisis) and 2014; which may be a reflection of regional political and economic
instability. In 2017 the value of exports reached an all-time-high of EUR 4.1 billion, an
increase (1.5%) from 2016 which stood at EUR 4.0 billion. The most important exports
sectors were machinery and transport equipment (33.2%), agricultural and products (18.5%)
and chemicals (13.3%). In 2017 the four largest exporters to Jordan from the EU28 were
Germany, Italy, the Netherlands and Spain.
The value of EU imports from Jordan has risen from EUR 314 million in 2002 to
EUR 358 million in 2017
an increase of EUR 44 million or 14%. Within the lifespan of the
agreement however the value of imports has fluctuated. In 2015 imports reached an all-time
high of EUR 386 million, but have since declined. Between 2016 and 2017, EU imports
increased (5%) from EUR 339 million in 2016 to EUR 358 million in 2017. In 2017 the most
important import sectors, were chemicals (37.5%), clothing (13.4%), machinery and transport
equipment (13.1%), and agricultural products (12.6%). In 2017 the four largest importers of
products from Jordan among the EU were Belgium, the United Kingdom, the Netherlands and
Italy.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Jordan increased by 310% between
2003 and 2017, from EUR 0.1 billion in 2003 to EUR 0.8 billion in 2017. Between 2016 and
2017, EU agricultural exports decreased (-6%) going from EUR 0.8 billion in 2016 to
EUR 0.7 billion in 2017. EU imports increased (12%) between 2016 and 2017, with imports
going from EUR 41 million in 2016 to EUR 45 million in 2017. In 2017, the EU mainly
exported wheat (15%), live animals (9%) and infant food and other cereals, flour, starch or
milk preparations (7%) to Jordan. The EU's key agricultural imports from Jordan were
vegetables (27%), cigars and cigarettes (20%) and preparations of vegetables, fruits and nuts
(11%).
Regarding agricultural TRQs, Jordan’s
2017 fill rate of the two TRQs on virgin olive oil and
fresh cut flowers and buds was practically 0%.
2.3.
Preference Utilisation rate
In 2017 Jordan’s use of the preferential utilisation rates was 75%. Data on the EU’s use of
preferential utilisation rates in not available for Jordan.
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2.4.
Trade in Services and Investment
87
In 2016
trade in services
between the EU and Jordan was worth EUR 1.3 billion. There has
been an overall decline in the value of services imported from Jordan from EUR 0.6 billion in
2010 to EUR 0.5 billion in 2016; no doubt explained by the protracted instability in the
region. In the same period there has been an increase in EU export of services to Jordan from
EUR 0.6 billion in 2010 to EUR 0.9
billion in 2015. Jordan’s exports
of services are
dominated by services in the travel sector, while Jordan’s imports of services are dominated
by the transport sector.
FDI EU28 with Jordan (million EUR)
Inward
2014
2015
Stocks
495
457
Flows
20
-23
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2016
0
-408
2014
2 977
335
Outward
2015
2 882
221
2016
3 039
133
In 2016, the total of
FDI
(FDI) stocks were EUR 3.03 billion (EUR 3.0 billion EU FDI in
Jordan and EUR 0.03 million Jordanian FDI in the EU). According to the World Bank 2018
"Ease of Doing Business" index which ranks 190 countries, Jordan ranked 103
rd
in the world
for overall ease of doing business, with a distance to frontier (DTF)
88
score of 60.6 out of 100
an increase of 2.38 in DTF score compared to 2017.
3.
I
SSUES
ADDRESSED IN THE
MEETING
S
A
NNUAL
(J
OINT
C
OMMITTEE
/T
RADE
C
OMMITTEE
)
The most recent
EU-Jordan Sub-Committee on Industry, Trade and Services
met in
December 2017 in Amman. Much of the Sub-Committee discussion focused on the
implementation of the Agreement on the relaxation of Rules of Origin applicable under the
EU-Jordan Association Agreement. The EU and Jordan had an exchange of views on the
overall investment climate in Jordan. On-going trade related assistance and capacity building
was also discussed.
The
Agriculture and Fisheries Sub-Committee
last met in December 2017 in Amman
(back-to-back with the Sub-Committee on Industry, Trade and Services) and discussed: latest
developments of agricultural policies, as well as a state-of-play with regard to GIs (GIs) and
organic farming in Jordan. The EU and Jordan also discussed technical assistance and
capacity building for Jordan in agriculture field.
The latest
EU-Jordan Customs co-operation sub-committee
met in December 2017 in
Amman. Issues discussed included the modernisation process of customs administration and
simplification of customs legislation and procedures, including computerisation. The EU
presented the state-of-play and latest developments with regard to the modernisation of the
PEM Convention. Other points of discussion referred to strengthening the EU-Jordan
administrative cooperation on customs matters, including to combatting irregularities and
customs fraud.
87
88
For more information see
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111671.pdf
The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory
performance in economies over time.
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4.
S
PECIFIC AREAS OF IMPORTANCE
The
protracted Syrian crisis
has had serious consequences for the Jordanian economy and
its trade. The closure of traditional trade routes has resulted in significant losses and
downscaling of production for the export market. The presence of over 650,000 Syrian
refugees in Jordan
89
has compounded existing economic grievances. In the absence of
sufficient reform to the regulatory environment, attracting foreign investments to offset the
negative trend has proven difficult. Jordan agreed in 2016 to three-year program with the IMF
of long-delayed structural reforms. Additionally, Jordan continues to benefit from Macro-
Financial Assistance (MFA) from the EU and it's currently implementing a second MFA
operation aimed at strengthening the country's foreign exchange reserve position and meeting
its balance of payments and budgetary financing needs. In order to address the problems
caused by the Syrian crisis, the EU is also providing Jordan with a package of support of
which the trade angle is a
simplification of the rules of origin applicable to Jordanian
exports to the EU and trade support programs.
This initiative was agreed in July 2016 and
will apply until the end of 2026. Under the initiative,
Jordanian exporters to the EU can
now benefit from the same rules of origin for manufactured products as those applied by
the EU for Least Developed Countries,
provided that certain conditions are met. These rules
are simpler than those that would otherwise apply under the Association Agreement. This
simplification applies to 52 product groups. To qualify to use the simpler rules, production
must take place in one of 18 designated industrial zones and Syrian refugees must also
account
for no less than 15% of a manufacturer’s workforce in the first 2 years of the scheme
and 25% from the third year, once the scheme enters into force.
Regarding the
Rules of Origin initiative
there is interest on both sides to further incentivise
economic operators to use the scheme. Until today eleven companies registered in the scheme
and four of them exported their products into the EU for a total value of EUR 2.3 million. In
its first report on the Implementation of the Rules of Origin scheme Jordan made a number of
requests for further modification of criteria required by the scheme. After an analysis of the
requests, the Commission considered it justified and intends to address certain requests in
2018, in order to further improve the effects of the initiative on Jordanian economy and
contribute to increasing a number of Syrian refugees legally employed in Jordan in decent
jobs.
A renewed
effort towards enhancing regulatory coherence
forms part of the
Partnership
Priorities
adopted in December 2016
90
, which also cover actions to enhance Jordan’s social
and economic resilience. The EU seeks to work with Jordan to promote a stronger, more
competitive economy whereby an enhanced trade and investment climate will encourage and
enable Jordanian enterprises to take better advantage of preferential access to the EU market
and act as a powerful incentive for job creation. Cooperation also covers the area of skills
development and related educational reform, to promote the productive contribution of young
people in the economy.
Jordan is also working on
approximating its standards to EU standards.
The Jordan Food
and Drug Administration was active in early 2017 on undertaking steps for alignment to EU
technical regulations and SPS standards. Two expert missions were conducted to determine
89
90
According to UNHCR data, see
http://data2.unhcr.org/en/situations/syria/location/36
See
http://www.consilium.europa.eu/en/press/press-releases/2016/12/20/eu-jordan-partnership-priorities-and-
compact/
135
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the needs and potential technical assistance. Trade-related assistance projects to improve the
trade and investment climate also include a EUR 55 million Private Sector Development
programme comprising a budget support component, technical assistance to the Government
and company-level assistance for the private sector. There is a further project to support
entrepreneurship in the north of Jordan, the region most strongly affected by the influx of
refugees. It aims to stimulate innovation and increase the competitiveness of Jordanian
exports and to supporting of the Rules of Origin initiative.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
There are no significant open issues or follow-up actions relating directly to the current
agreement. There is, however, a continuing difference of views concerning
Jordan’s
commitments on the import conditions for alcoholic drinks,
arising from the interaction
between the initial Association Agreement and the subsequent updated Agreement that
brought additional liberalisation of trade in agricultural, processed agricultural and fisheries
products.
Furthermore, there are a number of
structural issues
on the side of Jordan, which prevent the
country from taking full advantage of the FTA, such as a lack of clear trade and development
policies and administrative weaknesses. We also note a lack of interest from the private
sector, which still prefers to satisfy neighbouring markets to the EU as the latter remains a
highly competitive and demanding market with high regulsatory requirements. In addition,
production costs in Jordan are high due to water shortages, high electricity prices and
transportation costs, which reduce the competitiveness of goods made in Jordan.
6.
C
ONCLUSIONS AND OUTLOOK
Overall the
value of trade between the EU and Jordan has increased
since the Association
Agreement came into force. This is true in both directions. Goods continue to account for the
majority of trade, although services and foreign investment are also present. EU exports to
Jordan have grown faster than Jordanian exports to the EU, so the Jordanian trade deficit with
the EU has increased in the same period, no doubt exacerbated by regional developments.
The Syria crisis has closed many traditional trade routes for Jordan. The Decision on
relaxation of Rules of Origin, adopted in July 2016, was designed to boost Jordanian exports
into the EU and to support formal integration of Syrian refugees into the Jordanian economy.
Further actions are planned to raise awareness of this initiative and to promote the business
opportunities it provides. Based on additional requests made by Jordan in December 2017, the
EU has agreed to a further relaxation of certain criteria applicable throughout the Rules of
Origin scheme.
DCFTA negotiations have not yet started, however, the
importance of the DCFTA to
improve the resilience of the Jordanian economy was formally recognised
in the
Partnership Priorities
91
. In the last Sub-Committee on Industry, Trade and Services, Jordan
indicated that they preferred to deal with further liberalisation of agriculture, processed
agriculture, fisheries and processed fisheries products under the DCFTA.
91
See http://data.consilium.europa.eu/doc/document/ST-12384-2016-ADD-1/en/pdf
136
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-LEBANON ASSOCIATION AGREEMENT
92
1.
I
NTRODUCTION
The EU and Lebanon have an Association Agreement, creating a Free Trade Area, which was
provisionally applied on 1 March 2003 and fully entered into force on 1 April 2006
(hereinafter referred to as ‘the Agreement’). The Agreement liberalised two-way
trade in
industrial goods with an asymmetrical transition period of 12 years in favour of Lebanon. The
phased liberalisation of industrial products by Lebanon started in 2008 and was completed in
2015. From the first day of provisional application, it also granted tariff-free access to the EU
for most Lebanese agricultural and processed agricultural products (89% enter tariff and quota
free) with only 27 agricultural products facing a specific tariff treatment, mostly TRQs
(TRQs). On the other hand, agricultural liberalisation by Lebanon has been more limited. In
2010 the EU and Lebanon signed an additional protocol on a Dispute Settlement Mechanism,
which has not yet entered into force, pending the notification of the ratification by the
Lebanese Parliament.
Lebanon has signed the Regional Convention on Pan-Euro-Mediterranean preferential rules of
origin (PEM Convention) in 2014; it notified its ratification in October 2017 and formally
joined on 1 December 2017
93
.
The Convention’s main objective is to
provide a more unified
framework for origin protocols.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Since
2012 the EU has ranked as Lebanon’s first trading partner. In 2017
the EU represented
36% of Lebanese trade. The value of EU exports to Lebanon has increased more than in the
other direction. This has roughly doubled Lebanon’s annual trade deficit with the EU over the
same period. The annual trade balance in the EU’s favour
was EUR 3.0 billion in 2002
compared to EUR 6.8 billion in 2017. At the same time, the EU has become a less important
export destination in relative terms with its share of Lebanese exports falling in the last couple
of years. The increasing importance of regional export markets such as Saudi Arabia or the
UAE highlights the need for removing regional barriers and encouraging regional trade.
92
93
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/lebanon/
For more information see
https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-
origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-
convention_en
137
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Since the Association Agreement was provisionally applied, the value of imports and exports
between the EU and Lebanon has increased in both directions. In 2002, the year before the
Association Agreement was provisionally applied, the value of trade in goods was
EUR 3.4 billion and by 2017 it was EUR 7.7 billion (an increase of 126%).
The value of EU exports to Lebanon has risen by by 128% from EUR 3.2 billion in 2002 to
EUR 7.3 billion in 2017, an all-time high. Since then they have held steady with slight year-
on-year fluctuations. Between 2016 and 2017, EU exports increased (9%) rising from
EUR 6.6 billion in 2016 to EUR 7.2 billion in 2017. The most important groups for export by
value were fuel and mining products (32%), machinery and transport equipment (15.9%),
agricultural and food products (14.5%), and chemicals (12.3%). The four largest exporters to
Lebanon from the EU28 were Italy, Greece, Germany and France.
The value of EU imports from Lebanon has risen from less than EUR 0.2 billion in 2002 to
EUR more than 0.4 billion in 2017. The value of imports rose year-on-year up to 2009
(financial crisis), then recovered to exceed pre-crash levels before falling again from 2012 to
2014, in part explained by the simultaneous decrease in the price of gold. Between 2016 and
2017, EU imports increased (10%) going from EUR 413 million in 2016 to EUR 454 million
in 2017. The most important groups for import by value were base metals (31.8%),
agricultural and food products (21.8%), and semi-manufactured products (16.5%). In 2016,
the three largest importers from Lebanon within the EU were the Netherlands, Germany and
France.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Lebanon increased by 129% between
2003 and 2017, from EUR 0.5 billion in 2003 to EUR 1.1 billion in 2017. Between 2016 and
2017, EU agricultural exports increased slightly (2%) going from EUR 1.02 billion in 2016 to
EUR 1.04 billion in 2017. EU imports increased (4%) between 2016 and 2017, with imports
going from EUR 99 million in 2016 to EUR 103 million in 2017. In 2017, the EU mainly
exported live animals (16%), cheese (8%), spirits and liqueurs (7%) and milk powder & whey
(7%) to Lebanon. The EU's key agricultural imports from Lebanon were preparations of
vegetables, fruits and nuts (23%), offal, animals fats & other meats (14%) and raw tobacco
(11%).
138
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Regarding agricultural TRQs, the fill rate by Lebanon was low in 2017. It used 4% of the
olive oil quota and 8% of its table grape quota, but less than one per cent of other quotas.
2.3.
Preference Utilisation rate
In 2017 Lebanon’s PUR was 70%. In 2015 the EU’s preferential utilisation rate was 74%, the
same figure as in 2014.
2.4.
Trade in Services and FDI
94
In 2016
trade in services
between the EU and Lebanon was worth EUR 2.2 billion. In the last
5 years, there has been an overall increase in trade in services in both directions but with a
fluctuating trend. The import of services from Lebanon has risen from EUR 0.9 billion in
2010 to EUR 1.1 billion in 2014 and then shrunken to EUR 0.9 billion in 2016, while the EU
export of services has risen from EUR 1.2 billion in 2010 to EUR 1.9 billion in 2014 and then
back to EUR 1.4
billion in 2016. The annual trade balance on services in the EU’s favour has
increased from EUR 0.3 billion in 2010 to EUR 0.5 billion in 2016.
According to the Ministry of Economy and Trade, in 2016 the services sector represented
around 69% of Lebanese GDP and employed more than 76% of the total labour force. The
most prominent service sectors included trade (retailing and wholesale), construction, tourism,
telecommunications and financial services.
FDI EU28 with Lebanon (million EUR)
Inward
2014
2015
3 776
5 156
262
1 285
2016
5 515
332
Outward
2014
2015
1 399
1 712
129
86
2016
1 928
128
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
In 2016, EU
FDI
stocks in Lebanon amounted to EUR 1.9 billion with outward FDI stocks
from Lebanon to EU accounting for EUR 5.5 billion in 2016. In 2016, EU FDI flows
accounted for EUR 128 million.
According to The World Bank Doing Business Index 2018 which ranks 190 countries,
Lebanon ranked 133
rd
in the world on the ease of doing business, with a distance to frontier
(DTF)
95
score of 54.67 out of 100
a decrease of 0.1 in DTF score compared to 2017.
3.
I
SSUES ADDRESSED IN THE
A
NNUAL
J
OINT
C
OMMITTEE MEETINGS
The
EU-Lebanon Sub-Committee on Industry, Trade and Services
met the last time on 7
March 2018. The key issues discussed were the need to further increase Lebanese trade
integration with the EU and international community including through the possible
implementation of a the revised PEM rules, Lebanese accession to the Agadir Agreement
96
and the WTO membership bid
which the EU supports. Parties also discussed the EU support
94
95
96
For more information see
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111614.pdf
The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory
performance in economies over time.
The Agadir Agreement for establishing a Mediterranean Free Trade Area was signed on 25 February 2004
and entered into force in 2007. Agadir member countries include Morocco, Tunisia, Egypt and Jordan.
139
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to the strengthening of Lebanese capacity in key sectors that were identified in the Joint
Working Group on Trade and Investment
97
of July 2017: pharmaceuticals products, agri-food
and statistics. The EU also noted the obligation not to impose trade related measures without
consultation and required information on a series of measures that could have an impact on
EU exports, notably additional duties on imports of wine and spirits and the exemption of oil
from customs duties that has been suspended. Agricultural topics were also discussed: there
were exchange views on latest developments in Lebanese and EU agricultural and rural
development policies, the state of play regarding the review of the Lebanese draft law on GIs,
organic farming and the technical assistance for increasing competitiveness of the agricultural
and agro-food sectors.
The
Joint Working Group on Trade and Investment,
which reports to the Subcommittee
on Trade, meets at a technical level at least three times a year
98
.
The Sub-Committee
took place in the framework of an ‘Economic Cluster’ which included,
back-to-back: the
Macro-Economic dialogue and the Subcommittee on other economic-
related areas.
The latter discussed on areas of mutual economic interest such as the EU
External Investment Plan (EIP), Lebanon’s economic fragility brought about by slow growth,
rising public debt and vulnerability to the reforms planned within the framework of the
presentation of Lebanon’s Capital Investment Programme (and its monitoring mechanism),
EU-Lebanon cooperation to fulfil climate change commitments and its impact on economic
growth and job creation, waste management, energy and other issues. The CEDRE
99
conference was held on 6 April 2018 in Paris where international donors met to support
Lebanese developments and reforms and the conference on Supporting the future of Syria and
the region took place in Brussels on 24 and 25 April 2018.
4.
S
PECIFIC AREAS OF IMPORTANCE
The protracted
Syrian crisis
has had serious consequences for Lebanon. The conflict has
exacerbated the security, political and economic issues facing the country. It has resulted in a
decline in tourism, (private) investments and economic activities. This has culminated in
economic growth falling sharply from the 7%-9% growth rates experienced between 2008 and
2010 to 1.5% and less in the last years; the lowest growth performance since the 2006
conflict. The
unstable political environment
(with the Presidential election of 2016) and
budgetary constraints (exacerbated by the high debt levels, currently at 144% of GDP) have
made it difficult for the country to address
issues such as poverty, unemployment and ‘brain
drain’. Furthermore, Lebanon is characterised by regional socio-economic
disparities with
almost 30% of the population living under the poverty line and 8% under the extreme poverty
line. The numbers of Syrian refugees has significantly increased in 2013-2014. Refugees
currently constitute about one third of the population and, while spread throughout the whole
country, the highest concentrations are in Northern Lebanon and in the Beqaa. Lebanon is
seeking further support from the EU in order to boost the Lebanese economy and cope with
the spill-over effects of the Syrian Crisis.
97
98
99
For more information see
https://eeas.europa.eu/headquarters/headquarters-Homepage/26716/european-
union-and-lebanon-set-joint-working-group-trade-and-investment_en
In 2017 it met in March, July and October.
Conférence économique pour le développement, par les réformes et avec les entreprises
140
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1960849_0142.png
Following the commitments undertaken by the EU and Lebanon in the Partnership Priorities
and Compact to address the factors hindering trade towards the EU, a Joint Working Group
(JWG) on Trade and Investment was set up with the aim to address the factors hindering trade
with the EU and to
help Lebanon to upgrade its local production standards
(see in more
detail section 3 above). In particular, the three meetings of the working group that have been
held so far (the last one in October 2017) focused on sanitary and phyto-sanitary standards
(SPS) and pharmaceutical issues, in view of upgrading quality standards and good
manufacturing practices (GMPs) of the sector. Lebanon will also receive assistance under the
TAIEX program
100
. In addition, there are a number of trade related assistance projects to
improve the trade and investment climate.
For example,
the EU is currently financing a
EUR 15 million programme on improving value chains in agriculture and wood processing,
with the aim to improve quality of Lebanese products and boost the competitiveness of the
targeted sectors.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The EU and Lebanon are committed to increase the dialogue on trade, with a view to
identifying pragmatic solutions to help Lebanon to take advantage of trade opportunities
provided by the Association Agreement. The
Joint Working Group on Trade and
Investment,
which reports to the Subcommittee on Trade has an important role in shaping
future assistance and advocates for strategic trade reforms (horizontal reforms and sector
reforms, business climate, quality standards etc.). Specific issues addressed cover, but are not
limited to: facilitating exports of agri-food and industrial goods to the EU, improving
competitiveness and productivity of the agri-food sector as well as services, statistics, SPS,
SMEs, business and investment climate. At the JWG of July 2017 the EU and Lebanon agreed
to set up an
Action Plan
with defined milestones for establishing a Lebanese food safety
system that complies with basic principles and international standards.
Lebanon is still in the process of applying to the WTO. The EU will continue to support and
encourage Lebanon towards WTO membership and membership of the Agadir Agreement.
6.
C
ONCLUSIONS AND OUTLOOK
Overall the
value of trade between the EU and Lebanon has increased
since the
Association Agreement came into force. This is true in both directions. Goods continue to
account for the majority of trade, although services and foreign investment are also
noteworthy. Despite the overall increase in the value of trade, the increase in pace of exports
has been noteworthy and hence the overall trade balance has favoured the EU.
Services are the main driver of Lebanon’s economy. Enhancing the competitiveness of the
Lebanese service sector could lead to economic growth in selected sectors of strategic
importance for the country. There is therefore
untapped potential on services
whose growth
could have positive spill-over effects into other areas of the economy. At the same time, there
are a number of ongoing issues which restrict trade and investment in Lebanon and prevent
her taking full advantage of the FTA. In this regard, there will be further work on helping
Lebanon reach the EU standards, for example on SPS and Pharmaceutical products. The
private sector, in particular SMEs, forms the cornerstone of the Lebanese economy and is the
100
More information can be found here:
https://ec.europa.eu/neighbourhood-enlargement/tenders/taiex_en
141
kom (2018) 0728 - Ingen titel
main source of job creation in Lebanon. Despite its dynamism and high resilience, businesses
suffer from an inadequate business environment, weak infrastructure (an example being the
unreliable provision of energy, whose system is in need of a reform) and a lack of structural
reforms. In those areas as well, the EU is ready to support Lebanon.
Lebanon also remains constrained by the
spill-over of the Syrian conflict:
apart from the
high number of Syrian migrants in the country, the crisis has closed traditional trade routes for
both Lebanese imports and exports. The EU and Lebanon continue to consider further
collaboration to ease the strain of the refugee crisis.
142
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-MOROCCO ASSOCIATION AGREEMENT
101
1.
I
NTRODUCTION
The EU and Morocco established a Free Trade Area as part of the EU-Morocco Association
Agreement, signed in 1996, which entered into force on 1 March 2000. The Agreement
provides for a reciprocal liberalisation of trade in goods, with elements of asymmetry in
favour of Morocco: since the day of entry into force of the Agreement, all industrial products
covered by the Agreement could be exported by Morocco to the EU tariff-free, while
Morocco benefited from a transitional period of 12 years. The transitional period for Morocco
to reduce its tariffs on industrial products to zero ended in March 2012. The EU and Morocco
also signed an agreement on additional liberalisation of trade in agricultural and fisheries
products, which came into force in 2012. Trade for industrial products is now entirely
liberalised, while market opening for agricultural products is also substantial with only a few
products subject to TRQs on each side. Negotiations for a DCFTA started in 2013.
A protocol establishing a Dispute Settlement Mechanism was agreed upon by the EU and
Morocco, and came into force in 2012. Morocco also signed the Regional Convention on pan-
Euro-Mediterranean preferential rules of origin on 18 April 2012. The ratification process is
still pending. The main objective of the Convention is to provide a more unified framework
for origin protocols.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
In 2017, the EU was Morocco’s first partner for trade in goods, accounting for almost 60% of
Morocco’s total trade. Other trading
partners fell far behind the EU, such as China (6%), the
United States (6%), and Turkey (4%). Morocco is the EU’s 22
nd
largest trading partner and
the first trading partner in the Euro-Mediterranean region.
Trade in goods between the EU and Morocco
has increased significantly over the period
since the Free Trade Area entered into force:
trade flows have consistently grown since the
entry into force of the agreement and more than doubled over the past 16 years, from
EUR 14.3 billion in 2002 to EUR 37.5 billion in 2017 (162%). Between 2016 and 2017, total
trade increased by 8%, from EUR 34.7 billion in 2016 to EUR 37.5 billion in 2017.
101
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/morocco/
143
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EU exports rose by 186% between 2002 and 2017, from EUR 7.8 billion to EUR 22.4 billion.
Between 2016 and 2017, EU exports increased (7%) from EUR 20.9 billion in 2016 to
EUR 22.4 billion in 2017. In 2017, EU exports to Morocco were mainly made of machinery
and transport equipment (37.7%), fuels and mineral products (13.7%) and textiles (8.1%). The
three biggest EU exporters to Morocco were: Germany, France and Spain.
EU imports increased by 133% between 2002 and 2017. Between 2016 and 2017, EU imports
increased (9%) from EUR 13.7 billion in 2016 to EUR 15.0 billion in 2017. This tendency is
particularly reflected for industrial products and manufactured goods (+121%), with
important progress also being made in terms of EU imports of Moroccan agricultural products
(+150% between 2002 and 2017). In 2017, EU imports were made of machinery and transport
equipment (40.4%), agricultural products (23.0%), and textiles (19.3%). The three biggest EU
importers were: Spain, France and Italy.
The agreement has proven mutually beneficial. While the first years of implementation of the
EU-Morocco Free Trade Area led to an increasing trade surplus for the EU, this trend has now
stabilised.
2.2.
Trade in agricultural goods
Morocco is the largest exporter of vegetables to the EU. Total trade in agricultural products
between the EU and Morocco increased by 187% between 2003 and 2017, from
EUR 1.3 billion in 2003 to EUR 3.7 billion in 2017.
In 2017, Morocco was the EU’s biggest
supplier of agricultural products among our Euromed partners.
EU agricultural exports decreased by 10% between 2016 and 2017, going from
EUR 1.7 billion in 2016 to EUR 1.5 billion in 2017. Over the same period, EU imports
increased by 15% between 2016 and 2017, going from EUR 1.9 billion in 2016 to
EUR 2.2 billion in 2017.
Regarding the 6 agricultural TRQs granted by the EU under the Association Agreement,
Morocco’s 2017
fill rate was high for a limited number of products such as tomatoes (100%)
and courgettes (72%), intermediate for other products such as clementines (52%), cucumbers
(40%) or strawberries (25%). The utilisation of quota for garlic remained very low (1%),
whilst the quota on chemically pure fructose remained unused by Morocco.
144
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2.3.
Preference Utilisation rate
Morocco had an average utilisation rate of preferences of 97% in 2017 for all goods,
agricultural and non-agricultural products. No data was available to calculate the PURs for
EU exports to Morocco.
2.4.
Trade in Services and FDI
102
Total
trade in services
between the EU and Morocco increased between 2010 and 2016, from
EUR 7.5 billion in 2010 to EUR 8.8
billion in 2016. The EU is Morocco’s first partner
for
trade in services and investment. Moroccan exports of services to the EU have progressed by
15% between 2010 and 2016 and EU exports of services to Morocco have increased by 19%
over the same period. In 2016, the EU exported EUR 3.6 billion in services to Morocco and
Morocco exported EUR 5.9 billion in services to the EU.
FDI EU28 with Morocco (million EUR)
Inward
2014
2015
Stocks
955
966
Flows
203
46
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2016
574
-303
2014
14 153
-3 457
Outward
2015
15 014
791
2016
15 721
639
EU-Morocco FDI
flows remained relatively steady between 2013 and 2016, despite some
volatility, resulting in the total EU FDI stock of EUR 15.7 billion in Morocco at the end of
2016. More than 50% of FDI in Morocco comes from the EU, thanks to strong cooperation
efforts between EU Member States and the Moroccan Government, quality of local facilities
and infrastructure, and above all attractive conditions made available for investors, especially
in the automotive, aeronautics and the electronics sectors.
With the aim of improving its
attractiveness for investors, in 2017 Morocco merged three bodies which were dealing with
investments (Agence
Marocaine de Dévelopement des Investissements
AMDI,
the
Centre Marocain
de Promotion des Exportations
CPME and the
Office des Foires et Expositions de Casablanca
OFEC) into a single institution: the
Agence Marocaine de Développement des Investissements
th
AMDI).
Morocco currently ranks 69 out of 190 in the World
Bank ranking ‘Doing Business
2018’ with a distance to frontier (DTF)
103
score of 67.9 out of 100
a decrease of 0.03 in
DTF score compared to 2017. These positive developments efficiently mitigated more
contrasted results in traditional sectors (textiles, clothing, and tourism).
3.
I
SSUES ADDRESSED IN THE
J
OINT
C
OMMITTEE MEETINGS
The last Sub-Committee on Industry, Trade, and Services was held in December 2013 and
both the last Sub-Committee on Agricultural and Fisheries Products and the last Sub-
Committee on Customs Cooperation took place in 2015. Committees did not meet since then.
102
103
For more information see
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111609.pdf
The DTF score is a measurement used by the World Bank to assess the absolute score of regulatory
performance in economies over time.
145
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4.
S
PECIFIC AREAS OF IMPORTANCE
After a relative slowdown in 2016, Morocco’s economic indicators are rather positive for
2017, driven by growing exports and a strong agricultural season
104
and moderate
improvements in non-agricultural activities, including private consumption as main growth
driver on the demand side. The economic expansion in 2017 was also supported by the
continuation of sound macroeconomic policies, while external vulnerabilities abated driven by
strong export growth. According to IMF data, the Moroccan economy grew by 4.2% in
2017
105
, notably thanks to the recovery of Morocco’s main trade partners, including the EU.
Morocco also benefited from the good economic performance of new industrial sectors
(automobile, aeronautics, and electronics). Such sectors have enjoyed a fast-paced
development in recent years, driven by the investment-friendly industrial policy adopted by
the Moroccan government, which resulted in the country considerably improving its business
climate.
The
EU is providing support to Morocco
through several programmes. The programme
‘Réussir le statut avancé’
(RSA I and II)
106
supports Morocco’s efforts in terms of legislative
convergence with the EU
acquis,
in particular in areas which will be targeted by the future
DCFTA and ACAA (e.g. electrical appliances, toys, machinery, construction products, etc.).
In November 2016, the EU and Morocco launched a cooperation programme on sustainable
growth, in cooperation with several other actors (e.g. European Investment Bank, European
Bank for Reconstruction and Development EBRD). The programme will provide important
financial support, distributed according to three objectives: (1) enhancing the competitiveness
of Moroccan companies in accordance with the industrial strategy set forth by Moroccan
authorities for 2014-2020, (2) strengthening Moroccan export capacities to ensure a better
access to the European market, and (3) fostering the transition towards a low-carbon economy
by supporting the implementation of the Moroccan strategy for sustainable development. The
ultimate goal is
to prepare Morocco’s economy for the future DCFTA.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
In recent years, Moroccan authorities have adopted some
more restrictive trade measures.
The new Foreign Trade Law dedicates 12 articles out of 34 to the protection of national
production. Public procurement procedures have been modified so as to increase the
percentage of local component required to apply for tender (notably as regards renewable
energies). Since July 2016, EU companies and Moroccan importers reported an increasing
number of administrative procedures limiting effective market access in Morocco, notably in
the sector of car parts. The EU is currently addressing this issue through informal bilateral
dialogue with Moroccan authorities, waiting for regular bilateral trade-related work to resume.
On 10 December 2015, the General Court issued a ruling that annulled the Council Decision
2012/497/EU of 8 March 2012 on the conclusion of an Agreement in the form of an Exchange
of Letters between the European Union and the Kingdom of Morocco concerning reciprocal
liberalisation measures on agricultural products, processed agricultural products, fish and
104
For more information see
http://www.worldbank.org/en/country/morocco/publication/economic-outlook-
april-2017
105
For more information see
http://www.imf.org/en/Countries/MAR
106
See
http://europa.eu/rapid/press-release_MEMO-13-1029_en.htm
146
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fishery products. The subsequent appeal ruling by the European Court of Justice (ECJ)
107
established that the
EU-Morocco Association Agreement
and its protocols on additional
liberalisation of trade in agricultural and fisheries products are not applicable to Western
Sahara. HR/VP Mogherini and Moroccan Foreign Minister Nasser Bourita in their joint
statement took note and expressed their willingness to negotiate the necessary instruments in
relation to the fisheries partnership.
These ruling have affected the work of the Trade Sub-Committee and other bodies established
under the Agreement, which have not met in the past two years; and it has also slowed down
the ratification of the Agreement for the Protection of GIs, which is still pending. Following
the ruling Morocco has also put on hold the negotiations for a DCFTA, launched on 1 March
2013,
following Morocco’s request for a pause aimed at enabling Moroccan authorities to
carry out impact assessment studies as well as further internal consultations with stake holders
before a future round. The results of these studies have not yet been made public by Morocco.
More recently, in February 2018, in another case
108
the Court ruled that the EU-Morocco
Fisheries Agreement and its Protocol on fishing opportunities and financial contributions
109
do
not apply to the waters off the coast of the territory of Western Sahara.
To remedy the situation, following the mandate of the Council of the EU and in accordance
with the rulings of the European Court of Justice, the EU pro-actively engaged in negotiations
with Morocco in order to amend the relevant protocols of the EU-Morocco Association
Agreement to create the legal basis for granting the tariff preferences laid down in the
Association Agreement to products originating in Western Sahara.
6.
C
ONCLUSIONS AND OUTLOOK
The overall impact of the Free Trade Area on EU-Morocco trade has been
positive,
bringing
both economies closer and rapidly intensifying exchanges in goods. As a result, the EU is the
leading trade partner of Morocco today, accounting for over 50% of total Moroccan trade.
