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 2018 - 31 December 2018 - Hoofdinhoud

Council of the European Union

Brussels, 14 October 2019 (OR. en)

13110/19 ADD 1

WTO 282

COVER NOTE

From: Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt: 14 October 2019

To: Mr Jeppe TRANHOLM-MIKKELSEN, Secretary-General of the Council of the European Union

No. Cion doc.: SWD(2019) 370 final

Subject: 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 2018 - 31 December 2018

Delegations will find attached document SWD(2019) 370 final.

Encl.: SWD(2019) 370 final

EUROPEAN COMMISSION

Brussels, 14.10.2019 SWD(2019) 370 final

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 2018 - 31 December 2018

{COM(2019) 455 final i}

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. 

  Introduction ................................................................................................................... 16

• 2. 

  Evolution of trade .......................................................................................................... 18

• 3. 

  Activities of the implementation bodies ........................................................................ 19

• 4. 

  Implementation of the provisions on trade and sustainable development .................... 23

• 5. 

  Agriculture .................................................................................................................... 24

• 6. 

  Regulatory Cooperation ................................................................................................ 27

• 7. 

  Conclusions and outlook ............................................................................................... 28

• 8. 

  Statistics ........................................................................................................................ 28

ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-SOUTH KOREA

FREE TRADE AGREEMENT ............................................................................................. 31

• 1. 

  Introduction ................................................................................................................... 31

• 2. 

  Evolution of bilateral trade ............................................................................................ 31

  2.1 Trade in Goods ........................................................................................................... 31

  2.2 Trade in agricultural goods ........................................................................................ 32

  2.3 Trade in Services and Foreign Direct Investment (FDI) ............................................ 33

• 3. 

  Activities of the implementation bodies ........................................................................ 34

• 4. 

  Implementation of the provisions on trade and sustainable development .................... 36

• 5. 

  Specific areas subject to monitoring ............................................................................. 37

• 6. 

  Progress, main open issues and follow-up actions ........................................................ 38

• 7. 

  Conclusions and outlook ............................................................................................... 39

• 8. 

  Statistics ........................................................................................................................ 39

ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-

COLOMBIA/ECUADOR/PERU TRADE AGREEMENT ................................................ 41

• 1. 

  Introduction ................................................................................................................... 41

• 2. 

  Evolution of trade .......................................................................................................... 42

  2.1 Trade in Goods ........................................................................................................... 42

2.1.1 Overall evolution .............................................................................................................. 42

2.1.2 Trade in agricultural goods ............................................................................................... 45

2.2 Trade in Services and development of investment ..................................................... 49

2.2.1 Trade in Services ............................................................................................................... 49

2.2.2 Foreign Direct investment (FDIs) ...................................................................................... 50

3 Activities of the implementation bodies ........................................................................ 50

• 4. 

  Implementation of the provisions on trade and sustainable development .................... 54

• 5. 

  Specific areas subject to reporting or monitoring ......................................................... 55

• 6. 

  Conclusions and outlook ............................................................................................... 57

• 7. 

  Statistics ........................................................................................................................ 57

ANNUAL REPORT ON THE IMPLEMENTATION OF PART IV OF THE

ASSOCIATION AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES

AND CENTRAL AMERICA ................................................................................................ 63

• 1. 

  Introduction ................................................................................................................... 63

• 2. 

  Overall assessment: evolution of bilateral trade............................................................ 63

  2.1 Trade in Goods overall ........................................................................................... 63

Sectoral structure of trade ........................................................................................................ 64

Country-by-Country analysis ..................................................................................................... 64

2.2 Trade in agricultural goods .................................................................................... 66

2.3 Trade in Services and Foreign Direct investment (FDIs) ...................................... 68

Trade in Services ........................................................................................................................ 68

Development of Foreign Direct investment (FDI) ..................................................................... 68

3 Activities of the implementation bodies ........................................................................ 69

4 Implementation of the provisions on trade and sustainable development .................... 70

5 Specific areas subject to reporting or monitoring ......................................................... 70

6 Conclusions and outlook ............................................................................................... 72

7 Statistics ........................................................................................................................ 72

PART II: ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND

COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND

UKRAINE, MOLDOVA AND GEORGIA .......................................................................... 81

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND

COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND UKRAINE .................................................................................. 82

• 1. 

  Evolution of trade .......................................................................................................... 82

  1.1 Trade in goods overall ................................................................................................ 82

Scope of trade liberalisation...................................................................................................... 82

Sectoral structure of EU-Ukraine trade in goods ...................................................................... 82

1.2 Trade in agricultural goods ........................................................................................ 83

Use of Tariff Rate Quotas .......................................................................................................... 83

1.3 Autonomous trade measures ...................................................................................... 85

1.4 Establishment, trade in services and investments ...................................................... 85

Market access related to establishment and trade in services ................................................. 85

Trade in services ........................................................................................................................ 86 Foreign Direct investment (FDI) ................................................................................................ 86

1.5 EU support to the implementation of the DCFTA ..................................................... 86

1.5 EU support for Small and Medium sized Enterprises (SMEs) ................................... 87

2 Activities of the implementation bodies ........................................................................ 88

2.1 Joint decisions of the Association Bodies .................................................................. 88

2.2 Meetings of the Association Bodies ........................................................................... 88

3 Implementation of the provisions on trade and sustainable development .................... 90

4 Progress made, main open issues and follow-up actions .............................................. 90

4.1 Wood export ban ........................................................................................................ 90

4.2 Value added tax law 2440 .......................................................................................... 91

4.3 Poultry meat imports .................................................................................................. 91

4.4 Technical barriers to trade .......................................................................................... 91

4.5 SPS aspects ................................................................................................................. 92

4.6 Customs and Trade facilitation .................................................................................. 92

4.7 Intellectual property rights (IPR) ............................................................................... 93

4.8 Geographical indications (GIs) .................................................................................. 93

4.9 Competition and State aid .......................................................................................... 94

4.10 Public procurement .................................................................................................. 94

5 Conclusions and outlook ............................................................................................... 94

6 Statistics ........................................................................................................................ 95

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND

COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND GEORGIA ................................................................................. 97

• 1. 

  Evolution of trade .......................................................................................................... 97

  1.1 Trade in Goods overall ............................................................................................... 97

The scope of trade liberalisation ............................................................................................... 97

Overall evolution of EU–Georgia trade in goods ....................................................................... 98

Sectoral structure of EU-Georgia trade in goods ...................................................................... 98

1.2 Trade in agricultural goods ........................................................................................ 99

1.3 Use of Tariff Rate Quotas (TRQ) ............................................................................... 99

1.4 Establishment, trade in services and investments ...................................................... 99

Market access related to establishment and trade in services ................................................. 99

Trade in services ...................................................................................................................... 100

Foreign Direct investment ....................................................................................................... 100

• 2. 

  Activities of the implementation bodies ...................................................................... 100

  2.1 Joint decisions of the Association Bodies ................................................................ 100

  2.2 Meetings of the Association Bodies ......................................................................... 101 3. Implementation of the provisions on trade and sustainable development .................. 102

• 4. 

  Specific areas subject to reporting or monitoring ....................................................... 103

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 103

• 6. 

  EU support to DCFTA implementation ...................................................................... 106

• 7. 

  Conclusions and outlook ............................................................................................. 106

• 7. 

  Statistics ...................................................................................................................... 107

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND

COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND MOLDOVA ............................................................................. 109

1 Evolution of trade ........................................................................................................ 109

1.1 Trade in goods overall .............................................................................................. 109

The scope of trade liberalisation ............................................................................................. 109

Overall evolution of EU-Moldova trade in goods .................................................................... 110

Sectoral structure of EU-Moldova trade in goods ................................................................... 110

1.2 Trade in agricultural goods ...................................................................................... 111

Review clause for agricultural products .................................................................................. 111

Anti-circumvention mechanism for agricultural products ...................................................... 111

Use of Tariff Rate Quotas (TRQs) ............................................................................................. 112

1.3 Establishment, trade in services and investments .................................................... 112

Market access related to establishment and trade in services ............................................... 112

Trade in Services ...................................................................................................................... 113

Foreign Direct investment (FDIs) ............................................................................................. 113

• 2. 

  Activities of the implementation bodies ...................................................................... 113

  2.1 Joint decisions of the Association Bodies ................................................................ 113

  2.2 Meetings of the Association Bodies ......................................................................... 114

• 3. 

  Implementation of the provisions on trade and sustainable development .................. 115

• 4. 

  Progress made, main open issues and follow-up actions ............................................ 115

  4.1 SPS aspects ............................................................................................................... 115

  4.2 Technical Barriers to Trade ...................................................................................... 116

  4.3 Customs and Trade Facilitation ................................................................................ 116

  4.4 Energy ...................................................................................................................... 116

  4.5 Competition policy ................................................................................................... 117

  4.6 Intellectual Property Rights ...................................................................................... 117

  4.7 Services .................................................................................................................... 117

  4.8 Public Procurement .................................................................................................. 117

• 5. 

  EU support to DCFTA implementation ...................................................................... 118

5.1 EU Support to DCFTA-related reforms ................................................................... 118 5.2 EU Support for SMEs .............................................................................................. 118

• 6. 

  Outlook and Conclusion .............................................................................................. 118

• 7. 

  Statistics ...................................................................................................................... 120

PART III: FIRST GENERATION FREE TRADE AGREEMENTS ............................. 122

FIRST GENERATION FREE TRADE AGREEMENTS WITH MEDITERRANEAN PARTNERS .......................................................................................................................... 123

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ALGERIA

ASSOCIATION AGREEMENT ......................................................................................... 124

• 1. 

  Introduction ................................................................................................................. 124

• 2. 

  Evolution of trade ........................................................................................................ 124

2.1 Trade in Goods ......................................................................................................... 124

2.2 Trade in agricultural goods ...................................................................................... 125

2.3 Trade in Services and Investment ............................................................................ 126

• 3. 

  Issues addressed in the Sub-Committee meetings ....................................................... 126

• 4. 

  Specific areas of importance ....................................................................................... 127

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 128

• 6. 

  Conclusions and outlook ............................................................................................. 128

• 7. 

  Statistics ...................................................................................................................... 128

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-EGYPT

ASSOCIATION AGREEMENT ......................................................................................... 131

• 1. 

  Introduction ................................................................................................................. 131

• 2. 

  Evolution of trade ........................................................................................................ 131

2.1 Trade in Goods ......................................................................................................... 131

2.2 Trade in agricultural goods ...................................................................................... 132

2.3 Trade in Services and Foreign Direct Investment .................................................... 133

• 3. 

  Issues addressed in the Joint Committee meetings ..................................................... 133

• 4. 

  Specific areas of importance ....................................................................................... 134

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 135

• 6. 

  Conclusions and outlook ............................................................................................. 136

• 7. 

  Statistics ...................................................................................................................... 136

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ISRAEL

ASSOCIATION AGREEMENT ......................................................................................... 138

• 1. 

  Introduction ................................................................................................................. 138

• 2. 

  Evolution of trade ........................................................................................................ 138

2.1 Trade in Goods ..................................................................................................... 138

2.2 Trade in agricultural goods .................................................................................. 139

2.3 Trade in Services and Foreign Direct Investment (FDI)...................................... 140

• 3. 

  Issues addressed in the Annual (Joint Committee/Trade Committee) meeting .......... 140 4. Specific areas of importance ....................................................................................... 141

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 141

• 6. 

  Conclusions and outlook ............................................................................................. 142

• 7. 

  Statistics ...................................................................................................................... 142

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-JORDAN

ASSOCIATION AGREEMENT ......................................................................................... 144

• 1. 

  Introduction ................................................................................................................. 144

• 2. 

  Evolution of trade ........................................................................................................ 144

2.1. Trade in Goods ........................................................................................................ 144

2.2. Trade in agricultural goods ...................................................................................... 145

2.3. Trade in Services and Investment ............................................................................ 145

• 3. 

  Issues addressed in the Annual (Joint Committee/Trade Committee) meeting .......... 146

• 4. 

  Specific areas of importance ....................................................................................... 146

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 148

• 6. 

  Conclusions and outlook ............................................................................................. 148

• 7. 

  Statistics ...................................................................................................................... 148

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-LEBANON

ASSOCIATION AGREEMENT ......................................................................................... 151

• 1. 

  Introduction ................................................................................................................. 151

• 2. 

  Evolution of trade ........................................................................................................ 151

2.1 Trade in Goods ......................................................................................................... 151

2.2 Trade in agricultural goods ...................................................................................... 152

2.3 Trade in Services and Foreign Direct Investment (FDI) .......................................... 152

• 3. 

  Issues addressed in the Annual Joint Committee meetings ......................................... 153

• 4. 

  Specific areas of importance ....................................................................................... 154

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 154

• 6. 

  Conclusions and outlook ............................................................................................. 155

• 7. 

  Statistics ...................................................................................................................... 155

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-MOROCCO

ASSOCIATION AGREEMENT ......................................................................................... 157

• 1. 

  Introduction ................................................................................................................. 157

• 2. 

  Evolution of trade ........................................................................................................ 157

2.1 Trade in Goods ......................................................................................................... 157

2.2 Trade in agricultural goods ...................................................................................... 158

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 159

• 3. 

  Issues addressed in the Joint Committee meetings ..................................................... 159

• 4. 

  Specific areas of importance ....................................................................................... 159

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 160 6. Conclusions and outlook ............................................................................................. 161

• 7. 

  Statistics ...................................................................................................................... 161

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-PALESTINE

INTERIM ASSOCIATION AGREEMENT ...................................................................... 163

• 1. 

  Introduction ................................................................................................................. 163

• 2. 

  Evolution of trade ........................................................................................................ 163

2.1 Trade in Goods ......................................................................................................... 163

2.2 Trade in agricultural goods ...................................................................................... 164

2.3 Trade in Services and Foreign Direct investment (FDIs) .................................... 165

• 3. 

  Issues addressed in the Annual (Joint Committee/Trade Committee) meeting .......... 165

• 4. 

  Specific areas of importance ....................................................................................... 165

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 166

• 6. 

  Conclusions and outlook ............................................................................................. 166

• 7. 

  Statistics ...................................................................................................................... 166

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-TUNISIA

ASSOCIATION AGREEMENT ......................................................................................... 169

• 1. 

  Introduction .................................................................................................................... 169

• 2. 

  Evolution of trade .................................................................................................... 170

2.1 Trade in Goods ......................................................................................................... 170

2.2 Trade in agricultural goods ...................................................................................... 171

2.4 Trade in Services and Investment ............................................................................ 171

• 3. 

  Issues addressed in the Joint Committee meetings ........................................................ 172

• 4. 

  Specific areas of importance .......................................................................................... 172

• 5. 

  Progress, main open issues and follow-up actions ......................................................... 173

• 6. 

  Conclusions and outlook ................................................................................................ 174

• 7. 

  Statistics ................................................................................................................... 175

FIRST GENERATION FREE TRADE AGREEMENTS WITH THE WESTERN

BALKAN PARTNERS ........................................................................................................ 177

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE EU-ALBANIA STABILISATION AND ASSOCIATION AGREEMENT .... 178

• 1. 

  Introduction ................................................................................................................. 178

• 2. 

  Evolution of trade ........................................................................................................ 178

2.1 Trade in Goods ......................................................................................................... 178

2.2 Trade in agricultural goods ...................................................................................... 179

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 179

• 3. 

  Issues addressed in the Joint Committee meetings ..................................................... 180

• 4. 

  Specific areas of importance ....................................................................................... 180

• 5. 

  Main open issues and follow-up actions ..................................................................... 180 6. Conclusions ................................................................................................................. 181

• 7. 

  Statistics ...................................................................................................................... 181

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE EU-BOSNIA AND HERZEGOVINA STABILISATION AND ASSOCIATION AGREEMENT ...................................................................................................................... 183

• 1. 

  Introduction ................................................................................................................. 183

• 2. 

  Evolution of trade ........................................................................................................ 183

2.1 Trade in Goods ......................................................................................................... 183

2.2 Trade in agricultural goods ...................................................................................... 183

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 184

• 3. 

  Issues addressed in the annual Committee meetings .................................................. 184

• 4. 

  Specific areas of importance ....................................................................................... 185

• 5. 

  Main open issues and follow-up actions ..................................................................... 185

• 6. 

  Conclusions ................................................................................................................. 185

• 7. 

  Statistics ...................................................................................................................... 186

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE STABILISATION AND ASSOCIATION AGREEMENT BETWEEN THE EU AND NORTH MACEDONIA ............................................................................................. 190

• 1. 

  Introduction ................................................................................................................. 190

• 2. 

  Evolution of trade ........................................................................................................ 190

2.1 Trade in Goods ......................................................................................................... 190

2.2 Trade in agricultural goods ...................................................................................... 191

2.3 Trade in Services and FDI ........................................................................................ 191

• 3. 

  Issues addressed in the annual Committee meetings .................................................. 191

• 4. 

  Specific areas of importance ....................................................................................... 192

• 5. 

  Main open issues and follow-up actions ..................................................................... 192

• 6. 

  Conclusions ................................................................................................................. 192

• 7. 

  Statistics ...................................................................................................................... 193

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE EU-KOSOVO STABILISATION AND ASSOCIATION AGREEMENT ..... 195

• 1. 

  Introduction ................................................................................................................. 195

• 2. 

  Evolution of trade ........................................................................................................ 195

2.1 Trade in Goods ......................................................................................................... 195

2.2 Trade in agricultural goods ...................................................................................... 196

2.4 Trade in Services and Foreign Direct investment (FDIs)......................................... 196

• 3. 

  Issues addressed in the annual Committee meetings .................................................. 196

• 4. 

  Specific areas of importance ....................................................................................... 196

• 5. 

  Main open issues and follow-up actions ..................................................................... 196 6. Conclusions ................................................................................................................. 197

• 7. 

  Statistics ...................................................................................................................... 197

ANNUAL INFO SHEET ON the IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-MONTENEGRO STABILISATION AND ASSOCIATION AGREEMENT 199

• 1. 

  Introduction ................................................................................................................. 199

• 2. 

  Evolution of trade ........................................................................................................ 199

2.1 Trade in Goods ......................................................................................................... 199

2.2 Trade in Agricultural Goods .................................................................................... 200

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 200

• 3. 

  Issues addressed in the annual Committee meetings .................................................. 200

• 4. 

  Specific areas of importance ....................................................................................... 200

• 5. 

  Main open issues and follow-up actions ..................................................................... 201

• 6. 

  Conclusions ................................................................................................................. 201

• 7. 

  Statistics ...................................................................................................................... 201

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE EU-SERBIA STABILISATION AND ASSOCIATION AGREEMENT ........ 203

• 1. 

  Introduction ................................................................................................................. 203

• 2. 

  Evolution of trade ........................................................................................................ 203

2.1 Trade in Goods ......................................................................................................... 203

2.2 Trade in agricultural goods ...................................................................................... 203

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 204

• 3. 

  Issues addressed in the annual trade committee meeting ............................................ 204

• 4. 

  Specific areas of importance ....................................................................................... 205

• 5. 

  Main open issues and follow-up actions ..................................................................... 205

• 6. 

  Conclusions ................................................................................................................. 205

• 7. 

  Statistics ...................................................................................................................... 206

FIRST GENERATION FREE TRADE AGREEMENTS WITH LATIN AMERICAN COUNTRIES ........................................................................................................................ 208

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF

THE EU-CHILE ASSOCIATION AGREEMENT .......................................................... 209

• 1. 

  Introduction ................................................................................................................. 209

• 2. 

  Evolution of trade ........................................................................................................ 209

2.1 Trade in Goods ..................................................................................................... 210

2.2 Trade in agricultural products .............................................................................. 210

2.3 Trade in Services and Foreign Direct investment (FDIs) .................................... 210

• 3. 

  Annual Trade Coordinators Meeting and Trade-related Sub-committees .................. 211

• 4. 

  Progress made, Main open issues and follow-up actions ............................................ 211

• 5. 

  Conclusions and outlook ............................................................................................. 212

• 6. 

  Statistics ...................................................................................................................... 212

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF

THE EU-MEXICO ASSOCIATION AGREEMENT ...................................................... 215

• 1. 

  Introduction ................................................................................................................. 215

• 2. 

  Evolution of trade ........................................................................................................ 215

2.2 Trade in goods .......................................................................................................... 215

2.2 Trade in agricultural goods ...................................................................................... 216

2.3 Trade in services and Foreign Direct investment (FDIs) ......................................... 217

• 3. 

  Issues addressed in the joint committee meetings ....................................................... 217

• 4. 

  Progress made, main open issues and follow-up actions ............................................ 217

• 5. 

  Conclusions and outlook ............................................................................................. 218

• 6. 

  Statistics ...................................................................................................................... 219

FIRST GENERATION FREE TRADE AGREEMENTS WITH THE EFTA

COUNTRIES NORWAY AND SWITZERLAND ............................................................ 221

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-NORWAY FREE

TRADE AGREEMENT ....................................................................................................... 222

• 1. 

  Introduction ................................................................................................................. 222

• 2. 

  Evolution of trade ........................................................................................................ 222

2.1 Trade in Goods ......................................................................................................... 222

2.2 Trade in agricultural goods ...................................................................................... 222

2.3 Trade in Services and Foreign Direct investment (FDIs)......................................... 223

• 3. 

  Issues addressed in the EEA and FTA Joint committees ............................................ 223

• 4. 

  Specific areas of importance ....................................................................................... 224

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 224

• 6. 

  Conclusions and outlook ............................................................................................. 225

• 7. 

  Statistics ...................................................................................................................... 225

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-SWITZERLAND

FREE TRADE AGREEMENT ........................................................................................... 232

• 1. 

  Introduction ................................................................................................................. 232

• 2. 

  Evolution of trade ........................................................................................................ 233

Trade in Goods ..................................................................................................... 233

Trade in agricultural goods .................................................................................. 233

Trade in Services and Foreign Direct investment (FDIs) .................................... 234

• 3. 

  Issues addressed in the annual joint committee meeting ............................................. 234

• 4. 

  Specific areas of importance ....................................................................................... 234

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 235

• 6. 

  Conclusions and outlook ............................................................................................. 236

• 7. 

  Statistics ...................................................................................................................... 236

THE CUSTOMS UNION WITH TURKEY ...................................................................... 238

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-TURKEY CUSTOMS UNION AND TRADE AGREEMENTS ............................................................................ 239

• 1. 

  Evolution of trade ........................................................................................................ 239

1.1 Trade in Goods ..................................................................................................... 240

1.2 Trade in agricultural goods ...................................................................................... 240

1.3 Trade in Services and Foreign Direct investment (FDIs) .................................... 240

2 Issues addressed in the Committee Meetings .............................................................. 241

3 Specific areas of importance ....................................................................................... 242

4 Progress made, main open issues and follow-up actions ............................................ 242

5 Conclusions and outlook ............................................................................................. 243

• 6. 

  Statistics ...................................................................................................................... 243

PART IV: ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE

ECONOMIC PARTNERSHIP AGREEMENTS (EPAs) WITH AFRICAN,

CARRIBEAN AND PACIFIC COUNTRIES .................................................................... 245

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND THE SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) ................................................... 246

• 1. 

  Introduction ................................................................................................................. 246

• 2. 

  Evolution of trade ........................................................................................................ 246

2.1 Trade in goods .......................................................................................................... 246

2.2 Trade in services ....................................................................................................... 250

2.3 Foreign Direct Investment (FDI) .............................................................................. 251

• 3. 

  Issues addressed in the annual EPA Committee meeting............................................ 253

• 4. 

  Specific areas of importance ....................................................................................... 253

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 255

• 6. 

  Conclusions and outlook ............................................................................................. 255

• 7. 

  Statistics ...................................................................................................................... 256

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE INTERIM

ECONOMIC PARTNERSHIP AGREEMENT BETWEEN THE EU AND EASTERN AND SOUTHERN AFRICAN STATES ............................................................................ 263

• 1. 

  Introduction ................................................................................................................. 263

• 2. 

