The EU's position on tariff and non-tariff measures

Introduction

Despite the collapse of talks at Seattle the EU, led by its executive arm, the European Commission, still favours a comprehensive new round of trade negotiations. Trade commissioner Lamy has been holding a series of informal talks with the US Secretary of State for trade Mrs Bashefsky. Mr Lamy is also lobbying developing countries to ensure their support for such a trade round. He has recently been to India, and will soon travel to Brazil (this week), to Cairo for the EU-Africa summit, and will attend the EU-Mercusor negotiations in April. A new trade round as envisaged by the EU includes issues like investment, government procurement, competition, market access, environment and labour standards.

Tariffs

The European Union has a common tariff level for all forest products. On most forest products the tariff level is zero, with the exception of some manufactured goods, such as builders joinery and carpentry wood (2.1%), boards (4.9 %) and plywood (7.0%), and also live trees (8.4%).

The EU has always opposed the APEC-proposed acceleration of tariff liberalisation, the ATL proposal. Most of the European based timber industries, notably the Finnish, are not in favour of the ATL proposal. Labour and related costs in Europe are considerably higher than in the US or Canada. As the ATL proposal would have quite likely benefited 'low cost' countries more than 'high cost' countries, this might be one of the reasons for the lack of industry's enthusiasm for the ATL proposal. Nevertheless the EU is and has always been in favour of further tariff liberalisation in general and a strong proponent of market access as part of a new trade round. According to the bilateral trade agreements that the EU has recently negotiated with South Africa and Mexico[1], the EU will eliminate all remaining tariffs by 2003 and its partners will remove all their tariffs in 4 stages by 2007.

The European Commission has created a market access and trade barriers database that includes impact analyses, by country, of tariff and tariff escalation on EU export industries[2]. No analysis is carried out on the socially and environmentally protective impacts these tariff levels may have for the importing countries. European industries are encouraged to send relevant information on the trade barriers that they encounter exporting to third countries.

Non-tariff measures (NTMs)

The European Commission has made clear that it wishes to include non-tariff measures in trade negotiations; at the same time, however, it risks running into trouble regarding WTO compatibility over its own eco-label scheme.

According to the database created by the Commission on trade-distorting measures, non-tariff barriers to trade in forest products include: import prohibitions/quotas, export restrictions such as log export bans, state trading enterprises, standards and other technical requirements, local content schemes and subsidies.

The EU wants to include non-tariff measures in market access negotiations at the WTO. This position was reiterated in the EU submission on trade at the Intergovernmental Forum on Forests in New York (31 January - 9 February), in which it stated its support for:

" continued efforts by countries and the WTO to liberalise trade and to improve market access, including for sustainably managed forest products and services, with special attention to substantially reducing tariffs as well as non-tariff measures that restrict or distort trade while allowing for the optimal use of the world's resources in accordance with the objectives of sustainable management."

It further urges:

"countries, international organisations [, including WTO] and other interested parties to undertake as appropriate, further co-operative work on voluntary certification and/or labelling schemes, in line with the recommendations of IPF while seeking their international compatibility and considering their equivalence…"

Under the section on non-tariff barriers in the EU Mexico agreement[3], the EU also supports efforts to harmonise labelling schemes.

"working towards the approximation and simplification of labelling requirements, including voluntary schemes"

The Directorate General for Trade wants to include the EU's eco-label scheme in market access negotiations. As this is a government-led scheme, harshly attacked by the forestry industries particularly in Canada, the EU fears that a complaint might be presented to the WTO's to be dealt with by the WTO's dispute settlement mechanism. The outcome of a challenge to the eco-label scheme would be very unsure. Therefore, the Commission ­ under its WTO negotiating agenda proposals for environment ­ is seeking to ensure the WTO recognises the EU ecolabel scheme as WTO compatible. The Commission would be more likely to obtain WTO recognition for the eco-labelling scheme under a new negotiation round.

The EU ecolabel scheme deals with products varying from washing machines to paper. Forest NGOs have been concerned about the eco-label scheme as its criteria for forest management are extremely weak, based on the Helsinki criteria for European forests and related statements for non-European forests.

Although the EU and Japan, as well as the APEC study on non-tariff measures confirm that voluntary non-governmental certification schemes should not be considered non tariff measures, Commission services are discussing the possibility of establishing a framework for certification at EU level. This could create the same problems the EU is facing with its eco-label scheme. However, it is fair to say that not much support exists within the Commission to establish such a framework.