It will be
important to resume negotiations for a DCFTA
as soon as possible. The DCFTA
holds promise as it would both expand the existing free trade area into new areas as well as
deepening it in a number of areas that are already included but in a relatively superficial way.
Negotiations are meant to cover areas such as access to public procurement, disciplines on
non-tariff measures, harmonization of standards and regulations towards the EU acquis, SPS
measures, intellectual property rights, consumer protection, competition, investment, trade in
services and sustainable development.
The protocols between the EU and Morocco, allowing both parties to pursue bilateral
relations in the fisheries sector, started in 1986 with the signature of a first agreement and
continued, after interruption, during the conclusion of a second agreement in 2015. The last
107
108
109
Judgment of 21 December 2016 in Case C-104/16 P Council v Polisario
Judgment of 27 February 2018 in Case C-266/16 The Queen, on the application of Western Sahara
Campaign UK vs. Commissioners for Her Majesty's Revenue and Customs and Secretary of State for
Environment, Food and Rural Affairs.
Protocol between the European Union and the Kingdom of Morocco setting out the fishing opportunities and
financial contribution provided for in the Fisheries Partnership Agreement between the European Union and
the Kingdom of Morocco.
147
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Protocol concerns the access of up to 126 EU vessels to Morocco’s fishing
zone operating in
six different fishing categories and targeting pelagic and demersal species. It expired in July
2018. The revised negotiating directives for both the Fisheries agreement and its protocol
were approved on 16th April 2018. Negotiations of a revised Fisheries agreement and the
renewal of its Protocol started right afterwards and were concluded in late July 2018.
Approval by the Council of the EU and the European Parliament is pending.
148
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-PALESTINE INTERIM ASSOCIATION AGREEMENT
110
1.
I
NTRODUCTION
The
Interim Association Agreement
creating a Free Trade Area between the EU and
Palestine
111
(hereinafter called ‘the Interim Agreement’) was signed in 1997 and entered into
force on 1 July 1997. The Interim Agreement liberalised two-way trade in industrial goods by
providing duty-free and quota-free access for industrial goods traded in both directions, with .
some limited liberalisation of agricultural products by both parties. This was an asymmetrical
liberalisation to the extent that the EU dismantled its tariffs on the first day of the agreement
while Palestine had a phased reduction of tariffs. The Agreement was first updated in 2005
before a more significant update was signed in 2011 to further liberalise trade in agricultural,
processed agricultural products (PAPs), fish and fishery products. The EU removed all tariffs
and quotas on agricultural products and PAPs imported into the Community for a period of
ten years, which is renewable. Palestine continues to maintain a number of tariffs and quotas
on selected agricultural and PAPs products.
Products from Israeli settlements in Palestinian territory do not benefit from the preferential
tariff agreement under the EU-Palestine or EU-Israel Association Agreement.
Palestine is a member of the Regional Convention on pan-Euro-Mediterranean preferential
rules of origin (PEM Convention)
112
, which it signed in 2013 and notified the EU of its
ratification in 2014. The main objective of the Convention is to provide a more unified
framework for origin protocols.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
In 2017 the EU was Palestine’s second largest trade partner
behind Israel, representing 11%
of its total trade. The EU was the second largest exporter into Palestine behind Israel with a
12% market share. It was Palestine’s fourth largest export market behind Israel, Jordan and
UAE, representing 2% of Palestine’s
exports.
The value of trade between the EU and Palestine has increased since the Association
Agreement came into force. Since 2002, the first year for which data is available, there has
been an overall growth in trade in goods in both directions. In 2002 the value of trade in
goods was EUR 41 million and in 2017 it was EUR 278 million.
It should be noted that the value of EU exports to Palestine has increased more than in the
other direction. This has deepened Palestine’s trade deficit with the EU over
the same period.
Palestinian exports remained largely at that same level despite full preferential market access
110
111
112
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/palestine/
This designation shall not be construed as recognition of a State of Palestine and is without prejudice to the
individual positions of EU Member States on this issue
More information can be found at
:
https://ec.europa.eu/taxation_customs/business/calculation-customs-
duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-
pem-convention_en
149
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to the EU market. This is largely due to obstacles facing Palestinian trade, as well as
competitivity issues and the Palestinian difficulty in meeting EU standards, including SPS and
technical standards.
The value of EU exports to Palestine has risen from EUR 33 million in 2002 to
EUR 262 million in 2017 (an increase of almost 700%). Between 2002 and 2009 EU exports
to Palestine showed year on year variations but have grown steadily year on year since 2010.
EU exports increased (3%) between 2016 and 2017, rising from EUR 254 million in 2016 to
EUR 262 million in 2017. The main export markets are machinery and transport equipment
(52.6%), agricultural products (22.9%) and chemicals (10.5%). In 2017 the three largest
exporters to Palestine from the EU were Germany, Italy and Spain.
The value of EU imports from Palestine has risen from less than EUR 8 million in 2002 to
almost EUR 16 million in 2017, which represents an increase of 105%.. Within the lifespan of
the agreement however the value of imports has fluctuated. In 2009 it reached an all-time low
of EUR 6 million before demonstrating remarkable recovery in 2010 to reach an all-time high
of EUR 35 million. It has since fallen and fluctuated year on year. Between 2016 and 2017,
EU imports decreased (-12%) from EUR 18 million in 2016 to EUR 16 million in 2017. In
2017 the most important import sectors were agricultural products (82.3%) and chemicals
(12.3%). In 2016 the three largest importers of products from Palestine among the EU were
the United Kingdom, France and the Netherlands.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Palestine increased by 812% between
2003 and 2017, from EUR 8 million in 2003 to EUR 73 million in 2017. EU exports remained
the same between 2016 and 2017, accounting for EUR 60 million. EU imports decreased (-
8%) between 2016 and 2017, falling from EUR 14 million in 2016 to EUR 13 million in
2017.
In 2017, agricultural products represented the majority of EU imports from Palestine,
accounting for EUR 13 million (82.3%) of the EU's total imports from Palestine. Palestine
exports a limited number of agricultural products including: tropical fruit, nuts and spices,
bulbs, roots, live plants, vegetables and olive oil. Overall the level of Palestinian agricultural
exports has grown since the Agricultural Agreement of 2012, rising from EUR 9 million in
2011 to its current value. The biggest increase has been in olive oil which has risen from
EUR 1 million to EUR 4 million in the same period, with a peak of EUR 5 million in 2015.
150
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Export levels of vegetables, bulbs, roots and live plants have remained relatively static over
the same period and even fell slightly in the last year. The EU exported mainly preparations of
cereals, flour & starch, followed by cocoa & cocoa preparations and dairy produce to
Palestine.
2.3.
Preference Utilisation rate
In 2017 Palestine’s PUR was 77%. The EU’s preferential utilisation rate for the same year is
not available.
2.4.
Trade in Services and FDI
113
In 2016
trade in services
between the EU and Palestine was worth EUR 170 million which
represents a 62% increase on EUR 92 million in 2010. There have been year-on-year
fluctuations in the value of services imported from Palestine which declined slightly overall
between 2011 and 2015. In 2016, EU imports from Palestine reached a high of
EUR 95 million.With the exception of 2012, there has been a year-on-year increase in
services exported to Palestine which in 2016 stood at EUR 75 million.
FDI EU28 with Occupied Palestinian Territory (million EUR)
Inward
2014
2015
5
13
0
3
2016
15
1
Outward
2014
2015
16
17
0
0
2016
23
1
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
In 2016, EU
FDI
stocks in Palestine amounted to EUR 23 million, an increase from
EUR 15 million in 2013. In 2016, EU FDI flows accounted for EUR 1 million.
According to the World Bank 2018 "Ease of Doing Business" index which ranks 190
countries, Palestine ranked 114
th
in the World for overall ease of doing business, up from the
144
th
position in 2017. The distance to frontier (DTF)
114
score is 58.7 out of 100
an increase
of 3.8 in DTF score compared to 2017. This improvement is also due to the 2017 regarding
the Secured Transaction Law, the Registry of Interest in Movable Assets and the E-
Transaction Law which were enacted in 2017.
3.
I
SSUES
ADDRESSED IN THE
MEETING
A
NNUAL
(J
OINT
C
OMMITTEE
/T
RADE
C
OMMITTEE
)
The two most recent meetings of the
EU-Palestinian Sub-committee on Trade and Internal
Market, Industry, Agriculture and Fisheries, and Customs
took place in May 2017 and in
September 2018. On trade, it was recognised that the Association Agreement had not reached
its full potential due to external issues. On wider trade matters, the EU reiterated its support
for Palestine to have observer status at the WTO
and inquired about concrete steps for
Palestine’s accession to the Agadir Agreement
115
and to materialise this in practice. A
113
114
115
For more information see
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113074.pdf
The DTF score is a measurement used by the World Bank to assess the absolute score of regulatory
performance in economies over time.
The Agadir Agreement for establishing a Mediterranean Free Trade Area was signed on 25 February 2004
and entered into force in 2007. Agadir member countries include Morocco, Tunisia, Egypt and Jordan.
151
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possible negotiation in view of an Agreement on Conformity Assessment and Acceptance
(ACAA) was also discussed where Palestine is focused on construction material and
pharmaceuticals. Agriculture and SPS issues were also raised, with the EU encouraging
Palestine to diversify exports. Customs issues were discussed with Palestine providing
updates on customs procedures and ongoing reforms.
4.
S
PECIFIC AREAS OF IMPORTANCE
The expansion of Palestinian trade is largely influenced by its relationship with Israel. Several
reports have identified a number of key trade barriers including Israeli control over
Palestinian trade routes, internal restrictions on the movement of people and goods by
physical barriers (such as checkpoints) and the cost of bureaucratic process
including
transaction costs imposed at Israeli checkpoints. Such restrictions contribute to the increased
dependency of the Palestinian economy on Israel which in 2015 accounted for 55% of
Palestinian imports and absorbed 86% of Palestinian exports. The reactivation of the Joint
Economy Committee in charge of follow-up of the Paris Protocol that has not met since 2009
would be an important step in achieving progress.
In order to assess the usefulness and feasibility of Agreements on Conformity Assessment and
Acceptance of Industrial Products (ACAAs)
116
with Palestine, further analysis is needed in the
sectors of interest (pharmaceuticals and construction): a gap analysis in those two sectors
would help to establish whether an ACAA is desirable and if further support to improve the
quality of infrastructure will be needed.
Trade-related support to Palestine includes the EU-funded
project on ‘EU Support to the
Ministry of National Economy for trade policy formulation and WTO accession 2015-2017’.
The project supported Palestinian WTO accession Agenda with the provision of technical
assistance to align policies, legislation and trade agreements with WTO requirements.
Furthermore, the EU financed the National Export Strategy, formulated by the Palestinian
Authority and Paltrade, which identified 12 potential export growth sectors. An action plan
was rolled out mapping the specific activities needed for its implementation. The EU also co-
funds, together with certain EU Member States, projects supporting the implementation of the
National Export Strategy and local entrepeneurship. The EU supported the implementation of
the Asycuda customs management information system, in cooperation with UNCTAD, and
reinforced Palestinian readiness for border management with a project running from 2007 and
2011 and a Twinning between an EU Member States’ Customs and the Palestinian Customs
on valuation and revenue collection is under preparation and should start in 2018.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
There are preliminary discussions between the EU and Palestine to upgrade the interim
Association Agreement to a full Association Agreement.
116
An ACAA is an ambitious instrument, which facilitates access to the market for industrial products covered
allowing them to enter the EU without further testing or certification and move freely in the 27 Member
States and vice versa. As part of the preparations for negotiating such an agreement, the partner countries
need to overhaul their quality systems for industrial products. This includes a gradual approximation of
technical regulations, standards and procedures for conformity assessment in the priority sectors and the
upgrading of infrastructure for standardisation, accreditation, conformity assessment, metrology and market
surveillance.
152
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The ongoing situation with Israel remains a key factor in EU-Palestinian trade. The
Union for
Mediterranean Trade Ministerial
in 2010 adopted a package of measures to facilitate trade
of Palestinian products with other Euro-Mediterranean partners on a bilateral and regional
basis and was followed by an informal Trade Trilateral Working Group (European
Commission, Israel and Palestine). It is planned to continue this work to facilitate trade of
Palestinian products.
In March 2018 at the Union for the Mediterranean (UfM) Trade Ministerial Conference, the
EU presented a Technical Program Report on the implementation of the 2010 Package of
Measures. Ministers called for rapid and substantial progress in the implementation of the
2010 Package of measures to facilitate trade of Palestinian products with other Euro-
Mediterranean partners. Ministers thanked the European Union for preparing a Technical
Progress Report
117
and noted that the EU shall prepare updates of this report working for
concrete actions taken to facilitate Palestinian trade, including a report to be presented at the
2019 Ministerial Conference.
6.
C
ONCLUSIONS AND OUTLOOK
Overall the value of trade between the EU and Palestine has increased during the Association
Agreement. Trade flows are however uneven. The trade balance continues to increase in
favour of the EU as the value of Palestinian exports to the EU remains negligible. The
continuation of the trade restrictions applied by Israel remains a key issue in EU-Palestinian
trade relations and continues to be addressed in the trade discussions with both parties. The
EU continues to promote the usefulness of trilateral discussions on trade to facilitate progress
and will continue to engage with both sides to remove the obstacles to Palestinian trade.
117
For more information see http://trade.ec.europa.eu/doclib/docs/2018/june/tradoc_156946.pdf
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE EU-TUNISIA ASSOCIATION AGREEMENT
118
1.
I
NTRODUCTION
The EU and Tunisia established a Free Trade Area as part of the EU-Tunisia Association
Agreement, signed on 17 July 1995 and entered into force on 1 March 1998. The Free Trade
Area provided for a reciprocal liberalisation of trade in goods, with elements of asymmetry in
favour of Tunisia: since the day of entry into force of the Agreement, all industrial products
covered by the Agreement could be exported by Tunisia to the EU tariff-free, while Tunisia
benefited from a transitional period of 12 years. Tunisia started implementing the agreement
in 1996, i.e. 2 years before its official entry into force, and all tariffs and non-tariff measures
mentioned in the Association Agreement were entirely dismantled by 2008: so the EU-
Tunisia free trade area was even fully implemented two years ahead of schedule. Trade of
industrial products is entirely liberalised, while market opening of agricultural products has
been more limited. As regards fisheries products, the EU has opened its market (with only one
product subject to TRQs) while the Tunisian market remains closed. The EU and Tunisia
signed a protocol establishing a Dispute Settlement Mechanism, which came into force in
2011.
The Regional Convention on Pan-Euro-Mediterranean preferential rules of origin was signed
by Tunisia on 16 January 2013 and notified on 1 January 2015. The Convention seeks to
provide a more unified framework for origin protocols.
Negotiations for a DCFTA have started in 2015.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU is Tunisia’s main trading partner and Tunisia is the 34
th
trade partner for the EU
4
th
in the Euromed region. In 2016, the EU accounted for 73.7% of Tunisian total exports of
118
For more information see
http://ec.europa.eu/trade/policy/countries-and-regions/countries/tunisia/
154
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goods, and 53.1% of its total imports
119
. In 2017 the EU accounted for 64% of Tunisia’s total
trade. The EU was the 1
st
importer into Tunisia with a 54.3% market share and was also
Tunisia’s largest export market with a 78.5% market share.
Trade in goods between the EU and Tunisia has increased significantly over the period since
the Agreement entered into force: between 2002 and 2017, the total trade in goods increased
by 47%, from EUR 13.9 billion in 2002 to EUR 20.5 billion in 2017.
EU exports rose by 45% between 2002 and 2017. Between 2016 and 2017, EU exports
increased (5%), with exports reaching EUR 11.1 billion in 2017 compared to
EUR 10.5 billion in 2016. In 2017, EU exported machinery and transport equipment (35.1%),
textiles and clothing (12.3%), and fuels and mining products (11.6%). The three biggest EU
exporters were: France, Italy, and Germany.
EU imports rose by 52% between 2002 and 2017. EU imports increased (1%) slightly
between 2016 and 2017, with imports reaching EUR 9.4 billion in 2017 compared to
EUR 9.3 billion in 2016. A closer look at EU-Tunisia
trade trends shows that Tunisia’s
exports of non-fuel industrial products (machinery, transport equipment, textiles and clothing)
increased steadily over the period, while the export of agricultural products has remained at a
comparatively low level even if it more than tripled since 2002 . In 2017, EU imports were
made of machinery and transport equipment (41.3%), textiles and clothing (23.7%), and
agricultural products (6.1%). The three biggest EU importers were: France, Italy, and
Germany.
Overall, the agreement has proven mutually beneficial. Tunisia’s trade deficit (of EUR) with
the EU is relatively small when compared to the one Tunisia has with China, Russia or
Turkey
two countries which
make up for a far smaller share of Tunisia’s total trade.
Following a dip in 2008 due to the financial crisis, trade flows between the EU and Tunisia
appear to have reached a plateau since 2011. Negatively impacted by growing economic
difficulties faced by Tunisia, the total trade even decreased by 1.3% between 2014 and 2015
and by 2.3% between 2015 and 2016, mainly driven by decreasing EU exports due to the
economic crisis while Tunisian export to the EU remained stable. Ongoing negotiations for
the DCFTA therefore aim at making room for further progress in trade between the EU and
Tunisia, including further liberalising agricultural and fishery trade, two areas only covered in
a limited way by the current Agreement.
2.2.
Trade in agricultural goods
Total trade in agricultural products between the EU and Tunsia increased by 97% between
2003 and 2017, from EUR 0.5 billion in 2003 to EUR 1.0 billion in 2017. EU agricultural
exports decreased (-12%), going from EUR 0.6 billion in 2016 to EUR 0.5 billion in 2017.
EU imports also decreased (-6%) from EUR 489 million in 2016 to EUR 458 million in 2017.
Regarding agricultural TRQs, imports of olive oil from Tunisia almost filled the quota set out
in the bilateral agreement, reaching as much as 98.75% of the 56 700 tons availalable
(however, the additional quota of 35 000 tons unilaterally granted by the EU for 2016 and
2017 upon Tunisia’s request was not utilised in 2017, due to a low production during the
2016/2017 campaign). The utilisation rate was intermediate for other products such as sweet
oranges (41%,) but remained low for prepared tomatoes (6%), wine (6%), or cut flowers
(0.2%).
119
Institut National de Statistiques Tunisien, 2017.
155
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2.3.
Preference Utilisation rate
Tunisia had an average utilisation rate of preferences for all goods, agricultural and non-
agricultural products, of 94% in 2017. Data to calculate the PUR on EU exports was not
available.
2.4.
Trade in Services and Investment
120
The total
trade in services
between the EU and Tunisia decreased between 2010 and 2016,
from EUR 5.9 billion in 2010 to EUR 4.7 billion in 2016, mainly owing to the weak
performance of the tourism sector, mostly due to security issues. Both Tunisia and the EU
suffered from this decrease, with Tunisian exports of services to the EU falling by 23%
between 2010 and 2016 and EU exports of services to Tunisia falling by 17% over the same
period. In 2016, the EU exported EUR 1.4 billion in services to Tunisia compared to
EUR 1.3 billion in 2015 and Tunisia exported EUR 3.3 billion in services to the EU compared
to EUR 3.2 billion in 2015.
FDI EU28 with Tunisia (million EUR)
Inward
2014
2015
248
252
-25
-32
2016
253
-30
Outward
2014
2015
4 305
4 299
764
693
2016
4 380
747
Stocks
Flows
Source: Trade G2 Statistics/ISDB from Eurostat BOP statistics
FDI
flows remained relatively steady between 2013 and 2016, despite a slowdown of EU
foreign investment in Tunisia, resulting in the total EU FDI stock of EUR 4.9 billion in
Tunisia at the end of 2016. The EU remains the first foreign investor in Tunisia, accounting
for over 85% of FDIs entering the country. In 2015, 3 100 EU companies were present in
Tunisia, employing around 327 000 persons.
121
The
business environment
was affected by the instability prevailing after the 2011 Arab
Spring Revolution, even though Tunisia enacted a new Investment Law in 2017, which also
led to the establishment of a Tunisian Investment Authority in 2018. Tunisia remained ranked
at 88
th
out of 190 in the Doing Business 2018 ranking, with a distance to frontier (DTF)
122
score of 63.6 out of 100
a decrease of 0.2 in DTF score compared to 2017.
3.
I
SSUES ADDRESSED IN THE
J
OINT
C
OMMITTEE MEETINGS
The
Sub-Committee on Agricultural and Fisheries Products
met in December 2017.
Tunisia and the EU exchanged trade statistics on bilateral trade in agricultural and fishery
products and updated each other on their agricultural and fishery policies. Tunisia expressed
the wish for cooperation between the EU and Tunisia on quality policies, notably regarding
organic agriculture and GIs. Both Parties discussed Tunisian requests for a reintegration to the
Generalized System of Preferences, an additional olive oil quota and a possibility to renew a
quota for eels. The EU raised several self-contained SPS issues, notably regarding the exports
of apples, live plants, and poultry products from the EU to Tunisia. Tunisia touched on the
120
121
122
For more information see
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111593.pdf
Tunisian Foreign Investment Promotion Agency, 2017
The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory
performance in economies over time.
156
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issue of its fishery products returned by the EU and inquired about a possibility to export
dairy products to the EU. The EU raised concerns about the increase of customs duties on
some agricultural products and import restrictions on red meat and live animals.
The
Sub-Committee on Customs Cooperation and Taxation
met in February 2017. Several
issues were discussed, among which the modernisation of the Tunisian customs
administration, the evolution of the legislation of both parties since the previous meeting,
border management (especially the challenge met by Tunisian customs at the border with
Libya), preferential origin including a state of play of the revision of the pan-euro-
Mediterranean preferential rules of origin and the reform of the taxation rules. In general, both
Parties agreed on the need to support Tunisian customs in preparing projects relating to
customs legislation and operational questions as well as modernisation.
The
Sub-Committee on Industry, Trade, and Services
did not meet in 2017.
4.
S
PECIFIC AREAS OF IMPORTANCE
The economic situation of Tunisia is fragile. Multiple shocks, including the fall in EU demand
for Tunisian products because of the economic crisis and the 2011 Revolution and the
political transition that ensued, have resulted in a sharp drop in growth, a deterioration of the
balance of payments, increasing unemployment and poverty, and a growing informal sector.
To ensure this fragility does not compromise the democratic transition unfolding in Tunisia,
the EU provides sizable support to Tunisian authorities, and has stepped up its political and
financial support considerably since 2011. Also following the terrorist attacks in 2015, the EU
under an emergency autonomous trade measure granted additional olive oil quota of
35 000 tons/year for 2016 and 2017, adding to the existing quota of 56 700 tons.
Tunisia benefits from a
‘special relationship’
with the EU, which since 2012 takes the shape
of a ‘Privileged
Partnership’
detailed in an ambitious ENP (European Neighborhood Policy)
Action Plan. Additionally, and in complement to external support from the IMF, Tunisia has
benefitted from a first Macro-Financial Assistance (MFA) operation between 2014 and 2017,
and is currently implementing a second MFA operation aimed at alleviating balance of
payment issues as well as promoting growth-stimulating social and economic reforms. In
2016, the EU reaffirmed its support to Tunisia through a joint communication,
‘Strengthening
EU support for Tunisia’,
123
detailing the areas in which EU support is to be provided,
including a number of trade-related measures as well as the launch of a
‘Partnership
for
growth’ initiative. These include a possible early entry into force of the EU’s trade
concessions on agricultural market access of a future DCFTA on a temporary basis, the
possible advanced implementation of the new the Pan-Euro-Mediterranean (PEM) rules of
origin as well as temporary flexibility for certain products, the setting up of a structured
regulatory dialogue to facilitate and speed up the negotiation of an Agreement on Conformity
Assessment and Acceptance (ACAA) of industrial products that still needs key legislation to
be adopted (i.e. laws on security of industrial and food products). Discussions are ongoing on
several of these issues.
Following a preparatory process ahead of the launch of DCFTA negotiations, which included
an analysis of the Tunisian regulatory framework in the economic field, the Commission
123
http://europa.eu/rapid/press-release_IP-16-3192_en.htm
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concluded that Tunisia has achieved considerable progress in terms of regulatory alignment in
the areas which will be covered by the future DCFTA. Nevertheless, some challenges remain
in terms of implementation of some key and of institutional capacity.
The EU has provided
substantial trade-related assistance
to Tunisia, particularly following
the signature of the EU-Tunisia Association Agreement, through a number of private sector
development projects with the objective to allow Tunisia to take advantage of the agreement
and adapt to the new conditions of competition. In preparation of DCFTA negotiations, the
EU began supporting sectors that are not yet liberalised,
such as services (“Programme
d’Appui à la Compétitivité des Services (PACS)”
124
was launched in 2016 with a budget of
EUR 20 million). The EU also supported Tunisia in upgrading its horizontal quality
infrastructure and prepare for an ACAA in sectors identified as key by Tunisian authorities,
primarily electrical and mechanical industries and construction products. A new project called
“Programme d’appui à la compétitivité et aux exportations (PACE)”
125
to support the
competitiveness of Tunisian exports of industrial and agricultural sectors will be signed in the
second half of 2018.
5.
P
ROGRESS
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
There is no major contentious trade issue between the EU and Tunisia, although some
protectionist tendencies have appeared in recent years. Several open issues include:
technical and administrative difficulties met by EU exporters of pharmaceutical
products and ceramic tiles and glass,
brurdensome customs procedures and technical controls in ports on an extended list of
products
difficulties faced by EU operators to invest in Tunisia.
longstanding SPS issues related to exports of apples as well as (more recent) issues
with live plants, animals and poultry products exported from the EU.
Nevertheless, on some other issues Tunisia has been cooperative while looking for solutions
for EU companies such as with regard to the requiement for exporters to Tunisia to provide an
additionnal document, i.e. export declaration. The operators will be allowed to submit
documents in the original language, without having to translate them into French or Arabic,
and equivalent documents will also be accepted. The EU is pursuing a resolution of these
issues through regular dialogue, in the framework of the Sub-Committee Meetings, and in
view of the negotiations of the DCFTA.
As of spring 2017, the Tunisian authorities were under heightened public pressure to adopt
import restrictive measures as the ones described above in order to stop or slow down the
deterioration of the trade and current account deficit that is associated with increasing
imports, albeit mainly stemming from non EU partners, and to address stagnating exports, and
weak flows of remittances and tourism. The EU is following the issues closely. Tunisia also
raised MFN tariffs on all agricultural products from 0% to 15%, for all products currently
124
125
http://eeas.europa.eu/archives/delegations/tunisia/documents/projets/cp_pacs_26jan2016_fr.pdf
https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/tableau_feuille_de_route_tn-
ue_mars_2018.pdf
158
kom (2018) 0728 - Ingen titel
duty free and it raised tariffs from 15% or in some cases 27% to 36% for all processed
agricultural products and a number of agricultural products.
6.
C
ONCLUSIONS AND OUTLOOK
The overall impact of the Free Trade Area on EU-Tunisia trade has been
positive.
Both
Tunisia and the EU benefitted from the dismantling of bilateral tariffs and non-tariff barriers.
It seems, however, that the EU-Tunisia Association Agreement, the first signed by the EU in
the region, has reached its limits, and needs to be upgraded in order to continue to deliver
positive results. This means both extending the scope and deepening the provisions of the
Free Trade Area in the future DCFTA for which negotiations started in October 2015.
The
DCFTA aims to expand liberalisation in agriculture and fisheries and will also cover
services and investment.
With a view to supporting ongoing economic reforms in Tunisia
and in order to better integrate the country into EU and world markets, it will include a wide
range of trade related regulatory areas of mutual interest, such as trade facilitation, technical
barriers to trade, SPS measures, investment protection, public procurement, competition
policy as well as trade and sustainable development. Negotiations are guided by the principles
of progressivity and asymmetry in favour of Tunisia. One full round of negotiations was held
in April 2016, followed by a technical meeting in February 2017. A joint DCFTA Action Plan
for 2018 has been agreed between the Parties, which foresees to hold two full rounds before
the end of the year, one was held end of May in Tunisia, the other is planned for autumn in
Brussels. Important intersessional work is to take place inbetween the rounds.
159
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FIRST GENERATION FREE TRADE AGREEMENTS WITH THE
WESTERN BALKAN PARTNERS
‘Stabilisation and Association Agreements’ (SAAs) concluded between
2001 and 2016 with
our Western Balkan partners, including Albania, the former Yugoslav Republic of
Macedonia, Montenegro, Serbia, Bosnia and Herzegovina and Kosovo*, support the
economic development and political stabilisation of the region.
The SAAs are the legal instrument for aligning the laws of these countries to the EU acquis to
prepare for their progressive integration into the EU market. Except for Kosovo (where the
SAA entered into force directly, also covering the trade part) the entry into force of the SAAs
was preceded by the entry into force of Interim Agreements covering trade matters. These
interim Agreements have established individual free-trade areas between the EU and each
Western Balkan partner, eliminating duties and quantitative restrictions on bilateral trade for
goods, with a few exceptions concerning mostly agricultural and fishery products. The SAAs
also include additional provisions relevant to competition, protection of intellectual property
rights and customs' cooperation, commitments on services and establishment, and
approximation to the EU acquis on government procurement and standardisation.
All of the Western Balkan partners are either candidates or potential candidates to become EU
Members. Serbia and Montenegro are currently negotiating their accessions.
The EU supports the Western Balkan partners’ efforts, since 2017, to develop a Regional
Economic Area, building upon the free trade area established by the
Central European Free
Trade Agreement
in 2006. The Western Balkans Regional Economic Area aims at developing
an area where goods, services, investments and skilled workers can move without obstacles.
The Instrument for
Pre-accession Assistance
(IPA) is the means by which the EU supports
reforms in the enlargement countries. They help the beneficiaries to carry out the necessary
political and economic reforms, which should provide their citizens with better opportunities.
The current IPA framework for pre-accession assistance covers the period from 2014–2020
and has a dedicated budget of EUR 11.7 billion.
Each year the Commission adopts its ‘Enlargement
package’
a set of documents
explaining its policy on EU enlargement, including individual reports
126
in which the
Commission services present their detailed assessment of the state of play in each candidate
country and potential candidate.
This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the
ICJ Opinion on the Kosovo Declaration of independence.
https://ec.europa.eu/neighbourhood-enlargement/countries/package_en
126
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE TRADE PILLAR OF THE EU-ALBANIA STABILISATION AND
ASSOCIATION AGREEMENT
1.
I
NTRODUCTION
On 12 June 2006, the EU and Albania signed a Stabilisation and Association Agreement
(SAA). The SAA is the prime instrument of the EU’s overall policy towards the Western
Balkan countries’ Stabilisation and Association process
127
. Under this process, all Western
Balkans countries, including Albania, have a common future as EU Member States.
The full SAA entered into force on 1 April 2009, however, the
trade-related part of the
SAA
already entered into force through an Interim Agreement on
1 December 2006,
hereinafter ‘the Agreement’. This Agreement established a free-trade
area over a transitional
period of ten years. As regards the EU, in 2006, 98.7% of its tariff lines were already duty-
free, representing 100% of the value of imports from Albania. By 2010, Albania liberalized
92.7% of tariff lines for imports from the EU.
The Agreement covers products in all Chapters of the Harmonised System. Regarding
agricultural products the agreement is largely asymmetrical. EU agricultural imports from
Albania are almost completely liberalized (with very few exceptions). On the other hand, EU
agricultural exports to Albania are subject to tariffs and TRQs.
The Agreement also includes provisions concerning competition matters, investment and
related payments, a high level of protection of intellectual property rights and strengthened
co-operation in customs matters. Since the entry into force of the full SAA on 1 April 2009, a
number of additional disciplines are being implemented concerning, notably, government
procurement, legislative approximation in many areas including standardisation, as well as
provisions regarding services and establishment.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Albania and the EU are very close and growing trade partners having doubled their total trade
since the entry into force of the trade agreement. The EU is Albania’s main trading partner,
accounting for 77.2 % of total exports and 61.5 % of total imports of goods. Compared to
2016, total trade between the EU and Albania increased by 12.3% reaching nearly
EUR 4.5 billion
in 2017.
Table 1
127
See
http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/
for more information
161
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Imports
Exports
Balance
Total trade
2006
498
1.564
1.066
2.062
2007
631
1.855
1.224
2.486
EU 28 trade in
goods
with Albania (million euro)
2008
2009
2010
2011
2012
2013
681
651
895
946
1.118
1.235
2.203
2.121
2.187
2.330
2.444
2.326
1.522
1.470
1.292
1.384
1.326
1.092
2.884
2.772
3.083
3.276
3.562
3.561
2014
1.246
2.468
1.222
3.714
2015
1.165
2.520
1.355
3.684
2016
1.292
2.706
1.414
3.998
2017
1.503
2.986
1.483
4.490
Source: Eurostat
Figure 1
As can be seen from table 1 and figure 1, since the start of implementation of the trade
agreement, total trade between the EU and Albania has more than doubled (+118%), from
EUR 2 billion in 2006 to nearly EUR 4.5 billion in 2017. The main traded products concern
the following sectors: machinery and appliances; footwear, hats and other headgear; textiles
and textile articles and mineral products. Albania has a relatively narrow production base,
resulting in a large structural deficit on the trade balance for goods (around EUR 1.4 billion),
although it has slightly been contained by the more rapid expansion of Albania’s exports to
the EU (+200%) as compared to the growth of EU’s exports
to Albania (+90%).
2.2.
Trade in agricultural goods
As shown in table 2, the EU’s trade surplus with Albania concerns both
agricultural
and non-
agricultural products. Trade in agricultural products represents around
10% of the total
bilateral trade.
In
2017, 5.2% of all EU’s imports from Albania were agricultural products
versus 13% of all EU’s exports to Albania. This ratio has remained relatively stable over the
last ten years of implementation of the agreement. In 2017, both EU imports and exports of
agricultural products from / to Albania have increased by about 10% since 2016. The EU
imported mainly edible vegetables from Albania and exported primarily beverages and food
preparations to Albania.
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Table 2
EU28 merchandise trade by AMA/NAMA sector with Albania (million euro)
2008
2009
2010
2011
2012
2013
2014
EU28 imports
Total
681
651
895
946
1.118
1.235
1.246
Agricultural
29
26
29
36
41
46
49
Non-Agricultural
652
625
866
910
1.077
1.189
1.198
EU28 exports
Total
2.203
2.121
2.187
2.330
2.444
2.326
2.468
Agricultural
305
298
318
323
322
334
328
Non-Agricultural
1.897
1.823
1.870
2.008
2.122
1.993
2.140
EU28 trade balance
Total
1.522
1.470
1.292
1.384
1.326
1.092
1.222
Agricultural
276
272
288
286
281
288
280
Non-Agricultural
1.246
1.198
1.004
1.098
1.045
803
942
2015
1.165
62
1.103
2.520
335
2.185
1.355
273
1.082
2016
1.292
73
1.219
2.706
352
2.353
1.414
280
1.134
2017
1.503
79
1.424
2.986
388
2.599
1.483
309
1.174
A limited share of the EU-Albania agricultural trade is subject to duty-free TRQs. Three of
five Albania’s TRQs for agricultural products from the EU were fully utilised in 2017; two
quotas were not used or almost not used by EU exporters.