  Evolution of trade ........................................................................................................ 263

2.1 Trade in Goods ......................................................................................................... 263

2.2 Trade in Services ...................................................................................................... 266

2.3 Foreign Direct investment (FDI) .............................................................................. 267

• 3. 

  Issues addressed in the annual EPA Committee Meeting ........................................... 267

• 4. 

  Development Cooperation ........................................................................................... 268

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 269 6. Conclusions and outlook ............................................................................................. 270

• 7. 

  Statistics ...................................................................................................................... 270

Madagascar ........................................................................................................................... 271

Mauritius ............................................................................................................................... 272

Seychelles ............................................................................................................................... 274

Zimbabwe .............................................................................................................................. 275

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND COTE D’IVOIRE ................................................................................................................................................ 277

• 1. 

  Introduction ................................................................................................................. 277

• 2. 

  Evolution of trade ........................................................................................................ 277

2.1 Trade in goods .......................................................................................................... 277

2.2 Trade in services ....................................................................................................... 279

2.3 Foreign Direct investment (FDI) .............................................................................. 279

• 3. 

  Issues addressed in the annual EPA Committee meeting............................................ 280

• 4. 

  Development Cooperation ........................................................................................... 280

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 281

• 6. 

  Conclusions and outlook ............................................................................................. 282

• 7. 

  Statistics ...................................................................................................................... 282

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND GHANA .............. 284

• 1. 

  Introduction ................................................................................................................. 284

• 2. 

  Evolution of trade ........................................................................................................ 284

2.1 Trade in goods .......................................................................................................... 284

2.2 Trade in services ....................................................................................................... 286

2.3 Foreign Direct investment (FDIs) ............................................................................ 286

• 3. 

  Issues addressed in the first meeting of the joint EPA Committee ............................. 287

• 4. 

  Development Cooperation ........................................................................................... 287

• 5. 

  Follow-up actions ........................................................................................................ 288

• 6. 

  Conclusions and outlook ............................................................................................. 288

• 7. 

  Statistics ...................................................................................................................... 289

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CAMEROON .... 291

• 1. 

  Introduction ................................................................................................................. 291

• 2. 

  Evolution of trade ........................................................................................................ 291

2.1 Trade in goods .......................................................................................................... 291

2.2 Trade in services ....................................................................................................... 294

2.3 Foreign Direct investment (FDI) .............................................................................. 294 3. Issues addressed in the annual EPA Committee meeting............................................ 295

• 4. 

  Development Cooperation ........................................................................................... 296

• 5. 

  Main open issues and follow-up actions ..................................................................... 297

• 6. 

  Conclusions and outlook ............................................................................................. 297

• 7. 

  Statistics ...................................................................................................................... 297

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CARIFORUM ... 300

• 1. 

  Introduction ................................................................................................................. 300

• 2. 

  Evolution of trade ........................................................................................................ 300

2.1 Trade in goods .......................................................................................................... 300

2.2 Trade in services ....................................................................................................... 302

2.3 Foreign Direct investment (FDI) .............................................................................. 302

• 3. 

  Issues addressed in the EPA Committee meetings ...................................................... 303

• 4. 

  Specific areas of importance ....................................................................................... 304

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 307

• 6. 

  Conclusions and outlook ............................................................................................. 307

• 7. 

  Statistics ...................................................................................................................... 307

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND PACIFIC STATES ................................................................................................................................................ 309

• 1. 

  Introduction ................................................................................................................. 309

• 2. 

  Evolution of trade ........................................................................................................ 309

2.1 Trade in goods .......................................................................................................... 309

2.2 Trade in services ....................................................................................................... 311

2.3 Foreign Direct investment (FDI) .............................................................................. 312

• 3. 

  Issues addressed in the EPA Committee meetings ...................................................... 312

• 4. 

  Development Cooperation ........................................................................................... 313

• 5. 

  Progress made, main open issues and follow-up actions ............................................ 313

• 6. 

  Conclusions and outlook ............................................................................................. 314

• 7. 

  Statistics ...................................................................................................................... 314 DATA USED FOR THE COMPILATION OF INDIVIDUAL REPORTS AND INFORMATION SHEETS

The trade statistics used in this report and the attached staff working document on the evolution of trade and investment flows are based on EUROSTAT data as available on 30 March 2019, except where indicated otherwise. The most recent annual data available for trade in goods are for 2018, and for services and investment for 2017, except where indicated otherwise.

PART I: NEW GENERATION FREE TRADE AGREEMENTS 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 EU-Canada Comprehensive Economic and Trade Agreement (“CETA”) has been provisionally applied since 21 September 2017. 2018 was the first full year of provisional application. While it is too early to take a definitive view on the economic impact of the Agreement, trade flows suggest a positive trajectory with EU goods exports rising by 15% compared to the average of the previous three years. Good progress has also been achieved in implementing the institutional structure foreseen by the Agreement, with the parties identifying the co-chairs and contact points for the twenty committees and dialogues established under CETA and almost all committees and dialogues held their first meetings in the course of 2018 (more details below). Important efforts were made to ensure that the conduct of these meetings is transparent and inclusive. Meeting schedules, provisional agendas and reports of all CETA committees and dialogue meetings were made public on DG TRADE's website ( http://trade.ec.europa.eu/doclib/press/index.cfm?id=1811 ). Civil society mechanisms as foreseen by agreement were set up and further initiatives of civil society engagement were implemented for committees like the Regulatory Co-operation Forum, in light of the interest of stakeholders regarding the Forum.

On 26 of September 2018, the EU and Canada held the first CETA Joint Committee, which is the highest body under the agreement. They reviewed progress made by the various CETA committees and dialogues and discussed the effective implementation of the agreement. Several Member States and Canadian provinces participated in the meeting.

Issues of concern that the EU raised related notably to the cheese TRQ management by Canada, access to the Canadian Wines & Spirits and Geographical Indications (GI) protection in Canada. From the Canadian side, main concerns relate to EU legislation in the Sanitary and phytosanitary (SPS) field (Country of Origin Labelling, Maximum Residue Levels), the implementation of the conformity assessment protocol and the beef and pork TRQ management.

The Joint Committee formally adopted three recommendations, which set the stage for further work, namely to encourage small and medium-sized enterprises (SMEs) to use opportunities offered by CETA, to work jointly on climate action measures and the implementation of the Paris Agreement within the CETA context, and to work jointly to better understand how trade agreements can contribute to gender equality. The Parties also set up dedicated contact points for trade and gender and trade and SMEs. Work is underway to implement the concerned recommendations. For instance, a CETA Workshop on Trade and Gender, co-organised by the Commission and by the Mission of Canada to the EU, took place in Brussels on 1 April 2019. Participants from business, civil society, EU Member States and international organisations engaged with the objective to learn from women-led businesses about their experiences under CETA and challenges faced when participating in international trade more generally. Participants also discussed potential actions to implement CETA’s trade and gender recommendation. To help SMEs, the EU and Canada put online a dedicated webpage with information useful to smaller businesses on accessing Canadian and EU markets such as import requirements and other information considered to be useful for SMEs.

In line with its commitments in the recommendation on climate action, a joint EU-Canada conference on Trade and Climate was organised in Brussels on 24 January 2019. The event provided a platform for policy makers, businesses, non-governmental organisations to engage (more details below).

Work has also been ongoing on the foundations of the Investment Court System (ICS) already established in CETA. Although the ICS provisions are not provisionally applied, the contours of the further work on the ICS has been agreed between EU and Canada in the Joint Interpretative Instrument on CETA 1 and is also reflected in the Commission and Council Statement No 36 2 . In the course of 2018, the Commission has consulted with Member States and discussed with Canada on how to bring forward the work that has been committed to during the CETA ratification process.

In particular, the Commission has been working with the Member States at the Trade Policy Committee (Services and Investment) on four strands of action for the implementation of the Investment Court System: (1) the rules regarding the functioning of the Appellate Tribunal, (2) the code of conduct for the Members of the Tribunals, (3) the rules for mediation and (4) the procedure to adopt binding interpretations. The European Parliament has been kept informed of the discussions. At the first inaugural meeting of the CETA Committee on Services and Investment on 18 September 2018, the EU and Canada had first positive exchanges on the draft decisions. The Commission continued technical discussions on the texts with the EU Member States and with Canada. The aim is to reach a technical agreement on those texts in due course.

The Commission started work on other areas related to the implementation of the Investment Court System, in particular on the selection mechanism for the Members of the Court. Discussions on this issue with the Member States at the Trade Policy Committee (Services and Investment) started in December 2018 and are ongoing. In its Opinion 1/17 delivered on 30 April 2019, the Court of Justice of the EU confirmed the compatibility of the CETA’s provisions on the Investment Court System with EU law 3 .

At the time of writing, 13 Member States had notified the completion of their ratification process (Austria, Czech Republic, Denmark, Estonia, Spain, Croatia, Latvia, Lithuania, Malta, Portugal, Finland, Sweden and the UK). The ratification process is still ongoing in other Member States and the Commission continues to be engaged with Member States and stakeholders to create awareness of the opportunities and to ensure EU stakeholders are able to derive full benefits of the agreement. As part of these efforts, the Commission developed

1 Para. 6 (“Investment Protection”) of the Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States (OJ L 11, 14 January 2017, pp. 3–8)

2 Statement No 36 (“Statement by the Commission and the Council on investment protection and the Investment Court System (ICS)”) of the Statements entered in the Council minutes in the occasion of the signature of CETA (OJ L 11, 14 January 2017, pp. 9–22)

3 The Opinion of the Court is available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=213502&pageIndex=0&doclang=EN&mod e=req&dir=&occ=first&part=1&cid=6942898 .

specific guides to assist EU businesses which are or want to become active on the Canadian market (notably on the protection of geographical indications and public procurement). More such guides are in the process of being developed (notably on services and investment). The Commission also updated its Market Access Data Base to provide more information useful to EU exporters to Canada, in particular SMEs.

• 2. 

  E VOLUTION OF TRADE

In terms of trade in goods, Canada is now the EU’s 10th largest trading partner (imports plus exports), with total trade flows worth €72 billion, or 2% of the EU’s total trade with third

countries 4 .

The EU had a trade surplus of €10.4 billion, which amounted to a €3.9 billion improvement compared to the average between 2015 and 2017.

Although one year after the provisional application of CETA some caution is needed to interpret the limited data available, EU exports were on a positive trajectory in 2018. EU goods exports to Canada increased by 15% percent when compared to the average of the three previous years (€36 billion). This meant a stronger increase than for EU goods exports to third countries, which went up by 8% during the same period. Over the same period, total EU goods imports from Canada increased by 5% or €1.5 billion.

The EU’s most important export items all experienced a significantly stronger export performance when compared to the average of the three previous years: ‘Machinery and mechanical appliances’ were up 16% (accounting for almost one-fifth of total EU exports to Canada); ‘Vehicles and parts’ were up 11% (accounting for 14% of total EU exports to Canada); ‘Pharmaceuticals’ were up 29% (accounting for 12% of total EU exports to Canada); ‘Agricultural goods’ were up 7% (accounting for 9% of total EU exports to Canada); ‘Electrical machinery’ was up 2% and ‘Organic chemicals’ were up by 77%.

4 Total 2018 trade in goods, imports and exports combined.

At the same time, EU imports from Canada increased during the same period by 5% or €1.5 billion, from on average €29.5 billion in 2015-2017 to €31.0 billion in 2018. Imports from Canada grew at a slower pace than overall EU imports from third countries, which over the same period grew by 12%.

Canada is the EU’s 12th largest source of imported goods, accounting for 2% of all goods imported from countries outside the EU. To put this into perspective, 20% of the EU’s total imports originate from China (€394 billion), which is the EU’s first trading partner in terms of imports.

The EU's most important imports from Canada are displayed in the graph below.

With the exception of aircraft and spacecraft and ores, slag and ash, these sectors are also part

of the EU's top ten sectors when it comes to overall world imports.

Concerning services, total exchanges in 2018 amounted to €38.7 billion, an 11% increase compared to

2017 (see section statistics for the 2017 data). EU exports to Canada amounted to €23.5 billion, whilst

Canada’s exports to the EU amounted to €15.1 billion; the EU maintained a trade surplus at around €8.3 billion.

In 2017, total FDI stocks amounted to €600 billion.

• 3. 

  A CTIVITIES OF THE IMPLEMENTATION BODIES

In 2018, 18 of the 20 the committees and dialogues established under CETA met (only the

Dialogue on electronic commerce and the Mutual recognition of Professional Qualifications

Committee did not meet). For more details, the agendas and reports of these meetings can be

found on the Commission’s "CETA – Meetings and documents" webpage 5 .

Committees

The CETA Joint Committee met in Montreal on 26 September 2018 (details provided in the

introduction). The activities of the other committees and dialogues were as follows:

The first meeting of the CETA Committee on Government Procurement took place on 15

March 2018 in Brussels. The Parties exchanged recent legislative developments and discussed

inter alia technical updates that need to be made to Annex 19-8 of Canada’s market access

schedule, ongoing work in developing Canada’s single point of access for public

procurement, existing bid challenge mechanisms/domestic review procedures, as well as

public procurement opportunities, particularly in the space sector.

5 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1811

The first meeting of the Sanitary and Phytosanitary Joint Management Committee (JMC) on 26-27 March 2018 in Ottawa, achieved the following outcomes (i) identification of priority SPS issues affecting trade between the European Union and Canada, and (ii) establishing the foundations for bilateral exchanges of information and for ongoing cooperative efforts including cooperation on animal welfare and antimicrobial resistance. More specifically, the EU and Canada identified the topic of long distance transport of animals as a topic for engagement within the context of the CETA Regulatory Cooperation Forum meeting of December 2018.

During the 2 nd SPS JMC meeting in February 2019 the agreed follow-up actions were further

deepened to make the outcome more result- oriented on several pending market access issues, as reflected in more detail in the public report ( http://trade.ec.europa.eu/doclib/docs/2019/march/tradoc_157809.pdf ).

The Committee on Geographical Indications (GIs) convened on 17 May 2018. Canada explained the important changes it had made to its legislative framework to meet its CETA commitments on the protection of GIs. Concerns were raised by the EU about Canada’s implementation of CETA articles regarding administrative enforcement of GI protection and the lack of a list of companies entitled to use the grandfathering clause. Canada committed to organising explanatory meetings in certain EU Member States, which notably took place in Brussels, Paris, Madrid and Rome.

The Joint Customs Cooperation Committee (JCCC) convened in Brussels on 22 June 2018. Parties exchanged information about recent legislative and regulatory developments in the field of customs, explored bilateral and international cooperation topics and made progress towards the mutual recognition of the EU and Canada Authorised Economic Operator programmes.

The Wine and Spirits Committee met in Brussels on 5 July 2018. Parties had a detailed discussion on the implementation of the CETA Joint Declaration on wines and spirits, which contributed to developing a mutual understanding of their respective views. The EU expressed concerns about the enforcement of the protection of certain EU Wines and Spirits GIs, which the Canadian counterparts explained they were resolving. The EU provided an overview of its legislation on certain duty reductions, as well as on the on-going recast of the EU wine legislation, which should address Canada's concern about red ice wine.

The Financial Services Committee met in Brussels on 19 June 2018. The Parties discussed financial sector developments as well as regulatory and supervisory issues relating to banking and capital markets. They also discussed issues pertaining to financial stability as well as cybersecurity, consumer and data protection and sustainable finance.

The Committee on Trade and Sustainable Development (TSD) met in Brussels on 13 September 2018. The meeting was preceded and informed by exchanges of the first CETA Civil Society Forum, which took place on 12 September 2018. In addition, the Parties met with the representatives of the domestic advisory groups (DAGs) referred to by the TSD chapters, and debriefed them on the TSD Committee discussions. They exchanged views on the subjects raised during the TSD meeting and discussed expectations for future work between the DAGs and the Parties. The EU and Canada acknowledged the envisaged adoption of three recommendations on trade and climate, trade and gender and trade and SMEs, which had been prepared in the framework of the TSD implementation work and which were subsequently adopted by the CETA Joint Committee on 26 September 2018.

The Committee on Services and Investment met in Brussels on 18 September 2018. On investment protection, the Parties discussed the functioning of the Appellate Tribunal, the code of conduct and rules for mediation. Both the EU and Canada agreed that subsequent work will be carried out at technical level to produce a draft decision in early 2019. On services, the Parties exchanged information on Mutual Recognition Agreements, Canada’s coastal shipping legislative reform, ongoing negotiations relating to the development of performance requirements obligations for financial services, and the provision of information on temporary entry. Both Parties agreed that technical level discussions would advance these issues further.

The Agriculture Committee met on 19 September 2018 in Brussels. Reviewing their respective trade data, both Parties welcomed increased imports across most agricultural goods. Canada raised concerns about the EU’s beef and pork quota management system and asked about data access, while the EU expressed concern about the Canadian cheese quota administration and the very low uptake of the quota until late in 2018. Other issues discussed were Canada’s price class for milk protein ingredients as well as European national measures on origin labelling. Both Parties agreed to engage in information sharing to remedy the flagged issues, calling for more collaboration in order to take advantage of CETA’s new opportunities.

On 16 November 2018, the Joint Sectoral Group (JSG) on Pharmaceuticals convened by videoconference. Six administrative arrangements to facilitate the effective implementation and monitoring of the CETA Good Manufacturing Practices Protocol (GMP) on Pharmaceuticals were approved (Components of the Information Sharing Process; Two-way Alert Program; Procedure for Evaluating New Regulatory Authorities; Equivalence Maintenance Program; Components of a GMP Compliance Program; Contact Points). Canada’s Proposal on a Mutual Recognition Agreement (MRA) for Drug Facility Inspections in third countries and the Recognition of the Active Pharmaceutical Ingredients Program under the CETA GMP Protocol on Pharmaceuticals were discussed, with Parties agreeing to develop a common approach and propose a plan. The JSG confirmed the continued mutual recognition of GMP inspections and batch certification between the Parties.

On 29 November 2018, the Trade in Goods Committee convened via videoconference. The Committee welcomed the progress made on the reciprocal exchange of information on the safety of consumer products and discussed the implementation of the Protocol on conformity assessment. The Parties also exchanged information regarding the informal IPR dialogue in June 2018, the joint report of the Joint Sectoral Group on Pharmaceutical products, which took place on 16 November, as well as legislative developments. The Reports of the Agricultural Committee and the Wines & Spirits Committee were discussed thereafter, covering a range of issues (including the cheese TRQ, provincial discriminatory measures against EU wines exporters, enforcement of W&S GI protection, origin declaration on Wines & Spirits, veterinary medicines regulation, and country-of-origin labelling, amongst others).

The Regulatory Cooperation Forum met on 14 December 2018 in Brussels (and videoconference) and agreed on a work plan. It was also agreed that the plan should be published online and updates should be published regularly. Topics retained in the work programme were ‘cybersecurity and the Internet of Things’, ‘animal welfare’, ‘cosmetics-like drug products’, and ‘pharmaceutical inspections’. Both Parties emphasised the importance of safety of consumer products and welcomed the new administrative arrangement adopted to exchange non-personal information on dangerous non-food consumer products. Finally, the Forum debriefed civil society stakeholders and in response to requests of stakeholders conveyed openness to receiving suggestions for new topics, if there is a common interest. Stakeholders welcomed the increased transparency.

The Joint Committee on Mutual Recognition of Professional Qualifications met in Brussels on 16 April 2019. The Committee officially acknowledged the receipt of documents submitted by the Canadian Architectural Licensing Authorities (CALA) and the Architects’ Council of Europe (ACE) with a view to providing a joint recommendation on a Mutual Recognition Agreement (MRA) between Canada and the EU concerning the profession of architects. The Committee discussed the joint submission in light of Article 11 of CETA and exchanged views about the next steps in the process of the possible negotiation and adoption of the MRA.

Dialogues

The Bilateral Dialogue on Forest Products held a productive meeting on 23 May 2018 by videoconference, discussing resource efficiency of wood-based products, their sustainable use, product standards, hazard-based approach to regulation of plant protection products/biocides and EU-Canada cooperation on research and innovation.

The Bilateral Dialogue on Raw Materials took place on 16 November 2018 and discussed research and innovation aspects of the raw materials life cycle. The EU and Canada also agreed to continue to exchange best practices on sustainable mining as well as to find synergies to boost investment opportunities in exploration and mining in the EU and Canada. Stakeholder representatives joined part of the meeting to report on the main outcome of the EU-Canada Raw Materials Stakeholders Forum.

The 14 th Joint Science and Technology Cooperation Committee meeting - the first under

CETA- acknowledged the importance of the recent research and innovation policy developments in Canada and in the European Union - Budget 2018 and Horizon 2020. Reinforcing the links between industry and research was a key objective of both Parties for this meeting and they agreed to continue their strong cooperation in key areas like marine, health, aeronautics and agricultural research. Mobility of Canadian and European researchers was strongly reaffirmed and continued development of appropriate framework conditions for research cooperation was agreed.

The Dialogue on Biotechnology took place on 26 April 2018 by videoconference. Both Parties underlined the importance of information exchange on regulatory and technical issues affecting trade in agricultural products of biotechnology. Both sides exchanged information on legislative and policy developments. The EU raised the issue of Genetically Modified (GM) animals in Canada, specifically about GM salmon and its traceability requirements. Canada reaffirmed that all products exported to the EU, including salmon, must meet EU import requirements and therefore no GM salmon is exported to the EU.

The meeting of the Bilateral Dialogue on Motor Vehicle Regulations was held via videoconference on 5 October 2018 and focused on regulatory developments with respect to motor vehicles. Regulatory ambitions in the Automated Driving sector were discussed and the Parties agreed to hold additional technical meetings on regulations of relevance ahead of the UNECE meetings in Geneva. Both sides confirmed their willingness to continue technical exchanges on issues of common interest.

• 4. 

  I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

  DEVELOPMENT

In the context of the Trade and Sustainable Development Committee, the EU and Canada discussed issues of common interest in the multilateral context and exchanged views on potential priority areas in the trade and labour, trade and environment and other cross-cutting fields. The Parties recalled the existing high intensity of bilateral relations on environmental issues in general, and noted their commitment to future cooperation under CETA. The Parties updated each other on their relevant processes in relation to multilateral environment agreements (MEAs). In this context, the Parties also exchanged views on areas of mutual interest, such as trade in plastics, trade and biodiversity and clean technology. The Parties provided updates on their respective mechanisms and practices in receiving communications on the Trade and Environment Chapter (Canada) and Trade and Sustainable Development (EU) from non-governmental stakeholders and the wider public.

To expand the awareness of EU-Canada trade and climate action in the context of CETA, the EU and Canada hosted a conference in Brussels on 24 January 2019 to explore how to best leverage CETA’s institutional and legal framework to encourage further joint actions to support implementation of the Paris Agreement. At this conference business, civil society and policy communities from both sides of the Atlantic discussed topics such as the application of CETA to support sustainable and green investment, regulatory cooperation and trade in green technologies and services.

In relation to trade and labour, the Parties outlined their respective legal mechanisms for monitoring and ensuring compliance with core labour standards, and discussed possible priorities for cooperation. In this context, the EU and Canada expressed their preliminary interest in working jointly on (i) labour issues in relation to global supply chains in third countries; (ii) on collective bargaining in the context of the changing world of work, in particular on the platform economy; and (iii) on gender-related issues in the world of work, also in coordination with the work on the Trade and Gender Recommendation.

Under cross-cutting issues, the Parties also stressed the important role of businesses in promoting labour and environmental objectives and outlined their respective ongoing efforts in promoting responsible business conduct/corporate social responsibility with their trade partners. They agreed as a follow-up to explore potential synergies and cooperation activities.

