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Not only is each Member State of the European Union individually a member of the World Trade Organization (WTO), but also the European Community as a single, separate legal entity also has WTO membership in its own right. This is not surprising given the nature of the Community and the importance of WTO policies to the economic integration project of the EU.
Ministry of Education and Science, Yorth and Sport of Ukraine
Donetsk National University of Economics and Trade
named after
Michael Tugan-Baranovskiy
THE EUROPEAN UNION AND THE WORLD TRADE ORGANIZATION
Not only is each Member State of the European Union individually a member of the World Trade Organization (WTO), but also the European Community as a single, separate legal entity also has WTO membership in its own right. This is not surprising given the nature of the Community and the importance of WTO policies to the economic integration project of the EU. The relationship between the EU and the WTO is one of the largest and most important external relationships that the EU manages on the international scene. Therefore, it is vital when discussing the foreign policy of the Community to assess its management of the EU/WTO relationship. This relationship is fundamentally determined by the degree to which the EU adequately implements WTO agreements within Community law and how effectively and enthusiastically the Community enforces compliance with WTO rules among its Member States. A large part of this implementation concerns the approach adopted by the ECJ when disputes arise. This paper will examine the relationship of the EU and the WTO with an emphasis on the degree to which the EU complies with WTO rules. In this context it will look at how the ECJ in particular, but also the EU institutions as a whole, implement the policies of the EU. It will also examine the approach adopted towards the WTO by the Community in its relations and negotiations with other states, be they members or non-members of the WTO.
The European Community has had a long history with the WTO. Much of the ups and downs of this relationship have centered on the effectiveness of the EU’s implementation of WTO agreements. Right from the early days of this relationship, as can be seen in the Joined Cases 21-24/72 International Fruit Company [1972] ECR 1219 through to Case C280/93 Germany v Council [1994] ECR I-4973, that the European Court of Justice (ECJ) has steadfastly refused to grant direct effect to the provisions of GATT or WTO agreements. In the past the ECJ has justified this approach on the basis that GATT provisions were somewhat flexible in nature. They therefore lacked the necessary certainty and obligation to enable them to be directly effective. However, with the advent of the WTO and the binding and precise obligations that are contained in its agreements, the ECJ approach to direct effect has had to evolve. Such an evolution appeared to receive a set back in the case of C-149/96 Portugal v Commission [1999] ECR I-8395 in which at paragraph 47 the ECJ held that “the WTO agreements are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions.” This judgment, hereinafter referred to as the Portugal Textile ruling was somewhat tempered by the ECJ’s acceptance of the rules set out in Case 70/87 Fediol [1989] ECR 1781 and Case 68/89 Nakajima [1991] ECR I-2609 which held that the provisions of WTO agreements could be relied on by the Court to review community actions if the community action in question was intended to implement a WTO provision or explicitly referred to a WTO provision. The Portugal Textile ruling remains the primary judgment dictating the ECJ’s approach to the direct effect of WTO agreements and was recently reaffirmed in relation to the Trade Related aspects of Intellectual Property (TRIPs) agreement and other WTO protocols in Joined Cases C-300 & 392/98 Christian Dior [2000] ECR I-11307 and C-122/00 Omega Air [2002] ECR I-2569. Today a question that is being posed by academic circles is whether or not the Portugal Textile ruling applies to cases that have received a judgement from the WTO dispute settlement body (DSB) (Mendez, 2004). There are many who would say that if the DSB has made a finding that there is breach of a WTO rule by the EU, then the parties should be entitled to rely on such a ruling in support of their argument.
If GATT provisions had been found to be directly effective, it would have allowed Member States to challenge Community measures on the basis that the breached GATT. This would have been an additional bargaining tool in the Qualified Majority Voting context that existed for the common commercial policy at the time. In the case of C-280/93 Germany v Council [1994] ECR I-4973, at paragraph 109, the ECJ ruled: “those features of the GATT, from which the Court concluded that an individual within the Community cannot invoke it in a court to challenge the lawfulness of a Community act, also preclude the Court from taking provisions of GATT into consideration to assess the lawfulness of a regulation in an action brought by a Member State under the firstparagraph of Article 173 of the Treaty.”