The EU grants very few agricultural duty-free quotas to Albania, namely for wine and sugar,
which had a very low uptake by Albanian exporters in 2017.
Table 3 .Utilisation of TRQs for EU exports to Albania in 2017
Product
Milk and cream
Wheat
Maize
Sauces and preparations
Wine
Source: Albanian authorities
Size of the quota
790 t
42 000 t
10 000 t
60 t
10 000 hl
Fill rate (%)
100
3
0
100
100
2.3.
Preference Utilisation rate (PUR)
The PUR is relatively high for both imports and exports which highlight a generally good
knowledge of trade operators regarding the preferential access to both markets, with some
margin for improvement, particularly from the side of EU trade operators.
Table 4
Use of preferences on imports into EU from Albania
use as % eligible
2013
88%
2014
88%
2015
87%
2016
86%
2017
86%
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
Table 6
PUR (%)
EU
Use of preferences on imports into Albania from EU
2013
2014
2015
2016
-
72.9
76.4
79.8
2017
78.2
Source: DG TRADE based on Albanian statistics
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2.4.
Trade in Services and FDI
In 2016, total trade in services represented nearly 28% of the total bilateral trade of goods and
services with a share of 38% for EU imports and a more modest 21% share for EU exports.
For the first time since 2013, Albania recorded a trade surplus mainly explained by revenues
from foreign
tourism
and the export of manufacturing services for foreign-owned products.
Table 7
EU28
services
trade with Albania (million euro)
2011
2012
2013
2014
2015
EU28 imports
731
610
686
729
719
EU28 exports
601
725
643
738
724
Balance
-130
115
-43
9
5
Total trade
1,332
1,335
1,328
1,467
1,443
Source: European Commission
2016
802
730
-72
1,532
The EU’s contribution to total
FDI
in Albania was 242.3
million in 2016. Albania’s success
in attracting foreign investment in recent years has been heavily concentrated in non-tradable
and natural resource-based industries.
Table 8
Foreign direct investment EU28 with Albania (million euro)
2014
Stocks
Flows
50
21
Inward
2015
-182
-232
2016
65
227
Outward
2014
2015
5.723
5.963
156
175
2016
5.642
73
For
Source: European Commission
3.
I
SSUES ADDRESSED IN THE
J
OINT
C
OMMITTEE MEETINGS
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. The last two meetings took place on 24 January 2017
and more recently on 18 January 2018, during which the doubling of the trade volume
between the EU and Albania was highlighted, with the EU remaining Albania’s first trade
partner representing over 66% of its
global trade. Albania’s overall smooth implementation of
the trade agreement was welcome as well as its good co-operation in the context of WTO-
164
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related activities. Other trade issues addressed included the importance for Albania to deliver
on the implementation of its national plan on trade facilitation, with a particular focus on
border measures and the improvement of risk-based inspections by customs authorities.
The 11
th
EU-Albania Sub-Committee on Agriculture and Fisheries on 14 November 2017
confirmed progress in the following fields:
publication of agricultural census results,
adoption of framework law on GIs,
adoption of organics legislation, and
approximation of marketing standards for olive oil.
S
PECIFIC AREAS OF IMPORTANCE
4.
The key factors with negative impact on trade are unfair competition and lack of transparency,
especially in the public procurement process, as well as non-compliance with the rule of law,
including the judicial system.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Enhancing transparency and accountability -in particular ensuring the effective, efficient and
transparent functioning of the public procurement system- and the fight against corruption are
essential issues that affect EU businesses doing business in Albania. The appointment of a
new Minister of State for the Protection of Entrepreneurship in September 2017 is expected to
contribute to the development of effective state control mechanisms to eliminate the
conditions of unfair competition underlying the large informal economy. Finally, it is
expected that the acceleration of the European integration progress will give further impetus
to major reforms and consequently have a positive impact on the investment and business
climate in Albania in the following years.
6.
C
ONCLUSIONS
Albania and the EU are very close and growing trade partners having doubled their total trade
since the entry into force of the trade agreement. The EU is Albania’s main trading partner,
accounting for 77.2 % of total exports and 61.5 % of total imports of goods. While the trade
agreement is generally implemented smoothly by Albania, the business climate is negatively
affected by the large size of its informal economy and shortcomings in the rule of law which
are a strong deterrent to investments. Overall, it is expected that the renewed momentum of
the
European integration
process will give further impetus to major reforms and
consequently have a positive impact on the investment and business climate in Albania in the
coming period. Similarly, the development of a
Regional Economic Area
based on EU rules
and standards, to which all Western Balkan economies have committed, has the potential to
generate untapped growth.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE TRADE PILLAR OF THE EU-BOSNIA AND HERZEGOVINA
STABILISATION AND ASSOCIATION AGREEMENT
1.
I
NTRODUCTION
On 16 June 2008, the EU and Bosnia and Herzegovina signed a Stabilisation and Association
Agreement (SAA). The SAA is the prime instrument of the EU’s overall policy
towards the
Western Balkan countries’ Stabilisation and Association process
128
. Under this process, all
Western Balkans countries, including Bosnia and Herzegovina, have a common future as EU
Member States.
The SAA entered into force on 1 June 2015, however, the
trade-related part of the SAA
already entered into force through an Interim Agreement on
1 July 2008.
This Agreement
established a free-trade area over a transitional period of five years. The Agreement covers
products in all Chapters of the Harmonised System. Regarding agricultural products the
agreement is largely asymmetrical. EU agricultural imports from Bosnia and Herzegovina are
almost completely liberalized (with very few exceptions). On the other hand, EU agricultural
exports to Bosnia and Herzegovina are subject to tariffs and TRQs.
The Agreement also includes provisions concerning competition matters, investment and
related payments, a high level of protection of intellectual property rights and strengthened
co-operation in customs matters. Since the entry into force of the full SAA on 1 June 2015, a
number of additional disciplines are being implemented concerning, notably, government
procurement, legislative approximation in many areas including standardisation, as well as
provisions regarding services and establishment.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Bosnia and Herzegovina and the EU are very close trading partners with bilateral exchanges
that expanded by 32% since the entry into force of the trade agreement. The EU is the
country’s
main trading partner, accounting for 72.3 % of total exports and 60.8 % of total
imports of goods. Compared to 2016, total trade between the EU and Bosnia and Herzegovina
increased by 12.8% reaching
EUR 10.2 billion
in 2017.
Table 1
2008
2.493
5.209
2.716
7.702
2009
1.934
3.938
2.005
5.872
EU28 trade in
goods
with Bosnia-Herzegovina (million euro)
2010
2011
2012
2013
2014
2015
2.488
2.951
2.990
3.244
3.330
3.493
4.202
4.746
4.830
4.777
5.024
5.075
1.714
1.795
1.840
1.532
1.695
1.582
6.690
7.697
7.821
8.021
8.354
8.568
2016
3.782
5.254
1.472
9.036
2017
4.267
5.924
1.658
10.191
Imports
Exports
Balance
Total trade
Source: Eurostat
128
See http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/ for more information.
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In the ten years since the application of the agreement, total trade between the EU and Bosnia
and Herzegovina has increased by over
32%
from EUR 7.7 billion to EUR 10.2 billion. The
five top traded products are machinery and appliances; base metals; mineral products;
chemicals and miscellaneous manufactured articles. The EU has consistently recorded a large
trade surplus
with the country; it has however stabilised over the last five years around
EUR 1.5 billion down from EUR 2.7 billion at the start of implementation of the trade
agreement in 2008.
2.2.
Trade in agricultural goods
As shown in table 2, the EU’s trade surplus with Bosnia and
Herzegovina concerns both
agricultural
and non-agricultural products. In 2017, trade in agricultural products represented
just over
10% of the total bilateral trade;
this is a 2% reduction since the start of application
of the trade agreement. In 2017, 4.8%
of all EU’s imports from Bosnia and Herzegovina were
agricultural products versus 14% of all EU’s exports to Bosnia and Herzegovina. This ratio
has remained relatively stable since 2008. In 2017, EU imports of agricultural products from
Bosnia and Herzegovina increased by almost 17% since 2016. EU exports of agricultural
products to Bosnia and Herzegovina decreased by 6% over the same period. The EU exported
primarily meat followed by beverages, spirits & vinegar to Bosnia and Herzegovina.
Table 2
EU28 merchandise trade by AMA/NAMA sector with Bosnia-Herzegovina (million euro)
2008
2009
2010
2011
2012
2013
2014
2015
2016
EU28 imports
2.493
1.934
2.488
2.951
2.990
3.244
3.330
3.493
3.782
149
144
181
198
210
201
160
165
173
2.345
1.790
2.307
2.753
2.781
3.044
3.170
3.328
3.609
EU28 exports
5.209
3.938
4.202
4.746
4.830
4.777
5.024
5.075
5.254
763
683
708
789
831
803
791
808
779
4.446
3.255
3.494
3.957
4.000
3.973
4.233
4.266
4.476
EU28 trade balance
2.716
2.005
1.714
1.795
1.840
1.532
1.695
1.582
1.472
615
540
527
591
621
602
631
643
605
2.102
1.465
1.187
1.204
1.219
930
1.063
938
867
2017
4.267
203
4.064
5.924
828
5.096
1.658
626
1.032
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
167
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A limited share of EU-Bosnia and Herzegovina agricultural trade is subject to duty-free
TRQs.
Bosnia and Herzegovina’s authorities have not provided detailed figures on the utilisation of
the TRQs. EU export data suggest that most of Bosnia and Herzegovina's TRQs for
agricultural products from the EU were fully utilised in 2017 and for almost a quarter, EU
exports exceeded the quota volume (grapes, potatoes, biscuits and butter). A few quotas were
less utilised such as poultry products (average utilisation of 15%); spirits (6%) and tobacco
(30%).
The EU grants very few agricultural TRQs to Bosnia and Herzegovina: beef (not used by
exporters from the country, mainly due to SPS reasons), sugar (almost fully used in 2017) and
wine (significant, but not full use throughout the years, including 2017). .
2.3.
Preference Utilisation rate
The PUR is on imports from Bosnia and Herzegovina is extremely high, which highlights an
excellent knowledge of trade operators regarding the preferential access to both markets.
Table 4
Use of preferences on imports into EU from Bosnia-Herzegovina
2013
2014
2015
use as % eligible
93%
94%
93%
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
2016
94%
2017
94%
Reliable data to calculate the PURs for EU exports was not made available by Bosnia and
Herzegovina.
2.4.
Trade in Services and FDI
In 2016,
trade in services
represented roughly 24% of the total bilateral trade of goods and
services with a share of 23% of EU imports and a more modest 17% of EU exports. For the
first time again since 2011, Bosnia and Herzegovina recorded a trade surplus, with tourism
representing a major growth sector.
Table 6
EU28
services
trade with Bosnia-Herzegovina (million euro)
2011
2012
2013
2014
2015
EU28 imports
746
932
837
904
895
EU28 exports
669
976
1.033
976
940
Balance
-78
43
196
73
45
Total trade
1.415
1.908
1.871
1.880
1.835
Source: European Commission
2016
1.115
1.097
-18
2.211
168
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Source: European Commission
Regarding
FDI,
nearly 63 % of the country’s stock in FDI is originating from EU countries.
Annual FDI inflows largely show a similar pattern.
Table 7
Foreign direct investment EU28 with Bosnia-Herzegovina (million euro)
2014
102
8
Inward
2015
107
35
2016
156
-164
2014
2.453
-415
Outward
2015
3.348
201
2016
3.532
142
Foreign di
Stocks
Flows
Source: European Commission
3.
I
SSUES ADDRESSED IN THE ANNUAL
C
OMMITTEE MEETINGS
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. The last meeting took place on 24 October 2017,
during which the continuing growth of the bilateral trade in 2016 and 2017 was welcome. The
main trade issues addressed during the meeting concerned:
Excise duties on beer:
the country was requested to expedite alignment of the current
excise structure for small breweries with the threshold set by the acquis (200 000 hl).
Excise duties on spirits:
the EU reminded Bosnia and Herzegovina that applicable
provisions on excise duties on spirits do not comply with Article 35 of the SAA on
the prohibition of fiscal discrimination and the EU acquis that foresees a single rate
for all spirits.
WTO accession:
the EU encouraged Bosnia and Herzegovina to intensify efforts to
conclude its pending bilateral negotiations.
Agricultural and fishery issues were discussed in the Sub-committee meeting on
25 October 2017.
4.
S
PECIFIC AREAS OF IMPORTANCE
The
business environment
is a key area of importance, in particular the large size of the
informal economy which distorts competition and has a negative impact on the business
environment.
Public procurement
is another area of concern.
169
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5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Enhancing transparency and accountability -in particular ensuring the effective, efficient and
transparent functioning of the public procurement system- and the fight against corruption are
essential issues that affect EU businesses doing business in Bosnia and Herzegovina that are
part of the regular follow-up done under the SAA multidisciplinary subcommittee structures.
6.
C
ONCLUSIONS
While the trade agreement is generally implemented smoothly by Bosnia and Herzegovina,
the business climate is negatively affected by the large size of its informal economy.
However, it is expected that the renewed momentum of the
European integration
process
will give further impetus to major reforms and consequently have a positive impact on the
investment and business climate in the coming period. Similarly, the development of a
Regional Economic Area
based on EU rules and standards, to which all Western Balkan
economies have committed, has the potential to generate untapped growth.
170
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE TRADE PILLAR OF THE STABILISATION AND ASSOCIATION
AGREEMENT BETWEEN THE EU AND
THE
FORMER YUGOSLAV REPUBLIC OF
MACEDONIA
1.
I
NTRODUCTION
On 9 April 2001, the EU and the former Yugoslav Republic of Macedonia signed a
Stabilisation and Association Agreement (SAA). The SAA is the prime instrument of the
EU’s overall policy towards the Western Balkan countries’ Stabilisation and Association
process
129
. Under this process, all Western Balkans countries have a common future as EU
Member States.
The SAA entered into force on 1 April 2004, however, the
trade-related part of the SAA
already entered into force through an Interim Agreement on
1 June 2001.
Trade liberalisation
between the EU and the former Yugoslav Republic of Macedonia was completed over a
period of ten years. The Agreement covers products in all Chapters of the Harmonised
System.
Regarding agricultural products the agreement is largely asymmetrical. EU agricultural
imports from the former Yugoslav Republic of Macedonia are almost completely liberalized
(with very few exceptions). On the other hand, EU agricultural exports to
the
former
Yugoslav Republic of Macedonia are subject to tariffs and TRQs.
The Agreement also includes provisions concerning competition matters, investment and
related payments, a high level of protection of intellectual property rights and strengthened
co-operation in customs matters. Since the full entry into force of SAA, a number of
additional disciplines are being implemented concerning, notably, government procurement,
legislative approximation in many areas including standardisation, as well as provisions
regarding services and establishment.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Compared to 2016, total trade between the EU and the former Yugoslav Republic of
Macedonia increased by 12.7%, reaching over
EUR 9.2 billion
in 2017.
Table 1
2007
2.019
2.171
151
4.190
EU 28 trade in
goods
with the former Yugoslav Republic of Macedonia (million euro)
2008
2009
2010
2011
2012
2013
2014
2015
2016
1.949
1.321
1.852
2.281
2.110
2.388
3.019
3.365
3.723
2.643
2.170
2.532
3.038
3.372
3.396
3.818
4.114
4.450
694
849
680
758
1.262
1.008
799
749
727
4.592
3.491
4.384
5.319
5.481
5.784
6.837
7.479
8.173
2017
4.238
4.973
734
9.211
Imports
Exports
Balance
Total trade
Source: Eurostat
129
See
http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/
for more information.
171
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Between 2007 and 2017, total trade between the EU and the former Yugoslav Republic of
Macedonia has more than doubled (+120%), from EUR 4.2 billion to over EUR 9.2 billion in
2017. The five top traded products are machinery and appliances; chemical products; textiles;
pearls and precious metals; and mineral products. The EU has consistently recorded a large
trade surplus
with the country, which stabilised around EUR 750 million over the last four
years. Furthermore, the
EU is the country’s first trade partner with a share of over 70% of its
global trade.
2.2.
Trade in agricultural goods
Trade in agricultural products represents around
7% of the total bilateral trade.
In 2017,
6.5% of all EU’s imports from
the former Yugoslav Republic of Macedonia were agricultural
products versus 7.4% of all EU’s exports to the country.
Trade in agricultural products has
gradually decreased since the application of the trade agreement when it represented nearly
12% of the total bilateral trade. In 2017, both EU imports and exports of agricultural products
from / to the former Yugoslav Republic of Macedonia increased by 3.5% and 1.8%
respectively since 2016. Tobacco, vegetables and preparations of cereals, flour, starch were
the EU's key import products. The EU exported primarily meat followed by food preparations
to the former Yugoslav Republic of Macedonia.
Table 2
EU28 merchandise trade by AMA/NAMA sector with the former Yugoslav Republic of Macedonia (million euro)
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
EU28 imports
Total
1.949
1.321
1.852
2.281
2.110
2.388
3.019
3.365
3.723
4.238
Agricultural
176
170
183
186
204
233
259
259
266
276
Non-Agricultural
1.773
1.151
1.669
2.095
1.905
2.156
2.759
3.106
3.457
3.963
EU28 exports
Total
2.643
2.170
2.532
3.038
3.372
3.396
3.818
4.114
4.450
4.973
Agricultural
261
237
261
324
347
339
326
348
363
369
Non-Agricultural
2.382
1.933
2.270
2.715
3.025
3.057
3.492
3.766
4.087
4.603
EU28 trade balance
Total
694
849
680
758
1.262
1.008
799
749
727
734
Agricultural
85
67
78
138
143
107
67
89
97
94
Non-Agricultural
609
782
602
619
1.119
901
732
660
630
641
Source: European Commission
For a number of agricultural products, EU exports to the former Yugoslav Republic of
Macedonia are subject to Tariff rate quotas (TRQs), either duty-free or at a reduced customs
duty rate. Most quotas were either fully utilised or utilised to a large extent. The EU grants
172
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one agricultural TRQ to the former Yugoslav Republic of Macedonia (beef) which was not
used by the former Yugoslav Republic of Macedonia.
Table 3. Tariff rate quotas for EU exports to the former Yugoslav Republic of Macedonia in 2017
Size of the quota (tons,
Product
unless
indicated Fill rate (%)
otherwise)
Pork (2 quotas)
2 200
100
Milk and cream (4 quotas)
4 870
90
Cheese (4 quotas)
1 600
100
Potatoes (2 quotas)
550
99
Onions
300
49
Sunflower seed
100
100
Margarine
450
100
Sausages
3 400
99
Prepared meat
2 050
100
Sugar
385
100
Chocolate
1 150
100
Pasta
215
100
Bread, pastry, cakes
1 435
100
Vegetables, fruits and nuts
40
0
Yeasts (2 quotas)
885
76
Soups and broths (2 quotas)
550
100
Mushrooms
50
100
Other vegetables (2 quotas)
210
100
Fruit juices
300
96
Waters (3 quotas)
2 870
100
Wine
15 000 hl
89
Tobacco products (2 quotas)
370
79
Source: Authorities of the former Yugoslav Republic of Macedonia
2.3.
Preference Utilisation rate
The PUR
was high for both imports and exports,
which highlights a good knowledge of
trade operators regarding the preferential access to both markets.
Table 4
Use of preferences on imports into EU from For.JRep.Macedonia
2013
2014
2015
use as % eligible
96%
97%
97%
Source:
Eurostat - Includes all preferences (FTA, GSP, bilateral)
2016
95%
2017
94%
Table 5
Use of preferences on imports into For.JRep.Macedonia from EU
2013
use as % eligible
2014
90%
2015
2016
90%
Source:
DG TRADE based on statistics of the For.JRep.Macedonia
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2.4.
Trade in Services and FDI
In 2016,
trade in services
represented roughly 21% of the total bilateral trade of goods and
services with a share of 20% of EU imports and nearly 32% of EU exports. Overall the trade
balance in services has been largely positive for the EU over the last 6 years, and even more
pronounced in 2016 when it grew by 64%.
Table 6
EU28
services
trade with For.JRep.Macedonia (million euro)
2011
2012
2013
2014
2015
EU28 imports
418
496
507
569
602
EU28 exports
648
647
738
854
1.009
Balance
230
151
231
285
407
Total trade
1.066
1.143
1.245
1.422
1.611
Source: European Commission
2016
741
1.407
666
2.148
Source: European Commission
Regarding FDIs, the share of the stock of EU investments in total foreign investment
increased in 2016 to 79 %, while it had remained stagnant in the preceding five years.
Table 7
Foreign direct investment EU28 with For.JRep.Macedonia (million euro)
2014
-56
91
Inward
2015
-35
4
2016
-15
12
Outward
2014
2015
2.050
2.556
114
112
2016
2.614
237
Foreign d
Stocks
Flows
Source: European Commission
3.
I
SSUES ADDRESSED IN THE ANNUAL
C
OMMITTEE MEETINGS
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. Two meetings took place in 2017, on 4 April and on
23 November, during which the continuing growth of the bilateral trade was highlighted, and
in particular the fact that bilateral trade has increased almost 2.5 times (144% growth) since
2006. The country’s overall smooth implementation of the trade agreement was welcome as
well as its good co-operation in the context of WTO-related activities. Agricultural and
fishery issues were discussed in the Sub-committee meeting on 15 May 2018.
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4.
S
PECIFIC AREAS OF IMPORTANCE
The
business environment
is a key area of importance. Challenges for doing business in the
former Yugoslav Republic of Macedonia include frequent legal changes to the regulatory
framework, a lack of transparency of public procurement procedures, a lack of systematic,
efficient and transparent law enforcement including in inspections and commercial dispute
settlement, and many para-fiscal charges at different administrative levels. The size of the
informal economy is also an area of concern as it creates unfair competition from unregistered
companies.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The main open issues are linked to non-tariff barriers, including technical standards and
administrative obstacles. Barriers also include relatively high logistical and customs costs. In
its 2018-2020 Economic Reform Programme, the government included a measure on trade
facilitation aimed at simplifying inspections and clearance procedures which has the potential
to improve competitiveness. This new measure focuses on speeding up all trade that requires
veterinary and phytosanitary certificates issued through the EU Trade Control and Expert
System (TRACES). The resulting improved data exchange between customs authorities
would lead to faster and cheaper trade flows.
6.
C
ONCLUSIONS
The former Yugoslav Republic of Macedonia and the EU are very close and growing trade
partners having more than doubled their total trade between 2007 and 2017. The EU is the
country’s main trading partner, accounting for 81.3 % of its total exports and 62.4 % of its
total imports of goods. While the trade agreement is generally implemented smoothly by the
former Yugoslav Republic of Macedonia, the business climate is negatively affected by the
large size of its informal economy and shortcomings in the rule of law which are a strong
deterrent to investments. On the other hand, the renewed momentum of the
European
integration
process is expected to give further impetus to major reforms and consequently
have a positive impact on the investment and business climate in the former Yugoslav
Republic of Macedonia in the coming period. Similarly, the development of a
Regional
Economic Area
based on EU rules and standards, to which all Western Balkan economies
have committed, has the potential to generate untapped growth.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF
THE TRADE PILLAR OF THE EU-KOSOVO
*
STABILISATION AND
ASSOCIATION AGREEMENT
1.
I
NTRODUCTION
On 27 October 2015, the EU and Kosovo signed a Stabilisation and Association Agreement
(SAA). The SAA is the prime instrument of the EU’s overall policy towards the Western
Balkan countries’ Stabilisation and Association process
130
. Under this process, all Western
Balkans partners, including Kosovo, have a European perspective.
The SAA
-including
the trade-related part- entered into force on
1 April 2016
and foresees:
Upgrading the existing trade relations by gradual establishment of free trade area over
a period lasting a maximum of
10 years.
Almost unrestricted market access to the EU for Kosovo products: the EU has
abolished all customs duties with Kosovo upon entry into force of the SAA with
exception of a few product lines in the agricultural sector, which are subject to specific
duties or tariff-quotas.
Kosovo has abolished the customs duties on a number of tariff lines (industrial,
agricultural and fishery products) while for the rest it will reduce the duties
progressively over 10 years.
The SAA also includes Kosovo’s commitment to ensure the gradual approximation of its laws
with EU acquis in a number of important areas, such as public procurement, standardisation,
consumer protection, working conditions and equal opportunities. It also provides for a
gradual liberalisation in the areas of rights of establishment, supply of services and movement
of capital; and it includes provisions on competition matters, state aid, and intellectual
property rights.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU remains Kosovo’s main trade partner,
accounting for 25% of total exports and 43% of
total imports of goods. The EU has a very large
trade surplus
with Kosovo: despite a 23%
growth in exports to the EU, Kosovo’s trade deficit with the EU further widened in 2017.
Compared to the first year of implementation of the trade agreement, total trade between the
EU and Kosovo increased by 7.5% reaching nearly
EUR 1 billion
in 2017.
130
See
http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/
for more information
* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ
Opinion on the Kosovo declaration of independence
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Table 1
Merchandise trade EU28 with Kosovo (million euro)
2010
2011
2012
2013
2014
2015
149
140
124
125
96
104
681
736
714
724
728
764
532
596
590
599
632
660
830
876
838
849
823
868
2016
72
854
781
926
2017
89
907
818
996
Imports
Exports
Balance
Total trade
Source: Eurostat
Regarding the sectoral split, the main traded products from the EU side are machinery and
appliances, foodstuffs, beverages, tobacco, transport equipment, chemicals and plastics &
rubber products.
Kosovo’s exports consist
mostly of metals, minerals and low-value added
products.
Kosovo’s imports are likely to increase further because of large infrastructure
investment.
2.2.
Trade in agricultural goods
The EU’s trade surplus with Kosovo concerns both
agricultural
and non-agricultural
products. Trade in agricultural products represents nearly
26% of the total bilateral trade.
In
2017, 28% of all EU’s imports from Kosovo were agricultural products versus 26% of all
EU’s exports to Kosovo. In 2017, both EU imports and exports
of agricultural products from /
to Kosovo increased by 46% and 7.4% respectively since 2016.
The EU grants one TRQ to Kosovo (beef) which was not used by Kosovo's exporters in 2017.
177
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Table 2
EU28 merchandise trade by AMA/NAMA sector with Kosovo (million euro)
2010
2011
2012
2013
2014
2015
2016
EU28 imports
Total
149
140
124
125
96
104
72
Agricultural
13
14
13
16
19
17
17
Non-Agricultural
137
126
111
109
77
87
55
EU28 exports
Total
681
736
714
724
728
764
854
Agricultural
133
167
174
183
200
206
217
Non-Agricultural
548
568
540
541
528
558
637
EU28 trade balance
Total
532
596
590
599
632
660
781
Agricultural
121
154
161
166
181
188
199
Non-Agricultural
411
442
429
432
451
472
582
Source: European Commission
2017
89
25
64
907
233
674
818
207
611
2.3.
Preference Utilisation rate
The PUR for EU’s exports to Kosovo was very low at 44%, which highlights a poor
knowledge of trade operators regarding the preferential access to Kosovo’s market, which can
partly be explained by the still recent entry into force of the trade agreement (April 2016). By
contrast, the PUR on imports into the EU from Kosovo was high at 92%.
Table 3
Use of preferences on imports into Kosovo from EU
2013
use as % eligible
Source:
of Kosovo
Source:
DG
Trade
own
calculations
2014
2015
2016
44%
based
on
statistics
Table 4
Use of preferences on imports into EU from Kosovo
use as % eligible
2013
87%
2014
84%
2015
85%
2016
89%
2017
92%
Source:
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
2.4.
Trade in Services and FDI
The service sector contributes 57.3% of gross value added in Kosovo, and it is the fastest
growing export sector.
The EU is the main investor in Kosovo with 46.4 % of the overall inflow of FDI in 2017.
3.
I
SSUES ADDRESSED IN THE ANNUAL
C
OMMITTEE MEETINGS
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. The last two meetings took place on 6 April 2017 and
on 14 June 2018. The main points discussed in 2017 included information from the EU side
on the initiation of implementing procedures in order to ensure that the EU trade preferences
foreseen in the SAA could be effective at the customs level. Export trends with the EU and at
178
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regional level were discussed as well as the foreseen measure by Kosovo to increase the cost
efficiency of international transactions through simplification and standardisation of customs
formalities and procedures. The 2018 trade meeting included a follow-up of trading trends as
well as discussions on specific issues such as the need for Kosovo to adopt legislation which
takes into account losses during transportation of goods (evaporation of petroleum and look
into the possibility for recognition of losses for other perishable goods while transported from
the loading site to the final unloading point).
The first EU-Kosovo Stabilisation and Association Sub-committee on Agriculture and
Fisheries took place on 21 March 2017. It was agreed to continue aligning the legal
framework with the EU acquis in all sectors, according to the best EU practices and to
continue to strengthen all the bodies involved in the management of the agriculture, food
safety and fisheries parts of the EU acquis.
4.
S
PECIFIC AREAS OF IMPORTANCE
The business environment is struggling with an inefficient judiciary, a lack of transparency of
public procurement procedures, slow and inconsistent contract enforcement, a widespread
informal economy, weak property rights, and an inefficient and unaccountable public
administration.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Main open issues relate to Kosovo’s trade openness including the high administrative costs
linked to procedural, quality, logistical and border barriers which reduce the level of exports
and increase the price of imports. All these issues affecting EU businesses doing business in
Kosovo are closely monitored and followed up through the SAA multidisciplinary
subcommittee structures.
6.
C
ONCLUSIONS
Even though Kosovo is yet to reap the full benefits of its trade liberalisation with the EU, the
EU remains its main trading partner, accounting for 25% of total exports and 43% of total
imports of goods. Kosovo’s business environment is hampered by the large informal economy
which results in unfair competition from unregistered companies. However, it is expected that
the renewed momentum of the
European integration
process will give further impetus to
major reforms and consequently have a positive impact on the investment and business
climate in the coming period. Similarly, the development of a
Regional Economic Area
based on EU rules and standards, to which all Western Balkan economies have committed,
has the potential to generate untapped growth.
179
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR
OF THE EU-MONTENEGRO STABILISATION AND ASSOCIATION AGREEMENT
1.
I
NTRODUCTION
On 15 October 2007, the EU and Montenegro signed a Stabilisation and Association
Agreement (SAA). The SAA is the prime instrument of the EU’s overall policy towards the
Western Balkan
countries’ Stabilisation and Association process
131
. Under this process, all
Western Balkans countries, including Montenegro, have a common future as EU Member
States.
The SAA entered into force on 1 May 2010, however, the
trade-related part of the SAA
already entered into force through an Interim Agreement on
1 January 2008.
This Agreement
established a free-trade area over a transitional period of five years. From the date of the
Interim Agreement, the EU granted permanent liberalisation of 97.3% of tariff lines,
representing almost duty free treatment to all imports from Montenegro. By 2013,
Montenegro liberalised 95% of its tariff lines, representing 99% of EU imports during the
three preceding years of the entry into force of the agreement. The Agreement covers products
in all Chapters of the Harmonised System. Only a few agricultural and fishery products are
not fully liberalised and subject to preferential quantitative concessions (TRQs).
The Agreement also includes provisions concerning competition matters, investment and
related payments, a high level of protection of intellectual property rights and strengthened
co-operation in customs matters. Since the entry into force of the full SAA on 1 May 2010, a
number of additional disciplines are being implemented concerning, notably, government
procurement, legislative approximation in many areas including standardisation, as well as
provisions regarding services and establishment.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU is Montenegro’s main
trading partner, accounting for 81.3 % of total exports and 62.4
% of total imports of goods. Compared to 2016, total trade between the EU and Montenegro
increased by 7.6% reaching EUR 1.2 billion in 2007.
Table 1
2008
276
1.135
859
1.412
2009
172
693
521
865
EU28 trade in
goods
with Montenegro (million euro)
2010
2011
2012
2013
2014
2015
185
225
298
188
251
144
715
786
893
912
973
877
530
562
595
724
722
733
901
1.011
1.191
1.100
1.224
1.020
2016
153
994
841
1.147
2017
166
1.068
901
1.234
Imports
Exports
Balance
Total trade
Source: Eurostat
131
See
http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/
for more information.
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In the ten years since the application of the trade agreement, total trade in merchandise
between the EU and Montenegro went
down by 12.6%
going from EUR 1.4 billion in 2008
to EUR 1.2 billion in 2017. This reduction can be explained by the fact that the structure of
Montenegrin exports in the last 10 years has substantially changed in favour of exports of
services, which increased to over 70% of total exports in 2016. The main sectors traded are
machinery and appliances; transport equipment and mineral products. The EU has
consistently recorded a large
trade surplus
with the country (averaging EUR 1.1 billion).
2.2.
Trade in Agricultural Goods
The EU’s trade surplus with Montenegro concerns both
agricultural
and non-agricultural
products. Trade in agricultural products represents around
15% of the total bilateral trade.
In 2017, 3.6% of all EU’s imports from Montenegro were agricultural products versus 17% of
all EU’s exports to Montenegro. In 2017, EU imports of agricultural products from
Montenegro decreased by 25% since 2016 whereas EU exports of agricultural products to
Montenegro increased by 3.7%. The EU imported mainly edible vegetables from Montenegro
and exported meat to Montenegro.
Table 2
EU28 merchandise trade by AMA/NAMA sector with Montenegro (million euro)
2008
2009
2010
2011
2012
2013
2014
2015
EU28 imports
276
172
185
225
298
188
251
144
6
7
6
7
7
7
8
8
270
165
180
218
292
182
243
136
EU28 exports
1.135
693
715
786
893
912
973
877
124
115
121
134
184
159
195
164
1.011
578
594
652
709
753
779
713
EU28 trade balance
859
521
530
562
595
724
722
733
118
108
116
127
178
152
187
156
741
413
414
434
417
571
535
577
2016
153
7
145
994
177
817
841
169
672
2017
166
6
161
1.068
183
885
901
178
724
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Source: European Commission
Part of the agricultural trade between the EU and Montenegro is subject to Tariff rate quotas
(TRQs), either duty-free or at a reduced customs duty rate. The agricultural TRQs granted by
Montenegro were almost fully utilized by EU exporters.
181
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The EU grants two agricultural TRQs to Montenegro (beef and wine). In 2017, the beef quota
was not used by Montenegro's exporters and the wine quota was used at 14%.