Trade and Sustainable Development (TSD) review

The review process was formally initiated by an exchange of letters between the EU and Canada after CETA provisionally came into force on 21 September 2017. In the course of 2018, the Parties held several technical level discussions and exchanged views in the context of the early review of the Trade and Sustainable Development chapters. Canada and the EU reconfirmed their commitment to advance this process and agreed to intensify their efforts on this commitment, with a view to reviewing the implementation of the TSD chapters, including their enforcement mechanisms, to propose solutions and outcomes at the second CETA Joint Committee meeting and subsequent Joint Committee meeting as pertinent. In parallel, the EU Commission published a 15-point action plan to make EU trade and sustainable development chapters more effective and which is informing the EU position on TSD. The Parties devised a joint work plan to be implemented in advance of the second CETA Joint Committee meeting.

• 5. 

  A GRICULTURE

Since the provisional application of CETA on 21 September 2017, the Commission has been closely following the implementation of the commitments made in the field of agriculture. Canada is the 10 th most important market for EU agri-food exports. In 2018, the EU’s trade surplus with Canada grew by 31.5% to reach €1.7 billion.

EU-28 agri-food exports to Canada were up 4% in value when compared to 2017 and increased by 7% when compared with the average of the last three years (2015-2017). This is just slightly below the 4.3% annual growth recorded in the previous 4 years.

Meanwhile EU imports fell by nearly 12%. This was largely due to a sharp decline of 40% in oilseeds (notably rapeseeds and soybeans) and a decline of 26% in wheat imports. The tariff rate quotas opened by the EU for the import of Canadian agricultural products were hardly utilised. The highest fill rate was 11% for the common wheat and sweet corn quotas. For meat, fill rates ranged from 0% for frozen beef to 4% for bison meat. They were particularly low (0%–1%) for the origin quotas for sugar-containing products, chocolate, food preparations and pet food.

The additional duty free quotas for cheese are among 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.

In 2018, the CETA cheese quota was nearly completely filled (96.4%), an even better result than in 2017. The quota uptake, however, was very slow to take off for well over the first half of 2018 and the EU raised its concerns in this regard to Canada, both in CETA’s Agriculture Committee as well as in the CETA Joint Committee. In these forums, the EU also highlighted other concerns with the Canadian quota management system, which notably foresees that 50% of quota licenses be allocated to Canada’s cheese manufacturers, which would not appear to constitute the most likely users of the quota. At the CETA Joint Committee it was agreed that in order to draw meaningful conclusions it was important to have data for the first full year of quota utilisation. The experience of the first full year of application of CETA has confirmed concerns raised by EU stakeholders about a large number of quota licenses (up to 40%) being transferred to other operators. Such transfers add costs to EU cheeses in Canada. In April 2019, the EU therefore requested that Canada conduct a mid-term review of its CETA cheese quota administration system.

Utilisation of the CETA quota for EU cheese

Tariff

Code Product

Quota 2018 Utilisation 2018

(tonnes) (tonnes) Utilisation rate

0406 Cheese 5 900 5 693 96,5 % of which:

high quality 5 333 5 290 99,2 % industrial 567 403 71,1 %

Source: Global Affairs Canada.

On various occasions in 2018, the EU also expressed concerns about Canada’s price class for milk protein ingredients (milk class 7), which are made available to the food processing industry at world prices.

Canada for its part, raised concerns about the EU’s quota management system for meat quotas, specifically the automatic on-demand issuance of import licenses. The EU explained that for volumes not allocated during the initial application period, import licenses are automatically issued on-demand after they are processed. Canada also called for better access to quota utilisation data. The EU pointed out that data on quota allocation, which is publically available on-line, was a reliable guide to actual imports.

Alcoholic beverages, in particular wines and spirits, top the list of EU agricultural exports, accounting for over 40%. Many discriminatory practices remain in Canada against imported wines and spirits, notably at provincial level. Ontario and Quebec have implemented the commitment foreseen in CETA and have moved away from ad-valorem cost of service differential fees to a volume based system. In accordance with the agreement, the EU has requested that Ontario and Quebec carry out new audits of their accounting system. In addition, the EU called for more transparency and clarity on cost allocation in relation to these cost of service differential fees (some costs are seen as unduly absorbed by imported products). The federal excise duty on imported wine (that exists since 2006) was increased in 2017 by 2% and an escalator clause linked to inflation was included. The EU requested that the discriminatory aspects of the tax to be removed. The tax has also been challenged in the World Trade Organisation by Australia. Finally, the Commission is working with the Canadian authorities to seek mutually agreed solutions to the multitude of concerns relating to the discrimatory treatment of EU alcoholic beverages compared to local ones across few provinces.

Since the entry into force of CETA 143 EU food geographical indications (GIs) enjoy full protection from imitations in Canada, at a level comparable to that under EU law. The Commission worked with Canada to ensure that the protection of these GIs would be fully enforced. The amendment of Canada’s Trade-Mark Act to protect the geographical indications of food products, which was introduced as a result of CETA, established a procedure for the direct application for protection by EU rights-holders. The new system delivered its first result in September 2018 with the protection of an additional EU GI “Prosciutto di Carpegna”. This progress should be seen as a concrete positive outcome of CETA. European producers who are interested in exporting to Canada have for the first time access to an effective and easy mechanism to protect their geographical indications. In order to assist EU GI right holders to fully avail themselves of this new mechanism, the EU produced a GI guide available to businesses on the Commission’s webpage . Certain concerns remain as to how the administrative enforcement can be ensured notably for the 8 grandfathered GIs for which a specific regime applies in view of certain prior uses on the Canadian market. The Commission will continue to engage with Canada on this issue. In addition, the EU and Canada will also continue to work on updating the Annex of Wines and Spirits GIs. In the case of alcoholic beverages, CETA, as a result of the incorporation of the EU Canada wines and spirits agreement, only provides a list of GI names which are eligible for protection in Canada. EU GI rights-holders would still need to submit an application to Canadian authorities.

SPS measures

Currently only 17 EU Member States are authorised to export meat to Canada. Work is ongoing to ensure that the remaining EU Member States will also have access to this market. At the end of 2018, a process was agreed for Canada to recognise the EU Meat inspection system, based on an additional set of audits of a selection of EU Member States in 2019. If this were to result in a satisfactory outcome in all audited EU Member States, Canada would allow the exports of meat from all EU Member States for bovine, swine and poultry. This process will not affect ongoing trade for those EU Member States currently authorised to export meat to Canada.

Work on the harmonisation of EU export certificates continues, with priorities put forward by both sides aiming at some tangible initial results in 2019.

For some plant commodities, Canada does not recognise alternatives to the use of methyl bromide as a pest mitigating measure for trade. In 2018, an EU project on alternatives to the use of methyl bromide was launched in close cooperation with Canadian authorities with the objective to identify risk measures not based on the use of a pesticide which is known to be an ozone depleting compound. A workshop with experts on both sides took place in March 2019. The outcome of this cooperation will result in a guidance document for EU exporters of plants and plant products for the Canadian market.

Several other SPS issues are still outstanding and are being further discussed with Canada with a view to finding a solution. For example, the export of EU bovine semen is limited only to Schmallenberg Virus serologically negative animals, while there is no scientific basis to justify this restriction. Exports from the EU to Canada are also not authorised for potatoes for planting (called also “potato mini tubers” by Canada) and fresh tomato with vines, stems, and calyces, due to restrictive plant health requirements for Canadian imports. Discussions are ongoing with the Canadian authorities to identify appropriate solutions.

• 6. 

  R EGULATORY C OOPERATION

Chapter 21 of CETA lays out the framework for voluntary regulatory cooperation activities, including the establishment of the “Regulatory Cooperation Forum” (the Forum). The Forum builds on the existing regulatory cooperation agreement between the EU and Canada signed in 2004.

To prepare for this first meeting, both the EU and Canada held stakeholder consultations to identify issues, priorities, and sectors that the Forum could consider to include into its first work plan. In January 2018, the Commission published a call for proposals inviting civil society to come forward with suggestions for topics for regulatory cooperation with Canada. The Commission received 26 responses to this call, which were made public 6 . From February to April 2018, Canada also sought comments from stakeholders on potential areas for regulatory cooperation with the EU. Canada received close to 40 responses, which were also

made public 7 .

The first meeting of the Forum took place on 14 December 2018 in Brussels (and via video conference). The topics to be included in the work plan were drawn from the consultations following feedback from EU and Canadian regulators, before being agreed between the EU and Canadian Co-chairs. In choosing the topics, the EU and Canada also took into account the readiness of the topics proposed for regulatory cooperation and whether or not the topics were already dealt with in other CETA committees or existing bilateral or international dialogues. Regulators from both sides provided an update on the feedback received during the consultations, how the initiatives were identified for cooperation, bilateral discussions to date and next steps. On this basis, the parties agreed on a work-plan including the following 5 topics: (i) cybersecurity and the internet of things; (ii) animal welfare – transportation of animals; (iii) re-testing of cosmetics-like products; (iv) co-operation on pharmaceutical inspections in third countries; and (v) exchange of information on the safety of consumer products.

The last topic already saw the conclusion of an administrative arrangement for the exchange of information on dangerous non-food consumer products between the European Commission’s Directorate-General for Justice and Consumers (DG JUST) and Health Canada on 13 November 2018, during International Product Safety Week. The Forum welcomed the agreed administrative arrangement and took stock of the context, scope, and type of information that will be exchanged under the administrative arrangement. Furthermore, it was agreed that it would be relevant for the Forum to receive a report of the implementation of the administrative arrangement at the next meeting.

During the civil society meeting, co-chairs and regulators from the EU and Canada debriefed civil society stakeholders about the Forum’s activities. Audiences from multiple physical locations participated in this exchange: stakeholders participating in person in Brussels, in Ottawa via video conference, and from desks and conference rooms via web streaming. Several stakeholders in Brussels and Ottawa participated and had the opportunity to comment on the outcomes of the Forum and indicated their interests for future initiatives to strengthen regulatory cooperation.

• 7. 

  C ONCLUSIONS AND OUTLOOK

The first year of provisional application of CETA showed good results. The institutional structure of the Agreement was set up and committees and dialogues started their activities. Important efforts were made to ensure the conduct of meetings was transparent and inclusive and this was welcomed by stakeholders and civil society.

6 http://trade.ec.europa.eu/consultations/index.cfm?consul_id=248 .

7 https://open.canada.ca/data/en/dataset/c45c4cda-7134-4e65-8e99-5214eb07bcf3

Trade statistics for 2018 indicated that companies were starting to benefit from the signficant reduction of duties applicable since 21 September 2017 (i.e. 98% of the overall duties which will be ultimately reduced by CETA). We can observe an increase in trade in many sectors, particularly in those sectors where duties were high before the entry into force of CETA. The preliminary statistics also indicated an increase of EU exports to Canada for agricultural products, in particular for processed agricultural products and cheeses where the EU has strong economic interests. CETA also offers the protection of 143 distinctive EU food products labelled with GIs. Thanks to CETA, the Canadian Trade Mark Act was amended to allow for a procedure for the direct application for protection by EU rights-holders of food GIs. A first successful additional protection of an EU GI was delivered through that mechanism in September 2018.

CETA also provides for a significant further opening of the Canadian procurement market, including at provincial and local level which represent an important percentage of public procurment. These openings have been vigourously welcomed by EU companies. CETA also 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. A first proposal for a Mutual Recognition Agreement (MRA) was made in 2018 by the Canadian Architectural Licensing Authorities (CALA) and the Architects’ Council of Europe (ACE) aiming to facilitate recognition and licensing procedures of architects in the EU and in Canada, thus completing a first step of the mutual recognition framework outlined in CETA.

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.

• 8. 

  S TATISTICS

  Merchandise trade EU28 2014-2018 2014 2015 2016 2017 2018

EU28 trade with Canada (mio €) Imports 27.431 28.027 29.016 31.509 30.988 Exports 31.654 35.145 35.228 37.704 41.355 Balance 4.223 7.118 6.212 6.195 10.366 Share Canada in EU28 trade with

Extra-EU28 Imports 1,6% 1,6% 1,7% 1,7% 1,6% Exports 1,9% 2,0% 2,0% 2,0% 2,1% Total (I+E) 1,7% 1,8% 1,9% 1,9% 1,8%

Share EU28 in trade Canada with world Imports 11,3% 11,4% 11,4% 11,7% 12,3% Exports 7,4% 7,2% 7,7% 7,3% 7,4% Total (I+E) 9,4% 9,4% 9,6% 9,6% 10,0%

25- Source Trade G2 Statistics/ISDB mars

19 Trade EU28: Eurostat COMEXT; Trade Canada: IMF Dots

Total merchandise trade EU28 with Canada (mio €)

Growth

Canada 2017 2018 annual

mio € %

Imports 31.509 30.988 -521 -1,7%

Exports 37.704 41.355 3.651 9,7%

Balance 6.195 10.366 4.172

Total trade 69.213 72.343 3.130 4,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Canada (mio €)

Growth

Canada 2017 2018 annual

mio € %

Imports 2.251 1.988 -263 -11,7%

Exports 3.560 3.707 147 4,1%

Balance 1.309 1.720 411

Total trade 5.810 5.695 -116 -2,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Canada (mio €)

Growth

Canada 2017 2018 annual

mio € %

EU28 imports 29.258 29.001 -258 -0,9%

EU28 exports 34.144 37.647 3.503 10,3%

Balance 4.886 8.647 3.761

Total trade 63.403 66.648 3.245 5,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Canada (mio €)

Growth

Canada 2016 2017 annual

mio € %

Imports 12.067 13.228 1.160 9,6%

Exports 20.221 21.681 1.460 7,2%

Balance 8.154 8.454 300

Total trade 32.288 34.909 2.620 8,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Canada (mio €)

2013 2014 2015 2016 2017

Imports 11.684 11.036 12.640 12.067 13.228

Exports 17.976 16.558 19.376 20.221 21.681

Balance 6.292 5.522 6.736 8.154 8.454

Total trade 29.661 27.594 32.017 32.288 34.909

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

FDI EU28 with Canada (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 165.239 211.486 245.556 299.979 292.998

Outward 256.748 286.867 283.214 315.153 304.782

FDI Flows

Inward 20.367 17.856 30.507 40.437 29.400

Outward 22.243 9.291 -10.475 21.918 4.058

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-SOUTH KOREA

FREE TRADE AGREEMENT

• 1. 

  I NTRODUCTION

The Free Trade Agreement (FTA; referred to as ‘the Agreement’) between the EU and its Member States and the Republic of South Korea (in this report referred to as "South Korea") 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 it entered into force on 1 January 2016.

The EU-South Korea FTA is the first of a new generation of comprehensive FTAs meaning that apart from providing market opening commitments as well as a basis for regulatory cooperation in key sectors, it includes a substantial chapter on sustainable development that upholds and promotes social and environmental standards.

This is the 7th Annual Report on the implementation of the EU-South Korea FTA, which presents the recent evolution of EU-South Korea bilateral trade and investment and against 2010, which is the last year before the Agreement went into force. An overview of activities of the FTA Working Groups and Committees is also included in the report. Special attention is given to the Trade and Sustainable Development chapter.

According to the ex-post evaluation of the EU-South Korea FTA conducted by an

independent contractor, published in March 2019 8 , the EU economy gained additional €4.4

billion and the South Korean economy €4.9 billion through the FTA. This happened despite the fact that the external environment, notably the post financial crisis period was not particularly supportive, weighing on demand and international trade.

• 2. 

  E VOLUTION OF BILATERAL TRADE

2.1 Trade in Goods

In 2018, South Korea accounted for 2.5% of the EU’s total trade in goods and was the EU's eighth largest trading partner. The liberalisation of trade in goods has been beneficial for EU exports as the introduction of the EU-South Korea FTA saw EU exports in goods rise from €27.9 billion in 2010 to €49.2 billion in 2018, a 76% increase. EU imports of South Korean products also grew significantly over the same period, albeit at a slower pace, as values increased from €39.5 billion in 2010 to €51 billion in 2018.

While historically, the EU has had a trade deficit with South Korea, the sharp rise in exports since the introduction of the FTA led to an EU trade surplus from 2013 to 2016. Data for 2018 shows that the EU has a slight trade deficit of -€1.9 billion, however it is clear that there is now a more balanced level of trade in goods between the two partners.

8 http://trade.ec.europa.eu/doclib/docs/2019/march/tradoc_157716.pdf

EU28 trade in goods with South Korea 2010-2018

(millon euro)

60,000

50,000

40,000

30,000

20,000

10,000

0

-10,000 2010 2011 2012 2013 2014 2015 2016 2017 2018

-20,000

EU28 imports EU28 exports balance

The increase in EU exports over the 2010-2018 period was driven by a surge in trade in some key product categories. Machinery and appliances accounted for almost 30% (€14.2 billion) of EU exports to South Korea. Exports in this category have increased by 31% since 2010. The largest gains over the 2010-2018 period have been in transport equipment (+187%) which accounts for just under one fifth (€9.6 billion) of total EU exports. This was driven by a +226% increase in motor vehicles (including parts) which were valued at €8.6 billion (17% of total EU exports) in 2018.

At the same time, EU imports of machinery and appliances made up over one third of total EU imports (€18.4 billion) in 2018. There was a sharp decline in the import of these products in the first years after the FTA’s entry into force (falling as low as €13 billion in 2013), however since 2015 there has been a resurgence and imports of machinery and appliances are now at a very similar level as they were in 2010 (i.e. €18 billion). Imports of transport equipment grew by 16% and made up a quarter (€12.7 billion) of EU imports in 2018. Again, this increase was triggered by a substantial rise in imports of motor vehicles (including parts) (+165%) over the 2010-2018 period. Motor vehicles (including parts) accounted for 20% (€10.2 billion) of total EU goods imported from South Korea in 2018.

Annual comparisons show that both the EU total exports and imports from South Korea slithly decreased in 2018, compared to 2017, in line with the overall slowdown of international trade dynamics.

2.2 Trade in agricultural goods

With respect to trade in agriculture goods, EU exports to South Korea continued to grow in 2018 at 4.8%, albeit at a slower pace than in previous years and stood at €3 billion in 2018. Imports from South Korea in the agri-food sector stagnated at the record high of €201 million reached in 2017, resulting in a surplus of € 2.8 billion in 2018. Overall, EU exports have increased by 37.8% and imports have increased by 62% since 2014, the strongest growth rate in the agri-food sector among FTA partners. Main products exported by the EU are pork (24.6% of EU agricultural exports to South Korea), followed by beer, cheese, chocolate, confectionery and ice cream, spirits and liqueurs and wine.

The main impediments to expanding trade were again the following: first, approvals of EU beef (due to a Bovine Spongiform Encephalopathy (BSE)-related import ban) remained pending and have been for some Member States since 2004, and also for poultry there was no progress in revising the Korean policy of country-wide import bans in the event of an outbreak of avian influenza. Similarly, the country-wide bans of pork imposed on Belgium, Hungary and Poland due to African Swine Fever (ASF) were not lifted by South Korea. South Korea recently filed applications for beef exports to the EU, which might indicate a stronger trade orientation in the South Korean administration.

For sensitive agricultural products the EU-South Korea FTA foresees specific tariff rates quotas (TRQs). The fill rate of these import quotas applied by South Korea to goods originating in the EU decreased for 3 out of 10 product groups. Only in case of oranges the TRQ was not used in the two reference periods.

EU-South Korea FTA TRQ Fill Rates

Utilisation Rate

7/2016 to 6/2017 7/2017 to 6/2018

Milk Powder, Condensed

milk (cream) 99.9 % 100.0 %

Butter 100.0 % 99.9 %

Food Whey 98.3 % 99.0 %

Cheeses 99.9 % 99.1 %

Prepared dry milk 99.8 % 60.5 %

Natural honey 98.9 % 49.1 %

Oranges 0.0 % 0.0 %

Marling barley, malt 99.0 % 80.8 %

Supplementary feed 99.0 % 99.2 %

Dextrin 78.7 % 70.6 %

Source: South Korean authorities

2.3 Trade in Services and Foreign Direct Investment (FDI)

EU exports of services to South Korea increased from €7.4 billion in 2010 to €13.5 billion in 2017 while EU imports rose by 66% (€3.1 billion) over the same period to €7.9 billion in 2017. Although trade in services have grown in both directions, the EU has consistently held a trade surplus with South Korea that peaked at €6.3 billion in 2015. This fell to €5.6 billion of a surplus in 2017, which is greater than the 2010 balance (€2.6 billion).

Transport services account for the highest share of both EU imports (€2.4 billion) and exports (€2.9 billion) of services to South Korea. EU imports of construction services have increased significantly since the introduction of the EU-South Korea FTA, rising from €87 million in 2010 to €818 million in 2017 while other business services increased by 161% over the same period to €2.8 billion in 2017.

The largest gains in EU exports to South Korea include travel (+120%), telecommunications (+125%) and intellectual property (+189%) which account for over 40% (€5.3 billion) of total EU exports to South Korea in 2017.

As is the case with goods and services, the EU-South Korea FTA has also stimulated growth in FDI between the two partners. Latest available data shows that the stock of EU FDI in South Korea rose from €37.5 billion in 2010 to €51.3 billion in 2017, a 37% increase. The stock of South Korean FDI in the EU more than doubled, rising from €13.1 billion in 2010 to €28.3 billion in 2017.

• 3. 

  A CTIVITIES OF THE IMPLEMENTATION BODIES

The institutional provisions of the EU-South Korea FTA (Article 15) established seven Specialised Committees, seven Working Groups and an Intellectual Property (IP) and Electronics Dialogue. The annual meeting of the Trade Committee at ministerial level plays a supervisory role and ensures that the FTA operates properly. The summary below presents activities of Working Groups and Committees that took place between June 2018 and May 2019. 9

The Trade Committee met for the 8 th time on 9 April 2019 in Seoul. Both sides agreed that

the FTA is a success that has significantly increased bilateral trade and investment even though some concerns on implementation persist, including the long delayed market access for EU beef and the non-ratification of four fundamental ILO Conventions. Furthermore, the deteriorating business climate in South Korea remains a challenge for businesses to fully benefit from the FTA.

While recognising some positive developments related to the beef issue, the EU highlighted that the market remained closed and South Korea agreed to rapidly complete the technical steps for the most advanced applicants. On TSD, the EU recognized that some efforts have been made by the South Korean government but progress has been insufficient for South Korea to comply with its commitments. With regard to the car sector, both sides endorsed the finalisation of the administrative amendment of the car annexes under the written procedure. The Commissioner also raised the concerns that the car sector has highlighted regarding the difficult business climate. The EU also raised the well-known Intelletual Property Rights related issues (i.e. public performance rights and geographical indications) while South Korea repeated its request for market access for Samgyetang (chicken ginseng soup) and asked for a solution for the long-standing surimi issue. South Korea was also concerned about the adverse effect of the EU steel safeguards measures.

The 6th meeting of the Working Group on Geographical Indications was held in Brussels, on 30 May 2018. The extension of the initial list of EU Geographical indications remains a significant irritant with respect to the implementation of the FTA provisions on protection of intellectual property. With the recent adoption of the rules of procedures of the said Working Group, the EU now expects Korea to examine the 2014 EU request to add 46 GIs to the list of EU GIs protected under the FTA.

On 22 November 2018, the Customs Committee met in Brussels. It mostly addressed issues related to rules of origin, in particular origin verification procedures and issues related to the approved exporter system. The EU also raised duty relief on goods re-entered after repair and both sides discussed mutual administrative assistance, including the exchange of information points and cooperation on specific cases in which the level of co-operation from South Korea was considered by the EU side as unsatisfactory.

9 The 2018 edition of the Implementation report covered activities over 2017-mid 2018.

On 7 November 2018, the 4 th EU-South Korea Dialogue on Electronics took place in Brussels. A wide range of issues was discussed, including the following: the implementation and enlargement of the scope of Annex 2-B of the agreement to include radio equipment testing; the review of Appendix 2-B-3 of the agreement to simplify conformity assessment procedures; a future cooperation on the development of new standards; modifications on the EU Eco-design Regulation for Electronic Display asked by South Korea. Discussions were also held on EU energy labelling requirements for electronic displays, light source and household refrigerating appliances.

