Bridges Weekly Trade News Digest • Volume 8 • Number 33 • 6th October 2004
WTO Challenges Emerge Over EU Expansion
The enlargement of the European Union from 15 to 25 members on 1 May has been met with concern voiced by the US and other WTO Members relating to inconsistent customs administration across EU member states and higher tariffs on certain EU imports.
Inconsistent customs administration complaints
On 21 September, the US submitted a request to the WTO seeking consultations with the EU on the lack of uniform administration of customs laws and judicial procedures across the 25 EU member states. The US alleged that several EU council regulations that established customs regulations dating as far back as 1987 are "complicating the efforts of US companies to export to the union". The US pointed out in its request that companies in the field of agriculture, textiles and technology claim their products are often subject to varying sets of criteria for entry into different EU countries.
A statement issued by the Office of the US Trade Representative (USTR) gives three reasons for requesting WTO consultations. First, the USTR claims that the EU enlargement has further compounded the "trade barrier inherent in lack of uniform customs administration". By filing this request now, the US hopes the EU will tackle this problem early in the process of dealing with the challenges of enlargement. Second, the USTR notes that pressing a major trading bloc to administer its customs laws and regulations uniformly will help to advance WTO talks on trade facilitation, which were launched following a framework agreement negotiated at the end of July earlier this year. Finally, the USTR statement vaguely notes that this development is part of an effort "to work with the Commission to address the concerns of US exporters", and that "although Commissioner Lamy and his staff have tried to help with individual problems, it has become clear that the allocation of authorities within the EU and even the Commission has precluded achieving the necessary systemic solutions".
US industry groups affected by the alleged inconsistencies have expressed their support for the US initiative launched at the WTO. The Brussels-based Global Express Association (GEA), an international alliance of express delivery operators that includes major firms such as FedEx, UPS and DHL issued a statement on 24 September noting that "the ability of other nations to trade with the EU in an efficient and predictable manner is highly dependent on uniform application of customs procedures and rules throughout the EU."
In response to the US complaint, European Commission spokesperson Arancha Gonzalez said that the US the complaint had no legal basis and that the EU complied fully with all WTO rules relating to customs matters. This statement is in contrast to the EC’s alleged response to a critical report in 2001 prepared by the European Court of Auditors in which the EC noted that for the union to conduct itself as a "real customs union" that treats all imported goods uniformly, it must be "operating on the basis of a single customs administration, which is not the case."
If the US and the EU fail to settle their differences within 60 days, the US can request for the appointment of a WTO dispute panel to rule on its complaint.
EU extends deadline for enlargement negotiations relating to compensation
In a related development, the EU notified the WTO on 30 September that it would extend a 1 November 2004 retaliation deadline by six months for countries affected by high tariffs resulting from EU enlargement. In order to join the EU, the 10 new members — Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia — were required to replace their national tariffs with the EU’s common external tariff regime, leading to higher tariffs on certain products.
Under WTO rules, when a WTO Member that forms a customs union, such as the EU in this case, proposes to increase a bound rate of duty, affected countries who have submitted damage claims must first engage in negotiations with that Member to seek compensatory adjustment. If negotiations fail, the customs union is to offer compensation which may take the form of reductions of duties on other tariff lines. These procedures must be undertaken before affected Members exercise their right to withdraw substantially equivalent concessions to the losses they have suffered.
Under the above rules, therefore, Members seeking compensation from the EU had six months from the date of EU enlargement to withdraw trade concessions in the event negotiations were unfruitful. The rules also required 30 days advance notice from the retaliation deadline of 1 November before such action was taken — effectively mandating the affected countries to withdraw concessions by 1 October. The extended deadline means that affected countries have more time to negotiate for concessions with the EU.
The US has revealed that it will consider raising tariffs on selected EU imports — particularly food and agricultural products — if negotiations fail. In a parallel development, EU officials have reported that talks with the US on a dispute relating to increased rice tariffs are running smoothly.
Argentina, Australia, Brazil, Canada, Costa Rica, Colombia, Ecuador, Guatemala, India, Japan, Malaysia, New Zealand, Pakistan, Panama, Philippines, South Korea, Taiwan, Thailand and Uruguay, who welcomed the extended deadline, are also in negotiations with the EU.
The USTR statement is available at: www.ustr.gov
The EU’s WTO consultation request (G/L/695) is avaible.
ICTSD reporting; "EU Trading Partners Welcome Move To Give More Time on Enlargement Talks," WTO Reporter, 4 October 2004; "EU Gives More Time for Negotiations on Compensation Following Enlargement," WTO Reporter, 1 October 2004; "The EU’s Customs Cacophony," The Washington Times, 28 September 2004; "U.S. Proposes New Punitive Tariffs On Many Imported Goods," Mondaq’s Article Service, 20 September 2004.