Table 3.Utilisation of tariff rate quotas for EU exports to Montenegro in 2017
Product
Poultry meat
Cheese
Meat preparations
Waters (3 quotas)
Wine
Source: Montenegro's authorities
Size of the quota
500 t
65 t
130 t
14 800 hl
3 500 hl
Fill rate (%)
100
100
100
74
100
2.3.
Preference Utilisation rate
The PUR is relatively high for both imports and exports, which highlight a generally good
knowledge of trade operators regarding the preferential access to both markets, with some
margin for improvement from the side of EU trade operators.
Table 4
Use of preferences on imports into EU from Montenegro
use as % eligible
Source:
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
2013
83%
2014
85%
2015
81%
2016
83%
2017
90%
Table 5
Use of preferences on imports into Montenegro from EU
2013
2014
2015
2016
2017
use as % eligible
86%
86%
85%
85%
86%
Source:
DG TRADE based on statistics from Montenegro
2.4.
Trade in Services and FDI
In 2016, total trade in services represented nearly 57% of the total bilateral trade of goods and
services with a share of 69.5% for EU imports and a much more modest 23% share for EU
exports. This large imbalance allows Montenegro to run a surplus in its services trade with the
EU, which is largely explained by important investment on high-end tourism facilities.
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Table 6
EU28
services
trade with Montenegro (million euro)
2011
2012
2013
2014
2015
EU28 imports
165
233
219
231
236
EU28 exports
292
382
216
271
226
Balance
127
149
-3
40
-10
Total trade
458
615
435
502
462
Source: European Commission
2016
349
304
-46
653
The EU’s contribution to total FDI in Montenegro was 38.7% in 2017.
Table 7
Foreign direct investment EU28 with Montenegro (million euro)
2014
Stocks
Flows
-2
-29
Inward
2015
75
82
2016
5
-72
Outward
2014
2015
1.663
1.396
128
5
2016
1.307
140
Foreign di
Source: European Commission
3.
I
SSUES ADDRESSED IN THE ANNUAL
C
OMMITTEE MEETINGS
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. The last meeting of the Sub-committee on Trade,
Industry, Customs and Taxation took place on 3 October 2017, during which the slight
recovery of trade in 2016 was highlighted. In this respect Montenegro was encouraged to
diversify its exports of goods and to increase added value in export-oriented production.
Montenegro also recognised the need to further improve the business environment as an
essential prerequisite to attract investments in the country.
4.
S
PECIFIC AREAS OF IMPORTANCE
The
business environment
is a key area of importance, in particular unfair competition from
the informal economy, has a negative impact on the business environment.
Public
procurement
is another area of concern. Under the SAA (Article 76) the respective public
procurement markets are in principle opened on the basis of non-discrimination and
reciprocity (no less favourable treatment). Despite a broad level of alignment with the EU
acquis in the area of classical and utilities procurement, Montenegro needs to bring up
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implementation and enforcement capacities at all levels. Agricultural and fishery issues were
discussed in the Sub-committee meeting on 6 November 2017.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Enhancing transparency and accountability -in particular ensuring the effective, efficient and
transparent functioning of the public procurement system- and the fight against corruption are
essential issues that affect EU businesses doing business in Montenegro that are part of the
regular follow-up done under the SAA multidisciplinary subcommittee structures.
6.
C
ONCLUSIONS
Montenegro and the EU are very close trading partners, even though Montenegro is yet to
reap the full benefits of trade liberalisation with the EU. As a small country with an open
economy it needs to diversify and steer its goods-export base away from low-value added
sectors, which are exposed to volatile commodity prices, and from competition in low-value
added sectors. While the trade agreement is generally implemented smoothly by Montenegro,
the business climate is negatively affected by the large size of its informal economy and
shortcomings in the rule of law which are a strong deterrent to investments. However, it is
expected that the renewed momentum of the
European integration
process will give further
impetus to major reforms and consequently have a positive impact on the investment and
business climate in the coming period. Similarly, the development of a
Regional Economic
Area
based on EU rules and standards, to which all Western Balkan economies have
committed, has the potential to generate untapped growth.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE
TRADE PILLAR OF THE EU-SERBIA STABILISATION AND ASSOCIATION
AGREEMENT
1.
I
NTRODUCTION
On 29 April 2008, the EU and Serbia signed a Stabilisation and Association Agreement
(SAA). The SAA is the prime instrument of the EU’s overall policy towards the Western
Balkan countries’ Stabilisation and Association process.
Under this process, all Western
Balkans countries, including Serbia, are granted a clear perspective to become an EU Member
State.
The SAA entered into force on 1 September 2013, however, the trade-related part of the SAA
already applied, through an Interim Agreement, as of 1 February 2009 for Serbia, and as of 8
December 2009 for the EU side. This Agreement established a free-trade area over a
transitional period of six years. As regards the EU, in 2010, 97.5% of tariff lines were already
duty-free, representing
96% of the value of imports from Serbia. On Serbia’s side, by 2016,
95.6% of tariff lines for imports from the EU were liberalised.
The Agreement covers products in all Chapters of the Harmonised System. Only a few
exceptions, concerning a limited number of agricultural and fishery products were not fully
liberalised and are still subject to preferential quantitative concessions (TRQs).
The Agreement also includes provisions concerning competition matters, investment and
related payments, a high level of protection of intellectual property rights and strengthened
co-operation in customs matters. Since the entry into force of the full SAA in 2013, a number
of other legislation approximations with impact on trade were put in place in the fields of
public procurement, standardization and the right of establishment.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Compared to 2016, total trade between the EU and Serbia increased by 14.7% reaching nearly
EUR
23.5 billion
in 2017. Unlike last year’s trend,
where imports from Serbia increased by
almost 11% against a more modest 4.6% growth of EU exports to Serbia, 2017 saw an equal
growth rate on both imports and exports.
Table 1
2008
Imports
4.335
Exports
9.700
Balance
5.365
Total trade 14.035
2009
3.436
7.071
3.635
10.506
EU 28 trade in
goods
with Serbia (million euro)
2010
2011
2012
2013
2014
4.349
5.147
5.053
6.588
7.110
7.881
9.116
9.660
9.927
10.357
3.532
3.969
4.606
3.339
3.247
12.230
14.264
14.713
16.515
17.466
2015
7.879
11.155
3.277
19.034
2016
8.739
11.664
2.925
20.403
2017
9.997
13.408
3.411
23.405
Source: Eurostat
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Since the signature of the trade agreement in 2008, total trade between the EU and Serbia has
increased by almost
67%
from EUR 14 billion to nearly EUR 23.5 billion. Over this period,
the EU has further consolidated its position as Serbia’s main trade partner: 64.5% of Serbia’s
total trade is now with the EU compared to only 56.5% in 2008. The five top traded products
in 2017 remained machinery and appliances; base metals; transport equipment, mineral
products; and chemicals.
Overall, the EU enjoys a
trade surplus
with Serbia, which has however declined by more
than 36% since the start of the reciprocal trade preferences in 2008 and following the set of
reforms undertaken by the country to make its economy more competitive.
Serbia has also consistently recorded a trade surplus in
agricultural products,
in average
around EUR 200 million. In 2017 this surplus fell to EUR 54 million as Serbia was affected
by a major drought which led to a sharp decline in its agricultural output.
2.2.
Trade in agricultural goods
Trade in agricultural products represents around
10% of the total bilateral trade.
In 2017,
nearly 12% of all EU’s imports from Serbia were agricultural products versus 8.5% of all
EU’s exports to Serbia. This ratio has remained relatively stable over the last ten years of
implementation of the agreement. In 2017, EU imports and exports of agricultural products
from / to Serbia have increased by 3.4% and 23.4% respectively since 2016. The EU imported
mainly fruits & nuts and cereals from Serbia. Serbia's key export products to the EU were
food preparations and oil seeds & oleaginous fruits.
Table 2
2008
2009
2010
2011
2012
2013
2014
2015
2016
EU28 merchandise trade by AMA/NAMA sector with Serbia (million EUR)
EU28 imports
3.436
4.349
5.147
5.053
6.588
7.110
7.879
8.739
721
735
1.005
967
964
989
1.083
1.151
2.715
3.614
4.142
4.086
5.624
6.120
6.796
7.587
EU28 exports
7.071
7.881
9.116
9.660
9.927
10.357
11.155
11.664
476
505
563
694
768
838
911
924
6.594
7.376
8.553
8.965
9.160
9.518
10.244
10.740
EU28 trade balance
3.635
3.532
3.969
4.606
3.339
3.247
3.277
2.925
-245
-230
-442
-273
-197
-151
-172
-228
3.880
3.762
4.411
4.879
3.536
3.398
3.448
3.153
2017
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
4.335
579
3.756
9.700
550
9.150
5.365
-30
5.394
9.997
1.190
8.806
13.408
1.136
12.272
3.411
-54
3.465
Source: European Commission
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Part of the agricultural trade between the EU and Serbia is subject to TRQs, either duty-free
or at a reduced customs duty rate. The majority of agricultural and fish quotas were fully
utilised by EU exporters. Quotas for fruit juices and wine were well utilised (60 and 80%
respectively); quotas for wheat (31%) and sunflower seeds (10%) were little utilised and the
maize quota remained completely unused in 2017.
The EU grants tariff quota to Serbia for beef, sugar and wine. The sugar quota is traditionally
fully utilised with some take-up of the wine and beef quotas.
Table 3 Utilisation of TRQs for EU exports to Serbia in 2017
Product
Live pigs
Pork
Milk and cream (2 quotas)
Cheese
Potatoes
Vegetables
Wheat and meslin
Maize
Sunflower seed
Meat preparations
Sugar
Fruit juices
Wine
Spirits
Tobacco
Cigarettes (2 quotas)
Source: Serbian authorities
Size of the quota
200 t
200 t
260 t
50 t
165 t
20 t
300 t
270 t
60 t
150 t
70 t
20 t
25 000 hl
1 180
75
1 625
Fill rate (%)
100
100
100
100
100
98
31
0
11
100
100
60
81
100
100
n.a.
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2.3.
Preference Utilisation rate
The PUR is high for imports from Serbia, which indicates a good knowledge of trade
operators regarding the preferential access to both markets.
Table 4
Use of preferences on imports into EU from Serbia
2013
2014
2015
2016
use as % eligible
92%
94%
93%
90%
Source:
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
2017
91%
Reliable data to calculate the PURs for EU exports was not made available by Serbia.
2.4.
Trade in Services and FDI
In 2016, total trade in services represented nearly 20% of the total bilateral trade of goods and
services with a share of 17% for EU imports and a 16% share for EU exports. Overall the EU
records a surplus in its trade in services with Serbia which has averaged around
EUR 488 million over the last 6 years.
Table 6
EU28
services
trade with Serbia (million EUR)
2011
2012
2013
2014
EU28 imports
EU28 exports
Balance
Total trade
1.643
1.848
205
3.492
1.574
2.108
534
3.682
1.603
2.295
691
3.898
1.823
2.516
693
4.339
2015
1.953
2.288
335
4.242
2016
1.771
2.244
473
4.015
Source: European Commission
Regarding FDI, the EU is by far Serbia’s main investment partner, accounting for more than
three quarters of net FDI inflows. The EU continued to be the main source of foreign
investment with a share in net FDI of 63% in 2016 and more than three-quarters of the
cumulative FDI stock.
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Table 7
Foreign direct
investment
EU28 with Serbia (million EUR)
Inward
Outward
2014
2015
2016
2014
2015
2016
Stocks
Flows
Source: European Commission
20
271
156
69
165
26
12.570
185
11.941
262
12.657
403
3.
I
SSUES ADDRESSED IN THE ANNUAL TRADE COMMITTEE MEETING
Commercial issues are discussed on an annual basis in the context of the Sub-committee on
Trade, Industry, Customs and Taxation. The last meeting took place on 7 February 2017,
during which the positive trade trends were again highlighted, with the EU remaining Serbia’s
first trade partner with a share of nearly 64% of its global trade. Serbia’s decision to
discontinue the nearly two-year long safeguard measures against EU originating imports of
dairy and pork products as of 1 January 2017 was welcome and the importance to respect the
smooth implementation of the SAA was emphasised. Other trade issues addressed include the
importance for Serbia to finalise its WTO accession; the need to effectively and consistently
implement a risk-based methodology as the basis to exercise controls of exports and imports
at borders and avoid excessive administrative and time-consuming barriers to trade that result
from unnecessary inspections, and the excise discrimination of grain-based spirits, which tend
to be imported from the EU, as opposed to the favourable treatment of fruit-based spirits,
which tend to be produced domestically.
The most pressing open issue in 2017 concerned the
132
restrictive measures
imposed by
Serbia for the
export of non-hazardous waste,
in particular metal waste. These restrictions
led to a complete halt in the issuing of new export licences for metal waste up until the end of
March 2018 when a few, very limited, export licences were granted by Serbia. Since
December 2017, the EU has repeatedly urged Serbia to lift those measures which it considers
in breach of the SAA. After a series of bilateral consultations, the situation was resolved in
May 2018.
Agricultural and fishery issues were discussed in the Sub-committee meeting on 9 March
2017.
The next annual trade committee meeting is foreseen on 17 October 2018.
4.
S
PECIFIC AREAS OF IMPORTANCE
The EU has repeatedly encouraged Serbia to finalise its accession to the WTO as it will
anchor economic reform and trade liberalization carried out in the context of the EU
Stabilisation and Association Process.
WTO accession
is a requirement for the closing of the
External Relations Chapter (Chapter 30) in the process of Serbia’s accession to the EU. The
chapter on External Relations was opened at the Intergovernmental Conference in Brussels on
11 December 2017.
132
Since the second half of 2017
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Serbia applied for WTO membership in 2005. Serbia’s WTO membership remains dependent
on the adoption of a WTO and EU acquis-compliant law on genetically modified organisms
and on the completion of market access negotiations with a number of WTO members.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Although Serbia has continued to build a record of accomplishment in implementing the
interim agreement and then the SAA provisions since their entry into force, some non-
compliance issues remain. These concern mainly State aid regulation (article 73 of the SAA),
restrictions to free movement of capital - in particular restrictions to the acquisition by
foreigners, including EU citizens, of agricultural land - (article 63), respect for the
transparency and non-discrimination principals in public procurement procedures (article 73)
and fiscal discrimination on alcohol (article 37). All these pending issues were raised in the
relevant EU-Serbia Sub-committee meetings held or planned in 2018.
6.
C
ONCLUSIONS
Serbia and the EU have a very close and growing trade partnership which increased their total
trade by almost 67% since the entry into force of the trade agreement (SAA). The EU is
Serbia’s main trading partner, accounting
for 67.6 % of total exports and 62.3 % of total
imports of goods.
The EU continued to be the main source of foreign investment too, with a share in net FDI of
63% in 2016 and more than three-quarters of the cumulative FDI stock.
Despite very good trade and investment dynamics, companies still face a number of
challenges, including an unpredictable business environment and issues of non-compliance
with the SAA, regarding in particular a lack of transparency of public procurement
procedures, restrictions on capital movements, state aid control, fiscal discrimination on
imported spirits.
Overall, it is expected that the renewed momentum of the
European integration
process and
progress in accession negotiations will give further impetus to major reforms and
consequently have a positive impact on the investment and business climate in Serbia in the
coming period. Similarly, the development of a
Regional Economic Area
in the Western
Balkans based on the CEFTA agreement and on the EU rules and standards, to which all
regional economies have committed, has the potential to generate untapped growth.
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FIRST GENERATION FREE TRADE AGREEMENTS WITH LATIN AMERICAN
COUNTRIES
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ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF
THE EU-CHILE ASSOCIATION AGREEMENT
133
1.
I
NTRODUCTION
The trade pillar of the
EU-Chile Association Agreement
(‘the Agreement’) entered into
force on 1 February 2003 and was fully implemented after finalisation of all ratifications on
1 March 2005. During the following 15 years there has been continuous work and cooperation
by both sides to implement the agreement. The Agreement with Chile is one of the EU’s first
generation FTAs and was considered highly ambitious at the time of its conclusion. It was the
first trade agreement subjected to an ex-post evaluation study to analyse the impact it had had.
This study was concluded in 2012. Another study conducted in 2017 clearly showed the need
for modernising the agreement, to avoid the EU losing further ground to other partners trading
with Chile, such as the US and China.
Against this background, at the
EU-CELAC
(Community of Latin American and Caribbean
States) summit in Santiago in January 2013, the EU and Chile agreed to explore options for
a
comprehensive modernisation of the Agreement.
The 2015 Trade for All
Communication
134
highlighted the objective of pursuing a modernisation of the Agreement. A
scoping exercise was successfully concluded with Chile in January 2017. Negotiations for
modernising the Agreement were launched on 16 November 2017 in Brussels, following the
adoption of the negotiating directives by the Council on 13 November in 2013
135
. The EU and
Chile are now engaged in a negotiation process for an ambitious, comprehensive and
progressive modernised agreement. The most important areas include (1) further liberalisation
in agriculture and food products, (2) rules of origin, customs and trade facilitation provisions,
(3) non-tariff barriers for industrial and agri-food products, (4) market access for services
sectors of key EU and Chile interest, (5) more comprehensive investment liberalisation
disciplines, (6) public procurement rules and improved coverage in terms of entities, (7)
intellectual property rights, including the protection of GIs on foodstuffs, (8) TSD and (9) for
the first time trade and gender equality, which is a pilot case for the EU with the aim of
identifying and addressing those barriers faced by women to benefit from trade opportunities,
building on the sustainable development goals and reaffirming commitments of international
conventions.
133
134
135
More information can be found at:
http://ec.europa.eu/trade/policy/countries-and-regions/countries/chile/
http://ec.europa.eu/trade/policy/countries-and-regions/countries/chile /
http://www.consilium.europa.eu/media/32405/st13553-ad01dc01en17.pdf
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2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Overall evolution since the FTA provisional entry into force
Bilateral trade in goods between 2003 and 2017 more than doubled in value, increasing 114%
in total. Overall, the rise is substantially sharper for EU exports, which increased 197% over
the period, compared to a 65% grow in EU imports from Chile. Chile’s share in total EU trade
has remained stable since 2003, at around 0.5% of total EU trade, with a 0.7% peak in 2006.
Merchandise trade EU28 with Chile (million EUR)
Base
Latest
2003
2017
EU28 imports
5 004
8 259
EU28 exports
2 963
8 785
Balance
-2 041
526
Total trade
7 967
17 044
Source: Trade G2 Statistics/ISDB
Chile
Growth
total average
65%
6%
196%
9%
114%
7%
The evolution of bilateral trade in goods can be divided into three distinct periods, with
marked differences:
1. 2003-2007 was characterised by a substantial increase in EU imports, a more moderate
growth in EU exports and an increasing trade deficit.
2. 2008-2011 saw an initial fall in EU imports, followed by comparable growth rates in
EU imports and EU exports and a smaller trade deficit. In 2011 bilateral trade reached
a historic high of EUR 18.9 billion.
3. Since 2012 EU imports have fallen slightly while EU exports have remained relatively
stable and bilateral trade has been close to balance, with a slight trade surplus for the
EU (except in 2014), which is due to price effects rather than quantities.
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Trade flows in 2017
In 2017 EU-Chile bilateral trade grew by 6.7% in value compared to 2016, reaching
17 billion. The EU experienced a trade surplus worth EUR 544 million, the fourth trade
surplus in the EU’s favour since 2007. While EU exports increased 2.3% year-on-year,
EU
imports grew by 11.7%. The increase
in the value of Chile’s exports to the EU is mainly,
although not exclusively, attributable to the recovery of copper prices. Compared to 2016,
copper imports from Chile grew by 18% in value.
Performance of the EU compared to other trade partners of Chile
Despite the
prima facie
strong bilateral growth rate since 2003, over time the EU has
progressively lost market share in Chile to other trading partners. Between 2003 and 2009 the
EU was Chile’s 1
st
trading partner. The EU was overtaken by China in 2009 and by the US in
2011
136
, and is therefore currently Chile’s third trading partner. Whilst China’s share in
Chile’s total trade continues to increase (partly due to China’s increasing imports of Chilean
copper), the gap with the US has narrowed recently.
The external ex-post assessment of the impact of the FTA commissioned by DG TRADE in
2012 concluded that the FTA had helped to prevent the EU market share in Chile from further
substantial falls, thereby mitigating the crowding-out effect of the FTAs concluded by Chile
with third parties since 2003. The 2017 ex-ante external study commissioned by DG TRADE
to support the impact assessment on the modernisation of the Agreement confirmed that in
relative terms there is clear erosion in bilateral EU trade flows to Chile since 2003 in favour
of third partners.
136
The Chile-USA FTA entered into force on 1 January 2004 and Chile-China FTA entered into force on 1
October 2006.
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2.2.
Trade in agricultural products
Almost
a third of EU imports from Chile are agricultural products.
The main agricultural
products shipped by Chile to the EU are fruits (notably grapes, of which Chile is the world's
top exporter, apples and pears), vegetables, wines, nuts and fruit juices. In 2017, imports of
agricultural goods from Chile were worth EUR 2 371 million. While EU agricultural exports
to Chile were much smaller at EUR 716 million in (constituting 8% of the total value EU
exports to Chile), exports
of agricultural products to Chile grew by almost 30%
between
2016 and 2017.
EU products subject to TRQs are cheese, tuna, salmon and hake. The fish quotas are less
used, except for tuna where industry calls for an extension of the quota. Cheese, however, is
one of the top EU agricultural exports to Chile, with exports worth EUR 67 million in 2017.
Although the quota increases by 75 tons each year, cheese exports to Chile by far exceeded
the quota in recent years. The quota for 2018 was filled on 14 February. Quantities exported
in excess of the quota are subject to Chile’s flat 6% import duty.
Utilisation of TRQs for EU exports to Chile in 2017
Product
Cheese
Hake
Salmon
Canned tuna
Source: Chilean authorities
Size of the quota
(tons)
2 550
5 000
40
150
Fill rate (%)
100
n.a.
n.a.
97
For Chile, products subject to tariff quotas are certain types of fish (hake, Pacific salmon and
tuna), meat (beef, pork, poultry meat, sheep meat), garlic, processed cereals, mushrooms,
cheese, preserved cherries and sweets, chocolate and biscuits. The poultry meat quota was
fully filled in 2016 but the utilisation rate fell to 77% in 2017. Only a quarter of the pork and
sheep meat quotas were utilised in 2017. The use rate was smaller for beef (14% in the 2016-
2017 quota year) and garlic (2%), and even zero for all the other quotas.
2.3.
Trade in Services and FDI
Bilateral trade in services in 2016 stood at EUR 5.5 billion (EUR 3.7 billion in exports and
EUR 1.8 billion in imports), compared to EUR 5.6 billion in 2015. Between 2010 and 2016
EU exports of services increased 25%, while EU imports increased 18%.
Trade in Services EU-28 with Chile (million EUR)
2010
2011
2012
2013
EU28 (imports)
1 518
1 335
1 517
1 573
EU28 (exports)
2 956
3 192
3 064
3 081
Balance
1 438
1 857
1 547
1 507
Total trade
4 474
4 527
4 580
4 654
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2014
1 681
3 417
1 736
5 098
2015
1 907
3 677
1 770
5 584
2016
1 787
3 684
1 897
5 470
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The EU remains Chile’s first FDI provider, with outward FDI stocks worth EUR
47.2 billion
in 2016 but EU FDI flows in 2016 (EUR 3.2 billion) were less than half the outward flows
registered in 2014. The decrease in outflows is largely due to the evolution in the mining
industry, which has historically represented over 45% of total FDI in Chile. With 2016 data,
in 2017 Chile remained the 3
rd
recipient of FDI in Latin America overall, after Mexico and
Brazil, according to UNTACD. However with 2017 data, in 2018 report it is not among the
top 5 host regional economies.
FDI inflows from Chile to the EU recorded EUR 331 million in 2016, slightly above the
average. Since 1998, Chile has been the World Economic Forum’s most competitive nation in
the region (in 2017 it ranked 33 of 138 globally). Chile used to be regional leader on the
World Bank Doing Business Report (DB) but it is now second after Mexico. In 2018 Chile
ranks 55 of 190 on DB and 71.22 on the distance to frontier (DTF) measure (Mexico ranks 49
and 72.27 respectively)
137
FDI EU28 w ith Chile (m illion euro)
2013
2014
2015
998
1,707
823
29,134
42,723
42,576
846
5,746
205
8,180
-687
1,716
FDI EU28 w ith Extra-EU28 (m illion euro
2016
1,387
47,233
331
2,899
Inw ard stocks
Outw ard stocks
Inw ard flow s
Outw ard flow s
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2.4.
Preference Utilisation Rate (PUR)
In 2017 the
use of preferences on EU imports from Chile was 95%,
a high rate that has
remained stable over recent years.
Use of preferences on imports into the EU from Chile
2014 2015 2016 2017
use as % of eligible
94% 95% 95% 95%
Source Trade G2 Statistics/ISDB. Includes all preferences (FTA, GSP, bilateral)
The use of preferences for EU exports to Chile
was 75.7% in 2017 as compared to 74% in
2016, showing a
slight improvement in the take-up of the opportunities by EU firms.
Utilisation by EU companies can be expected to increase over time once the modernised
Agreement and its improved will be applied, offering, inter alia, a better market access for EU
exporters and a better framework for doing business in Chile.
137
Chile currently ranks 55th out of 190 countries on the list, down from 34th in 2014. Its ranking declined to
41st in 2015, 48th in 2016, and 57th in 2017, according to the World Bank’s reports.
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Use of preferences on EU exports to Chile (adjusted utilisation rate)
use as % of eligible
2013
78.3
2014
77.9
2015
75.7
2016
73.9
2017
75.7
Source Trade G2 based on Chilean national statistics
3.
A
NNUAL
T
RADE
C
OORDINATORS
M
EETING
AND
T
RADE
-
RELATED
S
UB
-
COMMITTEES
Both sides have invested the necessary resources in the institutional work under the
Agreement and the meetings under the Agreement have been very regular. The Trade
Coordinators Meeting and Subcommittees on trade related matters are organised every year.
The Trade Coordinators Meeting of the EU-Chile Association Agreement met in Brussels on
15 November 2017. It was preceded by meetings of all the trade-related subcommittees
created by the Agreement except for the Special Committee on Customs Cooperation and
Rules of Origin, which will be held at a later date.
The Committee on Standards, Technical Regulations and Conformity Assessment took place
on 30 October 2017, the Joint Committees on Trade in Wine and Spirits/Aromatised drinks on
13 November 2017 and the Joint Management Committee on SPS Measures on 14-15
November 2017.
Trade-related sub-committees
The
Special Committee on Standards, Technical Regulations and Conformity
Assessment Procedures:
the EU questioned Chile on a draft Technical Regulation on
the sector of cables that deviates from international standards. Chile stated that after
receiving and analysing numerous comments, the relevant authorities have decided to
undertake an impact study of the proposed measures before they are adopted. Also,
another issue discussed concerned the withdrawal of the certification of a specific
category of electric cables produced by the EU that had been deemed to be deficient
according to Chilean test results. The affected companies were re-admitted to certify
the cables in May 2018.
The
Joint Committee on Trade in Wine and Spirits/Aromatised drinks:
the Parties
agreed to finalise the textual modifications of the wine and spirits agreement and Chile
committed to conclude its examination of the pending EU GIs registration. Regarding
the Agreement on Trade in Organic Products,
138
which entered into force on 1 January
2018, Chile requested a transition period of six months during which both the new
agreement and the previous recognition by the EU of equivalent Control Bodies in
Chile would be valid.
138
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2017:331:TOC
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The
Joint Management Committee on SPS Matters:
The Joint Management
Committee on SPS Matters: the EU highlighted that good progress was made on EU
applications to access the Chilean market in the case of products of animal origin, but
pointed out the lack of effective market access for fruits and vegetables, except kiwis,
exported to Chile by the EU. The parties agreed that the work of the Animal Welfare
Group, established by the Joint Management Committee, was satisfactory and also
exchanged views on the need of updating some of the Appendixes of Annex IV
139
.
Trade Coordinators Meeting
The Trade Coordinators Meeting, to which the sub-committees on trade related issues report,
reviewed recent bilateral trade and investment flows, and exchanged information on relevant
multilateral developments and on trade negotiations with third partners. The Trade
Coordinators Meeting reviewed the reports on the outcome of the trade-related sub-committee
meetings. EU highlighted a number of issues related to government procurement, urging
Chile to make progress to ensure compliance with the obligations arising from the existing
Agreement. The EU also raised the issue of the access of its vessels fishing for swordfish to
Chilean ports. Chile took note and agreed to inform the Chilean competent authorities. The
issue was further discussed at the EU-Chile Ocean Governance Dialogue in Lima in January
2018 where Chile confirmed that there are no longer reasons to prevent the EU swordfish
vessels from accessing Chilean ports, as long as certain requirements, applying to all national
and foreign vessels, are met.
4.
PROGRESS MADE
, M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The main open issue on FTA implementation is related to some of the existing obligations on
government procurement, which Chile is yet to implement. Although Chile has made some
progress (e.g. creating a common procurement portal and registry), a number of pending
issues remain, and the EU continues to urge Chile to make progress, to ensure full compliance
with its obligations, and to possibly adopt interim measures in case legislative changes are
needed.
Moreover, the 2002 wine and spirits agreements were amended last time in 2009. Therefore,
they need to be up-dated, in particular adding the new wine and spirits names that have been
granted protection in the EU and Chile since then. This process has proven to be challenging,
due to the lengthy Chilean internal assessment procedures necessary for amending the wine
and spirits agreements.
In March 2017 Chile opened its market for EU beef. The last remaining obstacle was the
identification of meat cuts which was also reflected in amending the terms of the export health
certificate. With regard to SPS measures, Chile opened its market for bovine embryos from
139
Annex
IV, to the Association Agreement, is the ‘Agreement on Sanitary and Phytosanitary measures
applicable to trade in animals and animal products, plants, plant products and other goods and animal
welfare’, the SPS Agreement currently in force between EU and
Chile.
198
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Belgium, porcine semen from the Netherlands and casings from Denmark. These two
openings in 2017 added to an already long list of agri-food commodities that the EU exports
to Chile. The Market Access procedure derived from the EU/Chile SPS Agreement has
proved to be advantageous for the Member States. Chile recognises applies the same import
requirements to the entire EU. In addition, the market access procedure has been simplified.
Namely once the market is open for a commodity from one or more Member States and when
another Member State wants to export for the first time, Chile evaluates the information
provided by the Commission. Further information is only needed when Chile has some doubts
on specific aspects. Chile rarely requires to carry out on-the-spot verifications of the
information provided. In such cases, Chile visits some EU Member States and extends the
conclusions to the entire European Union. For certain commodities such as gelatine, collagen,
egg products, prepared meals, meat extract all MS are authorised. Chile approves the EU
exporting establishments with a pre-listing procedure in a short delay (within days).
5.
C
ONCLUSIONS AND OUTLOOK
As in previous years, the process of implementation through the work of the various trade-
related sub-committees and the Trade Coordinators Meeting has worked very well, dialogue is
fluid and potential problems have been generally addressed early on. The key issues are the
above-mentioned list of pending obligations for Chile on public procurement and the up-
dating of the wine and spirits agreement.
In absolute terms the evolution of bilateral trade and investment is at first sight overall
positive, both Chile and the EU have concluded numerous trade agreements since 2003, and
both sides face challenges to retain their respective market share and preferential status in
competition to other preferential trading partners.
It is against this backdrop that the EU and Chile decided to modernise to upgrade and replace
the existing EU-Chile trade agreement with a completely new and very ambitious framework
for bilateral trade and investment. This process is under way and two substantial rounds of
negotiations have already taken place in January 2018 in Santiago de Chile and in May 2018
in Brussels
140
.
140
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1395
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ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF
THE EU-MEXICO ASSOCIATION AGREEMENT
141
1.
I
NTRODUCTION
In 1997 Mexico was the first country in Latin America to sign an
Economic Partnership,
Political Coordination and Cooperation Agreement
with the EU, which came into force in
2000 (‘Global Agreement’). Its trade provisions were later developed into a comprehensive
Free Trade Agreement (hereinafter called ‘the FTA’), which entered into force in October
2000 for goods and 2001 for services, respectively. It has now been applied for 18 years.
At the time the FTA was concluded,
it was the most extensive trade agreement
that had
ever been signed by the EU. The Agreement was considered ambitious and worked well for
both sides, but over time it became clear that its provisions needed to be modernised to be fit
for the 21
st
century. Bilateral goods trade between the EU2 and Mexico has expanded
significantly after the entry into force of the FTA, with exports and imports having more than
doubled. Bilateral imports and exports developed in a similar pattern, although the exports
from the EU to Mexico have grown slightly faster than exports from Mexico to the EU.
Although the FTA between the EU and Mexico includes some elements of non-tariff
measures besides tariff reductions, it does not yet go as far as the deep and comprehensive
FTAs that the EU recently concluded with other partner countries. Nowadays, there is a clear
trend for FTAs to focus more on the Non-Tariff Measures (NTMs) aspects of trade, as tariffs
have become relatively less important barriers to trade than are NTMs. In this context, the EU
and Mexico agreed to explore the possibility of deepening the level of its commitments during
the CELAC summit in Santiago de Chile in 2013. Following these exploratory talks, trade
negotiations to modernise the existing EU-Mexico Global Agreement which includes an FTA
were launched on 25 May 2016 and carried out over 9 rounds.
An ‘Agreement in principle’ was reached at ministerial level on the trade part of a modernised
EU-Mexico Global Agreement on 21 April 2018. Discussions are now focussing on
completing the technical details of the new FTA, which, once in force, will replace the
existing FTA. In view of the above, trade relationships between the EU and Mexico were
marked in 2017 by the negotiation process to modernise the EU-Mexico Global Agreement.
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
In 2017, bilateral trade in goods between the EU and Mexico increased by 14.7% compared to
2016, and totalled EUR 61.7 billion. Mexican exports to the EU (EUR 23.2 billion) grew
faster than the EUR 37.9 billion worth of exports that the EU sent to Mexico (19.6% and
12.0%, respectively), even though the EU continues to register a trade surplus with Mexico,
which grew from EUR 13.9 to EUR 14.1
billion in 2017. In 2017, the EU remains Mexico’s
141
See
detailed
information
regions/countries/mexico/
available
on:
http://ec.europa.eu/trade/policy/countries-and-
200
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1960849_0202.png
second largest export market, with a share of 6% of total exports and totalling
EUR 23.8 billion.
Graph 1: Merchandise trade between the EU and Mexico
Source: Eurostat.
As can be seen from the above graphic the structure of Mexico’s trade with the EU maintains
a coherent pattern with the main sectors and their respective share of the bilateral trade
remaining quite stable over the years.