The Working Group on Motor Vehicles and Parts met in Brussels on 4 December 2018 and addressed environmental issues, technical standards, harmonization, convergence and market access issues. Compared to previous years, the Working Group also discussed different issues related to broader cooperation on trade policy, including international developments, the state of play of bilateral trade flows and investments and the business climate in the sector. During the April 2019 Trade Committee the EU and South Korea concluded to endorse the administrative amendment of Annex 2-C in order to be implemented by September 2019. On the regulatory side, the parties agreed to share information on CO2 emission regulations for passenger cars, heavy-duty vehicles and “Emission Related Components” certification procedures. The EU agreed to provide additional information on the entry into force of the EU “Whole Type Approval”. Market access issues discussed included, inter alia, truck-tractors, self-certification and marking of car parts, vehicle width limit, homologation certificates and producers responsibility for end of life vehicles.

The 7 th meeting of the Working Group on Pharmaceuticals and Medical Devices took

place on 5 December 2018. In the area of medical devices, the parties exchanged information on i.a. the current draft of the Unique Device Identifier (UDI) rules in South Korea and on the objective and future implementation of the Integrated Medical Device Information System (IMDIS) in South Korea. Concerning pharmaceuticals, both sides discussed i.a. the draft amended premium pricing policy published on 7 November 2018 by South Korea that amends the conditions for rewarding innovations in new pharmaceutical products in South Korea.

The Working Group on Chemicals organised a videoconference on 5 March 2019 and engaged in useful exchanges on regulatory developments of interest to both sides. The EU notably requested additional information and clarifications on i.a. the amendments to the South Korean REACH legislation implemented in January 2019 and on the requirements for treated articles placed on the South Korean market under the South Korean Biocidal Product Regulation.

The Committee on SPS Measures met in Brussels on 19 September 2018. The Parties discussed pending applications for import of EU and South Korean beef, the recognition of regionalisation measures for avian influenza and African swine fever, and policies related to certification. South Korea also requested to discuss the pending application for export of chicken-ginseng soup and dairy products to the EU. The meeting was followed by a one-day seminar to discuss regionalisation policies in the EU and South Korea to control outbreaks of highly pathogenic avian influenza.

The 7 th EU-South Korea Trade in Goods Committee was held on 6 th December 2018 in

Brussels. A number of sectoral issues wre discussed including the preparation of the next Trade Committee foreseen for April 2019. The meeting brought many clarifications on the cosmetics sector legislation in South Korea and the F-gas quota system in the EU. While no breakthrough was registered at the meeting, enhanced cooperation on electronics with the view to enlarge the annex to radio equipment was agreed. EU concerns were raised with regard to an increased support to shipbuilding by the South Korean government and the EU requested more transparency and a dedicated dialogue. The implementation of the competition chapter was also raised. Finally, both sides discussed the preparation of the Trade Committee.

The 5 th and the 6 th meetings of the Trade Remedy Cooperation Working Group were held on 7 December 2018 in Brussels and 20 May 2019 in Seoul, respectively. The latter meeting took place back-to-back with the International KTC Seoul Forum on Trade Remedies in which the EU side participated. During the 5 th th and the 6 meetings of the Trade Remedy Cooperation Working Group, the two sides updated each other on latest developments in domestic trade remedy laws, policies and practice. The EU side notably debriefed South Korea on the entry into force and implementation of the two latest amendments to the EU Trade Remedy basic legislation, namely the ‘new anti-dumping methodology’ and the ‘modernisation of trade defence instruments’, which had entered into force in December 2017

and June 2018 respectively 10 . South Korea expressed concerns with respect to the EU steel safeguard measures 11 and the EU briefed South Korea on the upcoming review investigation of the steel safeguard measures. The EU expressed concerns with the respect of general fairness and transparency principles in a recent investigation conducted by South Korea against Italian exports of stainless steel bars. The EU invited South Korea to revise its policy and methodology accordingly. The two sides also 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 Brussels on 26 November 2018. The Parties provided information on recent legislative developments, discussed market access issues and potential irregularities raised by European and South Korean industries. Both sides are committed to ensure that the FTA is implemented and any irregularity in the effective public procurement market access is corrected. Among other issues the Parties exchanged views on cooperation on SME policy (that may require a follow up with a recently established Ministry for SMEs in South Korea) and the EU inquired about a possible interest from the South Korean side to integrate a machine translation tool for tender notices in its e-procurement portal.

The 6 th EU-South Korea Cultural Cooperation Committee convened on 13 May 2019 in

Seoul, followed by a 2 day study visit to various South Korean cultural institutions. The topics discussed included performing arts, culture and cities, new developments in cultural and creative sectors- namely cultural entrepreneurship, the cultural content industry and the connections between arts, science and technology- architecture and audio-visual coproductions.

• 4. 

  I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

  DEVELOPMENT

The Commission continued to express its serious concerns and stepped-up its messages vis-à- vis the South Korean government regarding FTA commitments related to international (ILO) standards and agreements. These concerns have been raised in the framework of regular FTA

10 OJ L 338/1 2017 and OJ L148 2018

11 OJ L31 of 1.2.2019

committees including at the 6 th meeting of the TSD committee of 13 July 2018 12 . Also, civil society has again raised these concerns in the context of regular work of the Domestic Advisory Groups and the Civil Society Forum under the FTA.

Due to insufficient progress on the envisaged steps presented by Korea at the 6 th Committee on Trade and Sustainable Development, and in line with the more assertive approach to enforcement of commitments as outlined in the TSD 15-point action plan of February 2018, on 17 December 2018 the Commission formally requested the government request

consultations under Article 13.14 of the FTA to seek a mutually satisfactory solution 13 .

In that context, the EU raised concerns with regard to Korea’s issues with respecting in law and practice of the core International Labour Organisation (ILO) principles of the freedom of association and right to collective bargaining, and with regard to the insufficient efforts by Korea towards the ratification of four outstanding fundamental ILO Conventions.

Government consultations are a first step of dispute settlement proceedings. This is the first dispute settlement initiated by the EU under bilateral trade agreement. The EU held government consultations with Korea on 21 January 2019. Korean government has engaged cooperatively however the consultations however these did not lead to any satisfactory solution and the progress made until now by Korea has been insufficient. In the follow-up to the government consultations, the Commission raised the insufficient progress on labour commitments at meetings with Korean trade and labour ministers at the occasion of 8 th Trade Committee on 9 April 2019 in Seoul.

Since the outcome of the efforts by the Korean government remain uncertain, on 4 July 2019,

the EU requested the establishment of a panel 14 (the 2 nd stage of the arbitration procedure

under the FTA) to examine the matters that have not been satisfactory addressed through government consultations. During the panel proceedings, the Commission will remain open to continue looking for a mutually agreed solution to the dispute. If Korea does not comply with its commitments in a timely manner, the panel of experts will deliver a public report with recommendations on achieving compliance. The implementation of the recommendations of the panel report will then be monitored by the Trade and Sustainable Development Committee created under the terms of the EU-Korea trade agreement.

• 5. 

  S PECIFIC AREAS SUBJECT TO MONITORING

In line with Article 14 of the protocol on Rules of Origin, South Korea’s imports of key car parts and electronics from the most important suppliers (outside the EU) have been monitored. China and Japan remain the largest car parts suppliers. Japan still pays full duty on car parts while China benefits from tariff reduction (within the South Korea-China agreement most car parts will be liberalised in 10 or 15 years).

12 http://trade.ec.europa.eu/doclib/docs/2018/july/tradoc_157105.PDF

13 http://trade.ec.europa.eu/doclib/docs/2018/december/tradoc_157586.pdf

14 http://trade.ec.europa.eu/doclib/docs/2019/july/tradoc_157992.pdf

2018 total

import 2018 main import sourcing (outside the EU) and evolution of imports

1st 2017 2018 2nd 2017 2018

Electronic sector

Parts and accessories for pictures and

sound reproducing and recording HS 8522 apparatus $28.097 China $20.894 $18.232 Thailand $12.690 $3.827

HS 8527 Reception apparatus $169.174 China $89.383 $73.744 Malaysia $10.326 $50.898

HS 8529 Parts for reception apparatus $2.244.550 China $699.436 $1.023.065 Vietnam $381.769 $757.471

Core car parts

Spark-ignition reciprocating or rotary HS 8407 internal combustion piston engine $463.651 Japan $65.950 $226.852 USA $70.722 $147.791

HS 8408 Diesel or semi-diesel engines $882.462 Japan $367.842 $181.951 China $53.887 $50.773

HS 8409 Parts for engines of 8407 or 8408 $1.132.947 China $190.986 $220.214 Japan $244.395 $179.184

Parts and accessories for motor

HS 8708 vehicles of headings 8701 to 8705 $3.877.938 China $1.108.612 $1.136.596 Japan $788.173 $736.982

Source: KITA

In conclusion, the import pattern has not fundamentally changed since the EU-South Korea FTA was signed and there was no significant increase in imports of car components and key electronics from the largest suppliers to South Korea in 2018 compared to 2017. Based on these trade statistics, it is not possible to establish a link between the allowance of duty

drawback and the increase in EU imports of cars from South Korea.

• 6. 

  P ROGRESS , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Progress on the implementation of the Trade and Sustainable Development chapter of the FTA by South Korea has not been sufficient with regard to the ratification of the four pending ILO conventions and protection of labour rights. Therefore, the Commission stepped up the engagement with South Korea and launched dispute settlement proceedings under the FTA in

order to address these issues.

Access of EU beef to the South Korean market, which has been closed to all EU imports since January 2001, remains another EU key concern. By mid-2019, South Korea carried out audits in two Member States (Denmark and The Netherlands) which depending on the conclusions of the auditors, open the door to beef from these two Member States on the South Korean market. However, the acceptance of the principle of regionalisation for animal diseases by South Korea remains an important topic in the sanitary and phyto-sanitary area in particular

for the exports of pig meat and poultry products.

In the area of Intellectual Property, South Korea still needs to establish an effective remuneration system for public performance rights. Lack of progress in this area remains a concern to the EU. The revised Presidential Decree, which entered into force in August 2018 did not sufficiently address the core issues of exempting the majority of retail venues from paying remunerations and the low level of fees. These issues will be discussed again at the next EU-South Korea Intellectual Property Dialogue under the FTA in autumn 2019. The extension of the geographical indications’ (GI) list protected by the FTA is also still pending. Recent adoption of the Rules of Procedure of the EU-South Korea GIs Working Group should ease the way towards adding further EU and South Korean geographical indications to the

Annex of the FTA.

Improvements in the area of customs procedures could contribute to increase the preference utilisation rates, and further facilitate the participation of small and medium sized enterprises

(SMEs).

• 7. 

  C ONCLUSIONS AND OUTLOOK

The EU-South Korea FTA offers a sound institutional framework for bilateral trade between the EU and South Korea despite the fact that some difficulties persist as outlined in section 6. The ex post evaluation study of the FTA published by the EU Commission in March 2019 concluded that in the vast majority of areas the implementation works well, supporting economic development on both sides.

Both parties continue working on the implementation of the EU-South Korea FTA in order to bring further benefits to their businesses and consumers. In this respect, the specialised committees and working groups established under the EU-South Korea FTA serve as a forum to discuss and seek solutions to the implementation and market access issues, including regulatory developments on both sides.

• 8. 

  S TATISTICS

  Total merchandise trade EU28 with South Korea (mio €) Growth

South Korea 2017 2018 annual

mio € %

Imports 51.734 51.089 -645 -1,2%

Exports 50.132 49.250 -882 -1,8%

Balance -1.601 -1.839 -238

Total trade 101.866 100.339 -1.527 -1,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with South Korea (mio €)

Growth

South Korea 2017 2018 annual

mio € %

Imports 203 201 -2 -0,9%

Exports 2.889 3.028 139 4,8%

Balance 2.686 2.827 141

Total trade 3.092 3.229 137 4,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with South Korea (mio €)

Growth

South Korea 2017 2018 annual

mio € %

EU28 imports 51.531 50.888 -643 -1,2%

EU28 exports 47.244 46.222 -1.021 -2,2%

Balance -4.287 -4.666 -378

Total trade 98.774 97.110 -1.664 -1,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with South Korea (mio €)

Growth

South Korea 2016 2017 annual

mio € %

Imports 7.215 7.939 724 10,0%

Exports 12.608 13.520 912 7,2%

Balance 5.393 5.581 188

Total trade 19.823 21.459 1.637 8,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with South Korea (mio €)

2013 2014 2015 2016 2017

Imports 5.653 6.310 6.917 7.215 7.939

Exports 10.662 11.761 13.247 12.608 13.520

Balance 5.010 5.451 6.330 5.393 5.581

Total trade 16.315 18.071 20.164 19.823 21.459

Source Trade G2

Statistics/ISDB from Eurostat

BOP statistics

FDI EU28 with South Korea (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 15.517 17.922 18.571 24.308 28.288

Outward 32.105 42.976 42.520 47.013 51.286

FDI Flows

Inward 1.868 4.286 2.068 1.809 2.245

Outward 868 7.731 -5.195 3.244 4.978

Source Trade G2

Statistics/ISDB from Eurostat

BOP statistics

ANNUAL REPORT ON THE IMPLEMENTATION OF THE EU-

COLOMBIA/ECUADOR/PERU TRADE AGREEMENT

• 1. 

  I NTRODUCTION

2018 marked the fifth full 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 15 , 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 16 .

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 six years of provisional application in the case of Peru and Colombia, and almost three years in the case of Ecuador, remain positive, although bilateral trade with Colombia and Peru in 2018 underwent a slight decrease after the rebound of 2017. The Agreement offers tariff-free access for virtually all industrial and fishery products from the three Andean 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 countries’ exports of agri-food products. 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 2013. Ecuador joined the institutions in 2017. The institutional structure of the Agreement is common and the Trade Committee and the Sub-committees take place in the presence of all Parties, i.e. between the EU and the three Andean partner countries.

In December 2018, the annual meetings of the Trade Committee and eight Sub-committees met in Quito (Ecuador) (see below).

In accordance with Article 13 of Regulation (EU) No 19/2013 i 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 17

15 OJ L 354, 21.12.2012, p. 3.

16 Trade Agreement with Colombia and Peru ( http://www.consilium.europa.eu/en/docuents href="http://www.consilium.europa.eu/en/docuents-publications/agreements-conventions/agreement/?aid=2011057">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 ).

17 OJ L 17, 19.1.2013, p. 1.

(‘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. 

  E VOLUTION OF TRADE

2.1 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.

2.1.1 Overall evolution

Colombia

In 2018, the EU has gone from Colombia´s second to third trading partner (14%), after the US (26%) and China (16%). In fact, bilateral trade between the EU and Colombia decreased by 4%. Colombian exports to the EU saw a 9% decline amidst falling global prices of coffee, a key export product. Compared to 2012 (year before the application of the Agreement), bilateral trade decreased by 22%, in line with the 22% decrease of Colombia’s total trade with the rest of the world over the same period.

In 2018, bilateral trade amounted to €11 billion, compared to €11.5 billion in 2017. While historically, Colombia ran a trade surplus with the EU, this trend reversed since 2017 and the EU now posts a trade surplus of €925 million.

EU exports to Colombia increased by 1% in 2018 to €6 billion. The headings that recorded the largest increases were pharmaceutical products, vehicles, electrical machinery and base metals while exports of machinery products and aircrafts suffered the greatest declines.

EU imports from Colombia amounted to €5.1 billion in 2018, down from €5.6 billion in 2017, representing a 9% decrease. It is noteworthy that for the first time agricultural products represented the same share (43%) of total exports from Colombia as minerals. Overall, the export basket of Colombia to the EU is more diversified than Colombia's trade with China and the US, more dominated by coal and petroleum products.

EU-Colombia trade in non-agricultural products (NAMA)

EU exports to Colombia of NAMA products amounted to €5.6 billion in 2018, increasing by 1%. The most important categories in 2018 were:

 Machinery and mechanical appliances (HS 84) represented the largest share of EU exports

at 16%, amounting to €978 million despite suffering the largest drop in absolute terms,

with a decrease of 17% compared to 2017.

 Pharmaceutical products (HS 30), totalling €813 million, or 14% of EU exports, increased

by 12%;

 Motor vehicles (HS87), registered a 17% increase up to €556 million, now representing

9% of total EU exports.

EU imports from Colombia of NAMA products amounted to €2.9 billion in 2018, decreasing by 9% compared to the previous year. The main categories in 2018 were:

 Minerals (HS 27), €2.1 billion, representing 43% of total EU imports from Colombia,

versus 46% in 2017;

 Precious stones and minerals (mainly emeralds and gold) (HS 71); increased by 171%

compared to 2017, now representing €156 million, or 5% of total imports,

 Base metals (HS 72 to 83) (of which mainly iron and steel) amounted to €99 million,

representing 2% of EU imports, an increase of 3% compared to 2017.

Peru

The EU is Peru’s third largest trading partner (14% of total Peruvian trade), after China (24%) and the US (19%). In 2018, bilateral trade with the EU amounted €9.9 billion, decreasing by 3% compared to 2017, while Peru’s overall trade with the rest of the world increased by 17% over the same period. The EU’s trade deficit increased from €2.1 billion to €2.4 billion.

EU exports to Peru amounted to €3.7 billion, an 8% decrease when compared to 2017. 93% of EU exports are industrial products, mostly machinery and appliances, chemical products and transport equipment.

EU imports from Peru remained stable when compared to 2017 (€6.2 billion), Peru increased its exports to the rest of the world by 23%. Key export items are ores, slag and ashes, minerals, fruits, coffee and fishery products. The share of agricultural products in imports from Peru into the EU continued to increase.

EU-Peru trade in non-agricultural products (NAMA)

EU exports to Peru of non-agricultural products amounted to €3.47 billion in 2018, a 9% decrease (from €3.8 billion in 2017). The most important categories in 2018 were:

 Machinery, mechanical appliances (HS 84), amounting to €898 million representing

24% of total EU exports to Peru, with a 7% decrease compared to 2017;

 Electrical machinery and equipment (HS 85), or €327 million, accounting for 9% of

total EU exports to Peru, and with a 18% contraction compared to 2017;

 Vehicles and parts (HS 80), worth €300 million or 8% of EU exports, decreasing by

1% compared to 2017;

 Pharmaceutical products (HS30), amounting to €198 million, or 5% of EU exports,

decreasing by -3% compared to 2017.

EU imports from Peru of non-agricultural products also decreased by 4% amounting to €3.87 billion in 2018 (from €4.02 billion the previous year). The main categories in 2018 were:

 Ores (HS 26), amounting to €1.7 billion representing 27% of total EU imports from

Peru, versus 30% in 2017, with a 10% decrease compared to 2017;

 Mineral fuels (HS27) mainly natural gas, worth €496 million, representing 8% of EU

imports, a 26% decrease of 26% compared to 2017;

 Fish and crustaceans (HS 03), amounting to €308 million or 5% of EU imports, with a

strong 18% increase compared to 2017.

Ecuador

In 2018, the EU remained Ecuador´s second largest trading partner (14% of total Ecuador trade) after the US (27%) and ahead of China (12%). In 2018, bilateral trade amounted to €5.4 billion, a 3% increase compared to €5.2 billion in 2017, a much slower rate compared to the remarkable 20% growth registered in 2017, the first year of application of the Agreement. Ecuador’s trade with the rest of the world increased by 12% in 2018, compared to 16% in 2017. Several factors may explain these figures: i) a strong dollar reducing the competitiveness of Ecuadorian products in international markets; ii) a slowdown in Ecuador´s domestic consumption; and iii) a trade diversion towards Central American countries and China. While the EU has historically maintained a trade deficit with Ecuador, this deficit is getting progressively reduced.

EU exports to Ecuador increased by 6% year-on-year (2017: €2.2 billion; 2018: €2.3 billion) and concentrated on agricultural products and fishery products.

EU imports from Ecuador grew by 1% year-on-year (2017: €3 billion; 2018: €3 billion). Key categories were machinery and appliances, chemical products and mineral products.

EU-Ecuador trade in non-agricultural products (NAMA)

EU exports to Ecuador of NAMA products increased by 5% amounting €2.2 billion in 2018. The most important categories in 2018 were:

 Machinery and mechanical appliances (HS84), worth €425 million and accounting for

18% of total EU exports to Ecuador, shrunk by 3% compared to 2017;

 Mineral fuels (HS 27), amounting to €350 million, or 15% of total EU exports,

contracted by 11%;

 Vehicles and parts (HS87), of a value of €171 million, or 7% of EU exports, grew by

70%; Railways and trams (HS86), of €15 million, registering a 730% increase, as a consequence of works on the public transportation system (the metro of Quito, the

tramway of Cuenca, and the cableway in Guayaquil).

 Pharmaceutical products (HS 30), €166 million, or 7% of EU exports, grew by 6%;

 Fishery products (HS03), worth €98 million accounting for 4% of EU total exports to

Ecuador.

EU imports of NAMA products from Ecuador decreased by 2% amounting to €1.42 billion in 2018. The main categories in 2018 were:

 Fish and crustaceans (HS 03), amounted to €657 million, and accounted for 22% of

total EU imports from Ecuador, shrunk by 3%;

 Preparation of fish (tuna) (HS 16) worth €656 million, or 22% of total EU imports,

shrunk by 2%;

2.1.2 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 7% in 2018, and were dominated by:

 Beverages and spirits (HS22) at €91.4 million, or 21% of EU exports of agricultural

products to Colombia;

 Preparations of cereals, flour, starch (HS19) and preparation of vegetables, fruits, nuts or

plants (HS20) account for 1% of agricultural exports each.

 Animal and vegetable fats and oils (HS15) increased by 5%, representing 1% of EU

agricultural exports.

EU imports of agricultural products from Colombia amounted to €2.2 billion, decreasing by 9% from 2017 to 2018. The most important categories in 2018 were:

 Fruits (HS08), worth €1 billion, accounting for 20% of total EU imports from Ecuador,

down by 5% when compared to 2017. Bananas represented 83% of all fruits exported, followed by avocados with 6%. From 2017 to 2018, there was a strong increase in exports

of limes (78%), guavas, mangoes and mangosteens (31%) and oranges (19%);

 Coffee (HS09), €491 million, decreased by 20%, represents 10% of EU imports;

 Crude palm oil (HS151110) and crude palm kernel oil decreased by 15% and 5%

respectively but still accounted for 5% and 1% of imports.

Total EU imports of agricultural products from Colombia have increased by 45% since 2012, and now account for 43% of Colombian exports to the EU, versus 18% in 2012.

Use of Tariff-rate quotas (TRQs)

The Agreement provides for Tariff Rate Quotas (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’s use of the TRQ for cane sugar and chemically pure sucrose decreased to 64.8%. The TRQ for Rum was used for the first time in 2018. Other TRQs are hardly utilised or not utilised at all.

Rate of utilisation of EU TRQs by Colombia

2013 2014 2015 2016 2017 2018 Cane sugar and chemically pure sucrose 88.4% 85.7% 93.8% 96.2% 94.8% 64.8% Sugar confectionery 1.4% 1.3% 1.2% 1.5% 1.5% 1.3% Rum in containers holding > 2 litres 0% 0% 0% 0% 0% 58.8% Source: TAXUD, Surveillance Database

The EU is fully using the TRQs established for mushrooms, milk and cream in powder and sweetcorn, to a somewhat lesser extent the TRQs on preparations for infant use (almost fully used) and ice cream, which experienced a substantial increase through a better implementation of the Agreement. The TRQ for yogurt has experienced a sharp decrease after two years being almost fully used, while the one for cheese has increased although it remains low (13.4%). The EU barely uses its TRQ on sugar confectionery (less than 5% in 2018).