Therefore, GATT provisions could not be invoked by individuals, especially when they were seeking to use such provisions to challenge Community legislation. The same principle applies to prevent Member States challenging Community provisions under the GATT rules.
The political institution argument is also vital to understanding the Court’s decision. The power of the Council and the Commission would be compromised in two important respects if direct effect were to be afforded to WTO rules.
Firstly, the Community’s negotiators would be in a weaker position vis-à-vis the Community’s trading partners if those partners knew the Community provided direct effect to the agreement while they did not. Secondly, there would be a power shift within the EU from the Council and Commission to the Court in all matters of international trade. It would also make all Community legislation challengable on the ground that it was WTO incompliant.
If the Community, via the Commission, regarded the actions of a Member State as a breach of the WTO, enforecementpreceedings may be brought by the Commission against that Member State. Article 226 EC includes the obligation of Member States to comply with the WTO as well as any Treaty the Community enters. The WTO rules become a Community legal standard. This stems from Article XXIV:12 GATT which deals with any type of customs union and obliges any Contracting Party to take reasonable measures to ensure that any regional or local government or authority within its jurisdiction observes the agreement. Article 226 EC was used by the Commission to fulfil this role. Another way in which the Community has successfully ensured WTO compliance is the ECJ’s practice of interpreting Community provisions, in so far as is possible, consistently with the Community’s obligations under the WTO. This is similar to the practice of British courts, for example the duty to interpret legislation, so far as is possible, in compliance with the Human Rights Act. For the Community, the Hermes case set out the manner in which the Court would implement this policy. In that case Hermes, a French company, brought proceedings before a Dutch court alleging that a rival company, FHT, had breached its rights under Article 50(6) of the TRIPs Agreement. The Dutch court referred the matter to the ECJ. The Court stated that national courts, as well as the ECJ, had a duty to interpret national law in light of WTO provisions. In Case C-392/98 Parfumes Christian Dior and AsscoGeruste GmbH [2000] ECR I-11037 the court clarified the duty and stated that in a dispute falling within the scope of the WTO Agreement, if the Community had legislated on the matter, then national courts were under a general duty to interpret provisions of national law in so far as possible, in compliance with the WTO provisions. This was notwithstanding the fact that the WTO provisions are not directly effective. This approach can be described as “the next best thing” to giving WTO provisions full direct effect and should mean that national courts are examing and applying WTO provisions whenever possible.
In conclusion therefore, it is possible to conclude that EU membership of the WTO is effective and largely compliant. The EU has denied WTO rules the status of direct effect within the Community and this means that private parties cannot invoke them in disputes, but also that Member States cannot challenge Community provisions on the ground that they are inconsistent with WTO law. However, this can be explained by the fact that the ECJ is reluctant to incur on behalf of the Community the compromised bargaining position and trade disadvantage that would possibly result from direct effect. This is because the EU’s main trading partners, particularly Japan and the USA do not grant direct effect to WTO rules either. It is also necessary to appreciate the transfer in institutional competence in the area of trade from the Commission and Council to the ECJ that would result from a decision to make WTO law directly applicable. It is also clear that the parties to the WTO did not intend it to have direct effect.
Apart from that point, the Community ensures compliance with the WTO rules by frequently adopting measures to comply with DSB decisions. The ECJ also requires national courts to interpret national law, so far as it is possible, in compliance with WTO law. The Commission is able to challenge Member States for non-compliance with WTO rules. However, Member States are not given a corollary right to challenge the Commission on the same ground.
The EU has a common trade policy (“Common Commercial Policy”). In other words, where trade, including WTO matters, are concerned, the EU acts as one single actor, where the European Commission negotiates trade agreements and represents the European interests on behalf of the Union's 27 Member States.