Imports into the EU from Mexico: Imports into the EU from Mexico totalled
EUR 23.2 billion. The largest export categories of products imported from Mexico to the EU
were machinery and appliances (EUR 6 billion
25% of EU imports from Mexico), followed
by transport equipment (cars mainly EUR 5.6 billion
23.6%), oil-related products (17.8%)
and optical/photographic instruments (12%). The import growth is widespread throughout the
sectors as all sectors showed positive growth rates above 2015 levels (except for the oil
sector). This marks a positive trend compared to the year 2016, which was marked by a
significant decrease of overall trade flows due to a marked reduction of oil-related products
imports from Mexico.
EU Exports to Mexico: European exports to Mexico totalled EUR 37.9 billion; the main
categories remain the same in comparison to previous years, namely: industrial machinery
(EUR 13.6 billion - 36% of EU exports to Mexico), followed by the automotive sector
(EUR 6.3 billion
16.5%), then products of the chemical or allied industries
(EUR 5.4 billion), base metals (EUR 2.8 billion) and plastics (EUR 1.8 billion). The increase
was widespread throughout the different sectors.
2.2.
Trade in agricultural goods:
Trade in agricultural and fisheries products totalled EUR 2.7 billion, which represented 4.4%
EU-Mexico trade flows consisting of EUR 1.3 billion EU imports from Mexico and
EUR 1.4 billion EU exports to Mexico.
201
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1960849_0203.png
Table 1: Agrifood trade flow between the EU and Mexico
Source: Eurostat
2.3.
Preference Utilisation rate (PUR)
This rate shows to what extent Mexican importers and EU exporters are using the FTA
preferences, i.e. take advantage of the FTA’s duty reductions. In 2017,
the PUR for Mexican
imports into the EU was 70.5%.
This compares to 57.8% in 2016, 52.1% in 2015, and
60.7% in 2014 and 66.8% in 2013.
According to statistical data received from the Mexican authorities on the
utilisation of
preferences by EU exporters,
covering the period from 1 July 2016 to 30 June 2017, EU
preferential utilisation rates increased significantly reaching 85%, while EU exports to
Mexico have decreased in value during the same period. During the consecutive period (i.e. 1
July 2016 to 30 June 2017), EU exports increased substantially in value (by more than 16%)
but this was accompanied by a reduction of the preferential utilisation rate to a level
comparable to the year 2015 and 2016, (from 85% to 75%).
142
As a general pattern, it can be noted that the existing agreement does not provide tariff
reduction to approximately two thirds of the EU exports to Mexico due to the fact that,
depending on the product, the corresponding MFN applied rate is zero or because there is no
preference under the agreement.
See below statistics provided by the Mexican authorities on the PURs for EU exports to
Mexico. Note that Mexican data are not consolidated over a calendar year but over a temporal
window of 12 months starting on 1st July each year.
Table 2. Preferential Utilisation Rate for EU exports to Mexico (1000 EUR)
Period
1/7/2014 to 30/6/2015
1/7/2015 to 30/6/2016
Total EU
exports to
Mexico
31 603 733.6
37 226 535.6
Preference
eligible exports
10 694 933.1
12 775 592.0
Preferential
exports
8 263 931.2
9 745 100.7
Preference
Utilisation Rate
(%)
77.3
76.3
142
The fluctuation in the PUR for 2016 and 2017 could also have other reasons, including lack of detailed tariff
line data from Mexico for some product categories concerning exports worth 2.4 billion EURO (out of a total
of 43.2 billion EUR). The remaining "unknown" preference utilisation in lines with real preferences
concerns less than 1 million euro.
202
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1960849_0204.png
Period
1/7/2016 to 30/6/2017
1/7/2017 to 30/6/2018
Total EU
exports to
Mexico
36 419 907.6
43 277 509.6
Preference
eligible exports
12 307 045.4
13 527 132.4
Preferential
exports
10 467 239.1
10 178 425.3
Preference
Utilisation Rate
(%)
85.1
75.2
Source: Secretariat of Economy of Mexico
2.4.
Trade in services and FDI
Growth in
trade in services
was more limited than in goods, increasing marginally from
EUR 14.6 billion in 2015 to EUR 14.8 billion in 2016 (+2.1%). The trade surplus remained
stable as the EU registered a EUR 4.8 billion surplus with Mexico, identical to the one from
the previous year.
Table 3
Services trade EU28 w ith Mexico (m illion euro)
Grow th
Mexico
2015
2016
m io €
annual %
EU28 imports
4,850
5,015
164
3.4%
EU28 exports
9,696
9,843
147
1.5%
Balance
4,845
4,828
-17
Total trade
14,546
14,858
311
2.1%
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
Services trade EU28 w ith Extra-EU28 (m illio
As for
FDIs,
according to Eurostat BoP statistics, Mexican investment in the EU went up to
EUR 42 million in 2016, whereas EU investment reached EUR 137 million down from
EUR 152 million in 2016.
According to the Mexican Central Bank, the EU contributed with 27% (EUR 6.5 billion) of
the total FDI in 2017. Over 60% of the EU’s contribution came from two member states
(Spain and Germany). Total stocks of EU FDI in Mexico since 2000 is estimated to
EUR 130
billion and represents 31% of Mexico’s
total accumulated FDI since 2000, which
positions the EU as the second largest investor behind the US. According to the World Bank
classification, Mexico rank 49 in the 2018 ‘Doing business’ ranking and its ‘Distance
Frontier’ index increased from 72.09 to
72.27 owing, essentially, to the electricity reform.
Table 4
FDI EU28 w ith Mexico (m illion euro)
2013
2014
2015
Inw ard stocks
25,119
31,392
33,351
Outw ard stocks
110,180
135,203
152,741
Inw ard flow s
Outw ard flow s
1,832
22,885
7,560
24,528
2,353
16,990
2016
42,257
137,266
5,812
-11,960
FDI EU28 w ith Extra-EU28 (m illion euro
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
203
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1960849_0205.png
3.
I
SSUES ADDRESSED IN THE ANNUAL JOINT COMMITTEE MEETING
In 2017, the EU and Mexico focussed their efforts in advancing in the negotiations for modernizing
the existing agreement. As a consequence, no joint meeting was held in 2017 but in these regular
meetings the EU and Mexico were also able to address some existing trade irritants.
4.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The following paragraph presents below the evolution of the barriers which have been registered under
the EU market access database
143
.
Two barriers have been solved in the course of 2017:
Registration and approval of health products and agro-chemicals:
EU companies
complained about the length to receive the marketing authorization from the Mexican
Authority. During the last years, Mexico improved significantly the efficiency of the
process and reduced the delay to get products registered. In 2017, the EU did not
register new complaints on this matter and considers that this barrier has been de facto
lifted.
Restrictions on FDIs:
The barrier has been solved as a result of a reform carried out
by Mexico. There is no more equity cap for FDI in Telecom and satellite
communications, Energy (marketing of gasoline and distribution of liquefied
petroleum gas; drilling of petroleum and gas wells; construction of pipelines for
petroleum and petroleum products) and insurance institutions, bonding institutions,
credit information companies, securities rating institutions and insurance agents.
On
SPS matters,
the SPS Committee under the current Agreement did not meet in year 2017
due to the commencement of the negotiation for the modernisation of the Agreement. In
parallel of these negotiations, regular exchanges/meetings between the EU and Mexico took
place to find solutions on pending market access issues.
Mexico keeps several SPS measures in place which are considered a barrier to trade affecting
EU exports of fresh fruit and vegetables due to cumbersome administrative procedures with
disproportionate and overly costly mitigation measures including for some products, costly
pre-shipment inspections in the country of origin to be paid by the industry (preclearance).
Also for imports of meat and meat products, Mexico applies a burdensome application
procedure and when market access is granted for a limited number of approved
establishments, further on-the-spot inspections by Mexico have to be carried out for each new
establishment with the costs of this procedure to be covered by the EU establishments visited.
In 2017, more frequent exchanges between the EU and Mexico took place on SPS related
market access issues due to the ongoing negotiation on the modernisation of the existing EU-
Mexico FTA. The EU has carried out regular meetings with the competent Mexican
authorities, the SENASICA, in order to speed up the approval of pending applications by
143
See: http://madb.europa.eu/madb/barriers_crossTables.htm?isSps=false
204
kom (2018) 0728 - Ingen titel
Member States. This method has proved successful with many applications (some of which
were longstanding) approved and related to some key EU exports such as pork meat
(Belgium, France, Germany and Italy have been authorised) or poultry (Mexico applied the
recognition of regionalisation for exporting EU Member States affected by avian influenza
outbreaks in 2017). Also in 2017, further market access was granted to some EU Member
States for products such as pears, dairy, and fishery products. Current tariff measures limit
still the full benefit of the SPS barriers which have been addressed and further work continues
with the Mexican authorities for progressing on these issues. In April 2017, Mexico agreed
upon a certificate for poultry manure and opened the market for Tilapia fry from The
Netherlands. Early 2017 Mexico agreed upon a certificate on bees for reproduction for Italy.
In September 2017, a certificate was accepted by Mexico which opened the market for
hydrolysed proteins from porcine and avian origin for animal feed originating from The
Netherlands. On pig products, France received a communication from Mexico, October 2017,
that France can export cured ham with prelisting.
The EU monitored the other identified barriers, and continued pressing the Mexican
authorities for progressing on these issues. Most of these barriers (i.e. Enforcement problems
of IPR, SPS restrictions and pre-listing, Government Procurement) will be tackled when the
modernised agreement will enter into force.
5.
C
ONCLUSIONS AND OUTLOOK
In 2017 EU trade relations with Mexico confirmed their positive trends. Overall trade flows increased
well above the average to 14.7% and amounted to EUR 67.7 billion. In 2017, the opening of
negotiations to renegotiate NAFTA caused uncertainty as to the future of regional trade and could
have impacted investment decisions. Mexican growth GDP grew by 2.3%, which compares favourably
to the rest of Latin American region (+/ 0.9%) but is below its long-term average of 2.6%.
In 2017, the EU-Mexico trade relations were focussed on progressing on the negotiations for
modernising
the Global Agreement. An ‘Agreement in principle’ was reached on 21 April 2018.
The outcome of negotiations is highly satisfactory given that the level of ambition of the
modernised agreement is very high and in line with the most recent FTAs signed by the EU,
such as the one with Canada or with Japan. As a result the modernised agreement will bring
improvements across the board of EU-Mexico trade and investment relations, for example:
Goods:
The EU has obtained significant market access on key EU exports (e.g. pork,
poultry, PAPs and dairy).
Services:
Mexico committed to open up its services market with comprehensive and
ambitious concessions, including on Maritime Transport, Financial Services and
Telecommunication.
Investment protection:
Mexico has agreed to the ICS and to the substantive rules for
protection and to replace the existing 16 BITs with EUMS by the agreement with the
EU.
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Energy:
Mexico has accepted commitments in several chapters (Energy and Raw
Material, Services, Investment, State owned enterprise) which will give the EU
important market access.
SPS:
The agreed texts established a high level of cooperation between the Mexican
and EU administrations, in particular regarding pre-listing, pre-clearance and
regionalisation.
GIs:
Mexico has agreed to protect the shortlist of 340 EU GIs with a high level of
protection.
TSD, civil society mechanism & anti-corruption:
For the first time ever in an EU
trade agreement there will be an annex on anti-corruption to fight against bribery and
money laundering, with an enforcement mechanism. The modernised FTA will
contain a fully-fledged TSD Chapter in which Mexico committed to effectively
implement labour and environmental standards and agreements. For the first time ever,
the civil society consultation mechanism which previously was limited to the TSD
chapter will be extended to the whole agreement. This will allow the civil society on
both sides (but in particular in Mexico) to make its voice heard also on the human
rights provisions of the political pillar.
Some technical issues still remain to be finalised. Meanwhile the EU and Mexico have
decided to start the process for legal revision to allow the Commission to present its proposal
to the EU Council and European Parliament for the signature and conclusion of the
modernised agreement before the end of this Commission in the second half of 2019.
Now that the negotiations are closed, the Commission will seek to reinitiate the regular
dialogue with Mexico regarding the implementation of the existing EU-Mexico Global
Agreement. The Commission has proposed to Mexico organising the meetings of the Joint
Committee in early 2019.
Some technical issues still remain to be finalised. Meanwhile the EU and Mexico have
decided to start the process for legal revision to allow the Commission to present its proposal
to the EU Council and European Parliament for the signature and conclusion of the
modernised agreement before the end of this Commission in the second half of 2019.
Now that the negotiations are closed, the Commission will seek to reinitiate the regular
dialogue with Mexico regarding the implementation of the existing EU-Mexico Global
Agreement. The Commission has proposed to Mexico organising the meetings of the Joint
Committee in early 2019.
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FIRST GENERATION FREE TRADE AGREEMENTS WITH THE EFTA
COUNTRIES NORWAY AND SWITZERLAND
207
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1960849_0209.png
ANNUAL INFO SHEET ON IMPLEMENTATION OF THE
EU-NORWAY FREE TRADE AGREEMENT
1.
I
NTRODUCTION
On 1 July 1973, a
Free Trade Agreement between Norway and the EU
entered into force.
It foresaw the progressive abolition of customs duties and the creation of a Joint Committee.
It concerns
goods only
and is one of the oldest trade agreements signed by the EU.
Although the bilateral Free Trade Agreement is still in force, it has been in practice
superseded in many respects by the
Agreement on the European Economic Area
(EEA),
which entered into force on 1 January 1994, and brings together the EU Member States and
the three EEA EFTA States
Iceland, Liechtenstein and Norway
in the Internal Market.
The EEA agreement ensures the free movement of goods, services, capital and persons
between Norway and the EU and is the backbone of EU-Norway cooperation. Members of the
EEA fully apply the whole
acquis communautaire
related to the "four freedoms" through
dynamic incorporation of the relevant legislative acts into the Protocols and Annexes of the
EEA Agreement via Joint Committee Decisions.
The EEA Agreement does not cover the common agricultural and fisheries policies, the
customs union, the common trade policy, the common foreign and security policy, the field of
justice and home affairs, the economic and monetary union (EMU).
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU remains the first import and export partner for Norway, capturing 70 % of the latter's
trade. Norway is the EU's third largest FTA trade partner overall and its seventh largest
partner for trade in goods. Norway's trade with the EU shows a surplus. However, the balance
is in favour of the EU in the services' area, with a balance of almost EUR 13 billion in 2016,
comparable to figures the EU has with China or Japan. For agricultural products, the trade
balance is also positive for the EU (almost EUR 4 billion).
Exchange in goods is very dynamic between Norway and the EU. Between 2016 and 2017,
imports from Norway grew by 22%. Exports to Norway grew also, but not at such pace (by
4.9%).
Table 1
2007
79.295
43.470
-35.824
122.765
EU 28 trade in
goods
with Norway (million Euro)
2008
2009
2010
2011
2012
2013
95.945
68.918
79.026
95.325
99.843
89.559
43.719
37.492
41.933
46.819
49.930
50.079
-52.226
-31.426
-37.093
-48.506
-49.913
-39.479
139.664 106.411 120.959 142.143 149.773 139.638
2014
85.107
50.168
-34.939
135.276
2015
74.156
48.780
-25.376
122.936
2016
63.315
48.324
-14.991
111.639
2017
77.414
50.707
-26.707
128.122
Imports
Exports
Balance
Total Trade
208
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1960849_0210.png
Figure 1
120.000
Imports
100.000
80.000
60.000
40.000
20.000
0
Merchandise trade EU28 with Norway (million euro)
Exports
Balance
2003
-20.000
-40.000
-60.000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source Trade G2 Statistics/ISDB from Eurostat
07-06-2018
2.2.
Trade in agricultural goods
Agriculture is not covered by the EEA agreement (with the exception of processed
agricultural products). However the EEA agreement encourages further liberalisation of
agricultural trade through its Article 19. Negotiations based on this Article started in 2015 and
were concluded successfully at negotiators' level in April 2017.
This agreement
144
, signed on
4 December 2017, will enter into force on 1 October 2018.
The concessions consist of 36
fully liberalised tariff lines and TRQs to be opened by both sides. This will offer new trade
opportunities for EU and Norwegian exporters of agricultural products. The impact will be
duly monitored by the Commission.
The EU exported agricultural products worth EUR 4.5 billion to Norway and the trend is
increasing. Agricultural exports to Norway doubled in the last decade and increased by 4%
from 2016 to 2017. In 2017, the EU's key agri-food exports to Norway consisted of fruit &
vegetables (13%), pasta, pastry, biscuits and bread (8%), wine, vermouth, cider and vinegar
(7%), cigars and cigarettes (7%). The EU imported agri-food products worth EUR 575 million
from Norway. The EU's main agricultural products imported from Norway were oilcakes
(13%), raw hides, skins and furskins (13%) and vegetable oils (11%).
TRQs granted by Norway for key agricultural products (beef, pork, cheese) have been fully or
almost completely utilised by the EU since 2012. The uptake of the TRQs for other
agricultural products (fruit, sausages, live plants) has been high, ranging from more than 70%
to almost 100%. The utilisation rate for poultry and turkey meat as well as for eggs has
with
intermittent fluctuations
decreased from 100% in 2012 to more than 60% in 2017; these
fluctuations are due to a variety of factors such as the EU internal market's own demand.
In general, Norway makes little use of the agri-food TRQs granted by the EU. Only four
TRQs are fully utilised (waters, feedingstuff for fish, potato slices, cheese) and two TRQs are
utilised by about 50% (ethyl alcohol, chocolates).
144
Agreement in the form of an Exchange of Letters between the European Union and the Kingdom of Norway concerning additional trade
preferences in agricultural products, OJ L 129/3, 25.05.2018
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2018.129.01.0003.01.ENG&toc=OJ:L:2018:129:TOC
209
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1960849_0211.png
Table 2
EU28 m erchandise trade by AMA/NAMA sector w ith Norw ay (m illion euro)
2007
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Source Trade G2 Statistics/ISDB
2008
95.945
414
95.530
43.719
2.674
41.045
-52.226
2.260
-54.485
2009
68.918
382
68.537
37.492
2.552
34.940
-31.426
2.170
-33.596
2010
2011
EU28 im ports
79.026
427
95.325
469
2012
99.843
499
99.344
49.930
3.832
46.098
-49.913
3.332
-53.245
2013
89.559
523
89.036
50.079
3.983
46.096
-39.479
3.460
-42.939
2014
85.107
531
84.576
50.168
4.025
46.144
-34.939
3.494
-38.433
2015
74.156
535
73.621
48.780
4.091
44.689
-25.376
3.555
-28.932
2016
63.315
544
62.771
48.324
4.308
44.015
-14.991
3.764
-18.755
2017
77.414
575
76.840
50.707
4.486
46.222
-26.707
3.911
-30.618
79.295
385
78.910
43.470
2.441
41.030
-35.824
2.056
-37.880
78.599
94.856
EU28 exports
41.933
2.909
46.819
3.398
39.024
43.421
EU28 trade balance
-37.093
2.483
-39.575
-48.506
2.929
-51.435
Definition AM A UR AoA
2.3.
Preference Utilisation rate (PUR)
The PUR overall on imports into the EU from Norway is for the second consecutive year
below 70%. However, the declining trend since 2013 has been reverted in 2017. Figures to
calculate the PUR on EU exports to Norway were not available.
Table 3
Use of preferences on im ports into the EU from Norw ay
2013
2014
2015
2016
2017
69%
use as % eligible
74%
72%
71%
66%
Source: Eurostat - Includes all preferences (FTA, GSP, bilateral)
Source Trade G2 Statistics/ISDB
2.4.
Trade in Services and FDI
Regarding
trade in services,
the trade balance is positive for the EU. In 2016, after several
years of regular increase, the value of services provided by the EU to Norway however
slightly decreased while the value of imported services stabilised in 2015 and 2016 after
several years of increase.
Table 4
EU28 trade in services w ith Norw ay (m illion euro)
2011
EU28 imports
EU28 exports
Balance
Total trade
11.993
22.639
10.646
34.632
2012
12.764
24.964
12.200
37.728
2013
14.346
27.122
12.776
41.467
2014
16.418
28.179
11.761
44.597
2015
15.679
29.595
13.916
45.274
2016
15.169
27.947
12.779
43.116
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
FDI
is an important aspect of the EU-Norway relations. In 2016, Norwegian investment in the
EU was worth approximately 74 billion EUR while European investments in Norway
represented 94 billion EUR.
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Table 5
Foreign Direct Investm ent EU28 w ith Norw ay (m illion euro)
2014
Stocks
Flow s
73.824
4.977
Inw ard
2015
77.748
2.592
2016
74.719
2.854
2014
81.302
5.488
Outw ard
2015
82.993
6.209
2016
94.064
5.927
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
3.
I
SSUES ADDRESSED IN THE
EEA
AND
FTA J
OINT COMMITTEES
The EEA Joint Committee, where the European Action Service represents the EU side, meets
six to eight times per year
145
. Four subcommittees assist the Joint Committee (on the free
movement of goods, the free movement of capital and services including company law, the
free movement of persons and horizontal and flanking policies). They mainly deal with the
incorporation of the EU acquis into the legal system of Norway. The
EEA Council
meets
twice a year to discuss at political level a series of issues related to the EEA agreement. Trade
in agricultural products belongs to the topics raised in the 2017 and 2018 EEA Council
conclusions
146
.
In practice, since the signing of the EEA agreement, the bilateral FTA have been less active
and no
FTA Joint Committee
meetings have been called in the last years. Joint committee
decisions, often of technical nature and limited in number, are taken by written procedure.
Trade issues are also discussed on a case-by-case basis, notably at the occasion of high-level
meetings. In 2017, bilateral trade irritants such as reclassification and tariff switch issues were
notably raised from the EU side, in addition to pointing at areas with room for further trade
liberalisation, such as processed agricultural products or GIs.
4.
S
PECIFIC AREAS OF IMPORTANCE
The integration in the Internal Market via the EEA agreement is a main achievement of EU-
Norway relation and the main driver of our trade relations. Norwegian companies participate
in the Single Market almost under the same conditions as Member States, and vice-versa. The
same rules apply (for example, technical requirements of certain products or competition
rules) to ensure a level-playing field. EU Single Market rules are dynamically integrated into
Norwegian law through the EEA agreement. This creates a stable and predictable
environment. Norway has a say in the EEA decision-shaping process, albeit without a vote on
the final decision. A relatively high number of legal acts (554 acts as of May 2018) are
however still pending incorporation into the EEA Agreement, creating the so-called
"backlog"
in this dynamic approximation. A joint effort is required, especially in the area of
financial services, where the backlog is concentrated.
Agricultural and fisheries products, which are excluded from the scope of the EEA agreement,
are not in free circulation between Norway and the EU and quotas exist in a number of areas.
As Norway and the EU did not form a Customs Union, customs procedures apply
unlike
among Member States.
145
146
https://eeas.europa.eu/diplomatic-network/european-economic-area-eea/348/european-economic-area-eea_en
http://www.efta.int/EEA/EEA-Council-1315
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5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Processed agricultural products
Trade in processed agricultural products is regulated by Protocol 3 to the EEA agreement (and
by Protocol 2 to the FTA, which still offers a more preferential treatment than the EEA for a
few products). Protocol 3 of the EEA foresees the possibility to levy customs duties based on
the cost of the basic agricultural products in the EU and in Norway. In practice, EU exports of
processed agricultural products are hindered by high customs tariffs. Despite the fact that the
Protocol foresees annual consultations and possible new concessions to make sure that the
terms are adapted to market developments, there have been only two adaptations since the
entry into force of the EEA Agreement in 1994.
The EU is ready to engage in discussions on further liberalisation of trade in processed
agricultural products, as indicated at several occasions. This was notably discussed at three
meetings with Norwegian authorities in 2012-2014. At the last meeting in December 2014,
Norway said that such negotiations might only be envisaged if and when Article 19
negotiations on trade in agricultural products would be successfully concluded
which
eventually happened in 2017 as indicated above. Hence, the EU expects the discussions to
resume.
GIs
The last EU-Norway bilateral agreement negotiated under Article 19 of the EEA Agreement
contains also a commitment of the parties to encourage trade in agricultural products with GIs
(GIs). The GIs negotiations were launched on 20 November 2013 but were suspended at the
request of the Norwegian side following the 5
th
negotiating round on 5 April 2016. The EU is
ready to resume these negotiations.
Trade irritants
A recurring trade irritant since 2012 was linked to the reclassification and tariff switch by the
Norwegian Customs Authorities of several agricultural products under different HS tariffs
codes. These issues were successfully addressed in the framework of the recent EU-Norway
Article 19 negotiations, mentioned above. Additional export possibilities should be in October
2018 . This outcome will be duly monitored by the Commission.
During 2017, the Commission also sought clarification from Norwegian authorities on a
change of classification for kalanchoe varieties, one of the most popular potted plants in
Norway. Adopted in November 2016, it resulted, according to stakeholders, in duty increase
from 0% to 72% for the hybrid type of kalanchoes. This issue is being followed up with
Norwegian authorities.
Over the years, stakeholders have indicated that in several instances the auction fees for the
TRQs granted by Norway to the EU under bilateral agricultural trade agreements and
managed via auctioning, raise as high as the MFN duty. These fees may be passed on
indirectly to EU exporters eroding thereby the preferences given to the EU under bilateral
agreements.
In general, European companies or business associations report burdensome administrative/
tax procedures when exporting to Norway. The issues will be further examined and if
appropriate raised with the Norwegian partners.
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6.
C
ONCLUSIONS AND OUTLOOK
Institutionally, through the EEA agreement, Norway is as closely linked to the Internal
Market as a third country can be. There is however room for further strengthening of trade
relations in the area of basic and processed agricultural products. Politically, Norway and the
EU are close allies. Norway actively aligns itself with EU foreign policy instruments,
including the EU's sanction policy towards Russia, and is also subject to the Russian
agricultural ban. In multilateral trade fora, notably the WTO, the EU and Norway very often
defend the same position.
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1960849_0215.png
ANNUAL INFO SHEET ON IMPLEMENTATION OF THE
EU-SWITZERLAND FREE TRADE AGREEMENT
147
1.
I
NTRODUCTION
The EU-Swiss trade relations are among the deepest worldwide outside the context of a
customs union/internal market. Switzerland is the EU's largest FTA trade partner and its third
largest trade partner overall (number 2 for services). For Switzerland, the EU is by far the
most important trading partner. The EU’s trade in goods surplus with Switzerland
amounted
to more than EUR 40 billion in 2017 (EUR 20 billion in 2016) while the services surplus
reached EUR 20 billion in 2016 (EUR 44 billion in 2015).
The cornerstone of EU-Swiss trade relation is the EU-Switzerland
Free Trade Agreement of
1972
148
. It concerns
goods only
and is one of the oldest trade agreements signed by the EU. It
does not contain provisions on services, investment, IPR, government procurement or social
and environmental values. No dispute settlement mechanism is foreseen beyond the regular
annual dialogue at Joint Committee meetings.
As a consequence of the rejection of EEA membership in 1992 by the Swiss people,
Switzerland and the EU agreed on a package of seven sectoral agreements signed in 1999
(known in Switzerland as ‘Bilaterals I’). Some of them are relevant from a trade perspective:
The Free Movement of Persons Agreement
149
allows for the provision of
services, limited in time.
The Mutual Recognition Agreement in relation to conformity assessment
150
ensures that, in twenty regulated sectors, the conformity assessment provided
by one party is recognised by the other, which of course facilitates trade
between the parties.
The Public Procurement Agreement
151
, that builds on the WTO Government
Procurement Agreement;
The Agreement on trade in agricultural products
152
, which includes SPS rules,
as well as tariffs and quotas for agricultural products, except for cheese that is
liberalised.
A protocol on processed agricultural products (protocol 2) was also added to
the Free Trade Agreement, in 2004. It includes a mechanism whereby in
practice Switzerland receives compensation for the very significant price
differential of basic agricultural products - which serve as inputs to processed
agricultural products - between the EU and Switzerland.
147
148
149
150
151
152
http://ec.europa.eu/trade/policy/countries-and-regions/countries/switzerland/
https://eur-lex.europa.eu/legal-content/en/ALL/?uri=OJ:L:1972:300:TOC
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22002A0430%2801%29
http://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_152006.pdf
https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:22002A0430(06)
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2002.114.01.0132.01.ENG
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1960849_0216.png
Overall, the EU-Swiss relationship is characterised by a complex web of approximately 120
bilateral sectoral agreements. Since 2015, both parties are negotiating an
Institutional
Framework Agreement
to streamline the operation of some of these agreements. The aim is
to provide an overarching framework with clear mechanisms for dynamic acquis take-over,
uniform interpretation of rules and an efficient dispute settlement mechanism.
Between 2014 and end-2016, the EU-Swiss relation has been overshadowed by the popular
vote ‘against mass immigration’, which is now being implemented in a way that is compatible
with the Free Movement of Persons Agreement. New impetus was brought to the relation in
2017: the Swiss President and the President of the European Commission met at two
occasions and agreed that progress should be made on all open files in parallel - and in
particular on the institutional front.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
The EU is Switzerland’s main trading partner by far, representing 52%
of its exports of goods,
followed by the United States (with approximately 10%) and China (with around 6%).
Switzerland is the EU’s third trading partner, representing 7% of its trade, after the USA and
China. 60% of Swiss imports come from the EU while 45% of their exports go to the EU. The
total value of goods exchanged in the last decade grew by 65%. European exports to
Switzerland grew by 6% between 2016 and 2017.
Table 1
Figure 1
180.000
Imports
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
0
Merchandise trade EU28 with Switzerland (million euro)
Exports
Balance
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
17-05-2018
Source Trade G2 Statistics/ISDB from Eurostat
2.2.
Trade in agricultural goods
With EUR 4.7 billion imported yearly from Switzerland, and EUR 8.2 billion exported, the
Swiss and European markets for agricultural products are closely linked and on a lasting
215
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1960849_0217.png
increasing path. Our imports of agricultural products tripled since 2003 and our exports
doubled in the same period.
The EU imports mainly coffee and tea (HS 09), followed by beverages (HS 22), edible
preparations (HS 21), cocoa (HS 18) and dairy products (HS 04). The EU exports mainly
beverages (HS 22), fruits & nuts (HS 08) and cereals, flour and starch (HS 19). Between 2016
and 2017, our agri-food exports to Switzerland grew by 4.3% whereas our imports from
Switzerland declined slightly by 0.3%.
The EU utilised 25 of 32 agricultural TRQs by more than 85% (including EU key export
products such as cured ham & pork products). Five TRQs were utilised between 43-54%
(such as poultry meat, honey) and only two were below 33% (gherkins, frozen fruit
the
latter includes frozen strawberries and frozen raspberries for which the MFN is at zero %). In
2017, Switzerland hardly utilised the agri-food quotas granted by the EU. The majority of the
quotas were not used at all, or used by a very low percentage, notable exceptions being Dried
Bovine Meat and Cream & Yoghurt, that were used entirely.
Table 2
EU merchandise trade by AMA/NAMA sector with Switzerland (million EUR)
2007
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Total
Agricultural
Non-Agricultural
Source Trade G2 Statistics/ISDB
2008
82.650
2.911
79.739
100.623
5.572
95.051
17.973
2.661
15.312
2009
80.909
3.049
77.860
88.797
5.507
83.290
7.888
2.458
5.430
2010
85.493
3.400
82.092
110.470
6.011
104.459
24.977
2.611
22.366
2011
93.498
3.839
89.659
142.095
6.450
2012
EU 28 imports
105.900
4.189
101.711
EU 28 exports
133.619
6.715
2013
94.532
4.349
90.183
169.142
7.080
2014
96.560
4.433
92.127
140.286
7.211
133.075
43.726
2.778
40.947
2015
102.362
4.611
97.751
150.513
7.652
142.861
48.152
3.041
45.110
2016
121.723
4.674
117.049
142.219
7.875
134.344
20.496
3.201
17.295
2017
110.336
4.659
105.677
150.813
8.213
142.599
40.476
3.554
36.922
77.047
2.576
74.471
93.234
4.913
88.321
16.187
2.337
13.850
135.646
126.904
162.062
EU 28 trade balance
48.598
2.611
45.987
27.719
2.526
25.194
74.610
2.731
71.879
Definition AMA UR AoA
2.3.
Trade in Services and Investment
Switzerland is a very important partner of the EU for trade in services, in particular for
commercial services. The value of services provided by EU companies in Switzerland, and
vice versa, is on a fast growing path. The balance is positive for the EU. However, between
2015 and 2016, EU imports of services from Switzerland grew faster than EU exports, thus
reducing the size of the surplus, which nevertheless represents EUR 20 billion. Between 2016
and 2017 EU exports of services increased by 12% while EU imports decreased by 26%,
more than doubling the EU trade surplus, which amounted to 58 billion EUR in 2017.
Table 3
EU28 services trade w ith Sw itzerland (m illion euro)
2011
EU28 imports
EU28 exports
Balance
Total trade
47.414
82.201
34.788
129.615
2012
50.849
96.573
45.724
147.421
2013
54.563
100.203
45.639
154.766
2014
63.304
107.703
44.399
171.008
2015
72.636
114.477
41.842
187.113
2016
94.090
115.028
20.938
209.118
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
216
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1960849_0218.png
FDI is a prominent feature of the EU-Swiss relationship. The Swiss stocks of the FDI
represents 12% of all FDI in the EU.
Table 4
Foreign Direct Investm ent EU 28 w ith Sw itzerland (in m illion euro)
2014
Stocks
Flow s
510.669
38.317
Inw ard
2015
656.900
121.641
2016
766.992
80.468
2014
721.599
-31.037
Outw ard
2015
852.438
32.832
2016
976.744
62.396
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2.4.
Preference Utilisation rate
The PUR on EU exports to Switzerland has remained relatively stable over the past four years
and amounted to 78% in 2017 (table 5). The downward trend of the PUR on imports into the
EU from Switzerland was reverted in 2017 when the PUR amounted to 85%, back to the level
of 2015 (table 6).
Table 5
Use of preferences on imports into Switzerland from EU
PUR (%)
2013
2014
2015
2016
2017
EU
80.3
80.3
79.0
78.8
78.3
Table 6
Use of preferences on imports into EU from Switzerland
PUR (%)
2013
2014
2015
2016
2017
EU
92.0
90.8
85.7
83.4
85.0
3.
I
SSUES ADDRESSED IN THE ANNUAL JOINT COMMITTEE MEETING
At the 63
rd
meeting of the Joint Committee under the EU-Swiss FTA, which took place in
Brussels on 26 November 2017, the main points on the agenda have been the following:
Processed agricultural products:
Both parties exchanged latest reference prices for basic
agricultural products. On that basis, the Swiss customs duties for processed agricultural
products originating in the EU were lowered as of 1 May 2018. The processed agricultural
products originating in Switzerland enjoy a duty-free market access to the EU.
Company tax reform:
The EU inquired about the next steps envisaged by Switzerland to put
an end, in line with a political agreement of October 2015, to the cantonal fiscal status of
companies - considered discriminatory.
Reform of Swiss VAT law:
The EU sought clarification on planned changes to VAT law in
order to better assess its possible impact, notably on European SMEs and on e-commerce.