Rate of utilisation of Colombia TRQs by the EU

2013 2014 2015 2016 2017 2018

Mushrooms 1.6% 5% 100% 100% 100% 100%

Milk and cream in powder 0% 34.9% 100% 100% 82.5% 100%

Whey 57.6% 50% 92.9% No more TRQ

Preparations for infant use 40.4% 67.5% 99.1% 100% 100% 99%

Yogurt 0% 0.5% 0.8% 100% 99% 17.4%

Sweetcorn 0.4% 54.2% 100% 100% 100% 100%

Ice cream 5.3% 13.4% 7.4% 25.9% 45.7% 87%

Cheese 9% 8% 8.2% 7.9% 3.1% 13.4%

Sugar confectionary 1.8% 3.4% 3.1% 3.8% 3.9% 4.7%

Source: DIAN (Dirección de Impuestos y Aduanas nacionales)

Peru

EU exports to Peru of agricultural products in 2018 increased by 1% compared to 2017. The most important categories in 2018 were:

 Beverages and spirits (HS22), accounting for 23% of total EU exports of agricultural

products to Peru have decreased by -6% compared to 2017;

 Preparations of vegetables (HS20), representing 11% of total EU exports of agricultural

products to Peru decreased by -8% compared to 2017;

 Dairy products (HS04), posting a strong 26% increase compared to 2017 thanks to the

introduction of a harmonized import certificate in 2017. Dairy exports represent 11% of

total EU exports of agricultural products to Peru.

EU imports of agricultural products from Peru increased by 6% from 2017 to 2018. The most important categories in 2018 were:

 Fruits (HS08), accounted for 52% of total EU imports of Peruvian agricultural products ,

up 17% compared to 2017; avocados accounted for 32% of all fruits exported, a remained equal compared to 2017, followed by fresh grapes representing 20% (+68%), mangos

14% (+10%), fresh blackberries 12% (+59%) and fresh bananas 8% (+10%);

 Coffee (HS09) represents 16% of total EU imports of agriculture products from Peru

decreasing by 9.6% from 2017.

 Edible vegetables which account for 9% of total of agriculture products from Peru raised

by 6% between 2017 and 2018

Total EU imports of agricultural products from Peru increased by 49% since 2012, and now account for 37% of Peruvian exports to the EU, versus 24% in 2012.

Use of Tariff-rate quotas

Sweetcorn is the only product under TRQ where Peru has reached almost 100% utilisation rate in 2018, maintaining a positive trend since the date of application of the Agreement. Quota utilisation of both cane sugar and garlic has steeply dropped in 2018. Peru is starting to take advantage of the TRQ on maize (corn). Other TRQs have very low utilisation rate. The quotas for the other 11 products have not been utilised at all since the date of application of the Agreement.

Rate of utilisation of EU TRQs by Peru

2013 2014 2015 2016 2017 2018 Cane sugar 100% 100% 3,5% 99,9% 100% 9,2% Sweetcorn 21% 76% 83,2% 87,3% 95,7% 97,7% Garlic 0% 0% 2,4% 53,8% 54,2% 0% Rum 0% 0% 0,0% 7% 0% 5,7% Maize (Corn) 0,7% 2,9% 1,8% 6,1% 13,1% 15,5% Sugar confectionery 0,02% 0,01% 0,2% 0,1% 0,3% 0,02% Rice 0% 0% 0% 0% 0% 0,04% 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. Good progress for rum. Other TRQs are barely used.

Rate of utilisation of Peru TRQs by the EU

2013 2014 2015 2016 2017 2018 Butter 0% 0% 96% 100% 82% 100% Cheese 0% 0% 0% 4,3% 5,4% 5% Ice cream 59% 89,6% 98,5% 95,6% 94,2% 100% Milk powder 0% 4,1% 99,7% 100% 100% 100% Milk for babies 0% 0% 0% 29,9% 0,0% 0% Sugar confectionery 0% 0% 0,1% 2,2% 3,4% 2% Sugar 0% 0% 0% 0% 0% 0% Rum 4% 0% 3,5% 5,8% 4,2% 27% Source: SUNAT (Superintendencia Nacional de Aduanas y de Administracion Tributaria)

Ecuador

EU exports of agricultural products to Ecuador amounted to €157 million in 2018, a 29% increase compared to 2017, although the SPS chapter has not been fully implemented and some obstacles still persist. Agricultural products represented 7% of total EU exports to Ecuador. The most important categories in 2018 were:

 Beverages and spirits (HS22) amounting €36 million, growing by 102%, representing

23% of total EU agricultural exports, but 2% of total EU exports;

 Miscellaneous edible preparations (HS21), worth €25 million, a 29% increase

compared to 2017, and 16% of EU agricultural exports;

 Residues and waste from food industry (HS23) increased by 23%, representing 11% of

EU agricultural exports.

EU imports of agricultural products from Ecuador increased by 2% in 2018, reaching a total of €1.61 billion. EU continues to be Ecuador´s prime market for non-oil exports. Agricultural products represented 53% of total EU imports from Ecuador. The most important categories in 2018 were:

 Fruits (HS08), accounting for €1 billion or 64% of total EU imports of AMA (a 9%

increase compared to 2017) and 34% of total EU imports from Ecuador. Bananas accounted for 94% of fruit imports (+10% in 2018 compared to 2017). Fresh tamarinds grew by 19%, fresh plantains and dried bananas by 10% and 15% respectively, while

fresh pineapples and frozen fruit both decreased by 17%.

 Live trees and other plants, mainly fresh cut flowers (HS06) accounting for 13% of total

AMA imports, increased by 11% compared to 2017.

 Cocoa and cocoa preparations (HS18), accounting for 10% of EU agricultural imports

(and 5% of total Ecuador’s exports to the EU), shrunk by 13% compared to 2017.

Use of Tariff Rate Quotas (TRQs)

Ecuador´s use of the TRQs is progressively increasing in some categories of products.

Rate of utilization of EU TRQs by Ecuador

2017 2018

Sweet corn, uncooked, or cooked 3.3% 9.5%

Sweet corn provisionally preserved - 0.7%

Rice 0.01% 0.3%

Raw cane sugar not containing added flavouring or 4.3% 8.3%

colouring

Sugar and sugar products 1.6% 0.6%

Source: TAXUD, Surveillance Database

In 2018, the EU use of TRQs established for dairy products (powder milk, butter milk serum, whey) has almost tripled compared to the first year of FTA implementation. Other products where significant increases were registered are processed sweet corn and pork products (10 and 14% increase respectively).

A complex TRQ management system set out by the Ecuadorian authorities together with a slow process of registration of sanitary and phytosanitary conditions of Member States and EU establishments may explain the low TRQ use by the EU.

Rate of utilization of Ecuador TRQs by the EU 2017 2018

Preparations for animal feeding 6.1% 8.1%

Preparations for animal feeding 0% 2.7%

Bovine guts 0% 0%

Dairy products: Powder milk, butter milk serum,

whey 12.5% 35.7%

Dairy products: Evaporated milk, condensed milk 1.0% 3.0%

Diary products: Yoghourt, cheeses: grated or 2.7% 19.0% powdered, melted, others

Dairy products: Blue-veined cheese, mature cheese 3.9% 7.0%

Fresh sweet corn: Sweet corn, fresh, refrigerated

Processed sweet corn: Sweet corn: frozen, canned 21.9% 32.8%

Swine products: cured ham, bellies (streaky) 5.7% 18.9% sausages and similar meat products

Frozen potatoes 0% 1.9%

Confectionary product (high sugar content): Juices, 0.9% 0% chocolate, coffee, tea and others

Source: Ministry of Agriculture and Livestock

Preference Utilization Rate (PUR)

In the context of the Sub-committee on Market Access, the Parties agreed in 2015 to exchange data on PUR on an annual basis. During the annual meeting that took place in December 2018 in Quito, the EU stressed the need to have reliable data to get a better overview of the effects of the Agreement and to explore means to assist economic operators, in particular SMEs, to make better use of the opportunities.

2.2 Trade in Services and development of investment

2.2.1 Trade in Services

Colombia

Bilateral trade in services between the EU and Colombia increased by 22% in 2017 compared to 2016, totalling €5.4 billion. Both EU exports and Colombian exports increased during this period of time by 26% and 13% respectively.

According to Colombian statistics (DANE), the EU’s share in Colombia’s total trade in services represented 16% in 2018. Key EU exports of services are travel, IT and passenger air transport.

Peru

In 2017, EU-Peru bilateral trade in services amounted to €3 billion. Both EU exports (€1.9 billion) and Peruvian exports (€1.1 billion) increased year-on-year by 21% and 13% respectively. Balance remains positive for the EU.

Ecuador

In 2017, bilateral trade in services between the EU and Ecuador increased by 11% year-onyear to amount to €1.6 billion. EU exports amounted to €1 billion, increasing by 4% year-onyear. Ecuadorian exports of services (€582 million) experienced a 27% growth. The EU maintains a surplus in trade in services in 2017 although this surplus has shrunk by 15%. According to Ecuador’s Central Bank data, the EU share in Ecuador´s total trade in services represented 35%.

2.2.2 Foreign Direct investment (FDIs)

Colombia

For the fourth year in a row, the EU was the first foreign investor in Colombia, totalling €15 billion of Foreign Direct Investment (FDI) stocks in 2017. According to Colombian statistics, EU FDI accounted for 39% of the total FDI inflows to Colombia in 2018. Colombian FDI stocks in the EU increased by 33% since 2016, totalling €4.6 billion in 2017, and according to Colombian statistics, 31% of its outward flows went to the EU in 2018.

Peru

The EU is according to Peruvian statistics the first foreign investor in Peru. EU FDI stocks in Peru slightly decreased (-1%) between 2016 and 2017, totalling €16.6 billion in 2017. Between 2013 and 2014 total EU FDI stocks in Peru increased by 74%.

Peru’s FDI stocks in the EU increased by 21% compared to 2016 totalling €3.4 billion in 2017.

Ecuador

In 2017, EU FDI stocks have remained constant at €5.12 billion compared to 2016. According to Ecuador´s Central Bank statistics, in 2017, the EU was the first foreign investor, accounting for 32% of total FDI inflows into Ecuador.

3 A CTIVITIES OF THE IMPLEMENTATION BODIES

The fifth meeting of the Trade Committee took place on 13 and 14 December 2018 in Quito (Ecuador). It was preceded between 29 November and 12 December 2018 by meetings of all 8 Sub-committees under the Agreement.

Trade Committee

The EU and Colombia signed a Decision to include nine new Colombian geographic indications (GIs) to the Annex of the Trade Agreement . This is the first time since the provisional application of the Agreement.

The Trade Committee was able to take stock of progress achieved in the eight Subcommittees. The EU reiterated some of its main concerns, notably: with Colombia, the imposition of anti-dumping duties against frozen potatoes from Belgium, Germany and the Netherlands, the de facto lack of access to sub-central entities despite the signature of the Decision of the Trade Committee in 2017, the backtracking on truck scrappage policy with the six-month extension of its elimination, and discriminatory measures on alcoholic beverages (beers and spirits); with Peru, the continued discrimination of imported spirits in Peru, the lack of enforcement for EU GIs and cumbersome procedures to facilitate imports of medical devices and medicines from the EU; with Ecuador, the discriminatory treatment for imported alcoholic beverages, and trade-restrictive management of tariff-rate quotas (TRQs).

The EU also expressed concerns on slow progress on SPS matters with the three countries, notably on the approval of harmonised procedures (certificates and prelisting) or long delays or deviations from international standards attributed to Community of Andean Nations legislation and procedures. The EU called specifically upon Colombia to progress or lift trade restrictions imposed on Belgium over outbreaks of African Swine Fever in wild boars.

The EU called for more constructive engagement from the three Andean countries to change their provisions defining direct transport to allow for the splitting of consignments for products transiting a third country.

Colombia, Peru and Ecuador raised concerns about the potential impact of some EU SPS measures on their exports of agricultural products. They also showed interest to examine in 2019 the improvement of tariff liberalisation for bananas pursuant to the clause in the agreement. They expressed concerns about the recent increase of the autonomous TRQs for tuna and shrimps, which they consider to erode their preferences. Colombia and Ecuador conveyed their preoccupations about EU legislative activities that they consider may affect their exports of palm oil to the EU.

The EU gave an update on the state of ratification process in EU Member States of both the Agreement and the Protocol of Accession of Ecuador. Colombia 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.

Sub-Committee on Customs, Trade Facilitation and Rules of Origin

The two main issues discussed were the following:

The EU raised the update of the rule on Direct Transport with a view to allowing the splitting of consignments for originating goods transiting regional transport hubs in third countries. Unfortunately, no agreement could be reached on moving forward on this point.

For regional cumulation between the Andean countries and Central America, the parties discussed the requirement for adequate customs cooperation agreements. The two regions are in the process of finalising a region to region agreement to re-establish the agreement that existed under the Generalised System of Preference (GSP).

Sub-Committee on Government Procurement

The EU raised concerns on the interpretation by Colombia of the Decision 1/2017 of the Trade Committee adopted in November 2017 on the coverage by Colombia of some government procurement contracts at municipal level. As a result of Colombia’s interpretation of the exemption related to sub-central contracting entities with industrial and commercial character, EU companies are not granted national treatment in public procurement procedures in those contracts. This impacted the EU participation in major infrastructure projects in Colombia such as metros and hospitals and pressed Colombia to find a solution to remedy the situation and meet the legitimate EU expectations. Colombia and the EU agreed to work towards a mutually agreeable solution on this issue.

The Andean countries expressed their interest in exchanging information on the functioning of the EU public procurement platform SIMAP-TED, in order to facilitate the identification of business opportunities for Andean economic operators in the EU public procurement market.

Sub-Committee on Technical Barriers to Trade (TBT)

With regard to Peru, the EU reiterated its concerns about the lack of recognition by Peru of all Member States as having ‘strong health monitoring’ (“Alta Vigilancia Sanitaria”), as it facilitates the recognition of their certification for pharmaceutical and medical devices products to be exported to Peru.

Colombia, Ecuador and Peru expressed their concerns as regards EU legislation on endocrine disruptors. Colombia and Ecuador raised concerns about EU legislation on renewable energy that, in their view, may have a negative impact on their exports of palm oil to the EU.

Sub-Committee on Sanitary and Phytosanitary matters (SPS)

For the EU, the main offensive points were to make progress on the approval of harmonised certificates, to obtain the lifting or progress concerning trade restrictions imposed by Colombia on Belgium over outbreaks of African Swine Fever in wild boars, and ensuring that the Agreement’s provisions on communication, emergency measures and regionalization for animal diseases are respected.

The EU also pushed for progress on several market access applications, for which Colombia, Ecuador and Peru refer to SPS legislation (or procedures) at Community of Andean Nations (CAN) level to justify long delays or deviations from international standards. While respecting the role of CAN, the EU insisted that the provisions of the Agreement and international standards must be complied with.

Peru, Colombia and Ecuador reiterated their concerns on issues already raised bilaterally or multilaterally in other fora (for example, Codex, WTO SPS Committee, etc.), in particular the EU measures for maximum levels of cadmium in some cocoa-based products (e.g. chocolates), the ongoing revision of the maximum residue limits (MRLs) for some pesticides, the legislative framework on endocrine disruptors and the approval procedure for novel food.

Both sides agreed on an agenda and actions plans for the main points. Finally, the Andean countries presented several requests for technical assistance.

Agricultural Sub-Committee

The Parties exchanged information on the trade flows in agri-food trade (including the use of preferences and of tariff-rate quotas) and on the implementation of the Banana Stabilisation Mechanism.

Concerning Colombia, the EU expressed concerns on the methodology for the calculation of retail prices on alcoholic beverages, as well as about a new certification of Good Manufacturing Practices, which - if adopted - could impose additional requirements affecting EU exports. With Ecuador, the EU raised concerns about the system in place for granting import licences and the administration of tariff-rate quotas. With Peru, the EU raised concerns on the longstanding tax discrimination against spirits aggravated and invited Peru to take appropriate action.

Colombia and Ecuador expressed concerns on legislative developments in the EU that may affect their exports of palm oil as well as concerning production of cacao and coffee. They also reiterated their interest to negotiate with the EU bilateral agreements on organic production.

Sub-Committee on Intellectual Property Rights

Regarding Geographical Indications (GIs), the Parties addressed specific issues regarding ongoing investigations launched by Colombia on the usurpation of certain EU cheese GIs, as well as effective action needed on Peru’s side to protect a number of EU GIs suffering from usurpation. The request for corrections to the names of certain EU GIs already recognised in Peru was also discussed, as well as a case of alleged usurpation of an EU GI in Ecuador. Peru referred to the protection of “Pisco” in the EU in relation to registration of trademarks.

The EU informed of work concluded for the protection of nine additional Colombian GIs, and on-going work concerning the recognition of additional GIs from Colombia, Ecuador and Peru. The Parties also exchanged information concerning non-agricultural GIs in their respective markets.

Other issues discussed included the overall enforcement of intellectual property rights (IPR), including on-line and at the border, patentability issues in Colombia and Ecuador, as well as the protection of regulatory data submitted for marketing authorisations of pharmaceuticals and agro-chemicals. Copyright and related rights in the framework of revised legislation (Colombia) or implementing regulations (Ecuador) were also addressed, as well as the importance of effective protection of plant variety rights in Ecuador.

Cooperation projects were discussed in the context of activities already implemented by the IP Key Latin America Programme, and future possible activities aimed at supporting the implementation of IPR commitments in the Trade Agreement.

Market Access Sub-Committee

The Parties exchanged statistics on trade flows, including the use of preferences and tariff rates quotas.

With Colombia, the EU raised its concerns regarding the decision in November 2018 to impose anti-dumping duties against EU frozen potatoes, the extension by six months of the elimination of the truck scrappage policy, discrimination against imported beers in some departments, the implementation of the spirits law. On anti-dumping, Colombia mentioned the possibility for the EU to request an administrative review of the decision. With Ecuador, discussions focused on discriminatory treatment against imported spirits, where Ecuador indicated that it would need an additional 6 to 12-month period to remove the discrimination.

Colombia, Ecuador and Peru referred to the clause in the Agreement to examine in 2019 a possible improvement of tariff liberalisation for bananas. They also expressed concerns about the recent increase of the EU autonomous TRQs for tuna and shrimps, which they consider may erode their preferences.

• 4. 

  I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

  DEVELOPMENT

The fifth meeting of the Sub-committee on Trade and Sustainable Development (TSD) reviewed the progress made during a year of stepped-up engagement on TSD issues, which was accompanied by regular exchanges between the Parties.

The intense engagement with Peru reflects the more assertive EU stance on enforcing TSD commitments, in line with the European Commission’s 15-point action plan to improve implementation of TSD chapters. In her letter of July 2018 to Peru’s Trade Minister Rogers Valencia Commissioner Malmström expressed EU’s concerns regarding the implementation by Peru of some of the commitments undertaken in the TSD chapter. These concerns related to the right on freedom of association and collective bargaining (notably for workers in particular sectors including textiles and agriculture), the high levels of child labour and informality as well as weak capacity of labour inspection. The letter also signaled the need to sustain environmental protection levels and highlighted the insufficient civil society consultation on labour and environmental issues related to the implementation of the TSD chapter. The submission filed with the European Commission by a group of civil society organisations in October 2017 also raised some of these issues.

Following this letter, the EU and Peru engaged in more sustained contacts aiming to renew the impetus on the implementation of the TSD chapter, which included a technical mission of the Commission’s services to Lima in October 2018. Throughout the process, the Commission maintained a regular dialogue with civil society organisations, including the social partners.

The result of this engagement is reflected in the minutes of the TSD Sub-committee meeting that are available on the Commission’s website . Peru reiterated its commitment to the full implementation of the TSD chapter and listed the main policy initiatives already in place (or in preparation) to address the substantive challenges identified, while acknowledging that efforts needed to continue to ensure the commitments are met. Peru also agreed to be proactive in using the domestic mechanisms it chose to rely on to engage civil society on TSD-related issues.

Furthermore, the TSD Sub-committee meeting reviewed progress made by Colombia and Ecuador in the implementation of the TSD chapter. On labour, Colombia made advances notably through the implementation of initiatives to reduce labour informality and child labour. These included the national network of labour formalisation and the revision of the list of hazardous occupations. However, the persistence of cases of violence against trade union leaders remains concerning. In Ecuador, the right to freedom of association also continues to be a concern as well as labour informality. Both countries need to intensify efforts to strengthen labour inspection. The EU also encouraged all parties to ratify the 2014 Protocol to the ILO Forced Labour Convention.

On environment, Colombia and Ecuador continued to put in place initiatives to address deforestation and implement the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Colombia also adopted a national strategy for circular economy and a programme to support green business. The fight against the use of mercury in mining and industrial activities remains a main challenge for the country. Ecuador also made noteworthy advances by ratifying the Nagoya Protocol of the Convention of Biological Diversity in December 2017. In April 2018, the country adopted the Organic Environmental Code. The fight against illegal mining remains a concern as well as Ecuador’s compliance with its commitments on illegal, unreported and unregulated fishing.

There was good progress in the involvement of civil society in accompanying the implementation of the TSD chapter. The EU domestic advisory group (DAG) met regularly throughout 2018 to discuss issues of relevance to the TSD chapter. In Colombia, the dedicated consultative group continued to be consolidated. In Ecuador, the government organised a consultation process with civil society that led to the setting up of a dedicated consultative group for TSD issues in December 2018. Peru committed to make a more proactive use of its domestic consultative mechanisms. In line with Article 282 of the Agreement, the Subcommittee on TSD organised an open session on 12 December 2018 in Quito.

The Parties made progress with cooperation activities. In Colombia, two workshops were organised in March 2018: one on the use of mercury for gold extraction and one on responsible mining. The implementation of a new EU-financed project led by the ILO to strengthen labour inspection in agricultural areas started in January 2019. With Ecuador cooperation initiatives mostly focused on assisting the early phase of TSD implementation. These included the drafting of a TSD implementation handbook in partnership with Sweden. With Peru, a regional workshop on circular economy was organised in Lima in September 2018.

The positive momentum achieved with all three partner countries will allow further engagement to continue. It also reflects the more assertive and focused efforts by the EU, grounded on a closer partnership with EU Member States and the ILO and on the greater involvement of civil society, in accordance with the 15-point action plan .

• 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 provisional application of the Agreement until the year 2020 (following a 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 Andean country during the transition period.

Article 15 of Regulation (EU) No 19/2013 i 18 provides for the stabilisation mechanism. When the annual trigger volume of imports per country as set in the Agreement is met, the Commission examines the impact of these imports on the situation of the Union market for bananas and take a decision to either temporarily suspend the preferential customs duty or determine that such suspension is not appropriate. The stabilisation mechanism shall apply until 31 December 2019.

In this context and in accordance with Articles 3 and 13 of Regulation 19/2013 i, the Commission has been monitoring the evolution of imports of fresh bananas from Colombia, Peru and Ecuador.

2018 imports of fresh bananas from Colombia, Ecuador and Peru

Used volume Trigger level Country (tonnes) (tonnes) %

Colombia 1.286.314 1.890.000 68%

Ecuador 1.514.549 1.880.127 81%

Peru 127.168 97.500 130%

Total 2.928.031 3.867.627 76%

Source Eurostat

In 2018, EU imports of fresh bananas from Colombia amounted to 1 286 313 metric tons. Colombia remained 32% below the trigger volume of 1 890 000 metric tonnes established by the Agreement.

Ecuador exported 1 514 548 metric tons of fresh bananas to the EU, with imports remaining 19% below the trigger level of 1 880 127 metric tonnes, established for Ecuador in the Agreement.

Peru exceeded its trigger volume established in the Agreement (97 500 metric tonnes) on 15 October 2018. In line with Article 15(3) of the above-mentioned Regulation(EU) No 19/2013, the Commission examined the impact on the EU market taking into account, inter alia, the effects on the price level, developments of imports from other sources and the overall stability of the EU market.

As a result of the examination, the Commission concluded that the suspension of the preferential duty on fresh bananas originating in Peru was not appropriate for the following

reasons 19 :

• 1. 

  the share of imports from Peru (2.2%) in the overall imports of bananas over the period 1 January 2018 - 15 October 2018 was very small and the price development of imports from Peru remained in line with other import prices;

18 Regulation (EU) No 19/2013 i 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 as amended by Regulation (EU) 2017/540 of the European Parliament and of the Council of 15 March 2017.