The Commission is preparing a tender for an in-depth analysis of trade and investment barriers encountered in certain non-Community countries and in different sectors, including mechanical woodworking, paper and pulp.

Agriculture sector.

It is common knowledge that agriculture, through its impact on land-use patterns, has a great impact on forests. Agriculture is part of the so-called ‘built-in agenda’ and liberalisation negotiations are starting in Geneva. Most countries are demanding that the EU abolish its agricultural export subsidies under the Common Agricultural Policy (CAP). A lot of pressure has also been applied for the EU to abolish its domestic support measures -which are part of CAP-, including direct payments to farmers. Many environment and development NGOs have campaigned against the CAP because of its detrimental impacts on developing countries' economies. The EU still maintains high import tariffs for many agricultural products, thereby further discriminating against developing countries. Most NGOs therefore want the EU to move away from production-related direct support towards more sustainable rural development schemes. As the farmers lobby is strong in many European countries this is a tough battle.

Although some agricultural liberalisation could be environmentally and socially beneficial, reforms should be carefully crafted to allow support measures related to social and environmental objectives (i.e. for the protection of forest and biodiveristy and other rural development schemes).

NGOs were disappointed by the outcome of the 1999 CAP negotiations, which formed the basis of the EU's position on agriculture liberalisation. Environment NGOs had lobbied for less production subsidies and more environment protection measures. However, the amount of direct support was not reduced, the EU did not cut down on its export subsidies and the financial envelope for sustainable rural development was disappointing.

Sustainability Impact Assessment (SIA)

An instrument is being developed that, it is hoped, will permit an evaluation of the economic, social and environmental effects of trade liberalisation: a sustainability impact assessment. The Directorate General for Trade held a meeting on the results of its preliminary SIA[4], prepared for the Seattle ministerial. NGOs presented a joint statement to the Commission strongly criticising the methodology and process followed.

The methodology that has been developed attempts to combine both quantitative (e.g. regression analysis) and qualitative (e.g. case studies) impact assessment techniques. However, due to the time constraints faced by the consultants, the preliminary SIA is based on common sense judgment derived from the literature review and discussions with "experts".

Forests are not the main focus of the SIA. However, reference to the impact of further trade liberalization on forests is recognized under the section on tariff liberalization of non-agricultural products. The SIA also concludes that tariff escalation can contribute to an increase in environmental pressure in terms of natural resources. Higher tariffs on plywood than logs may contribute to an increase in the extraction rate from forests in exporting countries. The study also points out that further liberalization is likely to have negative environmental impacts in resource-based industries if increased trade liberalization encourages increased rates of depletion of natural resources, such as fish stocks and forests.

EU Bilateral and Regional Agreements

Bilateral

The bilateral agreements agreed by the EU with South Africa and Mexico both support the EU's comprehensive trade liberalisation approach: investment, government procurement and competition are all included. However, environment protection and the recognition of Multilateral Environment Agreements are notable through their absence. A free trade agreement also exists with Canada since 1998.

Regional agreements

The EU is negotiating a bilateral agreement with Mercosur. It is also in the process of negotiating a Euro Mediterranean free trade zone with its 12 Mediterranean partner countries.

On 3 February 2000 the European Community (EC) and 71 African, Caribbean and Pacific (ACP) States (i.e. the 'former colonies') concluded negotiations on a Partnership Agreement (PA) aimed at the establishment of a new framework for their future relations. The Agreement will, inter alia, regulate trade between these two groups of countries, as well as the political dimension of their relations, their development cooperation strategies and their financial cooperation subsequent to the expiration of the fourth Lomé Convention on 29 February 2000.

The trade provisions of the new ACP-EC PA, which will enter into force on 1st March 2000, cover a period of 8 years (Art.37.1) in preparation of a WTO-compatible regime. The Parties' ultimate objective is to integrate the ACP States successfully into the world economy and the multilateral trading system. At the end of the preparatory period, the Parties will conclude a new trading arrangement that will be fully compatible with their WTO obligations; they will progressively remove barriers to trade between them and enhance cooperation in all areas relevant to trade (Art.36. 1 and 2).

In the meantime, a waiver has been requested from the WTO regarding the preferential treatment given by the EU to the ACP countries.