The legal basis for the EU’s trade policy is Article 133 of the European Community Treaty. On this basis, the Commission negotiates on behalf of the Member States, in consultation with a special committee, “the Article 133 Committee”. The 133 Committee is composed of representatives from the 27 Member States and the European Commission. Its main function is to coordinate EU trade policy. The Committee meets on a weekly basis. It discusses the full range of trade policy issues affecting the Community, from the strategic issues surrounding the launch of rounds of trade negotiations at the WTO to specific difficulties with the export of individual products, and considers the trade aspects of wider Community policies in order to ensure consistency of policy. In this Committee, the Commission presents and secures endorsement of the Member States on all trade policy issues. The major formal decisions (for example agreement to launch or conclude negotiations) are then confirmed by the Council of Ministers.
The previous WTO trade round, the Doha Development Agenda, provides an example of how trade policy is coordinated in practice. The Commission sets and carries forward the priorities and aims of the EU as laid down in guidelines given by the Council of Ministers. Officials from the Commission's Directorate General for Trade, under the authority of the Commissioner are charged with actually conducting the negotiations, and speak on behalf of the EU as a whole. Coordination with Member States is assured at all times through the 133 Committee, while the Commission regularly informs the Parliament. At the end of the Round, the Council has to agree formally the outcome.
The EU is the world's largest trading block, which makes it one of the key players in the World Trade Organisation. In the WTO, the European Commission negotiates on behalf of the 27 countries of the European Union (see Working with the WTO).
The EU supports the work of the WTO on multilateral rule-making, trade liberalisation and, sustainable development.
Through the WTO, the EU seeks to:
The Everything But Arms initiative – where all imports to the EU from the world's poorest countries are duty- and quota-free, with the exception of armaments
The special incentive arrangement for sustainable development and good governance, known as GSP+. This offers additional tariff reductions to support vulnerable developing countries in their ratification and implementation of specified international conventions in the fields of human rights, core labour standards, sustainable development and good governance.
What does the WTO do?
The WTO is a member-driven organisation that sets the framework for trade between its members. Its core activities are:
Multilateral negotiations (see Doha Development Round)
Resolving differences between States (see Dispute settlement)
Setting the legal ground-rules for trade in the form of Agreements; and
Monitoring Member's trade policy
Working
with the WTO
Who
represents the EU in the WTO
The EU speaks with one voice in the WTO. Every EU country is a WTO member in their own right but work together to act as a single block. The EU itself is also a member.
The European Commission negotiates at the World Trade Organisation on behalf of the EU. The Commission coordinates with the EU Member States through the Trade Policy Committee and conducts EU policy following guidelines set down by the Member States in the Council of Ministers.
The Commission also regularly informs the European Parliament of key WTO issues.
When an agreement is negotiated at the WTO, the Commission needs the formal authorisation of the Council and European Parliament to sign the agreement on behalf of the EU.
The Commission also consults with other interested groups (see Civil Society) in the formulation of policy.
The EU in the WTO
The WTO is composed of governments and customs territories (such as the EU). It is a member-driven organisation with decisions mainly taken on a consensus basis.
The WTO's highest decision-making body is the Ministerial Conference, which meets at least every two years. The EU Trade Commissioner represents the EU in this forum (see Commissioner for Trade De Gucht). The latest conferences were in Cancun (2003), Hong Kong (2005) and Geneva (2009).
The General Council of the WTO acts on behalf of the Ministerial Conference. The Commission represents the EU in the General Council as well as in the other formations of the General Council which meet on a regular basis such as the Dispute Settlement Body or the Trade Policy Review Body. The Commission also represents the EU in subsidiary WTO bodies such as the Council for Trade in Goods or the Committee for Trade and the Environment. The WTO has 153 members. To become a member requires compliance with the WTO rules in force and negotiations with the existing members on the acceding country's commitments. These negotiations are concluded when there is a decision taken by the WTO Ministerial Conference.