19 Commission Implementing Decision (EU) 2018/1888 of 3 December 2018 determining that a temporary suspension of the preferential customs duty pursuant to Article 15 of Regulation (EU) No 19/2013 i of the European Parliament and of the Council and pursuant to Article 15 of Regulation (EU) No 20/2013 i of the European Parliament and of the Council is not appropriate for imports of bananas originating in Guatemala and Peru (OJ L 308, 04.12.2018, p.49).

• 2. 

  the other exporting countries remained - at that moment of the year - far below the thresholds defined for them (annual exports from the three Andean countries reached 76% of the cumulated trigger level);

• 3. 

  Peruvian imports did not show any negative effect on the EU wholesale price for bananas, which has remained fairly stable during the period.

Therefore, there was no indication that the stability of the EU market or the situation of the EU producers was affected by the level of Peruvian exports. Nevertheless, the Commission will continue its reinforced monitoring of banana imports and evaluate the market situation.

• 6. 

  C ONCLUSIONS AND OUTLOOK

After almost six years of provisional application with Colombia and Peru and the three years with Ecuador, the Agreement continues to function well and has created important business opportunities, which are being increasingly seized by businesses and exporters from both sides. Despite a slight decrease in bilateral trade with Colombia and Peru in 2018, the Agreement continues to contribute to an important diversification of Colombia and Peru’s exports, away from mineral products or ores, notably in favour of the agricultural sector, thus creating new opportunities, notably for SMEs. With Ecuador, results after two years of implementation are positive and there is still potential for growth and diversification on both

sides.

Full implementation of the Agreement remains a priority for the EU. The institutional framework under the Agreement has been working well and allows for discussions to seek solutions to the implementation and market access issues on both sides. Nevertheless, some difficulties persist and all Parties should continue working on the implementation of the

Trade Agreement in order to bring further benefits to their businesses and consumers.

In 2018, the Commission will launch an external ex post evaluation on the five years of implementation of the Agreement, which will undertake an in-depth analysis of the trade and economic impacts, social impacts, impact on labour and human rights, and environmental impacts of the Agreement. Stakeholders and the civil society will be widely consulted,

including through dedicated meetings.

• 7. 

  S TATISTICS

Colombia

Merchandise trade EU28 2014-2018 2014 2015 2016 2017 2018

EU28 trade with Colombia (mio €) Imports 8.178 6.724 5.443 5.590 5.085 Exports 6.352 6.523 5.403 5.973 6.010 Balance -1.826 -202 -40 383 925

Share Colombia in EU28 trade with Extra-EU28

Imports 0,5% 0,4% 0,3% 0,3% 0,3% Exports 0,4% 0,4% 0,3% 0,3% 0,3% Total (I+E) 0,4% 0,4% 0,3% 0,3% 0,3% Share EU28 in trade Colombia with world Imports 13,7% 15,3% 13,5% 14,7% 15,1% Exports 17,1% 16,6% 12,8% 13,4% 12,5% Total (I+E) 15,3% 15,8% 13,2% 14,1% 13,9% 25- mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Colombia: IMF Dots

Total merchandise trade EU28 with Colombia (mio €)

Growth

Colombia 2017 2018 annual

mio € %

Imports 5.590 5.085 -505 -9,0%

Exports 5.973 6.010 37 0,6%

Balance 383 925 542

Total trade 11.564 11.095 -468 -4,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Colombia (mio €)

Growth

Colombia 2017 2018 annual

mio € %

Imports 2.407 2.187 -220 -9,1%

Exports 400 428 27 6,8%

Balance -2.007 -1.760 247

Total trade 2.808 2.615 -193 -6,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Colombia (mio €)

Growth

Colombia 2017 2018 annual

mio € %

EU28 imports 3.183 2.898 -285 -9,0%

EU28 exports 5.573 5.582 9 0,2%

Balance 2.390 2.684 295

Total trade 8.756 8.480 -276 -3,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Colombia (mio €)

Growth

Colombia 2016 2017 annual

mio € %

Imports 1.381 1.554 173 12,5%

Exports 3.063 3.846 783 25,6%

Balance 1.682 2.292 610

Total trade 4.444 5.400 956 21,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Colombia (mio €)

2013 2014 2015 2016 2017

Imports 1.453 1.538 1.466 1.381 1.554

Exports 2.563 2.398 2.966 3.063 3.846

Balance 1.111 860 1.500 1.682 2.292

Total trade 4.016 3.935 4.431 4.444 5.400

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

FDI EU28 with Colombia (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 4.789 3.828 8.214 3.457 4.589

Outward 17.848 16.223 21.738 15.382 15.051

FDI Flows

Inward 1.365 -214 2.348 -584 650

Outward -261 71 1.579 -2.010 1.313

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

Ecuador

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Ecuador (mio €)

Imports 2.621 2.595 2.724 3.018 3.032

Exports 2.199 2.010 1.638 2.214 2.353

Balance -422 -586 -1.086 -804 -679

Share Ecuador in EU28 trade with

Extra-EU28

Imports 0,2% 0,2% 0,2% 0,2% 0,2%

Exports 0,1% 0,1% 0,1% 0,1% 0,1%

Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1%

Share EU28 in trade Ecuador with world

Imports 11,0% 11,6% 11,5% 13,0% 12,9%

Exports 11,6% 15,1% 16,9% 16,6% 15,1%

Total (I+E) 11,3% 13,2% 14,2% 14,7% 14,0%

25-

mars

Source Trade G2 Statistics/ISDB 19

Trade EU28: Eurostat COMEXT; Trade Ecuador: IMF Dots

Total merchandise trade EU28 with Ecuador (mio €)

Growth

Ecuador 2017 2018 annual

mio € %

Imports 3.018 3.032 15 0,5%

Exports 2.214 2.353 140 6,3%

Balance -804 -679 125

Total trade 5.232 5.386 154 2,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Ecuador (mio €)

Growth

Ecuador 2017 2018 annual

mio € %

Imports 1.567 1.606 39 2,5%

Exports 122 157 35 28,6%

Balance -1.445 -1.449 -4

Total trade 1.689 1.763 74 4,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Ecuador (mio €)

Growth

Ecuador 2017 2018 annual

mio € %

EU28 imports 1.451 1.427 -24 -1,7%

EU28 exports 2.092 2.197 105 5,0%

Balance 641 770 129

Total trade 3.543 3.623 80 2,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Ecuador (mio €)

Growth

Ecuador 2016 2017 annual

mio € %

Imports 458 582 124 27,2%

Exports 1.016 1.055 40 3,9%

Balance 558 473 -85

Total trade 1.474 1.638 164 11,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Ecuador (mio €)

2013 2014 2015 2016 2017

Imports 378 408 374 458 582

Exports 1.141 1.309 1.094 1.016 1.055

Balance 764 901 720 558 473

Total trade 1.519 1.716 1.468 1.474 1.638

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

FDI EU28 with Ecuador (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 399 536 230 176 178

Outward 4.052 5.157 8.254 5.152 5.123

FDI Flows

Inward -56 -233 -177 -115 -13

Outward -119 2 1.087 80 349

Source Trade G2 Statistics/ISDB

from Eurostat BOP statistics

Peru

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Peru (mio €)

Imports 4.978 5.033 5.183 6.175 6.157

Exports 3.236 3.732 3.614 4.053 3.731

Balance -1.742 -1.301 -1.569 -2.122 -2.426

Share Peru in EU28 trade with

Extra-EU28

Imports 0,3% 0,3% 0,3% 0,3% 0,3%

Exports 0,2% 0,2% 0,2% 0,2% 0,2%

Total (I+E) 0,2% 0,2% 0,3% 0,3% 0,3%

Share EU28 in trade Peru with world

Imports 11,8% 11,7% 12,0% 12,3% 12,1%

Exports 16,6% 16,1% 15,1% 14,7% 15,1%

Total (I+E) 14,0% 13,7% 13,5% 13,5% 13,7%

25-

mars

Source Trade G2 Statistics/ISDB 19

Trade EU28: Eurostat COMEXT; Trade Peru: IMF Dots

Total merchandise trade EU28 with Peru (mio €)

Growth

Peru 2017 2018 annual

mio € %

Imports 6.175 6.157 -18 -0,3%

Exports 4.053 3.731 -322 -7,9%

Balance -2.122 -2.426 -303

Total trade 10.228 9.888 -340 -3,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Peru (mio €)

Growth

Peru 2017 2018 annual

mio € %

Imports 2.158 2.280 122 5,6%

Exports 251 255 4 1,4%

Balance -1.907 -2.026 -118

Total trade 2.410 2.535 125 5,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Peru (mio €)

Growth

Peru 2017 2018 annual

mio € %

EU28 imports 4.017 3.876 -140 -3,5%

EU28 exports 3.802 3.476 -325 -8,6%

Balance -215 -400 -185

Total trade 7.818 7.353 -466 -6,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Peru (mio €)

Growth

Peru 2016 2017 annual

mio € %

Imports 978 1.108 130 13,3%

Exports 1.621 1.955 335 20,6%

Balance 643 848 205

Total trade 2.599 3.063 464 17,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Peru (mio €)

2013 2014 2015 2016 2017

Imports 840 910 899 978 1.108

Exports 1.699 2.109 1.710 1.621 1.955

Balance 859 1.199 812 643 848

Total trade 2.538 3.020 2.609 2.599 3.063

Source Trade G2

Statistics/ISDB from Eurostat

BOP statistics

FDI EU28 with Peru (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 244 158 2.293 2.812 3.416

Outward 9.567 9.702 13.244 16.754 16.630

FDI Flows

Inward 129 -363 836 769 60

Outward 519 -1.440 2.613 3.862 752

Source Trade G2

Statistics/ISDB from Eurostat

BOP statistics

ANNUAL REPORT ON THE IMPLEMENTATION OF PART IV OF THE

ASSOCIATION AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES

AND CENTRAL AMERICA

• 1. 

  I NTRODUCTION

The trade pillar (Part IV) of the European Union - Central America Association Agreement

(“the Agreement”) 20 has been in application for five years.

Under Article 13 of Regulation (EU) No 20/2013 i 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 21 , 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 also responds to this requirement.

• 2. 

  O VERALL ASSESSMENT : EVOLUTION OF BILATERAL TRADE

2.1 Trade in Goods overall

The EU trade with Central America in 2018 was overall quite balanced, with only a slight

overall deficit of around €0.1 billion in favour of Central America. The EU enjoyed a

considerable surplus of around €1.8 million with Panama and a €0.5 billion surplus with El Salvador. This surplus, however, is netted out by the deficit recorded with Costa Rica (€1.6

billion) and Honduras (€0.6 billion). Trade flows with Guatemala were quite balanced

whereas with Nicaragua the EU recorded a deficit of about €0.2 billion.

EU imports amounted to around €6.2 billion and remained roughly at the same level as in 2017. They were however still around 5.5% higher than the average value for the period

2014-2018. The EU maintained a stable level of imports from its largest supplier in the

region, Costa Rica. A significant increase in relative terms (almost 40%) was recorded in

imports from Panama, but that growth translated to a still relatively low level in absolute

terms (€0.7 billion). On the whole, Central America accounts for around 0.3% of total EU trade with the world.

In constrast to previous years, in 2018 EU exports to Central America registered an

annual double-digit growth of 11%. This growth fits into the general trend of increasing EU

global exports (4% over 2017). The increase in exports was mainly due to increased exports to Panama (up 15%) and El Salvador (up 68%). As regards other countries in the region, no

significant change in trade flows was observed. Panama imported almost 2.5 times more

20 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/ .

21 OJ L 17, 19.1.2013, p. 13.

transport equipment from the EU than in 2017 (ships and aircraft). El Salvador made similar

purchases to the value of €0.3 billion, unobserved in previous years (aircraft).

Sectoral structure of trade

EU imports

Agricultural foodstuffs make up 2/3 of EU imports from Central America, totalling €4.1 billion. Fruits constitute the largest chunk of those agricultural imports (close to €2 billion), including mainly bananas (€1.2 billion), pineapples, melons and papayas. Costa Rica is responsible for exports of a vast majority of these fruit to the EU. 2018 was another record setting year in the sale of fruits to the EU, in particular in the case of bananas. Other significant items include coffee (€0.9 billion), and animal and vegetable oils (€0.5 billion). Coffee comes mainly from Honduras, and to a smaller extent from Guatemala, Costa Rica and El Salvador. In 2018 Honduras was the third EU’s supplier of coffee (unroasted) (after Brazil and Vietnam). Vegetable oils include primarly palm oil (85% of the category) and coconut oil. Honduras and Guatemala and the biggest exporters of palm oil from the region, together accounting for around 11% of EU imports of palm oil. Little changes in trade in these main agricultural items were observed over the year, with a slight fall in the value of coffee (down 6%) and a slight increase in fruits (up 4%). Yet, on a national level, Honduras suffered a strongest decline (down 11%) which was compensated to some extent by others (e.g. Guatemala, Nicaragua).

Another major category of imports are medical instruments and devices that the EU sources from Costa Rica. These supplies are on the upward path, up 10% from the previous year. They accounted for around 12% of imports from Central America last year.

EU exports

EU exports to Central America are more diversified than imports. Around 60% of EU exports are concentrated in three major product categories: chemical industry products, machinery and appliances, and transport equipment. The chemical industry products are mainly pharmaceuticals and cosmetics, going primarily to Panama. Exports of transport equipment included ships and aircraft. EU exports of chemical products remained at a similar level as in 2017; a slight drop (8%) was observed in the case of machinery and appliances, whereas in the case of transport equipment, the EU recorded a spectacular growth of 144%. As explained above this was mainly due to increased purchases of Panama and El Salvador.

Country-by-Country analysis

On a national basis, the Costa Rica accounts for 44% of all EU imports from the six Central American countries. By contrast, Panama is the greatest recipient of EU exports, with a 42% share in the EU’s total exports to these countries.

The top three recipients of EU exports are Panama, Costa Rica and Guatemala, together accounting for around 75% of EU sales to the region in 2018. By contrast, the top three sources of imports were Costa Rica, Honduras and Guatemala with a combined 79% share in EU total imports from the six Central American countries.

EU EU

Country exports % Trade

(mio €) share

imports % share

(mio €) balance

Costa Rica 1.046 17% 2.689 44% -1643

El Salvador 807 13% 221 4% 586

Guatemala 986 16% 981 16% 5

Honduras 480 8% 1.148 19% -668

Nicaragua 190 3% 390 6% -200

Panama 2 527 42% 729 12% 1798

TOTAL 6.036 100% 6.158 100% -122 Source: Eurostat

Costa Rica

EU trade with Costa Rica in 2018 remained at the level of 2017. No particular change occurred in the structure of trade in comparison with 2017. Costa Rica is the EU’s largest supplier of bananas and pineapples to the EU in the region. The EU exports mainly machinery, transport equipment and chemical products to Costa Rica. Some drop in exports of these categories was observed in 2018: transport equipment down by 16%; chemical products down by 9% but a slight increase (5%) was observed in the case of machinery. Overall, EU exports slightly declined (down by 5%).

El Salvador

The trade flows between the EU and El Salvador were at the level of €1 billion in 2018, with EU exports shooting up by 68% i.e. by €0.3 million. The surge in exports was due to increased purchases of transport equipment from the EU (aircraft). Another item that El Salvador typically buys from the EU is machinery and appliances – no particular change was observed here in the value of annual purchases.

Imports from El Salvador went down by around 12%, to the level of €0.2 million. This was due to a drop in sales of frozen fish, apparel and clothing as well as sugar. The main categories of products imported by the EU are electrical capacitors (up 20%), frozen fish (down 26%) and fish products (no change), coffee (up 26%).

Guatemala

Trade with Guatemala remained very balanced. Both imports and exports amounted to around €1 billion in each direction. Only a slight drop was observed in the overall imports value (down 5%). Around half of EU exports to Guatemala are machinery and appliances (down 16%), products of the chemical industry (up 5%), which include also pharmaceutical products. Other exported items were vehicles, including cars (down 8%), as well as aluminium (up 9%).

Guatemala’s top export items were palm oil (up 3%) with around 22% share in total Guatemala’s exports, coffee (up 9%) bananas (up 49%) altogether accounting for close to a half the country’s exports. Other items exported by Guatemala include iron and steel, spirit drinks as well as sugar.

Honduras

In 2018, the EU recorded a deficit of about €0.7 billion, with imports amounting to €1.1 billion. The top item imported from Honduras that accounted for around 50% of EU imports was coffee (down by 11%). Other products included palm oil (down 7%) with a 20% share and fruit (melons and papayas, bananas) (up 8%), with a 6% share in 2018.

EU’s exports (€0.5 billion) are more diverse, with machinery and mechanical appliances (up 39%), electrical and electrical appliances (down 24%) accounting for about 45% of EU exports to Honduras. Other export items include products such as pharmaceutical products, paper and plastics, amongst others.

Nicaragua

Nicaragua is the smallest trading partner of all the six countries of the region. Similarly to the case above, the EU typically records a trade deficit in trade with Nicaragua, which in 2018 increased further to €200 million. EU’s exports dropped by 22% over the year, down to 190 million. The EU mainly imports coffee (up 10%) with a 28% share in total imports from Nicaragua, fish and crustaceans (up 3%) with a 23% share, as well as peanuts (no change) with a 13% share in total imports. Other import items are mainly agricultural foodstuffs.

EU exports are more diverse and cover various, mainly industrial, product categories. The top three export items to Honduras include machinery and mechanical appliances (down 34%), electrical machinery (down 30%) as well as pharmaceutical products (down 26%). All these categories accounted together for over 40% of EU exports.

Panama

Panama remained the EU’s top export market in the region, receiving around €2.5 billion worth of EU goods. Over 40% of EU exports to the region are destined for Panama. Note however that these data does not capture goods that may be later re-exported via Panama, which can amount to quite a considerable amount. Pharmaceutical products and cosmetics made up about 21% of EU exports in 2018, with a slight drop (down by 5% for cosmetics and down by 2% for pharma). Machinery and mechanical appliances accounted for about 10% of EU exports (down by 20%). 2018 saw a significant change in the purchases of aircraft (increasing from €8 million to €243 million). Other significant surges in sales concerned railway or tramway locomotives (up 320%) as well as vehicles (cars) (up 39%).

In 2018 imports from Panama largely consisted of fruit (mainly bananas which represent 35% of imports and were up by 2%) and ships and boats (33% share, up by 287%). Other important import items included gold, rubber, as well as fish and crustaceans.

2.2 Trade in agricultural goods

The Agreement defines a number of tariff rate quotas (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.

Under the Agreement, the EU grants eight TRQs in favour of Central America on products that did not enjoy preferential access to the EU market prior to the date of application of the Agreement. In 2018, as in previous years, the cane sugar and rum quotas were fully utilised. Guatemala supplied most of the rum imported under the quota and even increased its share to 86%, up from 82% the previous year. Guatemala also increased its market share in the sugar quota up to 48% (vs 43% in 2017). While five quotas remained unused in 2018, the manioc starch quota was filled by 13%.

TRQs granted by the EU to Central America – Utilisation in 2018

Origin Product Unit TRQ EU Utilisation volume imports rate

Garlic 550 0 0% Rice 25 000 0 0%

Central America Bovine meat 11 875 0 0% Mushroom Tonnes 275 0 0%

Manioc starch 5 000 646 13% Sweetcorn 2 040 0 0%

Central America Sugar 172 500 165 388 96% except Panama Rum in container > 2 l hl pure alcohol 8 500 8 500 100% Source: European Commission.

The Central American countries grant TRQs for four EU products. In 2018, EU exporters continued to make use of some of the opportunities offered by these TRQs. Notably, the milk powder quota was fully utilised in Honduras, as was the cheese quota in Costa Rica. The quota fill rate was also high for those two products in Panama. However, a margin of growth remains as the overall fill rate was below 50% for those dairy quotas across the region. An even larger margin of growth remains for preferential exports of pork.

TRQs granted by Central American countries to the EU – Utilisation in 2018

Products Quota Annual increase Importing Volume Utilisation (tonnes) (tonnes) country (tonnes) rate

Costa Rica 55 El Salvador 21

Cured hams Guatemala 43

(joint quota) 1 125 45 Honduras 0 35%

Nicaragua 0 Panama 274 Costa Rica 13 El Salvador 0

Prepared swine meat Guatemala 27

(joint quota) 1 125 45 Honduras 0 10%

Nicaragua 0 Panama 75 Costa Rica 0 0%

Powdered milk El Salvador 105 42%

(6 country-specific 2 375 95 Guatemala 25 5%

quotas) Honduras 500 100% Nicaragua 0 0%

Panama 545 87%

Cheese Costa Rica 396 100% (6 country-specific 3 750 150 El Salvador 165 23%

quotas) Guatemala 332 44% Honduras 312 50% Products Quota Annual increase Importing Volume Utilisation (tonnes) (tonnes) country (tonnes) rate

Nicaragua 0 0% Panama 594 79%

Source: Data collected at national level in the Central American countries.

2.3 Trade in Services and Foreign Direct investment (FDIs)

Trade in Services

As in previous years, trade in services between the two regions accounted for around 40% of total trade in goods and services. In 2017, total trade in services amounted to €7.8 billion, out of which Panama made up over 60%. Costa Rica was next in line with a share of almost 20% in total trade in services.

Similarly to the trade in goods, three countries stand out as the top recipients of EU exports of services (85% in total): Panama (58%), Costa Rica (18%) and Guatemala (8%). The same countries are the three top destinations for EU exports of goods.

2016 2017 Country

EU Exports EU Imports Total % EU Exports EU Imports Total %

Costa Rica 786 555 1341 18% 770 749 1519 19%

El Salvador 258 94 352 5% 229 91 320 4%

Guatemala 298 249 547 7% 316 306 622 8%

Honduras 171 94 265 4% 205 124 329 4%

Nicaragua 176 69 245 3% 178 96 274 4%

Panama 2 330 2 403 4 733 63% 2 306 2 435 4 741 61%

Total 4 019 3 464 7 483 100% 4 004 3 801 7 805 100%

Source: Eurostat

Development of Foreign Direct investment (FDI)

As in previous years, in 2018 EU’s FDI concentrated in three countries: Panama, Costa Rica and Guatemala, with Panama alone benefiting from around 75% of investment in the region. The overall outward investment of EU’s investors in the economies of the six countries slightly decreased (by 6%), still representing a figure that is comparable to the investment made in Colombia and Peru all together. Except for Guatemala and Nicaragua, Central American countries saw some decline in the value of stocks of EU’s direct investment in the region.

In 2017, a noticeable downturn in inward investment occurred, with Panamanian investors cutting their stocks in the EU by around half. As a result, the total value of stocks held by Central American investors in the EU was over 40% lower in 2017 compared to 2016.

Country 2016 2017

Inward Outward Total % Inward Outward Total %

Costa Rica 1 157 3 499 4 656 8% 1 272 3 113 4 385 10%

El Salvador 29 984 1 013 2% 147 854 1 001 2%

Guatemala 1 374 2 387 3 761 6% 2 729 2 615 5 344 12%

Honduras 15 480 495 1% 32 384 416 1%

Nicaragua 57 345 402 1% 95 428 523 1%

Panama 25 593 23 688 49 281 83% 11 551 21 987 33 538 74%

Total 28 225 31 383 59 608 100% 15 826 29 381 45 207 100%

3 A CTIVITIES OF THE IMPLEMENTATION BODIES

The body implementing the agreement is the Association Committee. It met in June 2018. The meeting of Association Committee and the meeting of its sub-committees (Market access, Customs and rules of origin, Technical Barriers to Trade (TBT), SPS, Intellectual Property Rights (Geographical Indications), Board on Trade and Sustainable Development, Government Procurement) were reported on in the 2018 Staff Working Document on FTA Implementation (2018) 454 final/2. During the Association Committee of June 2018, the Parties reached an agreement on the incorporation of Croatia to the Association Agreement, including the offer on compensation for bananas as submitted earlier by the EU. In order to start the final administrative procedures to adopt the relevant protocol, after the Committee meeting in 2018, the EU submitted a final revised text of the Croatia Protocol to Central America for confirmation so that the procedure for incorporation of Croatia into the agreement could eventually be completed.