217
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1960849_0219.png
Access to market/ trade barriers:
In line with Council conclusions adopted in February
2017
153
, the EU highlighted difficulties faced by European companies in relation to market
access, notably in the services sector. Switzerland has indeed put in place so-called
“flanking
measures” to accompany the implementation of the EU-Switzerland
Free Movement of
Persons Agreement
154
. Their objective is to monitor the respect of minimum working
conditions in Switzerland notably of (comparatively very high) Swiss salaries and to provide
for sanctions - where deemed necessary. The EU considers the flanking measures as
burdensome and disproportionate, giving rise to barriers for EU companies accessing the
Swiss services markets.
Radiometric controls:
Parties discussed the difficulties encountered by the Swiss due to
some administrative requirement set by a Member State, requiring radiometric controls on
certain types of metal imports from Switzerland.
Steel surveillance:
Switzerland emphasised the strong integration of European and Swiss
companies in the steel sector and noted that the general prior surveillance measures
introduced by the EU in 2016 to monitor steel imports are perceived as an administrative
burden by Swiss
companies involved in “just in time” delivery chains. They called for a
smooth and harmonised implementation of these surveillance measures by different Member
States.
Customs issues:
Parties addressed two unrelated customs issues with negative impact on the
partner country: the change of classification of dog and cat food by the EU and changes to
seasoned meat by the Swiss customs authorities.
PURs:
Despite relatively high utilisation rates of the FTA, the Joint Committee noted a slight
downward trend, especially on imports into EU from Switzerland, and agreed to examine in
more detail if
and how - further use could be made of the FTA.
In addition to the yearly meeting of the FTA joint committee, about a dozen joint committees
under other bilateral agreements take place on a regular basis but there is no overarching
committee which oversees bilateral economic relations in their entirety.
The Annual Joint Committee meeting on agriculture, for example, took place on
16 November 2017 and several working group met on technical issues such as GIs, organics
and wine & spirits drinks. The EU and Switzerland are also cooperating to protect the
homonymy of the denomination ‘Gruyère’ in agreements with third countries.
4.
S
PECIFIC AREAS OF IMPORTANCE
Unlike the three EEA EFTA countries (Norway, Iceland and Liechtenstein), Switzerland does
not have full access to the four freedoms of the Internal market and does not dynamically
integrate the EU
acquis.
On the basis of the sectoral bilateral agreements, Switzerland has
however access, to a certain extent, to two pillars of the internal market: free movement of
goods (with the exception of most agricultural products and approximately half of processed
agricultural products, where access is limited), and free movement of persons (which includes
also cross-border provision of services limited in time). The sectoral agreements are largely
153
154
http://www.consilium.europa.eu/en/press/press-releases/2017/02/28/conclusions-eu-swiss-confederation/
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22002A0430%2801%29
218
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static: the arrangements between Switzerland and the EU are usually based on recognition of
the identical or equivalent nature of the EU and Swiss legislation in the sectors. However,
Switzerland is taking over
on a contractual or even on an autonomous basis - parts of the
EU
acquis,
for example in the area of recognition of professional qualifications. Hence the
need for an Institutional Framework Agreement mentioned above.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Basic agricultural products:
Liberalisation of agricultural products is very limited (the most
notable exception being cheese which is fully liberalised on both sides). Although there was a
commitment in 2002 to progressively further liberalise trade in agriculture, the negotiations
stalled in 2010.
Processed agricultural products:
A protocol annexed to the FTA in 2004 foresees a rather
burdensome and asymmetric mechanism whereby in practice Switzerland receives
compensation for the very significant price differential between the EU and Switzerland of
basic agricultural products, which serve as inputs to processed agricultural products. The EU
considers that a review of protocol 2 is needed and expects discussions to start in due course.
SPS issues:
Negotiations to extend the scope of the SPS rules currently applicable between
Switzerland and the EU are on-going. A new agreement addressing notably labelling or food
security issues could facilitate trade between the parties. Transiting Swiss territory by road of
EU live animals is not allowed (Namely Swiss animal welfare standards are more stringent
than the EU standards).
Services:
There is no comprehensive services agreement between the EU and Switzerland,
only a partial coverage through the Land and Air agreements and the Free Movement of
Persons agreement, showing the potential for further trade development.
Trade barriers:
The main trade barriers for EU businesses in Switzerland are linked to the
services sectors, in particular to the implementation of the EU-Swiss Free Movement of
Persons Agreement and the “flanking measures”, as described above.
Dispute settlement:
the bilateral trade relationship lacks any reliable dispute settlement
mechanism.
6.
C
ONCLUSIONS AND OUTLOOK
EU and Switzerland remain very important trade partners and bilateral trade continues
growing. However, there is room for improvement. The institutional setting for EU-Swiss
bilateral trade relations is very complex with the coexistence of an old FTA and numerous
sectoral agreements addressing a variety of trade issues. The improvement of the institutional
setting for EU-Swiss trade relations is discussed in the broader context of the negotiations on
an Institutional Framework Agreement between the EU and Switzerland.
219
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1960849_0221.png
THE CUSTOMS UNION WITH TURKEY
The contractual relations between the EU and Turkey date back to 1963 when the European
Economic Community (i.e. the EU’s predecessor) and Turkey
signed an
Association
Agreement
(the ‘Ankara Agreement’), in which both parties agreed to progressively establish
a
Customs Union
over a period of several years. An Additional Protocol was signed in
November 1970 setting out a timetable for the abolition of tariffs and quotas on industrial
goods circulating between the parties. The final phase of the Customs Union was completed
on 1 January 1996 by the EU-Turkey Association Council Decision No 1/95, which is
currently in force.
155
The Customs Union ensures the free movement of all industrial goods and certain processed
agricultural products between the EU and Turkey. It also established a requirement for
Turkey’s alignment to the EU’s customs tariffs and rules, commercial policy, competition
policy, intellectual
property rights, as well as to the EU’s technical legislation related to the
scope of the Customs Union. The Customs Union with Turkey therefore goes well beyond the
traditional free trade agreements which the EU has concluded with other third countries.
In addition to the Customs Union, the EU and Turkey concluded two further bilateral
preferential trade agreements. The Agreement between the European Coal and Steel
Community (ECSC) and Turkey on trade in products covered by the Treaty establishing the
ECSC established a
Free trade agreement for coal, iron and steel products
156
, along with
relevant competition rules.
Association Council Decision No 1/98
157
(amended by Decision
No 2/2006
158
)
provides for preferential concessions on trade in certain agricultural and fishery
products.
On 21 December 2016, the European Commission adopted its Recommendation for a Council
Decision authorising the opening of negotiations with Turkey on an
Agreement on the
extension of the scope of the bilateral preferential trade relationship
and on the
modernisation of the Customs Union. The negotiations can start once the Council adopts the
related negotiating directives. The proposal is pending authorisation by the Council.
155
156
157
158
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:21996D0213(01):EN:HTML
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:21996A0907(01):en:HTML
http://eur-lex.europa.eu/legal-content/en/ALL/?uri=OJ:L:1998:086:TOC
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22006D0999&from=EN
220
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ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-TURKEY CUSTOMS
UNION AND TRADE AGREEMENTS
159
7.
E
VOLUTION OF TRADE
The Customs Union has led to substantial increase in trade between the EU and Turkey. Since
its entry into force in 1996, the value of bilateral trade increased more than fourfold
160
. The
rise in FDI to Turkey from the EU has been similarly significant, as has been the deeper
integration in production networks between Turkish and European firms. Turkey is now the
EU’s 5
th
largest trading partner overall (it is the EU’s 5
th
biggest export market and 6
th
largest
source of imports), whilst the EU is by far Turkey’s most important trading partner.
7.1.
Trade in Goods
Trade in goods between the EU and Turkey has seen a sharp increase over the last two
decades. In 2017, the total two-way trade amounted to EUR 154 billion up from 100
EUR billion in 2007. When comparing the more recent years 2016 and 2017, the data shows
that EU’s exports to Turkey grew by 8.4% from 2016 to 2017, and the EU’s imports from
Turkey also increased by 4.5%.
Table 1. EU merchandise trade with Turkey (million EUR)
Merchandise trade EU28 w ith Turkey (m illion euro)
Grow th
Turkey
2016
2017
m io €
annual %
EU28 imports
66,767
69,766
2,999
4.5%
EU28 exports
77,937
84,507
6,569
8.4%
Balance
11,171
14,741
3,571
Total trade
144,704
154,272
9,568
6.6%
Source Trade G2 Statistics/ISDB
Merchandise trade EU28 w ith Extra-EU28 (m ill
Figure 1 shows the overall evolution of trade in goods since 2007.
Figure1. EU Merchandise trade with Turkey (million EUR)
Imports
Exports
Balance
47,378
52,830
5,451
46,288
54,476
8,188
36,446
44,486
8,040
Merchandise trade EU28 with Turkey (million euro)
43,062 48,820 48,822 50,657 54,409
61,929 73,336 75,491 77,624 74,743
18,867 24,516 26,669 26,966 20,333
61,696
78,966
17,270
66,767
77,937
11,171
69,766
84,507
14,741
Regarding the sectoral split, the EU’s biggest
export category in 2017 was machinery and
appliances (26.3% of overall EU exports), followed by transport equipment (16.8%), base
metals and article thereof (11.8%) and chemical products (11.6%). Turkey’s biggest export
sector was transport equipment (26.2%), followed by textiles and textile articles (20.8%) and
machinery and appliances (17.2%)
159
160
More information on EU-Turkey trade relations can be found at the following website of the European
Commission: http://ec.europa.eu/trade/policy/countries-and-regions/countries/turkey/
World Bank: Evaluation of the EU - Turkey Customs Union, March 2014
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7.2.
Trade in agricultural goods
In 2017, Turkey was our 9
th
largest destination and 8
th
largest supplier of agricultural goods.
The EU had a trade deficit in agriculture with Turkey of EUR 816 million. However, that
trade deficit decreased by 602 million down from EUR 1.4 billion in 2016.
Table 2. EU-Turkey agricultural trade (million EUR)
EU imports
EU exports
Source: Eurostat
2013
3 751
2 639
2014
4 105
2 600
2015
4 966
3 244
2016
4 262
3 093
2017
4 492
3 676
EU agri-food exports to Turkey are well diversified. Only one specific category exceeded
10% of all agri-food exports in 2017, namely live animals (13.4%). The other biggest export
categories were wheat (7.4%), food preparations (7.3%), cotton, flax and hemp (4.7%), cigars
and cigarettes (4.6%), spirits and liqueurs (3.3%) and chocolate, confectionery and ice cream
(3.2%). The categories that showed the biggest increases from 2016 were beef, cereals, rice
and wheat. Beef, fresh, chilled and frozen, represents only 1.9% of agri-food exports but it
increased 154% in 2017, amounting to EUR 71 million, up from EUR 28 million in 2016.
EU exports of live cattle increased from EUR 46 million in 2013 to EUR 494 million in 2017,
making Turkey the EU’s largest market destination in 2017. EU exports were boosted in
particular by the temporary suspension of import duties by Turkey on an MFN basis.
For frozen beef, the 19 100 tons quota is used irregularly from one year to another, e.g. in
2016, 271 tons while in 2017, 10 800 tons. The quota is managed by a government agency,
the Meat and Milk Institute (ESK), which has in most years not issued import licenses
resulting in the non-utilisation of the quota.
In order to facilitate trade and ensure a better use of the quota, a Decision of the EU-Turkey
Association Council amending Protocol 2 of Decision No 1/98 and the quota definition to
include also fresh and chilled beef has been adopted on 28 March 2018 and has entered into
force on the same date.
As regards agri-food imports from Turkey, fresh, dried or preparations of vegetables, nuts or
tropical fruit represent around 70%. In 2017, these categories amounted to EUR 2 956 million
(7% decrease, from EUR 3 184 million in 2016).
7.3.
Preference Utilisation rate (PUR)
One of the specific features of the Customs Union is the free movement of goods between the
partner countries, without the need to prove compliance with the rules of origin, thereby
significantly reducing the overall cost of trade. It also makes it easier for traders to benefit
from the preferential arrangements. In 2017, the PUR on imports into the EU from Turkey
remained stable around 92%, while the PUR on exports from the EU to Turkey slightly
decreased from 95% to 94%.
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Table 3. Use of preferences on imports into EU from Turkey
Use of preferences on imports into EU from Turkey
2013
2014
2015
2016
91.7
92.5
92.8
92.5
PUR (%)
EU
2017
92.0
Source: Trade G2 Statistic, includes all preferences.
Table 4. Use of preferences on imports from the EU to Turkey
PUR (%)
EU
Use of preferences on imports into Turkey from EU
2013
2014
2015
2016
-
-
-
95.3
2017
94.3
7.4.
Trade in Services and FDI
The EU-Turkey Customs Union only covers trade in industrial goods and certain processed
agricultural products. Services and investment are not covered under the current agreement.
As regards
trade in services,
the latest data available cover the year 2016 and they show that
a trade surplus for Turkey, reflecting the high barriers to enter the Turkish market as well as
the net surplus of EU visitors to Turkey.
Table 4.
EU28 services trade w ith Turkey (m illion euro)
2011
2012
2013
2014
2015
15,042
14,577
15,124
15,904
16,617
9,163
9,492
10,317
10,670
12,275
-5,879
-5,085
-4,807
-5,234
-4,342
24,205
24,069
25,441
26,574
28,892
EU28 services trade w ith
2016
13,913
11,768
-2,145
25,681
EU28 imports
EU28 exports
Balance
Total trade
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
As for
FDI,
the EU is by far the biggest source of FDI (FDI) in Turkey, with a total FDI stock
exceeding EUR 72 billion in 2016 (the latest available data). In 2016, European investment in
Turkey was much more limited (EUR 337 million) than in 2015 (more than EUR 10 billion).
Table 5.
Foreign direct investment EU28 with Turkey (million euro)
Inw ard
2014
2015
9,238
9,688
1,720
957
2016
9,429
281
Outw ard
2014
2015
66,492
76,769
4,648
11,876
2016
72,318
337
Foreign direct investment EU28
Stocks
Flow s
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
8.
I
SSUES ADDRESSED IN THE
C
USTOMS
U
NION
J
OINT
C
OMMITTEE
M
EETING
The 34
th
and the 35
th
Customs Union Joint Committee (CUJC) meetings
took place on 11
and 12 May 2017 in Brussels , and on 16 and 17 May 2018 in Ankara, respectively. At both
meetings, the parties discussed issues linked to the proper functioning of the Customs Union,
including the following:
The state of play of the Commission’s proposal in the Council, as regards future
negotiations on the
modernisation
of the EU-Turkey Customs Union.
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Increasing number of trade barriers and breaches of the Customs Union by Turkey,
including measures such as
additional duties
imposed on imports of products from
third countries which, however, are already put into free circulation in the EU,
surveillance measures
of certain products,
export restrictions
of copper and
aluminium,
unnecessary testing requirements and customs procedures,
Turkey’s
localisation policy
in the pharmaceutical sector, IPR enforcement, etc.
The shortcomings of the IPR enforcement regime in Turkey and the new
international exhaustion regime while participating in the Customs Union with the
EU.
Turkey’s alignment to EU technical legislation
in areas which are essential for the
functioning of the Customs Union.
Update on recent
EU trade policy developments,
in particular as regards
negotiations
of free trade agreements with third countries, linked to Turkey’s
obligation to align with the EU’s commercial policy.
The non-discriminatory implementation of the Additional Protocol to the Association
Agreement towards all Member States including the Republic of Cyprus.
Under the umbrella of the Association Committee, the 13
th
meeting of the EU-Turkey Sub-
Committee on Agriculture and Fisheries was held on 22–23
March 2017 in Ankara. Turkey’s
agricultural policy was still not aligned with the Common agricultural policy. However, the
success of the Rural Development component of the Instrument for Pre-accession Assistance
for 2007-2013 (IPARD I) was highlighted and progress for the period 2014-2020 (IPARD II)
was on track. On 22 September 2017, consultations were held on hazelnuts in Ordu, Turkey.
9.
S
PECIFIC AREAS OF IMPORTANCE
In 2016 the Commission adopted a proposal to modernise the Customs Union to improve its
functioning and extend the scope to reflect its more recent trade agreements. The proposal is
pending authorisation in the Council. However, the General Affairs Council on 26 June 2018
concluded that
no further work towards the modernisation of the EU-Turkey Customs Union
would be foreseen.
161
10.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
In 2017, Turkey introduced various trade barriers, which also affect European companies. A
number of these measures are in breach of the Customs Union rules. As regards the
implementation of the existing bilateral preferential trade framework, Turkey has created
further trade barriers that breach the Customs Union agreement (ranging from localisation
policy in the pharmaceutical sector and discrimination against EU exports of tractors to
further deviation in the alignment of import tariffs to the EU and export restrictions on leather
products). The European Commission has been raising and addressing these barriers in
various fora, including the Customs Union Joint Committee and other bilateral meetings.
161
See
also
conclusions
of
the
General
Affairs
http://www.consilium.europa.eu/en/meetings/gac/2018/06/26/
Council
of
26
June
2018;
224
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At the same time, during 2017 Turkey also solved a number of trade barriers. For example,
Turkey abolished export restrictions on copper and aluminium scrap and removed paper
products from the scope of its import surveillance scheme.
11.
C
ONCLUSIONS AND OUTLOOK
Turkey’s obligation to align to the EU’s common customs tariff, as well as to EU technical
legislation which are important for the free movement of goods, go much beyond classic trade
agreements and thus make the bilateral trade relationship unique. The Customs Union has
therefore led not only to significant increase in bilateral trade over the last 20 years, but also
to important investment and production links between the two parties. However, the economic
and trading environment has changed substantially since the creation of the Customs Union
and it has become less well equipped to deal with the modern day challenges of trade
integration.
The European Commission has therefore adopted on 21 December 2016 a proposal to
modernise the Customs Union
to improve its functioning and to further extend the scope of
the bilateral preferential trade arrangements in line with its approach to modern free trade
agreements and the ‘Trade for All’ Communication, thus also covering areas such as services,
public procurement, specific rules for SMEs and sustainable development, as well as further
liberalisation of agricultural products. A modernised Customs Union would also need to
contain an effective dispute settlement mechanism to address the increasing number of trade
and market access problems faced by European companies. It remains to be seen when the
political circumstances will allow for the Council to resume its suspended work on the above
Commission proposal.
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PART IV: ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE
ECONOMIC PARTNERSHIP AGREEMENTS (EPAS) WITH AFRICAN,
CARRIBEAN AND PACIFIC COUNTRIES
The Economic Partnership Agreements (EPAs) with African, Caribbean, and Pacific groups
of states aim at
leveraging trade and investment to accelerate sustainable development
in
the partner countries.
162
A total of
7 EPAs
were being implemented with
29 ACP countries
in 2017.
163
These include
14 Caribbean countries, 13 African countries
and
2 Pacific
countries.
In addition, two regional agreements (with West Africa and with the East African
Customs Union) have been negotiated and are awaiting signature and implementation.
EPAs implemented in 2017
EPA partners
Antigua and Barbuda, Bahamas, Barbados, Belize,
Dominica, Dominican Republic, Grenada, Guyana,
Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Suriname, and Trinidad and Tobago
Fiji, Papua New Guinea
Madagascar, Mauritius, Seychelles, Zimbabwe
Botswana, Lesotho, Mozambique, Namibia, Swaziland,
South Africa
Cameroon
Ghana
Côte d’Ivoire
CARIFORUM
Pacific
Eastern and Southern Africa (ESA)
Southern African Development
Community (SADC)
Central Africa
Ghana
Côte d’Ivoire
EPAs are
asymmetric trade agreements.
The ACP side liberalises around 80% of trade over
a period of 15 years (20 years for some products), while the EU grants duty free quota free
access for all products from day one. Numerous instruments, from generous rules of origin to
special safeguards, ensure that the EPAs support
economic development, export
diversification and regional integration
in partner countries. While EPAs have some
common characteristics, they
differ
from each other in order to respect the interests and needs
of different regions.
162
163
More on EPAs online:
http://ec.europa.eu/trade/policy/countries-and-regions/development/economic-
partnerships/;
EPA State of Play:
http://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144912.pdf
For the EPAs negotiated by 2007, the terms ‘comprehensive/full’ and ‘interim’ have been used. The term,
‘full’ EPAs indicated regional EPAs with comprehensive thematic and country coverage. ‘Interim’ EPAs
with more limited thematic (trade in goods, development cooperation) and country (sub-regional) coverage,
were meant as stepping stones for full EPAs. However, all EPAs are self-standing international agreements
subject to signature, provisional application, ratification and ultimately entry into force. The dichotomy has
lost much of its meaning as ‘interim’ EPAs are not limited in time and can be extended to cover wider areas.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND THE SOUTHERN
AFRICAN DEVELOPMENT COMMUNITY (SADC)
1.
I
NTRODUCTION
The EU-SADC EPA is an agreement between the EU and six countries from the Southern
African Development Community (SADC): Botswana, Lesotho, Mozambique, Namibia South
Africa and Swaziland.
164
It was signed on 10 June 2016 and entered into provisional
application on 10 October 2016 for all Parties to the Agreement except for Mozambique. It
entered into provisional application for Mozambique on 4 February 2018. Hence 2018 will be
the first year in which all SADC EPA states fully implement the agreement.
165
The EU-SADC
EPA (‘the Agreement’) is the first and only regional EPA in Africa to be fully
operational (all partners are implementing the tariff cuts foreseen by the EPA). The
Agreement replaces all the trade provisions of the former bilateral Trade and Development
Cooperation Agreement (TDCA) between the EU and South Africa
166
.
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
The EU-SADC EPA provides for asymmetric liberalisation of trade in goods. All SADC EPA
States except for South Africa receive duty free and quota free treatment of all their goods
(except arms and munition) in the EU. South Africa receives such treatment for 96% of its
exports to the EU and an additional 2.7% of exports from South Africa benefits from reduced
tariffs or from TRQs.
In return, Botswana, Lesotho, Namibia, Swaziland and South Africa (who form the Southern
African Customs Union, SACU) grant duty free and quota free treatment to 84.9% of
products exported by the EU to the region. An additional 12.9% of EU exports benefits from
partial liberalisation (reduced tariffs or TRQs). Mozambique (a Least Developed Country and
not a member of SACU) liberalises a smaller percentage of exports from the EU.
Exports of SADC EPA States to the EU have been growing steadily in the last years. Exports
to the EU have increased for Lesotho (+30%), Mozambique (+25%), Namibia (+19%) and
South Africa (+0.7%) in 2017 (the first full year in which the EPA has been provisionally
applied). A decrease in exports from Botswana (-37%) was caused by a drop in the value of
diamond exports (EUR -683 million or -33% compared to 2016). The decrease in exports
164
165
166
Of the remaining 9 SADC countries, 4 are Parties of the interim EPA with Eastern and Southern Africa
(ESA), namely Mauritius, Madagascar, Seychelles and Zimbabwe. The reminder has the possibility of
accession to either the ESA or SADC EPA.
More on trade with SADC EPA states:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/sadc/
The TDCA has been concluded in 1999 and governed the trade relations and development cooperation
between the EU and South Africa. It has been fully replaced by the EPA.
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from Swaziland (-28%) can be attributed to a contraction of its sugar exports due to the end of
the EU’s sugar quota system, as well as severe droughts in 2016-2017.
EU exports to SADC EPA States have increased by 5.6% in 2017, after a drop in 2016. The
strongest increase in value (outside mineral products) was for motor vehicles
(EUR +594 million), while the largest percentage increase was in animal products (+134%)
and cereals (+88%).
Table1: EU28 Merchandise trade with SADC6 (million EUR)
2014
Botswana
EU28 imports from Botswana
EU28 exports to Botswana
EU28 trade balance
Lesotho
EU28 imports from Lesotho
EU28 exports to Lesotho
EU28 trade balance
Mozambique
EU28 imports from Mozambique
EU28 exports to Mozambique
EU28 trade balance
Namibia
EU28 imports from Namibia
EU28 exports to Namibia
EU28 trade balance
Swaziland
EU28 imports from Swaziland
EU28 exports to Swaziland
EU28 trade balance
South Africa
EU28 imports from South Africa
EU28 exports to South Africa
EU28 trade balance
TOTAL
EU28 total imports from SADC-6
EU28 total exports to SADC-6
EU28 trade balance
Source: Trade G2 Statistics, from Eurostat
1 822
273
-1 549
247
11
-237
1 366
894
-472
963
585
-378
151
29
-122
18 514
23 318
4 804
23 063
25 110
2 046
2015
1 503
275
-1 228
254
12
-242
1 435
983
-453
1 039
404
-635
139
35
-104
19 399
25 432
6 033
23 769
27 141
3 372
2016
2 199
331
-1 868
208
12
-195
1 326
682
-645
1 092
372
-719
122
51
-71
22 933
22 979
46
27 879
24 426
-3 453
2017
1 384
267
-1 117
271
12
-259
1 664
531
-1 133
1 305
476
-828
87
49
-39
23 112
24 465
1 353
27 823
25 800
-2 022
It should be borne in mind that all SADC EPA States, except for South Africa, already
benefited from duty free and quota free access to the EU market before the entry into
provisional application of the EU-SADC EPA. Similarly, South Africa already benefited from
preferential treatment under the Trade, Development and Cooperation Agreement (TDCA),
even though in less favourable term compared to the EPA.
However, the EPA created new legal certainty about trade relations between the EU and the
SADC EPA States. In addition, the EPA included new elements to facilitate trade between the
EU and the SADC EPA States, such as: (a) the possibility for SADC EPA States to use
flexible rules of origin; (b) additional market access for agricultural products from South
Africa; (c) some additional market access for the EU in SADC EPA states; and (d) a
framework for the protection of GIs in the EU and South Africa. This value-added of the EU-
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SADC EPA is already reflected in the trade statistics for specific products, in particular those
that benefited from additional liberalisation.
For example, the EU-SADC EPA contains
additional market access concessions for South
African exports
of sugar, frozen orange juice, wine, ethanol, flowers and fish. As a result, the
following could be observed following the entry into application of the EU-SADC EPA:
The value of South African exports of
sugar
to the EU increased from
EUR 2.3 million in 2015 to EUR 52.6 million in 2017, indeed the TRQ of 150 000 t
was nearly fully used in 2017;
Similar situation was for the TRQs for wine and orange juice, on the other hand the
TRQ for ethanol was used only partly;
The value of South African exports of
fish fillet and fish meat
increased from
EUR 34.93 million in the first semester of 2016 (under the TDCA) to
EUR 42.5 million in the first semester of 2017 (under the EPA). Overall exports of
fish, crustacean and molluscs from South Africa to the EU increased from
EUR 192.7 million in 2016 to EUR 235 million in 2017 (+22%).
EU Imports from South Africa: TRQ fill rate for 2017
Product
Skimmed milk powder
Butter
Strawberries
Cane sugar
Glucose and glucose syrup
Citrus jams
Canned pears, apricots, peaches and mixtures
Canned tropical fruit
Frozen orange juice
Apple juice
yeast
Wine in containers
Wine
Ethanol
Source: European Commission
Annual quota in 2017
500 t
500 t
385 t
150 000 t
500 t
100 t
57 156 t
3 020 t
1 057 t
3 595 t
350 t
77 741 300 l
33 317 700 l
80 000 t
Quota fill in 2017 (%)
0%
0%
0%
95%
0%
0%
55%
0%
100%
25%
24%
75%
100%
14%
Exports from Botswana, Lesotho, Namibia and Swaziland (BLNS)
167
to the EU have also
increased for a number of tariff lines despite droughts in Botswana, Namibia and Swaziland:
For example, the value of exports of
soft drink concentrates
increased from
EUR 2.98 million in 2015 to EUR 8.94 million in 2017 (+ 200.2%);
The value of exports of
dates, figs, pineapples and avocados
increased from
EUR 0.37 million in 2015 to EUR 1.49 million in 2017 (+ 299.7%);
167
Mozambique has not been included in the analysis since they only started applying the EPA in February
2018
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The value of exports of
dried nuts and fruit
increased from EUR 1.18 million in
2015 to EUR 1.32 million in 2017 (+ 12.4%).
Figure 1: EU28 Merchandise trade with SADC6 (million EUR)
30000
25000
20000
15000
10000
5000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-5000
-10000
EU28 Imports from SADC6
EU28 Trade Balance
EU28 Exports to SADC6
Source: Trade G2 Statistics/ISDB from Eurostat
Similarly, EU exports to SACU have increased for many products for which the EPA
provides
additional market access,
in the form of additional or modified TRQs:
The value of EU exports of
wheat
increased from EUR 223.8 million in 2015 to
EUR 266.2 million in 2017 (+19%):
The value of EU exports of
pig fat
increased from EUR 418 119 in 2015 to
EUR 1 994 168 in 2017 (+ 376%);
The value of EU exports of
frozen pork ham and shoulder
have increased from
EUR 549 089 in 2015 to EUR 890 078 in 2017 (+ 62%);
The value of EU exports of
butter
increased from EUR 5.56 million in 2015 to
EUR 14.1 million in 2017 (+ 153%).
In the case of the most prominent EU export products that are subject to TRQs by
SACU, in particular wheat, pork, cheese, the TRQs were overall well used.
Table 1: SACU Imports from the EU: Usage of TRQs from 1 January to 1 September 2017
Product
Pork
Pig fat
Butter
Cheese
Wheat
Barley
Cereal Based Food Preparations
Ice cream
Annual quota in 2017
(tons)
1 500
200
500
7 550
300 000
10 000
2 300
150
Quota fill till 1 September
2017
1 240
123
21
5 767
289 064
0
0
0
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Product
Mortadella Bologna
Annual quota in 2017
(tons)
100
Quota fill till 1 September
2017
0
Source: DG TRADE calculations based on data provided by the Office of the Executive Secretary of SACU
Table 2: EU28 merchandise trade with SADC6 by AMA/NAMA (million EUR)
2014
Trade in Agri-food products (AMA)
EU28 imports from SADC
2 689
EU28 exports to SADC
1 697
EU28 Trade Balance
-993
Total trade
4 386
Trade in non-agricultural goods (NAMA)
EU28 imports from SADC
20 374
EU28 exports to SADC
23 413
EU28 Trade Balance
3 039
Total trade
43 787
Source: Trade G2 Statistics/ISDB from Eurostat
2015
2 977
1 812
-1 165
4 789
20 792
25 329
4 536
46 121
2016
2 968
1 837
-1 130
4 805
24 911
22 589
-2 322
47 500
2017
3 076
1 943
-1 134
5 019
24 747
23 858
-889
48 605
Growth 2016-2017
%
108
105
-3
213
-164
1 269
1 433
1 105
3.6%
5.7%
4.4%
-0.7%
5.6%
2.3%
Generally, there has been a clear increase in agri-food trade between the EU and the SADC
EPA States in the years 2014-2017. Total trade in agri-food products went up from
EUR 4 386 million in 2013 to EUR 5 019 million in 2017 (an increase of 14.4%). Throughout
this period the trade balance has been in favour of the SADC EPA States.
Similarly, for non-agricultural goods, there has been a clear positive trend in trade from
EUR 43 787 million in 2013 to EUR 48 605 million in 2017, representing an increase of 11%.
2.2.
Trade in services
The EU-SADC EPA does not liberalise trade in services, but it should be noted that the EU
and Botswana, Lesotho, Mozambique and Swaziland have started negotiations on trade in
services. Services trade with the SADC EPA States has slightly increased over the last six
years. The balance of trade is positive in favour of the EU.
Table 3. EU28 services trade with SADC EPA States (million EUR)
EU28 imports
EU28 exports
Balance
Total trade
2011
4 938
8 555
3 617
13 494
2012
4 912
8 597
3 685
13 509
2013
5 137
8 334
3 197
13 471
2014
5 175
8 439
3 264
13 614
2015
5 672
9 815
4 143
15 487
2016
5 720
8 870
3 151
14 590
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
2.3.
FDI
The EPA does not cover investment; however, it is expected to contribute to an increase in
FDI in the region. Both the inward and the outward investment stock have seen variations in
recent years. The outward investment stock continues to be much more significant than the
inward investment stock. Of the EUR 74.6 million in EU FDI stocks in SADC EPA states in
2016, EUR 71.6 million were in South Africa. Similarly, the vast majority of inward
231
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1960849_0233.png
investment is from South Africa. It should be noted that the international investment climate
rankings of SADC EPA states, as well as macroeconomic outlooks (of South Africa in
particular), have deteriorated over the past few years, and the debt situation in several of the
countries has been worsening.
Table 4: FDI EU28 with SADC EPA States (million EUR)
2014
12 602
698
Inward
2015
9 766
-669
2016
13 076
5 763
2014
63 040
4 606
Outward
2015
94 397
21 645
2016
74 563
-11 753
Stocks
Flows
Source Trade G2 Statistics/ISDB from Eurostat BOP statistics
3.
I
SSUES ADDRESSED IN THE ANNUAL
EPA C
OMMITTEE MEETING
Since the EPA entered into force in October 2016, the Trade and Development Committee has
met three times (in February 2017, October 2017 and February 2018). During the meeting,
Parties discussed the setting up of the institutional framework of the Agreement (in particular
the setting up of the dispute settlement system) and differences of interpretation on specific
provisions of the Agreement (in particular on bilateral safeguard measures and on tariff
dismantling). Other issues included quota management systems, cumulation of origin
168
and
the agricultural safeguard.
Since the entry into application there have also been meetings of the Customs and Trade
Facilitation Committee (CTFC), of the Committee on GIs, Wines and Spirits (a bilateral
Committee with South Africa only) and of the Agricultural Partnership. The meeting of the
CTFC allowed partners to advance preparatory work for the start of diagonal cumulation of
origin, but this work is not finalised yet.
In October 2017, non-state actors from both the EU and SADC held a first Civil Society
Dialogue Meeting in Johannesburg, South Africa. Stakeholders elaborated a range of
recommendations, including the establishment of a permanent civil society platform under the
EPA and intensified outreach, using technology-based information and communication tools.
4.
S
PECIFIC AREAS OF IMPORTANCE
Under the 10
th
European Development Fund (EDF)
169
, the Regional Indicative Programme for
SADC included regional economic integration as a key focal sector. In total EUR 20 million
were allocated to the
Regional Economic Integration Programme (REIS)
and
168
SADC EPA States have the possibility to cumulate origin among themselves, as well as with a range of other
ACP and non-ACP countries. Cumulation means that originating products from country X can be further
processed or added to products originating in e.g. Botswana, just as if they had originated in Botswana. The
final product would have the origin of Botswana. The SADC EPA allows SADC EPA States to cumulate
with originating products from any country, as long as the product in question faces zero tariffs upon entry in
the EU (e.g. products that fall under MFN zero, or face zero tariffs under the EBA regime or under an FTA).