Helping others participate in global trade
The EU supports the integration of all countries into the global trading system. As well as developing policies to help developing countries (such as the Generalised System of Preferences), the EU financially assists countries:
In November 2009, the European Communities donated another EUR 2 million to the Doha Development Agenda Global Trust Fund (DDAGTF) and the Standards and Trade Development Facility (STDF). The donations will finance technical assistance programmes and training activities for developing and least developed countries as well as economies in transition. The aim is to better adapt their practices and laws to WTO rules and disciplines, improve the implementation of their obligations and enhance the exercise of their membership rights.
Again in November 2009, the EC donated EUR 75,000 to the special trust fund established to finance the travel costs for the participation of the least-developed countries’ delegations in the 7th Ministerial Conference, which took place from 30 November to 2 December 2009.
In February 2010, the EU announced a EUR 180,000 donation to the WTO Trade Facilitation Trust Fund. Overall, the EU’s contribution to the various WTO development trust funds amounts to more than EUR 7 million.
The Doha Round
For EU submissions to the WTO during the Doha Round.
The Doha Development Agenda is the current round of the world trade talks which started in November 2001.
The Doha Round of world trade negotiations was launched in Doha (Qatar) in November 2001. Named the Doha Development Agenda, this round of trade negotiations is much broader than past global trade negotiations and is specifically targeted at addressing the needs of developing countries. The focus of negotiations has been on reforming agricultural subsidies improving the access to global markets and ensuring that new liberalisation in the global economy respects the need for sustainable economic growth in developing countries.
EU priorities for Doha
The successful conclusion of the Doha negotiations would confirm the central role of multilateral liberalisation and rule-making. It would confirm the WTO as a powerful shield against protectionist backsliding.
The EU's objectives are as follows:
In market access for the industrial goods sector, the EU wants to create significant new trade flows by cutting tariffs in both developed countries and the growing emerging economies such as China, Brazil and India. The goal is to create new trade between developed countries, but also between developing countries. This means lowering tariffs on industrial goods but also negotiating common rules on how to address obstacles to trade generated by a too complex and non-transparent regulatory system.
The EU also wants to improve and clarify the WTO rulebook on subsides that distort the production of industrial goods. These include longstanding financial support made available to exporters on non-commercial terms as well as governments' provision of inputs to domestic producers at prices substantially more favourable than those available to foreign producers (so-called dual or discriminatory pricing).
For the agriculture sector the EU is committed to an agreement that reforms farm subsidy programs throughout the rich world in line with the EU's wide-ranging 2003 reform of the Common Agricultural Policy. As part of the Doha Round, the EU has offered to cut farm tariffs by 60%, reduce trade distorting farm subsidies by 80% and eliminate farm export subsidies altogether. The EU also wants to see new market access opportunities for its own processed agricultural exports.
In market access negotiations for the services trade, Doha should bring considerable and real market opportunities for business as well as benefits to consumers world-wide. However, the EU does not seek general deregulation or privatisation of sectors where principles of public interest are at stake, and the EU is also committed to defending the right of WTO members to promote cultural diversity.
The EU wants the Doha Round to agree a package of development measures including: a special agreement to address trade distortions caused by subsidies to cotton farmers in developed countries; the extension of unlimited markets access to all Least Developed Countries by as many countries as possible; a new global package of 'aid for trade' assistance to help the poorest build the capacity to trade; special measures to help the poorest countries implement any Doha Agreement effectively and without long-term harm to their economies.
The
EU wants the Doha Round to agree a new set of rules to govern the use
of trade defence instruments so that they are not abused, and a complete
update of the WTO's rulebook for trade facilitation, the standard practice
for customs and other border related procedures world wide – a potential
source of huge savings for traders, especially in developing countries.
The EU also wants to use the Doha Round to improve the protection of
geographical indications – the special legal identity given to products
like Parma Ham and Roquefort cheese that are closely linked to a particular
place and tradition of production.
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