The Parties continued to work on the collection of reliable data on the use of tariff preferences by EU exporters as deficiencies in this regard had been identified in previous years. Both parties had technical exchanges which aimed at finding a solution to the issue.

In the course of 2018, the Parties also worked on the preparation of several procedural decisions that were pending in the area of customs and rules of origin.

During the 2018 Committee, Central America insisted on the need to establish clear and workable procedures for cumulation of origin with other countries of Latin America. In this regard, the EU clarified that it is awaiting the confirmation of existence of administrative cooperation arrangements between the countries of Andean Community and Central America.

The fourth meeting of the sub-committee on Sanitary and Phytosanitary Measures (SPS), held on 4-5 June 2018, delivered positive outcomes and consolidated progress was made to date. The EU highlighted the following issues:

• The importance for Central America 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.

4 I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

DEVELOPMENT

Representatives of the EU and of the six Central American countries met in the Trade and Sustainable Development (TSD) Board established under the EU Central America Association Agreement on 11-12 June 2018 in Brussels. A report on the meeting is available. A Civil Society Forum took place on 13 June 2018.

Implementation activities were framed by the 15-point action plan published by the Commission in February 2018. The EU continued to provide support to the ILO Regional Office for Central America to assist its efforts to support implementation of the fundamental ILO Conventions in Guatemala and El Salvador. Commission’s services (DG TRADE and DG EMPL) also held several videoconferences with Guatemala regarding its implementation of a country-specific ILO Roadmap. Some progress was made in Guatemala, notably the establishment of a tripartite Labour Council. Nonetheless, significant challenges remain with regards to ensuring labour rights and the implementation of the fundamental ILO Conventions, particularly in Guatemala, El Salvador and Honduras.

A seminar and workshop on “Decent Work, Corporate Responsibility and the EU-Central America Association Agreement” was held in Guatemala City on 15-16 May 2018 with the participation of representatives of OECD and the ILO and support of the regional project ATEPECA and Guatemala government. The event drew considerable interest with over 200 participants, including from other Central American countries. The EU Delegation in Costa Rica also provided support to the Costa Rican government for the development and implementation of a new national policy on Corporate Social Responsibility, which takes into account Costa Rica’s international commitments and the Sustainable Development Goals (SDGs).

In addition, the EU, through in-country meetings and other contacts, encouraged Central American domestic advisory groups (DAGs) established under the Association Agreement to take an active role in implementation of the Trade and Sustainable Development Chapter.

5 S PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING

Political situation

In the course of last year, the EU monitored closely the situation of the civil society in Nicaragua in the context of human rights’ violation. The EU condemned the repression of peaceful demonstrations, independent media and civil society. It is to be noted that the respect of the rule of law and human rights constitute an essential element of the EU-Central America Association Agreement.

The EU continues to monitor an alarming situation in Guatemala with respect to the rule of law and respect of human rights, while it continues to make diplomatic efforts to encourage a peaceful solution of the crisis.

Special clauses: banana mechanism

The Agreement provides a preferential customs duty on bananas under heading 0803.00.19 (fresh bananas), progressively reduced since the date of application 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.

Implementation of Regulation (No) 20/2013 i

Article 15 of Regulation (EU) No 20/2013 i 22 provides for the stabilisation mechanism for fresh

bananas (HS code 08 03 90 10). When the annual trigger volume of imports per country as set in the agreement is met, the Commission examines the impact of these imports on the situation of the Union market for bananas and takes a decision to either temporarily suspend the preferential customs duty or determines that such suspension is not appropriate. The stabilisation mechanism shall apply until 31 December 2019.

In this context and in accordance with Articles 3 and 13 of Regulation 20/2013 i, the Commission has been monitoring the evolution of imports of fresh bananas from the Central American countries party to the free trade agreement (Guatemala, Honduras, Nicaragua, Panama, Costa Rica and El Salvador).

2018 EU imports of fresh bananas from Central America

Country Used volume Trigger level % Guatemala 149.509.230 70.000.000 214% Honduras 20.759.675 70.000.000 30% Nicaragua 80.097.320 14.000.000 572% Panama 253.458.920 525.000.000 48% Costa Rica 1.188.350.193 1.435.000.000 83% El Salvador 0 2.800.000 0 Total 1.692.175.338 2.116.800.000 80%

Source: Eurostat

Imports of fresh bananas from Central America as a whole did not reach their trigger level under the stabilisation mechanism. At the end of 2018, the overall total import volume that had benefitted from preferential treatment in Central America was 80%. These import volumes were higher, but still close to the 74.4% reached in the previous year, and did not threaten the EU banana sector.

Nevertheless, banana imports from both Guatemala and Nicaragua exceeded their individual trigger level for 2018, as they did in previous years, by 114% and 472% respectively. 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 the price level, developments of imports from other sources and the overall stability of the EU market.

Notwithstanding these individual countries’ level of exports, the Commission concluded that the suspension of the preferential duty on imports of fresh bananas originating in Guatemala

22 Regulation (EU) No 20/2013 i 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, of the other part as amended by Regulation (EU) 2017/540 of the European Parliament and of the Council of 15 March 2017.

and Nicaragua was not appropriate as 23 the share of imports from these two countries (1.2% for Nicaragua and 2.95% for Guatemala) in the overall imports of bananas was very small at the moment the respective thresholds were exceeded; imports from the other countries remained far below the thresholds defined for them at the moment the respective thresholds were exceeded; and these imports did not show any negative effect on the EU wholesale price for bananas, which remained fairly stable in 2018.

6 C ONCLUSIONS AND OUTLOOK

Five years after the application of the agreement, EU exports picked up to bring to a balance the trade flows between Central America and the EU. EU exports to the region were up by 11%, reaching a record high of €6 billion in 2018. Similarly to previous years, Panama was the main destination of EU exports to the region and, together with El Salvador, accounted for most of the growth of EU’s annual exports.

The correct functioning of the institutions created by the Agreement is necessary for its proper implementation.

Building upon the positive cooperation now established with Central America 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.

In 2018, the Commission will launch an ex-post evaluation study into the Agreement. The study will assess the impact of the trade pillar of the Association Agreement (economic, social and environmental impact and impact on human rights). The findings are meant to offer lessons for the further improvement of the implementation of the Agreement.

7 S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Central America 6 (mio €)

Imports 6.228 5.215 5.488 6.097 6.158 Exports 5.254 5.719 5.294 5.446 6.037 Balance -974 504 -193 -651 -121 Share Central America 6 in EU28 trade with Extra-EU28 Imports 0,4% 0,3% 0,3% 0,3% 0,3% Exports 0,3% 0,3% 0,3% 0,3% 0,3% Total (I+E) 0,3% 0,3% 0,3% 0,3% 0,3%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Central America 6: IMF Dots

Total merchandise trade EU28 with Central America 6 (mio €)

Central America 6 2017 2018 Growth

23 Commission Implementing Decision (EU) 2018/874 of 14 June 2018 determining that a temporary suspension of the preferential customs duty pursuant to Article 15 of Regulation (EU) No 20/2013 i of the European Parliament and of the Council is not appropriate for imports of bananas originating in Nicaragua (OJ L 152, 15.06.2018, p.58) and Commission Implementing Decision (EU) 2018/1888 of 3 December 2018 determining that a temporary suspension of the preferential customs duty pursuant to Article 15 of Regulation (EU) No 19/2013 i of the European Parliament and of the Council and pursuant to Article 15 of Regulation (EU) No 20/2013 i of the European Parliament and of the Council is not appropriate for imports of bananas originating in Guatemala and Peru (OJ L 308, 04.12.2018, p.49).

annual mio € %

Imports 6.097 6.158 60 1,0% Exports 5.446 6.037 591 10,8%

Balance -651 -121 530

Total trade 11.543 12.194 651 5,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Central America 6 (mio €)

Growth

Central America 6 2017 2018 annual

mio € %

Imports 4.209 4.121 -88 -2,1%

Exports 637 679 42 6,6%

Balance -3.571 -3.442 130

Total trade 4.846 4.800 -46 -0,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Central America 6 (mio €)

Growth

Central America 6 2017 2018 annual

mio € %

EU28 imports 1.889 2.037 148 7,8% EU28 exports 4.809 5.358 549 11,4%

Balance 2.920 3.321 401

Total trade 6.697 7.394 697 10,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Costa Rica

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Costa Rica (mio €)

Imports 3.771 2.250 2.404 2.648 2.689 Exports 829 976 1.052 1.095 1.046 Balance -2.942 -1.275 -1.352 -1.552 -1.643 Share Costa Rica in EU28 trade with Extra-EU28

Imports 0,2% 0,1% 0,1% 0,1% 0,1% Exports 0,0% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Costa Rica with world

Imports 8,3% 9,2% 9,6% 10,0% 9,6% Exports 17,6% 18,8% 21,0% 20,9% 20,9% Total (I+E) 12,0% 12,9% 14,1% 14,4% 14,2%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Costa Rica: IMF Dots

Total merchandise trade EU28 with Costa Rica (mio €)

Growth Costa Rica 2017 2018 annual

mio € %

Imports 2.648 2.689 41 1,6%

Exports 1.095 1.046 -49 -4,5%

Balance -1.552 -1.643 -91 Total trade 3.743 3.735 -8 -0,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Costa Rica (mio €)

Growth

Costa Rica 2017 2018 annual

mio € %

Imports 1.830 1.781 -48 -2,6%

Exports 120 116 -4 -3,3%

Balance -1.709 -1.665 45

Total trade 1.950 1.897 -52 -2,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Costa Rica (mio €)

Growth

Costa Rica 2017 2018 annual

mio € %

EU28 imports 818 908 90 11,0%

EU28 exports 975 930 -45 -4,7%

Balance 157 22 -135

Total trade 1.793 1.838 44 2,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Costa Rica (mio €)

Growth

Costa Rica 2016 2017 annual

mio € %

Imports 555 749 193 34,8%

Exports 786 770 -16 -2,0%

Balance 231 22 -209

Total trade 1.341 1.519 178 13,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Costa Rica (mio €)

2013 2014 2015 2016 2017

Imports 497 493 530 555 749 Exports 600 621 617 786 770

Balance 104 128 86 231 22

Total trade 1.097 1.115 1.147 1.341 1.519

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Costa Rica (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 406 879 880 1.157 1.272

Outward 1.648 2.339 2.708 3.499 3.113

FDI Flows

Inward 51 21 60 369 52

Outward 200 140 400 210 308

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

El Salvador

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with El Salvador (mio €)

Imports 184 195 217 249 221 Exports 530 546 472 481 807 Balance 346 351 255 232 587 Share El Salvador in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0% Share EU28 in trade El Salvador with world

Imports 5,9% 6,4% 4,7% 6,3% 7,7% Exports 3,5% 2,9% 3,1% 3,1% 2,8% Total (I+E) 5,1% 5,2% 4,1% 5,2% 6,0%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade El Salvador: IMF Dots

Total merchandise trade EU28 with El Salvador (mio €)

Growth

El Salvador 2017 2018 mio annual

€ %

Imports 249 221 -29 -11,5%

Exports 481 807 326 67,8%

Balance 232 587 355 Total trade 730 1.028 298 40,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with El Salvador (mio €)

Growth

El Salvador 2017 2018 mio annual

€ %

Imports 69 54 -14 -21,0%

Exports 48 52 5 9,8%

Balance -21 -2 19

Total trade 116 107 -10 -8,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with El Salvador (mio €)

Growth

El Salvador 2017 2018 mio annual

€ %

EU28 imports 181 166 -14 -7,8%

EU28 exports 434 755 322 74,2%

Balance 253 589 336

Total trade 614 922 308 50,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with El Salvador (mio €)

Growth

El Salvador 2016 2017 mio annual

€ %

Imports 94 91 -3 -3,3%

Exports 258 229 -29 -11,4%

Balance 164 138 -26

Total trade 352 319 -33 -9,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with El Salvador (mio €)

2013 2014 2015 2016 2017

Imports 94 84 106 94 91

Exports 224 242 276 258 229

Balance 130 158 170 164 138

Total trade 318 327 382 352 319

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with El Salvador (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 47 48 21 29 147

Outward 710 933 1.101 984 854

FDI Flows

Inward -18 7 -13 -2 140

Outward -408 326 213 -109 -266

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Guatemala

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Guatemala (mio €)

Imports 691 864 920 1.035 981 Exports 894 956 906 994 986 Balance 203 91 -14 -40 5

Share Guatemala in EU28 trade with Extra-EU28

Imports 0,0% 0,1% 0,1% 0,1% 0,0% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,0% 0,1% 0,1% 0,1% 0,0%

Share EU28 in trade Guatemala with world

Imports 7,1% 7,5% 7,2% 7,4% 7,3% Exports 7,5% 7,8% 9,0% 9,1% 9,4% Total (I+E) 7,3% 7,6% 7,9% 8,0% 8,0%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Guatemala: IMF Dots

Total merchandise trade EU28 with Guatemala (mio €)

Growth

Guatemala 2017 2018 mio annual

€ %

Imports 1.035 981 -54 -5,2%

Exports 994 986 -9 -0,9%

Balance -40 5 45 Total trade 2.029 1.967 -63 -3,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Guatemala (mio €)

Growth

Guatemala 2017 2018 mio annual

€ %

Imports 718 787 68 9,5%

Exports 125 132 8 6,0%

Balance -594 -654 -61

Total trade 843 919 76 9,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Guatemala (mio €)

Growth Guatemala 2017 2018 mio annual

€ %

EU28 imports 316 194 -122 -38,5%

EU28 exports 870 853 -16 -1,9% Balance 553 659 106

Total trade 1.186 1.048 -138 -11,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Guatemala (mio €)

Growth

Guatemala 2016 2017 mio annual

€ %

Imports 249 306 57 23,0%

Exports 298 316 19 6,2% Balance 49 10 -39

Total trade 547 623 76 13,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Guatemala (mio €)

2013 2014 2015 2016 2017

Imports 205 214 297 249 306

Exports 875 541 343 298 316

Balance 671 327 46 49 10

Total trade 1.080 755 640 547 623

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Guatemala (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 153 4.041 2.628 1.374 2.729 Outward 1.527 1.870 3.075 2.387 2.615 FDI Flows

Inward -34 421 245 11 266

Outward 127 140 618 234 22

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Honduras

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Honduras (mio €)

Imports 841 1.015 1.048 1.263 1.148 Exports 450 496 452 437 480 Balance -391 -519 -596 -826 -668

Share Honduras in EU28 trade with Extra-EU28 Imports 0,0% 0,1% 0,1% 0,1% 0,1% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Honduras with world

Imports 6,7% 7,1% 6,9% 5,9% 6,2% Exports 21,8% 23,8% 25,0% 33,5% 29,0% Total (I+E) 11,3% 12,0% 12,4% 14,7% 12,9%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Honduras: IMF Dots

Total merchandise trade EU28 with Honduras (mio €)

Growth

Honduras 2017 2018 annual

mio € %

Imports 1.263 1.148 -115 -9,1%

Exports 437 480 43 9,8%

Balance -826 -668 158

Total trade 1.701 1.629 -72 -4,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Honduras (mio €)

Growth

Honduras 2017 2018 annual

mio € %

Imports 1.049 947 -102 -9,7%

Exports 49 54 5 10,3%

Balance -1.000 -893 107

Total trade 1.098 1.001 -97 -8,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Honduras (mio €)

Growth

Honduras 2017 2018 annual

mio € %

EU28 imports 214 201 -13 -6,1%

EU28 exports 388 426 38 9,8%

Balance 174 225 51

Total trade 603 627 25 4,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Honduras (mio €)

Growth

Honduras 2016 2017 annual

mio € %

Imports 94 124 30 32,3%

Exports 171 205 34 19,9%

Balance 77 81 4

Total trade 265 329 64 24,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Honduras (mio €)

2013 2014 2015 2016 2017

Imports 187 81 107 94 124

Exports 196 163 182 171 205 Balance 9 83 75 77 81

Total trade 383 244 289 265 329

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Honduras (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward -5 93 27 15 32

Outward 372 473 532 480 384 FDI Flows

Inward 51 -8 -90 -0 2 Outward 145 41 12 -36 -91

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Nicaragua

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Nicaragua (mio €)

Imports 285 327 309 375 390 Exports 223 225 236 244 190 Balance -62 -101 -73 -130 -200 Share Nicaragua in EU28 trade with Extra-EU28 Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0% Share EU28 in trade Nicaragua with world Imports 6,1% 7,6% 5,3% 5,4% 4,6% Exports 6,5% 6,5% 9,1% 11,6% 11,7% Total (I+E) 6,3% 7,1% 6,4% 7,2% 7,0%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Nicaragua: IMF Dots

Total merchandise trade EU28 with Nicaragua (mio €)

Growth

Nicaragua 2017 2018 annual

mio € %

Imports 375 390 15 4,0%

Exports 244 190 -54 -22,1%

Balance -130 -200 -69

Total trade 619 580 -39 -6,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Nicaragua (mio €)

Growth

Nicaragua 2017 2018 annual

mio € %

Imports 250 260 10 4,2%

Exports 24 24 0 1,2%

Balance -226 -236 -10

Total trade 274 285 11 3,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Nicaragua (mio €)

Growth

Nicaragua 2017 2018 annual

mio € %

EU28 imports 125 129 5 3,7%

EU28 exports 220 166 -54 -24,7%

Balance 95 36 -59

Total trade 345 295 -50 -14,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Nicaragua (mio €)

Growth

Nicaragua 2016 2017 annual

mio € %

Imports 69 96 26 38,2%

Exports 176 178 2 1,1%

Balance 107 83 -24

Total trade 245 274 28 11,6%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Nicaragua (mio €)

2013 2014 2015 2016 2017

Imports 47 90 89 69 96

Exports 206 126 164 176 178

Balance 159 36 75 107 83

Total trade 253 217 252 245 274

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Nicaragua (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 57 19 62 57 95 Outward 874 296 419 345 428 FDI Flows

Inward 27 -15 120 -6 41

Outward 656 -572 48 35 145

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Panama

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Panama (mio €)

Imports 455 564 590 528 729 Exports 2.327 2.521 2.176 2.194 2.527 Balance 1.872 1.956 1.586 1.666 1.799

Share Panama in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1%

Share EU28 in trade Panama with world

Imports 11,4% 11,7% 11,0% 10,6% 10,0% Exports 26,1% 27,5% 29,5% 27,7% 29,4% Total (I+E) 12,3% 12,6% 12,0% 11,4% 11,0%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Panama: IMF Dots

Total merchandise trade EU28 with Panama (mio €)

Growth

Panama 2017 2018 annual

mio € %

Imports 528 729 201 38,1% Exports 2.194 2.527 334 15,2%

Balance 1.666 1.799 133

Total trade 2.721 3.256 535 19,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Panama (mio €)

Growth

Panama 2017 2018 annual

mio € %

Imports 293 292 -2 -0,6% Exports 271 300 28 10,4%

Balance -22 8 30

Total trade 565 591 26 4,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Panama (mio €)

Growth

Panama 2017 2018 annual

mio € %

EU28 imports 234 437 203 86,5% EU28 exports 1.922 2.228 305 15,9%

Balance 1.688 1.791 103

Total trade 2.157 2.665 508 23,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Panama (mio €)

Growth

Panama 2016 2017 annual

mio € %

Imports 2.403 2.435 32 1,3% Exports 2.330 2.306 -24 -1,0%

Balance -73 -129 -56 Total trade 4.732 4.741 9 0,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Panama (mio €)

2013 2014 2015 2016 2017

Imports 1.590 1.689 2.495 2.403 2.435 Exports 1.533 1.503 2.055 2.330 2.306

Balance -58 -186 -440 -73 -129

Total trade 3.123 3.192 4.550 4.732 4.741

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Panama (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 2.766 3.815 4.634 25.593 11.551

Outward 14.240 18.632 38.265 23.688 21.987 FDI Flows

Inward 336 -0 1.956 4.765 -1.263

Outward -13 901 1.037 -2.432 -2.541

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

PART II: ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND UKRAINE, MOLDOVA AND GEORGIA

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND UKRAINE

The Deep and Comprehensive Free Trade Area part of the Association Agreement (DCFTA) with Ukraine has been in force provisionally since 1 January 2016 and formally since 1 September 2017, following ratification by all EU Member States. Ukraine’s commitments under the DCFTA are considerable in areas spanning from competition and state aid to public procurement and sanitary and phytosanitary measures.

• 1. 

  E VOLUTION OF TRADE

Bilateral trade in goods continued to increase in 2018 and EU imports from the Ukraine reached record levels in 2018 of around €18 billion. This is an increase by 8% from 2017, which was another record year of imports into the EU from Ukraine.

EU exports continued to increase, too, and reached around €22 billion in 2018, up by 10% from 2017. For more than 5 years, the EU has had a positive trade in goods balance of €4 billion with Ukraine.

The EU remained Ukraine’s main trading partner, representing 42% of Ukraine’s total trade, with a similar split between imports and exports. Total trade between the EU and Ukraine reached €40 billion in 2018, an increase of close to 9% when compared to 2017. Russia and China are the 2 nd and 3 rd largest trading partners of Ukraine, respectively, followed by Belarus, Turkey and the US. Ukraine is EU’s 21 st largest trading partner.

1.1 Trade in goods overall

Scope of trade liberalisation

The elimination and reduction of customs duties is taking place over a transitional period, which in the case of Ukraine runs until 2026 and will ultimately result in market opening for 96% of tariff lines for products imported from the EU (98% in terms of import value). The EU will open its market earlier than Ukraine, implementing its liberalisation commitments by 2023 for 96% of tariff lines (97.8% 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 Tariff Rate Quotas (TRQ) applied indefinitely by both sides, which foresee annual increases for some products over a five year transition period.

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 between themselves. The EU granted unilateral trade concessions for a three years’ period in 2017. See more details in section 1.4.

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 characterised by a growing share of goods with higher value added. The main product categories, exported by the EU to Ukraine in 2018 were machinery and appliances, chemical products, transport equipment, mineral products, plastics, rubber and articles thereof, textiles and textile articles.

In 2018, Ukraine mainly exported base metals, mineral products, vegetable products, machinery and appliances and wood and charcoal. Ukraine’s export profile is now more diversified than a decade ago when 70% of exports consisted on vegetable products, base metals and mineral products. Today, other categories such as animal products, foodstuff and machinery products, feature much more prominently on the export list. Footwear and articles of stone, although still relatively low have seen exports increasing by more than 50% over the last 10 years.

1.2 Trade in agricultural goods

In 2018, Ukraine continued to be the EUʼs 4 th biggest supplier of agricultural products and the

first origin of agri-food imports among preferential trade partners. However, EU imports of agricultural products from Ukraine increased at a slower pace than in previous years (i.e. a 4% increase between 2017 and 2018, compared to a 32% increase between 2016 and 2017) and reached €5.6 billion. EU agricultural exports to Ukraine increased by 14% to €2.1 billion.

While traditional export products continue to dominate Ukrainian imports into the EU (cereals, oil seeds, animal and vegetable fats and oils represented 73% of Ukrainian agricultural exports to the EU), vegetables and meat products showed considerable increases (278%, 184%, respectively) in 2018. Increase in imports of meat products were due to poultry meat, especially to new chicken cuts which can be marketed, after a minimum transformation, as chicken breast (see further information under section “Progress made, main open issues and follow-up actions”). Imports of these cuts represented 45% of poultry imports from Ukraine in 2018.

EU agricultural exports to Ukraine continued to be more diversified, with significant growth rates especially for beverages, food preparations, dairy products, meats and tobacco products.

Use of Tariff Rate Quotas

For products, which have not been completely liberalised under the DCFTA, tariff rate quotas are in place: 36 tariff rate quotas are granted by the EU, and five tariff rate quotas are granted by Ukraine.