More on the European Development Fund:
https://ec.europa.eu/europeaid/funding/funding-instruments-
programming/funding-instruments/european-development-fund_en
169
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EUR 32 million to the
Trade Related Facility (TRF).
The first one aimed at building trade
capacities at regional level, while, under the second one, support was provided to the
implementation of the regional free trade areas and to EPA implementation in each individual
SADC country. In practice, however, the former also included support to national
administrations to better integrate them into the wider regional context. For instance, under
the REIS, each SADC EPA country requested funds to implement specific projects aimed at
strengthening the capacities of their respective international trade administrations,
competition and customs enforcement, SPS authorities and bodies in charge of standards,
trade facilitation and private sector development. In addition, the EPA implementation unit in
the SADC Secretariat has also been funded under this programme.
National EPA Implementation Plans (NEIPs)
have been drawn up jointly between the EU
and the partner country for all SADC EPA States except Namibia. The purpose is to identify
necessary steps and measures the country would need to take in order to maximize the
contribution of the EPA to long-term sustainable economic development. The NEIPs are a
useful tool to align EPA implementation priorities with development assistance funds. Under
the 11
th
EDF, a total of EUR 30 million are about to be earmarked to the 5 SADC EPA States
other than South Africa specifically for EPA implementation. Under a separate instrument,
EUR 10 million have been earmarked for the same purpose only to South Africa.
A significant part of development cooperation (under the range of EU external aid instruments
available), at regional and national level, provides support to EPA-related policy fields
including SME development, vocational education and policy dialogue, as well as support to
agriculture and venture capital development, but also to connectivity (transport and energy)
through blending.
Finally, the SADC region will also benefit under the 11
th
EDF of EUR 15 million for trade
facilitation, EUR 18 million for industrialisation and productive sectors, and EUR 14 million
for the investment and business environment.
The support provided by EU Member States individually should also been taken into
consideration. For example, Germany, through a EUR 3.5 million project managed by
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), is promoting sustainability
aspects in the implementation of the SADC and CARIFORUM EPAs. GIZ is also
implementing a EUR 20.7 million project on regional economic integration in SADC. The
UK has allocated GBP 35 million under the UK prosperity fund to support economic growth
in South Africa.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
2017 marks the first year when the Agreement was provisionally applied between all
parties.
170
There are a number of outstanding issues with regard to the implementation of the
EU-SADC EPA. To begin with, the institutional framework of the Agreement is not fully in
170
With the exception of Mozambique which started to apply the agreement in 2018.
233
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place yet. The dispute settlement system has not yet been agreed upon (roster of arbitrators,
rules of procedure and code of conduct for arbitrators are pending). The Joint Council, the
Trade and Development Committee and other Committees do not have rules of procedure yet,
meaning that these institutions cannot take binding decisions at this stage.
Furthermore, the possibility to ‘cumulate origin’ between SADC EPA States, one of the key
benefits of the Agreement, is not active yet. Cumulation of origin will allow SADC EPA
states to fulfil origin requirements jointly and hence boost regional value chains. SADC EPA
States have to notify (orally or in writing) the administrative cooperation agreements (a
prerequisite for cumulating origin) that they have already put in place.
Differences of views about the interpretation of certain provisions of the Agreement would
need to be resolved, particularly on the tariffs that apply to specific textile products exported
from the EU to SACU.
SACU has carried out a safeguard investigation on EU poultry according to a legal basis and
methodology the EU disagrees with.
With regard to SPS measures, since the Trade and Development Cooperation Agreement was
signed in 1999, EU agri-food trade with South Africa has more than doubled, with EU exports
increasing four-fold by 2017.
SPS issues are discussed in the Trade and Development Committee, which last met in
November 2017. Foremost among the issues related to the EU exports was the suspension of
nearly all exports of EU poultry (had reached over 200 billion euro in 2015 and 2016) by
South Africa following the avian influenza (HPAI) outbreaks of the winter of 2017.
The Commission has been actively pressuring the South African authorities to recognise the
HPAI-free status of Member States, and to recognise regionalisation in future outbreaks
instead of imposing country-wide bans. However, South Africa has made the re-opening of
market conditional on audit visits to EU Member States, to be conducted in 2018.
Finally, work is ongoing to agree a mechanism to monitor the operation and impact of the
Agreement and on a way to regularly involve non-state actors from all Parties in the
monitoring process.
6.
C
ONCLUSIONS AND OUTLOOK
For 2017 we can observe a clear increase in trade flows for specific products from both the
EU and South Africa that have benefited from additional liberalisation in comparison to
TDCA regime. Exports of certain products from Botswana, Lesotho, Namibia and Swaziland
also increased. Moreover, progress was made in preparing the future implementation of the
Agreement through several EU-SADC Trade and Development and Sub-Committee meetings.
However, it is clear that, to maximise the Agreement’s positive impacts, in addition to tariff
liberalisation, other outstanding implementation issues will need to be addressed. This will be
easier once the institutional framework of the Agreement will be complete and fully
operational.
234
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND
COTE D’IVOIRE
1.
I
NTRODUCTION
Pending an EPA with the West African region, Côte d’Ivoire concluded a
stepping stone or
interim Economic Partnership Agreement
with the EU in November 2008.
171
The stepping
stone EPA with Côte d’Ivoire was signed on 26 November 2008, approved by the European
Parliament on 25 March 2009 and ratified by the Ivorian Parliament on 12 August 2016. It
entered into provisional application on 3 September 2016. Côte d’Ivoire
officially announced
that it would start liberalising its market for EU products by the 1
st
of January 2019. The
stepping stone or interim EPA (iEPA) will be substituted by the regional EU-West Africa
EPA once the latter enters into force.
172, 173
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
Trade with Côte d’Ivoire has been relatively stable over the last decade. Exports of Côte
d’Ivoire to the EU have seen a steady increase. Côte d’Ivoire has a trade surplus, except for
non-agricultural products, where the EU has a surplus.
Table 1: EU-28
Merchandise Trade with Côte d’Ivoire (million EUR)
EU-28
imports from Côte d’Ivoire
EU-28
exports to Côte d’Ivoire
EU-28 trade balance
Source: Trade G2 Statistics/ISDB Eurostat
2014
3 258
2 306
-952
2015
4 255
2 672
-1 583
2016
4 548
2 434
-2 114
2017
4 678
2 849
-1 829
The EU is by far the most important trade partner of Côte d’Ivoire: In 2017, 40.5% of Côte
d’Ivoire’s exports went to the EU and 32.5% of Côte d’Ivoire’s imports came from the EU.
Since 2008, all exports
from Côte d’Ivoire enter the EU duty-free
and quota-free. Main
products imported by the EU from Côte d’Ivoire 2017 were cocoa beans (45% of total imports
in value), processed cocoa products (23%), oil (9%), natural rubber (8 %) and bananas (5%).
171
172
173
The official name of the agreement (‘stepping-stone agreement’) reflects
the fact that the initial and ultimate
objective for economic partnership in West Africa is a comprehensive, regional agreement. It is also called
‘interim EPA’.
The Economic Partnership Agreement was signed in December 2014 by the European Union and 13 West
African Countries. In 2017, three West African countries had still not signed the agreement (The Gambia,
Mauritania and Nigeria). The agreement will enter into provisional application if the 16 West African
Countries sign the agreement and 2/3 of these countries ratify it.
More on Trade with West Africa and Côte d’Ivoire:
http://ec.europa.eu/trade/policy/countries-and-
regions/regions/west-africa/
236
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1960849_0238.png
The main EU exports to
Côte d’Ivoire in 2017 were machinery and transport equipment
(35%), a variety of foodstuff and agricultural products (20%) and chemicals and
pharmaceuticals (17%).
The interim EPA foresees that Côte d’Ivoire will liberalize 80% of imports
from the EU in the
coming years. Côte d’Ivoire has formally announced to the EU and the WTO that it would
start liberalising its market for EU products by the 1
st
of January 2019.
Table 2: EU-28
merchandise trade with Côte d’Ivoire (million EUR)
2014
2015
2016
4 548
3 653
895
2 434
541
1 893
-2 114
-3 113
998
2017
4 678
3 580
1 098
2 849
575
2 274
-1 829
-3 005
1 176
EU-28
imports from Côte d’Ivoire
Total
3 258
4 255
Agricultural
2 443
3 282
Non-Agricultural
815
973
EU-28
exports to Côte d’ivoire
Total
2 306
2 672
Agricultural
510
551
Non-Agricultural
1 796
2 121
EU-28 trade balance
Total
-952
-1 583
Agricultural
-1 933
-2 731
Non-Agricultural
981
1 148
Source: Trade G2 Statistics/ISDB Eurostat
Between 2014 and 2017 Côte d’Ivoire made large use of EU preferences (MFN zero, GSP
and EPA preferences) for its exports to the EU market. More than 98% of its products entered
the EU market duty free in the past four years. For most years, the share of products entering
under MFN zero is around 60-65% of total exports, owning to the large share of raw materials
in Côte
d’Ivoire’s exports to the EU.
Figure 1. EU-28
Merchandise trade with Côte d’Ivoire (million EUR)
6000
5000
4000
3000
2000
1000
0
-1000
-2000
-3000
EU-28
imports from Côte d’Ivoire
EU-28 trade balance
EU-28
exports to Côte d’Ivoire
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Trade G2 Statistics/ISDB Eurostat
237
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1960849_0239.png
Success stories: Bananas from Côte d’Ivoire
EU imports of banana
from Côte d’Ivoire expanded by 80% over the last decade (2007-2017),
even as overall banana imports in the EU only increased by around 50%. Exports in quantity
increased to 316 000 tons in 2017 (amounting to EUR 235 million in value in 2017). The
upward trend was aided by having secured long-term duty free and quota free access to the
European market through the interim EPA. The production of bananas for exports accounts
for about 10% of agricultural GDP in Côte d’Ivoire and production covers about
8 000 hectares. Banana production is labour intensive, with a ratio of employment higher than
other agricultural sectors in the country. The sector employs around 10 000 workers directly
and another 3 300 workers are engaged in supporting activities. Taking into account family
members, 60
000 people rely on the banana sector in Côte d’Ivoire for their livelihood.
Figure 2: EU-28 Imports of Bananas (incl. plantains, fresh or dried)
from Côte d'Ivoire
350000
300000
250000
200000
150000
100000
50000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Import value (in 1000 EUR)
Import quantity (in 1000kg)
2.2.
Trade in services
The EPA does not cover trade in services. Trade in services between the EU and Côte d’Ivoire
has shown some variation over the last years.
Table 3. EU28 services trade with Côte d’Ivoire (million EUR)
EU28 imports
EU28 exports
Balance
Total trade
2013
409
926
517
1 335
2014
478
796
318
1 274
2015
664
793
129
1 457
2016
590
797
207
1 387
Source: Eurostat Balance of Payment statistics
2.3.
FDI
The EPA does not cover investment. The EU investment stock in Côte d’Ivoire has seen some
variation over last years, mostly unrelated to the EPA which does not yet cover investment.
238
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1960849_0240.png
However, sectors such as bananas and cocoa processing, where the EPA secures long-term
duty-free and quota-free access to the EU market for final products, have seen an increase in
European investment (see also above).
Table 4: FDI EU28 with Côte d’Ivoire (million EUR)
Inward
2014
2015
3
-183
35
-216
2016
-58
62
Outward
2014
2015
3 694
3 732
-65
700
2016
3 477
-176
Stocks
Flows
Source: Eurostat Balance of Payment statistics
3.
I
SSUES ADDRESSED IN THE ANNUAL
EPA C
OMMITTEE MEETING
The first EPA Committee meeting between Côte d’Ivoire and the EU took place on in April
2017, and the second meeting in March 2018, both in Abidjan. The parties finalised the
transposition
of Côte d’Ivoire’s market access offer from the Harmonised System (HS)
version 2002 to HS2017 and acknowledged Côte d’Ivoire’s proposal for a updated tariff
dismantling schedule (as the initial market access offer is from 2008, it includes liberalisation
dates
already in the past). This paves the way for Côte d’Ivoire to start opening its markets for
EU imports from 2019 onwards. In addition, the second meeting approved the internal rules
of the EPA committee and made substantial progress in the negotiation of reciprocal rules of
origin. Parties furthermore discussed the future monitoring and evaluation arrangement for the
agreement.
4.
S
PECIFIC AREAS OF IMPORTANCE
Development cooperation, particularly trade-related assistance, is an important pillar of the
EPA, as it contributes to operationalizing the development dimension of the partnership.
The
Côte d’Ivoire
EPA Implementation Strategy
was adopted in October 2017. Its
implementation is already supported by the EU through a series of programmes and projects
that target value chain development, export competitiveness and industrialization. The
national component (EUR 9.9 million) for Côte
d’Ivoire of the regional
“Competitiveness
support programme in West Africa”
will aim at: (1) Upgrading and supporting consortiums
of companies in target sectors and value chains; (2) Strengthening the capacities of the Private
Sector Intermediary Organizations that will serve as a lever for modernization,
competitiveness and growth for SMEs; (3) Improving the overall business regulatory
environment. The programme will further consolidate results achieved under the previous
Trade and Regional Integration support programme (PACIR, EUR 16 million, 2010-2015).
A dedicated programme in
support of EPA implementation
is currently under preparation. It
will promote customs cooperation on tariff and non-tariff issues and provide support on SPS
measures to reduce barriers to trade. The programme will also assist relevant government
actors with other reforms related to the implementation of the EPA, including transition in
taxation (diversification of fiscal revenues away from customs income) and the establishment
of trade defence instruments.
239
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Two measures that came to an end recently were
support to the banana sector
(EUR 44.75 million) and the
sugar sector.
In the case of bananas, the programme contributed
to increasing productivity of the sector and contributed to making
Côte d’Ivoire the largest
banana exporter in Africa. In the sugar sector, production of cane sugar and revenue earned
increased for the targeted villages. Measures also focussed on social and environmental
aspects of sugar production and supported the construction and rehabilitation of social
infrastructure for sugar producing communities, as well as the introduction of environmental
management practices.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
The next steps towards full implementation
of the stepping stone EPA with Côte d’Ivoire
include:
a) Implementation of the different steps leading to the first tariff cut on the 1
st
January
2019;
b) Effective communication on the state of play, challenges and opportunities of the
interim EPA to main stakeholders, including regional organisations, the private sector
and civil society;
c) Preparing a study to examine the implications of the implementation of the interim
EPA in Côte d’Ivoire for the regional economic integration;
d) Finalisation of the negotiation of the protocol on rules of origin;
e) Completing of work on a dispute settlement procedure.
6.
C
ONCLUSIONS AND OUTLOOK
Based on the extensive preparatory work in 2017, the 2
nd
EPA EU-
Côte d’Ivoire Committee
opened the way for the liberalisation of the
Côte d’Ivoire Market by the 1
st
of January 2019.
This is an important step in EU trade’s relationship with Côte d’Ivoire. Each step of the
liberalisation process will be closely followed up by the EU in close coordination with Côte
d’Ivoire and the regional
organisations West African Economic and Monetary Union
(UEMOA) and Economic Community of West African States (ECOWAS).
The EU will
support Côte d’Ivoire in the implementation of the EPA through trade related development assistance.
In terms of impact, it is too early to draw conclusions. Overall, trade flows have steadily
increased and the EU remains the primary trading partner of Côte d’Ivoire. The EPA has
provided predictability to new investors and led to increased production and market share in
the
EU for Côte d’Ivoire’s cocoa and bananas production, among others. Moving forward, the
impact of the EPA on trade flows, the business climate in general, fiscal revenue and
sustainable development will be closely monitored to ensure that EPA objectives are
achieved.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND GHANA
1.
I
NTRODUCTION
Pending an EPA with the West African region, Ghana concluded a stepping stone (or interim)
Economic Partnership Agreement with the EU in December 2007.
174
The stepping stone EPA
with Ghana was signed on 28 July 2016, ratified on 3 August 2016 by the Ghanaian
Parliament and approved by the European Parliament on 1 December 2016. It entered into
provisional application on 15
December 2016. Discussions are ongoing to update Ghana’s
market access commitments and timeline for implementation. Once completed, Ghana will
start reciprocating its preferential access to the EU. This agreement will be substituted by the
regional EU-West Africa EPA once the latter enters into force.
175 176
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
Merchandise trade with Ghana has been relatively stable over the last decade. The decrease in
value of imports from Ghana in recent years can be attributed to a decline in oil prices: the
value of oil imports from Ghana dropped by EUR 800 million between 2014 and 2017. Non-
oil imports from Ghana remained stable over the same period and stood at EUR 1 655 million
in 2017. The EU has an overall trade surplus, but Ghana has a surplus on agricultural
products.
Table 1. Total Merchandise Trade EU-28 with Ghana (million EUR)
EU-28 imports from Ghana
EU-28 exports to Ghana
EU-28 trade balance
2014
2 885
3 112
227
2015
2 645
3 041
396
2016
2 308
2 845
537
2017
2 119
3 042
923
Source: Trade G2 Statistics/ISDB Eurostat
The EU is by far the most important trade partner of Ghana for imports (30% of Ghana’s
imports come from the EU) in 2017. The EU is also the 4
th
largest destination for Ghana’s
exports (13% of total exports), after Switzerland (17%), India (15 %) and China (13 %).
All exports from Ghana enter the EU duty-free and quota-free. In 2017, the main products
exported by Ghana to the EU in value were cocoa beans (30% of total exports in value), cocoa
174
175
176
The
official name of the agreement (‘stepping-stone agreement’) reflects the fact that the initial and ultimate
objective for economic partnership in West Africa is a comprehensive, regional agreement. It is also called
‘interim EPA’
The Economic Partnership Agreement was signed in December 2014 by the European Union and 13 West
African Countries. In 2017, three West African countries still had not signed the agreement (The Gambia,
Mauritania and Nigeria). The agreement will enter into provisional application if the 16 West African
Countries sign the agreement and 2/3 of these countries ratify it.
More on trade with Ghana:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/west-africa/
241
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1960849_0243.png
butter, paste and powder (23%), fuels (22%), and edible fruits and nuts (6%), half of which
bananas. The main EU exports to Ghana in 2017 were machinery and transport equipment
(30%)
177
, fuels (16%), prepared foodstuff and animal products (16%) and chemicals (11%).
Figure 1. EU-28 Merchandise trade with Ghana (million EUR)
4.000
3.500
3.000
2.500
2.000
1.500
1.000
500
0
-500
-1.000
EU28 Imports from Ghana
EU28 Exports to Ghana
EU28 trade balance
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Trade G2 Statistics/ISDB Eurostat
Table 2. EU-28 merchandise trade by AMA/NAMA sector with Ghana (million EUR)
2014
2015
EU-28 imports from Ghana
Total
2 885
2 645
Agricultural
1 335
1 508
Non-Agricultural
1 550
1 136
EU-28 exports to Ghana
Total
3 112
3 041
Agricultural
321
348
Non-Agricultural
2 791
2 693
EU-28 trade balance
Total
227
396
Agricultural
-1 014
-1 160
Non-Agricultural
1 241
1 557
Source: Trade G2 Statistics/ISDB
2016
2 308
1 650
658
2 845
348
2 497
537
-1 301
1 839
2017
2 119
1 313
806
3 042
444
2 598
923
-870
1 793
The EPA foresees that Ghana will liberalize 80% of imports from the EU in the coming years.
Effective liberalization is still pending (more on this below).
In the past years, Ghana made a large use of EU preferences (Most Favoured Nation (MFN)
tariffs that are at zero percent, General System of Preference and EPA preferences) for its
exports to the EU market. Between 96% and 98% of its products entered into the EU market
duty and quota free in the years 2013 to 2017. For most years, the share of products entering
177
Especially of HS chapters 83, 84, 85 and 87
242
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1960849_0244.png
under MFN zero is far above 60% of total exports, owning to the large share of raw materials
in Ghana’s exports to the EU.
Increased exports of processed cocoa products provide for more local value-added
A key success story for Ghana has been its ability to increase exports of processed cocoa
products. Since 2008, Ghana benefited from duty-free quota-free market access for processed
cocoa products and steadily increased their exports of transformed cocoa products to the EU
market. In the past 10 years, Ghana increased its exports of cocoa butter, cocoa paste and
cocoa powder to the EU by 237%. By comparison, Nigeria, which remained under the GSP
trade regime saw its processed cocoa exports to the EU stagnating.
Moving beyond the export of raw cocoa beans towards locally processed cocoa products
makes Ghana more resilient to fluctuating world market prices for raw materials. Low prices
for Cocoa beans in 2017 lead to a EUR 400 million drop in cocoa beans exports from Ghana
to the EU. By contrast, the value of processed cocoa exports continued on an upward trend.
Figure 2. EU28 Imports of raw and processed Cocoa from Ghana,
in million EUR
1.200
1.000
800
600
400
200
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Cocoa beans (1801) and Cocoa shells, husk, skins etc. (1802)
Cocoa paste (1803), Cocoa butter (1803), Cocoa powder (1805), Chocolate (1806)
Source: ISDB/Eurostat
2.2.
Trade in services
The interim EPA does not cover trade in services. Trade in services between the EU and
Ghana has shown some variation over the last years.
Table 3. EU-28 services trade with Ghana (million EUR)
EU-28 imports
EU-28 exports
Balance
Total trade
2013
568
973
405
1 542
2014
1 174
1 553
379
2 726
2015
1 353
1 968
615
3 321
2016
1 340
1 800
460
3 140
Source: Eurostat Balance of Payment statistics
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1960849_0245.png
2.3.
FDI
The interim EPA does not cover investment. There was some variation in the EU investment
stock in Ghana over the last years, unrelated to the EPA which does not cover investments.
Table 4. EU-28 FDI with Ghana (million EUR)
Inward
2014
2015
-567
-1 070
-41
-396
2016
-1 431
-307
Outward
2014
2015
2 665
4 888
68
237
2016
3 412
219
Stocks
Flows
Source: Eurostat Balance of Payment statistics
3.
I
SSUES ADDRESSED IN THE FIRST MEETING OF THE JOINT
EPA C
OMMITTEE
After Ghana’s ratification in 2016, the preparatory work for implementation commenced. As
a result, the first meeting of the EPA Committee was held in Accra, Ghana, on 24 January
2018. The EPA Committee adopted its rules of procedures governing the Joint EPA
committee. The Parties exchanged information on the state of play in the implementation of
the EPA with
Côte
d’Ivoire and the process of adoption of the regional EPA with West Africa.
The Parties have discussed Ghana’s updated liberalization schedule. The interim EPA was
negotiated back in 2007 and was only signed and ratified in 2016, therefore a certain number
of dates in the market access offer were still in the past and had to be updated. At the same
time, the Parties made substantial progress in the transposition of Ghana’s market access
commitments from HS2002 (in which it was originally drafted) to HS2017. The Parties
furthermore discussed rules of origin, the institutional set up for the implementation of the
EPA, the monitoring of operation and impact of the EPA, as well as the Aid for Trade
accompanying measures.
4.
S
PECIFIC AREAS OF IMPORTANCE
Development cooperation, particularly trade-related assistance, is an important pillar of EPA,
as it contributes to operationalizing the development dimension of the partnership.
Ghana adopted an
EPA Accompanying Measures Strategy
in 2015 to facilitate EPA
implementation. The EU will support the implementation of the strategy with EUR 12 million
for 2018-2023 through the following actions: i) support to the Ministry of Trade to implement
the EPA and to engage on EPA-related issues; ii) support to the Ghana Export Promotion
Authority and the Ghana Investment Promotion Centre in promoting local SMEs to upgrade
along value chains and improve the quality of their products; and iii) overall support to
improving the business policy and regulatory environment.
Previously, the EUR 12 million
Trade Related Assistance and Quality Enabling
programme (TRAQUE),
helped to modernise the Ghanaian quality infrastructure and
strengthen export competitiveness. Implemented from 2011 to 2017, the project facilitated the
upgrading of equipment and provided training for staff in 28 Ghanaian laboratories.
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Furthermore, with TRAQUE, Ghana was able to improve the inspection and control system
for phytosanitary requirements at exit points
which resulted in the EU lifting an import ban
on five vegetable commodities from Ghana (chilli pepper, bottle gourds, luffa gourds, bitter
gourds and eggplants).
With regard to productive capacities, value chains and competitiveness, the EU supports
Ghana’s agricultural sector,
through the
Market Oriented Agricultural programme
(MOAP) (EUR
35 million, 2017-2024) and the programme to promote
productive
investments for sustainable agriculture in Northern Ghana
(2018-2025,
EUR 102 million).
Furthermore, the EU is also supporting
Ghana’s
infrastructure
sector, e.g. the upgrade of
Eastern and Western transport corridors and a power transmission line with neighbouring
Cote d’Ivoire.
5.
F
OLLOW
-
UP ACTIONS
In regard to the next steps for the iEPA, EU and Ghana agreed to:
a)
b)
c)
d)
6.
Review and endorse the final transposition of the tariff nomenclature in HS 2017;
Review and endorse the updated liberalization schedule;
Set up an appropriate mechanism to monitor the operation and impact of the EPA;
Start negotiating the procedures relating to a reciprocal Protocol on Rules of Origin.
C
ONCLUSIONS AND OUTLOOK
The implementation of the iEPA with Ghana is in its early stages. As Ghana moves to
implement its market access commitments, close attention will be paid to the effects the iEPA
might have for
Ghana’s economy in terms of trade and investment flows, government revenue
and sustainable development. In the coming years, the implementation of iEPA should also be
impacted by the ongoing business climate and fiscal reforms in Ghana and by the EU support
to various aspects of iEPA implementation 2018.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CAMEROON
1.
I
NTRODUCTION
Pending an EPA with the Central African region, Cameroon concluded
an Economic
Partnership Agreement (EPA)
with the EU on 17 December 2007
178
. This agreement was
signed by Cameroon and the EU on 15 January 2009. It was approved by the European
Parliament (EP) on 13 June 2013 and ratified by the Parliament of Cameroon on 22 July 2014.
On 4 August 2014, the agreement entered into provisional application. In August 2016 and
August 2017, Cameroon started reciprocating its preferential access to the EU, and the
agreement has now reached cruising speed.
179
This EPA is a regional agreement and is open
to the accession of other Central African countries
180
.
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
Trade with Cameroon has been relatively stable over the last decade. Cameroon’s present
trade surplus is slowly decreasing.
Table 1. Total Merchandise Trade EU-28 with Cameroon, 2014-2018 (million EUR)
EU-28 imports from Cameroon
EU-28 exports to Cameroon
EU-28 trade balance
Source: Trade G2 Statistics, Eurostat
2014
2 150
1 627
-523
2015
1 800
1 578
-222
2016
1 776
1 560
-217
2017
1 914
1 470
-444
The EU is by far the most important trade partner of Cameroon: 32% of Cameroon’s imports
come from the EU and 54% of Cameroon’s exports go to the EU.
All exports from Cameroon enter the EU duty free and quota free. Main products exported
from Cameroon to the EU are oil (32% of total exports in value), cocoa beans (22%), wood
(15%), bananas (13%), and aluminium (5%) (Eurostat, 2017). Exports of processed cocoa
products have increased by 82% since 2010, to EUR 84 million in 2017.
178
179
180
The official name of the agreement (‘stepping-stone agreement’) reflects the fact that the initial and ultimate
objective for economic partnership in Central Africa is a comprehensive, regional agreement.
More on Trade with Cameroon / Central Africa:
http://ec.europa.eu/trade/policy/countries-and-
regions/regions/central-africa/
By 2016, negotiations for a comprehensive regional EPA with Cameroon, Central Africa Republic, Chad,
Congo, Democratic Republic of Congo (DRC), Equatorial Guinea, Gabon and Sao Tome y Principe had
come to a halt. For the time being, the Commission is focussing its efforts on the ‘stepping stone’ agreement
with Cameroon.
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1960849_0248.png
Taking into account
the share of raw materials in these exports, 75% of Cameroon’s exports
to the EU are free of duty on an MFN basis. The remainder, mainly bananas but also
aluminium, processed cocoa and wood are imported under EPA preferences.
The EPA foresees that Cameroon will successively liberalize 80% of imports from the EU
over the next years. Effective liberalization started on 4 August 2016 for 1
st
category products
(1727 tariff lines) and on 4 August 2017 for 2
nd
category products (985 tariff lines). The two
first categories consist mainly of basic necessities, industrial and agricultural inputs,
machines, chemicals, vehicles and spare parts, computers, papers, consumer products for
households.
Table 2. EU-28 merchandise trade with Cameroon (million EUR)
2014
2015
EU-28 imports from Cameroon
Total
2 150
1 800
Agricultural
657
726
Non-Agricultural
1 493
1 074
EU-28 exports to Cameroon
Total
1 627
1 578
Agricultural
298
301
Non-Agricultural
1 329
1 277
EU-28 trade balance
Total
-523
-222
Agricultural
-358
-425
Non-Agricultural
-164
203
Source: Trade G2 Statistics/ISDB
2016
1 776
747
1 030
1 560
276
1 284
-217
-471
254
2017
1 914
665
1 249
1 470
267
1 203
-444
-398
-46
The total value of goods imported into Cameroon under EPA preferences from August 2016
to February 2018 is estimated at EUR 150 million. Main products imported under EPA
preferences according to Cameroon customs were clinker (31% of total value of imports
under EPA preferences), machinery and Equipment (21%), articles for breweries (13%),
chemical industries (10%), fertilizers (10%), electrical machinery and equipment (7%).
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1960849_0249.png
Figure 1. EU-28 Merchandise trade with Cameroon (million EUR)
3.000
2.500
2.000
1.500
1.000
500
0
-500
-1.000
-1.500
-2.000
-2.500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EU28 imports from Cameroon
EU28 trade balance
EU28 exports to Cameroon
Source: Trade G2 Statistics, Eurostat
Over the year 2017, the total value of forgone customs revenue as a result of the EPA was
EUR 2.72 million or 0.4% of total 2017 customs revenue.
181
(Source: Cameroon Customs)
Parties are currently still negotiating a common reciprocal regime governing the rules of
origin, to be annexed to the agreement. In the meantime, Cameroon benefits from the general
EPA rules of origin included in EU Market Access Regulation 2016/1076. Before starting
liberalization, Cameroon published a decree on rules of origin applicable to products imported
from the EU (Decree 2016/367, 3 August 2016).
2.2.
Trade in services
Trade in services between the EU and Cameroon shows little variation over the last years. The
EPA does not yet cover trade in services.
Table 3. EU28 services trade with Cameroon (million EUR)
EU28 imports
EU28 exports
Balance
Total trade
2013
458
673
215
1 132
2014
404
933
530
1 337
2015
422
601
179
1 023
2016
353
640
287
993
Source: Eurostat Balance of Payment statistics
181
The 2018 Budget law estimate total yearly customs revenue at 670 million euros, including exports and
imports taxes, stamp duties, etc. The IMF estimates customs revenues at 1.14 billion euros in 2017, also
including VAT on imports.
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1960849_0250.png
2.3.
FDI
The investment stock has been stable over the last four years. The EU investment stock
remains largely tied up in extractive industries, although recent EU investments in Cameroon
are diversified across various sectors such as infrastructure (transport, energy), agriculture
(bananas, sugar), communication and distribution. Main investor is France with about 300
companies established that are estimated to contribute about 30% of the Government’s tax
revenue. The largest single EU investment announced in the last 12 months was Actis LLP,
which plans a USD 200 million investment into a shopping mall and Business Park in Douala.
Table 4. FDI EU28 with Cameroon (million EUR)
2014
43
1
Inward
2015
-14
-46
2016
4
33
2014
1 281
44
Outward
2015
1 123
44
2016
1 352
95
Stocks
Flows
Source: Eurostat Balance of Payment statistics
3.
I
SSUES ADDRESSED IN THE ANNUAL
EPA C
OMMITTEE MEETING
The 3
rd
EPA Committee between Cameroon and the EU took place in December 2017 in
Brussels. One of the main points of discussion was the assessment of the tariff dismantling
process in Cameroon and its impact in terms of products concerned and customs revenue
losses. A dedicated study on the fiscal impact of the EPA will be prepared over the coming
months. Parties also further refined the tariff dismantling schedule. In particular, the Parties
concluded transposition of Cameroon’s market access commitments under Annex
III of the
EPA from Harmonised System (HS) 2002 to HS 2017.
182
In addition, parties took stock of the
current negotiations of the protocol on rules of origin to be annexed to the agreement.
Furthermore, the parties discussed EPA accompanying measures and action programmes to be
elaborated over the next few months. Other issues addresses during the meeting include
Croatia’s accession the EPA, trade barriers, and the presentation of the EPA to the WTO
Committee on Regional Trade Agreements (CRTA).
4.
S
PECIFIC AREAS OF IMPORTANCE
The EU has been a long standing partner for Cameroon’s economic development.
Development assistance from the EU in recent years focussed for example on strengthening
agricultural productivity and competitiveness. In anticipation of the EPA, the EUR 10 million
PACOM programme (Programme
d’appui à l’amélioration de la compétitivité de l’économie
camerounaise)
183
facilitated the expansion of quality infrastructure, public private dialogue
and enhanced productivity of Cameroon’s enterprises.
PACOM supported Cameroonian firms
182
183
As Cameroon's tariff dismantling schedule runs over multiple years, it is important to regularly transpose it
into the most recent HS nomenclature, to ensure that customs and traders always have correct, up to date
information.
Implemented from 2013-2018, under the 10
th
European Development Fund (EDF)
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in upgrading their productive equipment and production processes, and in acquiring
international quality certifications (ISO, OHSAS). For more than 10 years, the EU together
with other international partners has been supporting
the ‘Cameroon Business Forum’ as a
platform for dialogue between the government and the business community. Also technical
assistance and support for customs modernisation were provided. PACOM will be replaced in
2018 by DACC (Dispositif
d’appui à
la compétitivité du Cameroun),
another EUR 10 million
programme under the 11
th
European Development Fund (EDF) to provide direct support to
companies, start-ups and intermediary organizations and to improve the provision of business
services.
In addition, another programme of accompanying measures directly linked to the
implementation of the EPA under the regional 11
th
EDF envelope is under preparation.
Part of the support provided will include a monitoring mechanism. Such monitoring should
include among others the tax implications of the liberalization process, and the sustainable-
development dimensions of the agreement.
Throughout 2017, various outreach and awareness raising events with civil society and private
sector representatives were organized by the Cameroonian Administration and the EU
Delegation to Cameroon.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Negotiations are ongoing on a common protocol of rules of origin, which was not included in
the EPA at the time negotiations were concluded in 2007. The main open issue is adjusting
the liberalization timetable (2008-2023) to the delay in implementation resulting from
Cameroon’s EPA ratification in 2014. Contacts are ongoing between the regional
organisations and the EU on accession to this EPA by other Central African States.
6.
C
ONCLUSIONS AND OUTLOOK
In 2017, Cameroon took again important steps in implementing its commitments, culminating
in significant tariff cuts. While it is too early to discern any impact on trade and investment
flows in 2017, there was a clear increase in the number of import declarations in Cameroon,
without major additional revenue losses. Implementation will also be impacted by the ongoing
domestic reforms and accompanying measures to be implemented from 2018.
In March 2017, the ministers in charge of EPA from the Central African region declared the
availability of their countries to study their possible accession to the stepping stone
agreement. However, uncertainty remains as to the effective resumption of negotiations and
the possibility of concluding an agreement.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CARIFORUM
1.
I
NTRODUCTION
The EU-CARIFORUM
(CF) EPA (hereinafter ‘The Agreement’) is a
regional agreement
between the EU and its Member States and 15 Caribbean countries.
184
The negotiations
were concluded in December 2007. The agreement was signed in October 2008 and it entered
into provisional application on 29 December 2008. In 2017, this agreement was provisionally
applied by the EU and by 14 Caribbean States (Haiti still needs to ratify the agreement in
parliament before applying it, due to domestic legal requirements). By the end of 2017, 22 EU
Member States and 9 Caribbean States had ratified the EPA.
The EU-CF
EPA is ‘comprehensive’ both in the geographic and thematic sense, covering the
whole region and including not only provisions on trade in goods, but also trade in services
and provisions on trade-related issues (including competition, innovation and intellectual
property, transparency in public procurement and trade and sustainable development).
185
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
The trade in goods chapter provides for reciprocal but asymmetric market opening by the
Parties. All Caribbean products (except arms and ammunition) enter the EU market duty free
and quota free. This largely represents a continuation of the trade preferences granted up to
2008 under the Cotonou Agreement. CARIFORUM states will open about 92% of its trade
over a 25-year period (83% over 15 years), and will exclude about 8% of imports from
liberalisation altogether. The first tariff cuts were scheduled for 1 January 2011, 2013, 2015
and 2017. As of November 2017, the bigger Caribbean countries were implementing the tariff
liberalization schedule as planned, while some progress was still required in some of the
smaller countries that form part of the Organisation of Eastern Caribbean States (OECS).
Table 1: Total Merchandise Trade EU28 with CARIFORUM-14 (million EUR)
EU28 imports from CF states
EU28 exports to CF states
EU28 trade balance
Source: Trade G2 Statistics, Eurostat
2014
4 057
4 159
102
2015
4 043
5 270
1 228
2016
3 176
4 950
1 775
2017
3 561
5 130
1 569
184
185
The EU-CARIFORUM EPA has been negotiated with 15 countries in the Caribbean Region, the Member
States of the Caribbean Forum (CARIFORUM): Antigua and Barbuda, Bahamas, Barbados, Belize,
Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent
and the Grenadines, Suriname, and Trinidad and Tobago. All except Haiti apply the EPA provisionally.
More on trade with the Caribbean:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/caribbean/
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1960849_0253.png
The EU is the 2
nd
most important trading partner for the Caribbean, behind the USA. In total,
14% of Caribbean imports come from the EU and 14% of Caribbean exports go to the EU.
The overall trade volume between the EU and the Caribbean shows fluctuations over the last
decade. Total Caribbean exports to the EU increased by 12% in 2017 (almost
EUR 400 million), recovering from a significant drop in 2016. EU exports to the Caribbean
also increased.
Table 2: EU28 merchandise trade sector with CARIFORUM-14 (million EUR)
Agricultural trade EU28 with CARIFORUM-14
Growth
2016-2017
EU28 imports
931
918
1 021
1 026
909
-117
EU28 exports
567
626
741
751
786
35
Balance
-364
-292
-279
-275
-123
153
Total trade
1 498
1 544
1 762
1 777
1 694
-82
Non-agricultural trade EU28 with CARIFORUM-14
Growth 16-
2013
2014
2015
2016
2017
17
EU28 imports
3 450
3 107
2 989
2 109
2 604
495
EU28 exports
3 488
3 339
4 340
3 996
4 118
122
Balance
38
232
1 351
1 887
1 514
-373
Total trade
6 938
6 446
7 329
6 105
6 722
617
Source: Trade G2 Statistics, Eurostat
2013
2014
2015
2016
2017
Growth 2016-
2017 in %
-11.4%
4.7%
-4.6%
Growth 16-17
in %
23.5%
3.1%
10.1%
Main exports of Caribbean states to the EU in 2017 included oil and gas (around 14% of total
exports in value), mineral products including gold, corundum, aluminium oxide and
hydroxide (14%), fresh and dried bananas (10%), sugar (4%), rum (4%), cocoa beans (3%), as
well as fertilisers, fish, crustaceans, rice and tobacco products.
Main exports from the EU to the Caribbean in 2017 were boats, ships, yachts and other
vessels (around 14% of total value of exports), cars and other vehicles (4%), machinery and
parts (9%), milk products (3%) and spirits (3%).
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1960849_0254.png
Figure 1: Merchandise trade EU with CARIFORUM14 (million EUR)
6.000
5.000
4.000
3.000
2.000
1.000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-1.000
-2.000
EU-28 imports from CARIFORM
EU trade balance
EU-28 exports to CARIFORUM
Source: Trade G2 Statistics, Eurostat
The Dominican Republic accounts for 25% of Caribbean exports to the EU and for 34% of
EU exports to the region. Exports by the Dominican Republic to the EU have increased by
23% since 2010 and are the most diversified of the region.
In terms of agricultural trade, exports of tropical agricultural goods (sugar cane, tropical fruits
and rice) from CARIFORUM into the EU have increased over the past years. However,
Caribbean exports of several agricultural commodities (bananas, cocoa beans, rice) to the EU
dropped in 2017, partly due to heavy cyclones that destroyed large parts of agricultural
production. World market prices of cocoa beans also declined. EU agri-food exports to the
Caribbean predominantly consist of processed food products and beverages (such as spirits,
wine, dairy products, pasta,).
Most of the CARIFORUM countries are not yet implementing the regional preference clause
which requires countries to grant each other treatment at least as favourable as that accorded
to the EU (hence a provision that promotes regional trade and economic integration).
2.2.
Trade in services
Trade in services shows a favourable balance for the CARIFORUM states and total volumes
of services imports from the Caribbean are increasing. Services exports to the EU are
dominated by the Bahamas (In 2016: EUR 15 638 million). Other exporters are the
Dominican Republic (EUR 994 million), Barbados (EUR 424 million) and Jamaica
(EUR 402 million).
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Table 3: EU28 services trade with Cariforum-14 (million EUR)
EU28 imports from CF
EU28 exports to CF
EU28 trade balance
Total trade
2011
3 803
2 927
-876
6 730
2012
3 843
3 475
-369
7 318
2013
3 285
3 390
105
6 675
2014
13 595
3 230
-10 366
16 825
2015
20 980
2 950
-18 030
23 930
2016
18 846
3 423
-15 422
22 269
Source: Trade G2 Statistics, Eurostat Balance of Payment Statistics
2.3.
FDI
Investment is not covered under the EPA, nevertheless, positive spillover effects from
liberalisation in trade in goods and services may be expected. The European investment stock
in the Caribbean remained constant over the last three years, while the Caribbean investment
stock in the EU substantially increased. However, this does not seem to reveal any clear trend
in
productive
investment flows.
Table 4: FDI EU28 with CARIFORUM-14 (million EUR)
2014
80 298
4 847
Inward
2015
81 330
-7 552
2016
85 346
2 795
2014
22 198
5 087
Outward
2015
72 823
2 005
2016
128 394
49 829
Stocks
Flows
Source: Trade G2 Statistics, Eurostat Balance of Payment statistics
3.
I
SSUES ADDRESSED IN THE
EPA C
OMMITTEE MEETINGS
The EPA establishes a full institutional structure to manage the implementation of the
agreement, including the Joint Council (JC) (Ministerial level), the Trade and Development
Committee (TDC) (Senior Officials), the Parliamentary Committee (Parliamentarians from
the European Parliament and the Caribbean state’s parliaments), the Consultative Committee
(civil society representatives from the EU and the Caribbean); and Special Committees which
meet on an ad hoc basis.
The JC meeting is the biannual ministerial meeting where the fulfilment of the objectives of
the EPA is monitored, and the TDC meeting is the annual senior official meeting where the
main issues concerning the implementation of the EPA are discussed. The last Joint Council
and TDC meetings took place in Brussels in November 2017. Discussions took place on
several issues, including CARIFORUM’s tariff liberalisation schedule, Trade in Services,
technology transfer, cultural cooperation, intellectual property rights, EPA monitoring and
development cooperation. It was agreed to establish a special committee on Trade in Services
as a forum to exchange more regularly on the topic. On Agriculture, the Parties referred to the
progress achieved in the negotiations for the CARIFORUM-EU Geographical Indications
Agreement.
The 3
rd
meeting of the Consultative Committee (CC) took place in November 2017 in
Trinidad and Tobago, and its recommendations and conclusions were presented at the TDC
meeting in Brussels in November. The CC emphasized the need to observe the social aspects
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and the core labour standards in the implementation of the EPA. The CC also called for the
timely adoption of a monitoring mechanism.
The 3
rd
meeting of the Parliamentary Committee (PC) also took place in Trinidad and Tobago
in November and its conclusions were also presented at the TDC meeting in Brussels in
November. The PC particularly encouraged the Parties to make efforts in raising awareness
around the opportunities provided by the EPA.
4.
S
PECIFIC AREAS OF IMPORTANCE
Agriculture:
Parties are intensifying their cooperation on agricultural trade and development.
The Special Committee on Agriculture and Fisheries held its first meeting in the Dominican
Republic in October 2017. The meeting had a substantive agenda, including issues such as
agriculture development (enhancing rural development and agribusiness though increased
investment, value added production and technology development), SPS measures, technical
barriers to trade, climate change and disaster risk management. A negotiation directive to
negotiate an agreement on GI under the CARIFORUM EPA was adopted by the Council of
the EU in November 2017; negotiations with CARIFORUM have started and will continue in
2018. EU delegations in the region are actively promoting awareness on GIs through tailor-
made events and workshops with business community and producer groups.
Services:
The Services chapter, and in particular Mode 4 (movement of natural persons for
business purposes), is considered one of the key elements of the EPA. On the implementation
side, tangible steps have been limited so far but both Parties agreed at the JC meeting in
Brussels to establish a Special Committee on Services.
Monitoring:
Both Parties continued working on the establishment of a monitoring mechanism
for the EPA, exchanging documents and suggestions about the type of monitoring mechanism
to be put in place. As a result of this work, a joint monitoring mechanism seems achievable.
Development Cooperation:
The EPA is a genuinely pro-development agreement and directly
linked to the European Development Fund (EDF) funds. The EDF provides considerable
support to CARIFORUM and Caribbean governments for EPA implementation under the
Caribbean Regional Indicative Programme (CRIP). Under the
10
th
EDF
(2008-2014),
EUR 140 million (85% of the total CRIP, EUR 165 million) were allocated to regional
economic integration and EPA implementation. Under the
11
th
EDF
(2014-2020), the total
indicative allocation to CRIP is EUR 346 million which represents a substantial increase
compared to the allocation of the 10
th
EDF. Once again, an important allocation in the CRIP is
earmarked to regional economic cooperation and integration (EUR 102 million) in the
Caribbean, including the EPA implementation. Support is provided at different levels,
including institutional support to CARIFORUM and OECS Secretariats, support to
Government services at national level, and support to the private sector via the Caribbean
Export Development Agency (CEDA).
New programs were adopted in 2016/2017 under the 11
th
EDF,
namely a new private
sector development programme to be implemented by Caribbean Export Development
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Agency (EUR 24 million) and a new programme to support CARIFORUM in the
implementation of the EPA for further EUR 6.2 million. A new EPA implementation proposal
is under discussion by the parties, new forms and themes for cooperation are being explored.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
Discussions are ongoing on the monitoring system that needs to be established according to
the EPA. Negotiations on GIs are ongoing. Parties also need to achieve progress in
implementing and making use of the Services chapter.
6.
C
ONCLUSIONS AND OUTLOOK
In 2017 progress was achieved in the implementation of the agreement, including notably on
agriculture issues and services. Productive meetings of all EPA bodies took place. Continuous
effort of all partners will be needed to ensure that benefits of the agreement fully materialize.
Caribbean exports to the EU increased by 12% in 2017, although the value of agricultural
exports to the EU decreased by 11%, partly due to falling world market prices. The four main
Caribbean Services exporters maintained a trade surplus with the EU.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC
PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND PACIFIC STATES
1.
I
NTRODUCTION
Negotiations for an EU-Pacific
EPA (hereinafter the ‘Agreement’) were concluded on 23
November 2007 with Papua New Guinea (PNG) and Fiji
2 of the 14 Pacific States
186
,
representing the vast majority of regional exports to the EU.
187
The EU and PNG signed the
EPA on 30 July 2009 and Fiji on 11 December 2009. The European Parliament approved the
Agreement on 19 January 2011 and the PNG Parliament ratified it on 25 May 2011. Fiji is
still to ratify the Agreement but has notified the Council of its provisional application as of 28
July 2014.
The objectives of this Agreement are to promote sustainable development and the gradual
integration of Pacific States into the world economy. The EPA aimes to establish a free trade
area between the parties, through progressive liberalisation, taking into account the specific
needs and capacity constraints of the Pacific States. The EPA only covers trade in goods.
The Agreement is open for accession of other Pacific Island States.
188
Interested Parties will
need to submit a market access offer that is compliant with GATT 1994 Article XXIV. In
2017, Samoa and Solomon Islands indicated their intentions to accede to the EPA.
2.
2.1.
E
VOLUTION OF TRADE
Trade in goods
Under the Pacific EPA, the EU provides duty free and quota free market access for the Pacific
states to the EU market. The Pacific states commit to liberalize 87% (Fiji) and 88% (PNG) of
trade. PNG has already made all tariff cuts.
Table 1: EU28 Trade in goods with Fiji and PNG (million EUR)
EU28 imports from Fiji and PNG
from Fiji
from PNG
EU28 exports to Fiji and PNG
to Fiji
to PNG
EU28 trade balance
Source: Trade G2 Statistics/Eurostat
2014
893
99
794
234
99
135
-659
2015
833
86
747
342
177
165
-491
2016
743
61
682
279
64
214
-464
2017
993
95
898
228
65
164
-765
186
187
188
Of which 5 LDCs (Kiribati, Samoa, Solomon Islands, Tuvalu, Vanuatu) and 9 developing countries (Cook
Islands, Fiji, Marshall Islands, Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea,
Tonga).
More on trade with the Pacific:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/pacific/
Accession is open to all Pacific Island States that are party to the Cotonou Agreement, and to Pacific Islands
whose structural characteristics and economic and social situation are comparable to the above mentioned.
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Overall, the EU is the Pacific countries’ fifth largest trading partner, but trade remains very
small in absolute and relative terms. Exports to the EU account for about 11% of the region’s
total exports while 3% of the region’s imports come from the EU.
PNG and Fiji, together represent around 83% of all EU - Pacific trade. However, key trade
partners of both countries are notably Australia, China and Singapore.
Exports from PNG to the EU have increased considerably over the last four years, while
exports from Fiji to the EU are much smaller and more volatile. EU trade balance with the
two countries continues to be largely negative.
Figure 1: EU28 Trade in goods with Fiji and PNG (in million EUR)
1.200
1.000
800
600
400
200
0
-200
-400
-600
-800
-1.000
EU28 imports from Fiji and PNG
EU28 Balance of trade
EU28 exports to Fiji and PNG
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Trade G2 Statistics/Eurostat
Fiji and PNG’s main exports to the EU are commodities: palm oil, copper, sugar, coconut
and
fish. Their main imports from the EU are mechanical machinery, electrical machinery,
vehicles and oil.
The Pacific EPA includes improved preferences (or rather a special derogation of the standard
Rules of Origin) for processed fish products. The
‘global sourcing’ provision
allows Pacific
EPA countries to source fish from any vessel for further processing (regardless of who caught
the fish, or where it is caught). This exclusive exemption recognises the special importance of
fisheries, especially canned tuna (HS 1604), for long-term economic development in the
region. Thanks to the provision, countries can further develop their onshore processing
capacity, creating local employment and income.
PNG has benefitted from the global sourcing provision since 2008 and thus substantially
increased its exports of processed (canned) tuna to the EU (Figure 2). Processed or prepared
fish products (HS 1604) accounted for 17.7% of PNG’s total exports to the EU in 2017.
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The provision comes with a comprehensive reporting requirement to ensure the promotion of
sustainable fisheries and good fisheries governance. Based on the reports, the EU and the
Pacific States hold consultations on the utilisation and effects of the provision.
Figure 2. EU imports of prepared or preserved fish (HS 1604) from PNG (million EUR)
180
160
140
120
100
80
60
40
20
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Agricultural products
189
constitute the bulk of Fiji and PNG’s export to the EU. Agri-food
exports from PNG to the EU are dominated by palm oil (over 80% of total PNG’s agri-food
exports to the EU), with coffee as the second most important agricultural commodity. For Fiji,
94% of its agricultural exports to the EU consist of cane sugar.
EU agricultural exports to the region consist mostly of meat preparations and preparations of
fruits, vegetables and nuts.
Table 2: EU28 Trade in goods with Fiji and PNG by AMA/NAMA sector (million EUR)
2014
EU28 imports from Fiji and PNG
Agricultural
593
Non-Agricultural
300
EU28 exports to Fiji and PNG
Agricultural
16
Non-Agricultural
219
Source: Trade G2 Statistics/ISDB
2015
583
251
17
325
2016
556
187
17
261
2017
700
293
18
210
Growth 2017 (%)
25.9%
57.0%
3.6%
-19.4%
2.2.
Trade in services
At present, the EU-Pacific EPA does not cover trade in services. Generally, Pacific exports
have not diversified into other non-traditional exports or higher-value goods. However,
services (particularly tourism services) are a major economic sector in many Pacific countries
and show a high potential for growth, including in Fiji and PNG.
189
Agricultural (or agri-food) trade considered comprises the HS Chapters 1 to 24, except fish and fish products
(as defined in the WTO Agreement on Agriculture).
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Table 3: EU28 services trade with Fiji and PNG (million EUR)
EU28 imports
EU28 exports
Balance
Total trade
2013
171.9
633.9
462
805.8
2014
135.1
227.8
92.7
362.9
2015
123.5
676
552.5
799.5
2016
96.7
566
469.3
662.7
Source:Trade G2 Statistics/Eurostat Balance of Payment Statistics
2.3.
FDI
EU outward investment stocks in both countries have increased over the last three years. The
EPA does not cover investment.
In PNG, the biggest EU investment is SP Brewery (a Dutch-Singaporean joint venture
producing beer). Other investments are in oil (Spanish) and liquid natural gas exports
(French). A number of smaller investments in Services sectors are linked to the large energy
infrastructure projects.
In Fiji, the most prominent EU investments are French investments in the banking sector and
oil sectors. EU investment is also manifest in the tourism sector.
Table 4: FDI EU28 with Fiji and PNG (million EUR)
2014
4
1
Inward
2015
3
-1
2016
4
1
2014
1 165
-92
Outward
2015
1 374
202
2016
1 469
63
Stocks
Flows
Source: Trade G2 Statistics/Eurostat Balance of Payment Statistics
3.
I
SSUES ADDRESSED IN THE
EPA C
OMMITTEE MEETINGS
Five meetings of the Trade Committee established under the EPA have taken place between
the Parties to the Agreement. The last Committee meeting in 2017 discussed the state of play
of EPA implementation (particularly PNG and Fiji’s tariff schedules) and ratification, as well
as rules of procedure, rules of origin, sustainability issues (fisheries management and
regulations, progress on labour issues, environmental protection reforms, etc.) and possible
areas for deepening cooperation under the EPA. Accession of other interested Parties was also
discussed. Samoa and Solomon Islands were invited and participated as observers to the
Committee meeting.
4.
S
PECIFIC AREAS OF IMPORTANCE
EPA implementation is a top priority, with Fiji still to ratify and PNG having made all its
tariff cuts and now seeking to extend export diversification beyond the fisheries sector.
Development cooperation is essential for EPA implementation, although it is not part of the
Pacific-EU EPA or its accession process. For instance, the European Development Fund will
be used under the Pacific regional indicative programme (a) to strengthen regional trade and
business enabling environment and (b) to better involve the private sector in order to
260
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strengthen the economic integration of the Pacific region. These are in addition to the support
already foreseen under the national indicative programme to strengthen the rural
entrepreneurship, investment and trade in PNG.
The EU is supportive of the accession of other Pacific States to the existing Agreement with a
view to extending EPA benefits to them.
5.
M
AIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
It is important to convene the next Trade Committee meeting, inter alia to follow up with
PNG on the above implementation issues as well as technical matters, while pursuing efforts
towards Fiji’s effective implementation and ratification of the Agreement.
The end of 2018 is a target date for Samoa’s
accession in view of its graduation out of Least
Developed Country (LDC) status.
In addition to Samoa, that graduated from LDC status in 2014, four other Pacific countries are
projected to graduate soon (Kiribati, Solomon Islands, Tuvalu and Vanuatu) and will lose the
EU’s Everything-But-Arms
(EBA) preferences. They will fall under the less generous
General Scheme of Preferences (GSP) unless these countries decide to accede to the current
EU EPA with PNG and Fiji. The Parties to the Agreement are open
to consider each country’s
accession.
6.
C
ONCLUSIONS AND OUTLOOK
Although the overall volume of trade in goods with the EU is small, the EPA is an important
tool for the Pacific States in order to develop non-traditional exports. In particular they have a
strong interest in safeguarding their rights to sell processed fisheries to the EU market by
exploiting the improved rules of origin, subject to compliance with sustainable fisheries
management, technical standards and food safety requirements.
Effective implementation, coupled with corresponding domestic reforms (especially in areas
of trade facilitation and improvement of value chains and business climate) will enable Fiji
and PNG to take full advantage of the EPA, including to attract EU investment.
The EU remains open to extend the benefits of the EPA to acceding countries.
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ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE INTERIM
ECONOMIC PARTNERSHIP AGREEMENT (IEPA) BETWEEN THE EU AND
EASTERN AND SOUTHERN AFRICAN (ESA) STATES
1.
I
NTRODUCTION
Pending an EPA with the full Eastern and Southern African region
190
, an interim EPA was
signed in 2009 by four ESA countries (Madagascar, Mauritius, Seychelles and Zimbabwe).
191
This ESA-EU
interim EPA (iEPA; hereinafter ‘The Agreement’) is provisionally applied
since 14 May 2012. In 2017, Comoros also signed it. It will become a Party to the agreement
after it has ratified it. An established, functioning EPA Committee serves as a platform for
dialogue in a spirit of partnership to oversee and monitor the agreement’s implementation
and
to take appropriate decisions. In 2017, the four ESA states expressed their interest to deepen
the agreement beyond trade in goods. Scoping missions and studies in that regard will be
conducted in 2018.
2.
2.1.
E
VOLUTION OF TRADE
Trade in Goods
Total trade with the four ESA iEPA countries (ESA4) increased by 24.1% since its
provisional application. The ESA4 exports to the EU increased faster and more (25.3%) than
the EU exports to the ESA4 (22.6%). The trade balance has always been positive in favour of
the ESA4.
Table 1. Total Merchandise Trade EU28 with ESA4, 2012-2018 (million EUR)
2012
2 272
EU28 imports from ESA4
Madagascar
583
Mauritius
1 050
Seychelles
221
Zimbabwe
417
1 913
EU28 exports to ESA4
Madagascar
517
Mauritius
848
Seychelles
266
Zimbabwe
282
-359
EU28 trade balance
Source: Trade G2 Statistics, Eurostat
2013
2 505
738
1 086
293
388
1 961
537
862
321
241
-545
2014
2 580
840
960
270
510
1 865
532
875
237
221
-715
2015
2 450
904
895
249
402
1 981
563
899
302
220
-469
2016
2 469
986
866
282
334
1 958
556
949
279
174
-511
2017
2 848
1 178
925
291
454
2 347
685
1 170
298
192
-501
In addition to benefitting from "the Everything but Arms Initiative"
Madagascar
has seen
clear benefits from EPA implementation, as its exports more than doubled over the period
2012-2017, albeit from a low start level, due to the
political crisis and insolation of
190
191
Eastern and Southern Africa (ESA) is a diverse EPA group including Indian Ocean islands (Comoros,
Madagascar, Mauritius and Seychelles), countries of the Horn of Africa (Djibouti, Ethiopia, Eritrea and
Sudan) and some countries of Southern Africa (Malawi, Zambia and Zimbabwe).
More on trade with ESA:
http://ec.europa.eu/trade/policy/countries-and-regions/regions/esa/
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Madagascar between 2009 and 2013, before a return to stability and democracy as of
2013/2014.
Main export products are textiles, followed by vanilla, fisheries, fruits and cobalt.
Seychelles’
exports (mostly fishery products) followed the same trend and increased by one
third in the same period. For
Zimbabwe,
an 8.9% increase of its exports to the EU over the
period is a particular success compared to the sharp decline of its exports to the rest of the
world (2017 exports to the rest of the world were almost down to one third of 2012 exports
level). Zimbabwe’s main exports
to the EU are tobacco, sugarcane, fruit, hides and leather,
tea, flowers, metals and granite. Higher value agricultural products have been added (berries,
stone fruit, peppers and peas) as a renewed diversification that may boost further its export
values in the future. Exports of
Mauritius
destined for the EU saw a relatively steep decrease
(-17.5%) in the first years 2012-2016 (attributed to the global economic conditions).
However, this trend is now clearly reversing, with exports increasing by 7% in 2017,
exceeding the level in 2016. Mauritius’ exports to the EU remain concentrated on three main
products, that is, sugar, textiles and fisheries making up 90% of total exports. Exports are
starting to diversify slightly in recent years, including also pharmaceutical and beauty
products, watches and medical devices.
Total
agricultural trade
between the parties has been growing stronger (+36% on average)
than non-agricultural trade (+18.5%) since implementation of the EPA. For ESA4,
agricultural exports to the EU grew by 43% annually, while non-agricultural exports grew by
only 17.6% annually. ESA4 countries have a high trade surplus for agricultural goods while
the EU has a slight surplus for non-agricultural goods.
The EU exports to ESA4 increased by 23% over the period 2012-2017 reflecting the market
access liberalisation implemented by all ESA4 countries.
Table 2: EU28 merchandise trade by AMA/NAMA sector with ESA4 (million EUR)
2012
2013
EU28 imports from ESA4
Total
2 272
2 505
Agricultural
641
723
Non-Agricultural
1 630
1 782
EU28 exports to ESA4
Total
1 913
1 961
Agricultural
203
208
Non-Agricultural
1 710
1 753
EU28 trade balance
Total
-359
-545
Agricultural
-439
-516
Non-Agricultural
80
-29
Source: Trade G2 Statistics/ISDB
2014
2 580
743
1 837
1 865
239
1 626
-715
-504
-212
2015
2 450
725
1 725
1 981
259
1 726
-469
-466
1
2016
2 469
783
1 685
1 958
275
1 683
-511
-508
-1
2017
2 848
919
1 928
2 347
308
2 036
-501
-611
108
The
EU is the largest trade partner of ESA4
for its exports and the second largest partner
for its imports. Seen from the individual countries, the EU is the largest trade partner for
Seychelles and Mauritius for both their exports and imports, while for Madagascar the first for
its exports and second for its imports. As for Zimbabwe, the EU is the fourth and third largest
partner for its exports and imports respectively; Zimbabwe trades mainly with South Africa.
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ESA4 countries have high
PURs
in their exports to the EU. A large share of their exports are
raw materials and hence duty-free on an MFN basis. The remainder of exports are imported
under EPA preferences, with the exception of 1-2% of exports where the MFN tariff is
positive but low enough to offset compliance costs for the preferential rate.
Figure 1: EU28 Merchandise trade with ESA4 (million EUR)
3.500
3.000
2.500
2.000
1.500
1.000
500
0
-500
-1.000
-1.500
EU28 Imports from ESA4
EU28 Exports to ESA4
EU Balance of trade
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mauritian edible flower wafers make their way to EU tables
In 2017, almost half of the Mauritius’ exports found their way to the EU market.
One
of the companies benefitting from the EPA is Creasim Ltd, a Mauritian company that
produces edible cake decorations of wafer-made flowers, fruits and leaves for pastry
and bakery products. More than 180 tons of cake decorations per year are exported to
EU markets, representing 60% of their turnover. Creasim has 230 workers, of which
30% have been employed since the EPA entered into force.
Wafer is becoming more and more popular because of its low cost and calorie
content. Registered patterns and models are hand-made productions and are subject to
a strict quality control conforming to EU standards.
2.2.
Trade in Services and Investment
The iEPA does not cover trade in services. Trade in services between the EU and ESA4 has
shown some variation between countries and over the last years. In the last years, the EU had
a negative net balance with all ESA4 but Zimbabwe. However, this trend varies between
them, showing that there are different patterns of trade.
Table 3: EU28 Services trade with ESA4 (million EUR)
EU28 imports
EU28 exports
2011
2 416
1 506
2012
2 143
1 638
2013
2 030
1 407
2014
2 355
1 821
2015
2 476
1 599
2016
2 336
1 873
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1960849_0266.png
EU28 balance
Total trade
-910
3 922
-505
3 781
-624
3 437
-534
4 176
-877
4 075
-463
4 209
Source: Trade G2 Statistics/ISDB from Eurostat BOP statistics
2.3.
FDI
The Agreement does not cover investment. On FDI, no clear pattern emerges either at
regional or at country level. Investment flows have fluctuated for all countries, though they
have increased for Zimbabwe in the last three years. Mauritius accounts for more than 90% of
EU FDI stocks in ESA4.
Table 4: FDI EU28 with ESA4 (million EUR)
Inward
2014
2015
2016
Stocks
6 289
6 301
6 412
Flows
1 410
-1 474
1 142
Source: Trade G2 Statistics/ISDB from Eurostat BOP statistics
2014
21 506
183
Outward
2015
22 336
2 428
2016
20 017
-3 911
3.
I
SSUES ADDRESSED IN THE ANNUAL
EPA C
OMMITTEE MEETING
The main issues addressed by the 6
th
Meeting of the EPA Committee in October 2017 (in
Madagascar) were:
Continuous support to EPA implementation under both the 10
th
and the 11
th
European
Development Fund (EDF);
Agreement on modernisation of rules of origin;
Agreement to hold a dedicated meeting in 2018 to discuss the scope and objectives of
the envisioned deepening of the agreement (covering additional topics) which the
ESA4 have asked for. The deepening may evolve around the issues mentioned in the
rendezvous clause of the interim agreement.
S
PECIFIC AREAS OF IMPORTANCE
4.
Development cooperation is essential for EPA implementation and for ensuring the long-term
sustainable development impact of the agreement. In this context, it was an important
achievement when envelopes of EUR 10 million were allocated to each of the four EPA
countries under the SADC regional programme.
Through this support, Mauritius is now already implementing a project to improve the ease-
of-doing-business and investment regulatory framework. An e-licensing platform has been
developed as a single point of entry for business licenses and permits, shortening and
simplifying the application procedure. In addition, Regulatory Impact Assessments (RIA) will
be conducted for the first time to aid the improvement of policy formulation with regards to
investment, trade and business regulation. Technical assistance is also provided for the
implementation of the Intellectual Property Rights (IPR) reform, a key reform to support the
transformation to a knowledge-based economy.
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In Seychelles, the programme will focus on trade policy capacity building, private sector
development in manufacturing and agriculture & fisheries, with a focus on niche sectors that
could generate exports, and business to business trade promotion.
Projects are being finalised in the remaining ESA countries, with both Zimbabwe and
Madagascar focusing on SMEs development and trade facilitation in selected value-chains.
With EU support, Madagascar has successfully set up a well-functioning dialogue platform
where business and government come together to discuss issues surrounding the EPA, export
performance and the business climate.
5.
P
ROGRESS MADE
,
MAIN OPEN ISSUES AND FOLLOW
-
UP ACTIONS
All ESA4 countries are implementing the Agreement and have made tariff cuts according to
their liberalisation schedule.
The ESA States expressed
their interest in ‘deepening’ (new issues) and ‘widening’ (new
members) the existing iEPA
192
. Both sides agreed to jointly define the scope and objectives of
the deepening before launching the negotiation process.
As for widening, the EPA is open for accession by other ESA states
193
. Comoros has already
signed the agreement in July 2017 and is expected to ratify it in 2018. Zambia can, at any
time, also sign and ratify the agreement that it initialled in 2007. The other ESA States will
first need to submit market access offers before eventually joining the agreement.
There are challenges raised by non-tariff measures that need to be tackled by constructive
dialogue between the competent services and by appropriate EU support. The prospects of an
ESA4 Business Forum, an awareness-raising EPA seminar in Zimbabwe and specific training
on GIs have been raised.
6.
C
ONCLUSIONS AND OUTLOOK
In 2017, all the four ESA countries implemented their commitments, culminating in
significant tariff cuts. The trade balance remained positive in favour of the ESA4, and there
was sustained growth of exports, in particular from Madagascar, whereas exports from
Zimbabwe started growing. Exports have further potential through the implementation of
domestic reforms and accompanying measures. Comoros signed the agreement in July 2017
and is expected to ratify it in 2018. Uncertainty remains as to the intentions of Zambia to sign
the iEPA.
192
193
The full name
of the agreement, ‘Interim Economic Partnership Agreement’ reflects the fact that the
objective on both sides for an agreement in Eastern and Southern Africa was a comprehensive, regional
agreement. However, negotiations for a regional EPA with the ESA4 and seven other ESA countries have
come to a halt, and the Commission focused its efforts on the agreement already implemented by the ESA4.
Comoros, Djibouti, Ethiopia, Eritrea, Sudan, Malawi and Zambia
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ANNEX
LIST OF ABBREVIATIONS
ACP
Cariforum
CETA
CITES
DAG
DCFTA
EBO WWN
EEA
EEN
EPA
ESA
FDI
FTA
GIs
IPRs
ILO
MFN
PUR
SAA
SADC
SME
SPS
TBT
TRQ
TSD
African, Carribean and Pacific countries
Forum of the Caribbean Group of ACP States
Comprehensive Economic and Trade Agremeent EU- Canada
Convention on International Trade in Endangered Species of Wild Fauna and Flora
Domestic Advisory Group
Deep and Comprehensive Free Trade Area
European Business Organisations worldwide network
European Economic Area
Enterprise Europe Network
Economic Partnership Agreement
Eastern and Southern Africa
Foreign Direct Investment
Free Trade Agreement
Geographical Indications
Intellectual Property Rights
International Labour Organisation
Most Favoured Nation
Preference Utilisation Rate
Stabilisation and Association Agreement
Southern African Development Community
Small and medium-sized enterprise
Sanitary and Phytosanitary
Technical Barriers to Trade
Tariff Rate Quota
Trade and Sustainable Development
267