Ukraine was able to fully or nearly fully use the DCFTA tariff rate quotas for wheat, maize, butter, honey, garlic, barley groats and meal, malt, starch, prepared or preserved tomatoes, grape and apple juice, dextrins and glues, finishing agents and one of two TRQs for poultry meat. Other tariff rate quotas remained either not used or used only partially (see table below).

DCFTA TRQs usage for exports by Ukraine to the EU in 2018

Description Volume of Imports in 2018 quota fill

TRQ in

2018 (t) 2018 (t)

Sheep meat 1.800 0 0

Honey 5.400 5.400 100%

Garlic 500 490 98%

Oats 4.000 1.459 36,5%

Sugar 20.070 17.062 85%

Glucose and fructose 14.000 2.228 15,9%

Flavoured sugar syrup 2.000 0 0

Groats, pellets, grains.. 6.900 6.891 99,9%

Malt and gluten 7.000 7.000 100%

Starches 10.000 9.988 99,9%

Dextrins and glues 1.400 1.400 100%

Residues 19.000 8.217 43%

Mushrooms 500 0 0

Mushrooms 500 0 0

Preserved tomatoes 10.000 10.000 100%

Grape and apple juice 14.000 14.000 100%

Buttermilk, cream, yogurt 2.000 443 22%

Dairy spreads 250 0 0

Sweetcorn 1.500 14 0,9%

Fructose, preparations, odoriferous substances 2.400 335 14%

Tapioca, bulgur wheat 2.000 802 40%

Chocolate milk crumb and others 380 16 4,2%

Food preparations 2.000 17 0,9%

Ethyl alcohol 56.200 5.867 10,4%

Cigars, cigarettes 2.500 0 0

Mannitol, sorbitol 100 0 0

Finishing agents 2.000 2.000 100%

Beef Meat 12.000 0 0

Pork Meat (TRQ 1) 20.000 0 0

Pork Meat (TRQ 2) 20.000 0 0

Poultry meat (TRQ 1) 17.600 16.492 93,7%

Poultry meat (TRQ 2) 20.000 9947,708 49,7%

Milk, cream, condensed milk and yogurts 8.800 1279,04 14,5%

Milk powder 2.900 700 24,1%

Butter and diary spreads 2.100 2061,813 98,2%

Eggs and albumins (TRQ 1) 2.100 756,049 36%

Eggs and albumins (TRQ 2) 3.000 997,007 33,2%

Common wheat, flour and pellets 970.000 956.031,084 98,6%

Barley, flour and pellets 290.000 47.531,469 16,4%

Maize, flour and pellets 500.000 538.738,921 100,00% Source: DG AGRI, DG TAXUD

The EU has (nearly) fully used the five TRQs granted by Ukraine to the EU for pork meat and poultry meat. However, the usage of the additional quota for poultry meat and the quota for sugar remain negligible.

DCFTA TRQs usage for exports by EU to Ukraine in 2018

Product Volume of TRQ (t) Used quantity (t) Utilisation rate

Pork 10 000 10 000 100% Pork 10 000 9 995 100%

additional for:

02031110, 02031219,

02031911, 02031915,

02031959, 02032110,

02032219, 02032911,

02032915, 02032959

Poultry meat 8 800 8 800 100%

Poultry meat 10 000 29 0,3% additional for:

020712

Sugar 34 000 677 2%

Source Ukraine authorities

1.3 Autonomous trade measures

In view of the difficult economic and political situation in Ukraine the EU granted it temporary autonomous trade measures (ATMs) for certain agricultural and industrial products for a period of three years, starting on 1 October 2017. These additional trade concessions mean that tariff elimination for 22 industrial products (ammonium sulphate and nitrate, fertilisers, footwear, aluminium and certain electrical machinery) is accelerated and additional Tariff Rate Quotas are granted for 8 agricultural products (common wheat, maize, barley, barley groats and pellets, oats, natural honey, processed tomatoes and grape juice). In 2018, most ATM tariff rate quotas were fully used: wheat, maize, natural honey, barley groats and pellets, prepared or preserved tomatoes.

1.4 Establishment, trade in services and investments

Market access related to establishment and trade in services

The agreement contains the necessary arrangements for the progressive reciprocal liberalisation 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 liberalisation 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) internal market treatment may be envisaged once Ukraine effectively implements the EU acquis and ensures adequate administrative capacity to implement and enforce it. 24

Trade in services

Total trade in services has increased considerably from around €8 billion in 2013 to more than €9 billion in 2017. In 2017, EU exports of services accounted for 70% of total trade in services. EU exports in services increased by more than 20% while Ukraine experienced an increase of 9% in 2017.

Foreign Direct investment (FDI)

The inflows of FDI into Ukraine, particularly from the EU, were relatively low. According to Eurostat, FDI outward flows from the EU to Ukraine amounted to €245 million in 2017, while FDI inflows from Ukraine to the EU were €152 million in the same year. The EU outward FDI stock in Ukraine, which represents the value of EU investors' equity in and net loans to enterprises in Ukraine, declined from almost €14 billion in 2016 to around €12 billion in 2017, largely due to valuation effects. According to the Ukrainian central bank, total inflows of FDI to Ukraine (from all countries) amounted to €2.3 billion (2.2% of Ukraine’s GDP) in 2017 and €2 billion (1.8% of GDP) in 2018, while the outflows of FDI were minimal.

More FDI is needed to diversify the economy and generate more value added production so Ukraine can advance its integration into global value chains, and hence stimulate growth and diversify exports. One of the most important factors in attracting FDI is the rule of law and an effective anti-corruption system. Ukraine has made progress in this field in recent years but a lot still needs to be done.

Another key issue for FDI is macroeconomic stability. Ukraine’s economic recovery continues: after the deep recession in 2014-15, real GDP growth reached 2.5% in 2017 and accelerated to 3.3% in 2018, driven by strong investment activity and private consumption. The unemployment rate has decreased in the wake of the recovery as well as significant labour emigration. Annual inflation has slowed down to below 10% year on year, albeit at the cost of high domestic interest rates (policy rate: 17%). Budget deficits have been reduced since 2014 and the 2018 budget deficit was 2% of GDP. Improving business expectations and a further improvement in financial performance of Ukrainian enterprises should further stimulate foreign investment

1.5 EU support to the implementation of the DCFTA

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 Association Agreement/DCFTA implementation. This includes a substantive package on good governance with Public Administration Reform, decentralization reform and the rule of law including the fight against corruption in the focus sectors, private sector development, fostering of energy efficiency and energy market reforms, support to the conflict-affected areas in Eastern Ukraine, skills development and people-to-people contacts. With an annual

24 The Commission in 2018 notified Ukraine of the amendment to the acquis listed in Annex XVII, which in some cases also envisage revised dates for approximation. Exchanges continue with Ukraine and a formal decision to update the annex is envisaged for 2019.

budget of up to €200 million, €965 million have been allocated bilaterally under the European Neighbourhood Instrument so far.

In addition to regular cooperation assistance, DCFTA implementation is also supported by policy conditionality of the EU’s macro-financial assistance (MFA) to Ukraine. Conditions of the current MFA operation approved in 2018 include anti-money laundering and customs facilitation measures (the adoption of an anti-money laundering law and a law establishing an Authorised Economic Operator programme).

In the area of economic reform, including the implementation of the DCFTA and the related approximation of Ukrainian legislation to the 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 phytosanitary measures, and others. Most significant EU support operations to DCFTA-related reforms currently take place in the areas of customs, food safety and financial services. Ukraine benefits from EU support projects provided through a whole set of assistance modalities, including technical assistance,

twinning and TAIEX projects 25 .

Legal approximation of Ukraine's customs legislation with the EU acquis is about to be supported under the Public Finance Management Support Program for Ukraine (EU4PFM). This technical assistance programme aims to support the legal approximation of customs law with the EU acquis and implement customs reforms in order to facilitate mutual trade.

The EU assists Ukraine with food safety and sanitary and phytosanitary measures in order to align Ukrainian standards to those of the EU. The EU continues to support the 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.

In financial services, a technical project by the EU focuses on financial transparency, stability and better supervision. Another technical assistance project intends to strengthen the regulation and supervision of the non-bank financial market.

The EU supports the 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 furthering regulatory harmonisation between the EU and Ukraine in the area of technical barriers to trade, including through a twinning project with the Ukrainian standardisation body.

Alignment of Ukraine's national competition legislation with EU standards is being supported by a twinning project. In the perspective of the introduction of domestic rules on state aid control in the Ukraine, a further technical assistance project is aiming to build institutional capacities and effective state aid control bodies.

1.5 EU support for Small and Medium sized Enterprises (SMEs)

SMEs in Ukraine are benefitting from EU support under the DCFTA Facility for SMEs, which aims at increasing SMEs competitiveness, easing their access to finance, helping them

25 https://ec.europa.eu/neighbourhood-enlargement/tenders/taiex_en

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 programs implemented principally by European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).

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 significant technical assistance to authorities on SME policy, better regulation and the improvement of inspection services: FORBIZ including the Better Regulation Delivery Office (BRDO) and the Small-and Medium Enterprise Development Office (SMEDO), and EU4Business: From Policies to Action (OECD).

2 A CTIVITIES OF THE IMPLEMENTATION BODIES

2.1 Joint decisions of the Association Bodies

Decision 1/2018 26 of the EU-Ukraine Customs Sub-Committee was adopted on 21 November

2018, replacing Protocol I to the EU-Ukraine Association Agreement, concerning the definition of the concept of “originating products” and methods of administrative cooperation with the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention).

2.2 Meetings of the Association Bodies

The third Association Committee in Trade configuration (ACTC) was held 22-23 November 2018 in Kyiv. The meeting allowed for a useful exchange of views and information on the state of play of implementation under the different chapters of the agreement as well as on the evolution of bilateral trade over the past year. The ACTC also adopted its operational conclusion for 2019.

In relation to customs and trade facilitation, Decision 1/2018 of the Customs Sub-committee, referred to in section 2.1 above is an important achievement to further facilitate trade and it will allow diagonal cumulation with other partners to the Regional Convention on pan-Euro Mediterranean preferential rules of origin (PEM) with whom Ukraine has a free trade agreement, Norway for example. Ukraine’s accession to the Conventions on a Common

Transit Procedure 27 and the Convention on Simplification of Formalities in trade in goods, as

well as the setting up an Authorised Economic Operator (AEO) Programme are still ongoing and foreseen under the Association Agreement. The EU provides significant support, assistance and expertise to help Ukraine in its efforts to accede to the conventions and setting

26 OJ L 20, 23.1.2019, p. 40.

27 The Convention of 20 May 1987 on a common transit procedure forms the basis for the movement of goods between the EU Member States, the four EFTA countries (Iceland, Norway, Liechtenstein and Switzerland), Turkey, North Macedonia and Serbia.

up the AEO, which will simplify, ease and facilitate the movement of goods between countries.

The EU expressed its concern about the lack of progress on intellectual property rights and encouraged laws to be adopted to properly implement the intellectual property rights Chapter of the DCFTA and strengthen enforcement to reduce counterfeiting and piracy. On geographical indications (GIs), the two Ukrainian GIs protected under the DCFTA have been included in the E-Bacchus 28 database. Ukraine agreed to undertake during 2019 the necessary work with the Ukrainian industry in order to develop a new name for “Cognac of Ukraine” and to modify the recently adopted ‘rules of production of Cognac of Ukraine’, clearly stating that these rules shall be applied no later than the expiry of the 10-year transition period provided by the Association Agreement, i.e. no later than 2026.

EU provided an overview of the state of play of notifications on amendments to EU legislation on the four services sectors; postal and courier services, telecommunication, financial services and international maritime transport services. Ukraine will submit its comments during the first half of 2019 following which, a consolidated list of legislation will be drawn and a formal decision to amend Annex XVII will be adopted.

EU welcomed the updated roadmap on postal and courier services from March 2018, which would serve as a good guideline for approximation and alignment to EU legislation. Ukraine indicated that draft legislation with a view to aligning with Directive 97/96 was underway and would be submitted to the EU.

EU reiterated its concerns about the wood export ban which was still in place as well as the value added tax law 2440 that restricted the exports for rapeseed and soybeans. Several other

topics on RAPEX 29 , road transport, the list of arbitrators for the bilateral dispute settlement

mechanism, competition and state aid, poultry imports and certificates and documentation for metal scrap exports were also discussed. The details of the discussions on SPS and TSD are reported below.

The Sanitary and Phytosanitary Management Sub-Committee held its third meeting on 16 November 2018 via video conference, however both parties have regular meetings on SPS issues to keep track of the developments and interfere where issues arise. During the meeting, the Ukrainian authorities presented progress on the implementation of the operational conclusions from the previous Sub-Committee meeting of October 2017 and updates as regards the implementation of the DCFTA SPS Chapter as well as on institutional reforms. The EU informed about the marketing standards it has in place for the import of shell eggs.

Parties discussed the final steps to be made in order to adopt Annex V of the Association Agreements that lists the EU SPS legislation and the deadlines as to when Ukraine should have concluded the approximation per act. Parties reached a technical agreement on this annex and discussed their internal procedures that have to be followed in order for the SPS Sub-Committee to finally adopt this important document.

28 E-Bacchus is a database that, among other things, lists non-EU countries' geographical indications and names of origin protected in the EU in accordance with bilateral agreements on trade in wine concluded between the EU and the non-EU countries' concerned.

29 EU Rapid Alert System for non-food and feed products.

Due to the importance of SPS in general and the Ukrainian commitment in the Association Agreement in particular, the SPS sector will remain a core sector in its bilateral cooperation with Ukraine for the years to come. Two projects of a combined value of around €5 million are foreseen in 2019.

The Commission carried out an audit on the control system for poultry meat and informed that a follow-up audit would be carried out in 2019 to verify whether the shortcoming that had been identified had been rectified accordingly. The next meeting is planned for the first half of 2019.

3 I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

DEVELOPMENT

The second Trade and Sustainable Development (TSD) Sub-Committee between the EU and Ukraine was held on 13 November 2018 in Kyiv, followed by an open Civil Society Forum on 14 November 2018 during which members of the EU Advisory Group were able to meet the newly established Ukraine Advisory Group for the first time. The meeting of the Sub-Committee enabled a first substantial exchange on TSD labour provisions. It notably discussed labour inspections as a cross-cutting issue for all labour standards, revision of the labour legislation to address compliance gaps with several ILO fundamental conventions as well as recent issues around trade-unions’ rights. The EU notably called for action to bring the current labour inspection system fully in line with the relevant ILO conventions. An EU- funded ILO project is making a positive contribution to strengthening the Ukrainian labour inspection system and the EU encouraged Ukraine to take full advantage of this support. The operational conclusions of the TSD Sub-Committee and its joint statement to civil society are

available online 3031 and contains additional valuable information. They highlight the key areas

of EU-Ukraine TSD implementation work, including on trade and labour issues (labour inspection, modernisation of labour relations, social dialogue) as well as trade and environmental issues (sustainable forest management and related wood production, sales, processing and trade).

In line with the TSD 15-point action plan of February 2018, in particular its theme of “working together”, EU Member States were regularly updated both in Brussels through TSD expert group meetings and on the ground in Kyiv via the EU Delegation on TSD matters and were asked for inputs and feedback, for example regarding ongoing projects benefiting TSD implementation in Ukraine.

In 2019, Ukraine is expected to select its experts for the TSD list of experts. A panel composed of experts from that list would be sought for advice in cases of disputes over TSD matters between the EU and Ukraine.

4 P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

4.1 Wood export ban

Ukraine has not made any efforts in removing the wood export ban despite repeated requests by the EU at all levels and instances, and repeated promises by Ukraine to solve the problem.

30 http://trade.ec.europa.eu/doclib/docs/2018/november/tradoc_157498.11.2018%20final.pdf 31 http://trade.ec.europa.eu/doclib/docs/2018/november/tradoc_157499.11.2018%20final.pdf

The EU consequently submitted on 15 January 2019 a formal request for dispute settlement consultations with regard to certain Ukrainian export restrictions on wood pursuant to Article 305 of the Association Agreement. This request is publicly available and can be found on DG TRADE’s web site . During the ensuing bilateral consultations held on 7 February 2019 in Kyiv, Ukraine provided useful information and replies to the questions prepared by the EU but the consultations essentially confirmed the Commission’s legal assessment of the measures at stake as well as their economic and political background. The EU will carefully consider the next steps. The EU explained to Ukraine that the wood export ban could not be considered as an appropriate forest preservation measure and does not appropriately address the challenges of the forestry sector in Ukraine as regards corruption and illegal business activities. The EU has always been a staunch supporter of efforts to develop a sustainable forest management in Ukraine and have provided support and assistance and continues to do so.

4.2 Value added tax law 2440

In 2018, Ukraine adopted a law 2440 on the cancellation of value added tax. The law denies, for certain exporters, the refund of the value added tax upon export of rapeseed and soybeans. The law sets out that exporters, when exporting soybeans from 1.9.2018 to 31.12 2021 and rapeseed from 1.1.2020 to 31.12.2021 will not be reimbursed for the value added tax. This has a negative impact on most stakeholders, in particular processing plants in the EU (for whom the cost of Ukrainian grains increases), EU and Ukrainian traders without Ukrainian production but also Ukrainian farmers who face lower domestic prices. This is a measure that appears incompatible with the provisions of the Association Agreement and Ukraine’s Protocol of Accession to the WTO. The EU has on several occasions, at both technical and Ministerial level, raised concerns about this measure and encouraged Ukraine to take the necessary steps to end it.

4.3 Poultry meat imports

The imports of a new type of poultry cut continued its increase in 2018. This novel cut consists of a traditional breast cap with the humerus bones and, after a minimal transformation, this cut can be marketed in the EU as poultry breast. The rapid increase in duty free imports of this particular poultry cut, which was neither existent nor foreseeable during the negotiations of the agreement, risk undermining the protection provided for poultry breast. The EU held working consultations with Ukraine during the summer 2018 and on 20 December 2018, the Council authorised the Commission to open negotiations with Ukraine with a view to find a solution by amending the trade preferences for poultry meat and poultry meat preparations. The negotiations held in January, February and March 2019 resulted in an agreement to include the poultry cuts in question into the existing quota, reintroducing the most favoured nations duty of €100.8 /100kg net and finally to increase the existing poultry quota for Ukraine. Actual imports from Ukraine of these particular poultry cuts reached 55,000 tonnes in 2018.

4.4 Technical barriers to trade

The dialogue on technical barriers to trade that took place in March 2019 allowed the exchange of detailed information allowing for the assessment of the Ukrainian legislation, the quality infrastructure institutions, their effectiveness and their preparedness to implement EU legislation in the field of technical regulations. Ukraine is making substantive progress to align its regulatory framework and standards with the EU, however work still needs to be completed on standardisation. Legislative work is still pending in Verkhovna Rada in respect to the amendments of two laws (on Technical Regulations and on Market Surveillance). Furthermore, implementation and enforcement of Ukrainian legislation transposing the EU acquis by relevant institutions must be strengthened, in particular in the area of market surveillance where significant further efforts are needed to meet EU requirements. Work will continue bilaterally to review progress achieved before the next plenary session of the High Level Industrial and Regulatory Dialogue.

4.5 SPS aspects

Ukraine has committed to approximate its SPS and animal welfare legislation to that of the EU – in an ongoing process already undertaken by Ukraine with assistance and support from the EU. The specific details concerning the timeline of approximation with regard to individual EU legal acts was not included in the DCFTA and was to be agreed by the sides in the comprehensive SPS strategy. Both sides expect to be able to formally adopt the SPS strategy in 2019. The SPS Strategy contains more than 240 acts of EU legislation for approximation by Ukraine and according to a recent examination 170 acts have already been approximated or are in the process of approximation.

The EU informed Ukraine about the marketing standards it has in place for the import of shell eggs, which require imported eggs to be labelled as ‘non-EU compliant’ until equivalence has been recognised, which includes compliance with the EU animal welfare requirements. Further audits with favourable results have been conducted by the Commission on the official oversight by Ukraine of the poultry industries regarding animal health and food safety aspects.

The parties also made progress on the establishment of harmonised certificates that will apply to all EU Member States for their exports of animal products to Ukraine. Talks on the certificates for gelatine/collagen have been finalised and certificates for poultry products are in the final stages of negotiation. Ukraine is about to publish ‘Order 71’ that lists Ukraine’s import requirements on animal products and allows for favourable treatments of EU products.”

The parties discussed the implementation of the article in the Association Agreement on diseases and pest regionalisation and the EU requested that Ukraine expand this to diseases other than highly Pathogenic Avian Influenza (HPAI) and New Castle Disease (NCD), for which Ukraine conducted an audit of the performance of EU-control measures (e.g. concerning African swine fever carried out by Lithuania).

Ukraine requested the EU to finalise procedures leading to the recognition of equivalence of Ukrainian seed production and control systems for which all technical preparations have been concluded.

Ukraine informed the EU about its interest to start exporting ware potatoes whereas the EU inquired about imports of Ash wood from Ukraine and requested information about monitoring systems Ukraine should have put in place to timely detect outbreaks of the emerald ash borer (Agrilus planipennis) and methods to prevent its spread to the EU.

4.6 Customs and Trade facilitation

Ukraine is working on topics to further facilitate trade and cross border cooperation with the EU through the possibilities already foreseen under the agreement. Ukraine has taken steps to introduce the Authorised Economic Operator (AEO) programme, which helps improve customs clearance and facilitate external trade and the draft law to that effect is currently in the Parliament pending for the second reading. Ukraine has also drafted a law on implementing the provisions to accede to the Convention on a Common Transit Procedure, which pending its consideration in the Parliament. Similar progress is made for accession to Convention on the Simplification of Formalities in Trade. In relation to Ukraine’s approximation to the Union Customs Code as foreseen under Annex XV and chapter 5 on Customs and Trade Facilitation, the first exchanges are foreseen in 2019 and, once finalised, the annex will be formally updated. Ukraine is a member of the PEM Convention on preferential rules of origin and once the relevant legislation in the EU is updated the PEM Convention will apply. These are important initiatives foreseen under the agreement which will help trade flow faster, easier and safer.

4.7 Intellectual property rights (IPR)

Throughout 2018, implementation results of the ambitious commitments in the DCFTA on alignment of Ukraine's system of protection and enforcement of intellectual property rights (IPRs) were limited. The law on collective rights management in force since July 2018 was reviewed by the Commission, which identified several serious shortfalls that need to be addressed. The Ministry of Economic Development and Trade established an expert group for the preparation of a new draft Law on Copyright and Related Rights, which will also address the CMO law shortfalls. The European Commission follows closely and supports the endeavours of this expert group. Another bill aimed to improve the distribution of copyrighted material was adopted by the Parliament of Ukraine in September 2018. Regrettably, many bills presented by the government as the IPR reform package contain problematic provisions and need to be carefully revisited to solve existing problems in the area of IPR and to become in full compliance with the DCFTA requirements. In particular, the draft patent bill needs to make sure that no limitations to the patentable subject matter that are contrary to the DCFTA and TRIPS are introduced. Throughout 2018 the EU provided inputs and comments to several draft laws, including on IPR Border Measures which has still not been adopted by the deadline established by the Association Agreement, Article 250 (by 1 January 2019). Furthermore, the Ukrainian legislation does not include adequate provisions ensuring effective enforcement of IPR rights; they are particularly unfit for enforcement in the digital environment. 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 Commission is following this closely and is in a constructive dialogue with the Ukrainian authorities.

4.8 Geographical indications (GIs)

In 2018, the draft Law "On amendments to a number of legislative acts of Ukraine to improve legal protection of geographical indications" passed its first reading on 13 March 2018 and was approved for the second on 4 July 2018. Despite having been on the agenda of the parliament since September 2018 the draft law has not been adopted yet. Furthermore, three additional draft laws were prepared and harmonised with EU legislation, respectively "on GIs for Agricultural Products and Foodstuffs", "on GIs for Spirit Drinks" and "on GIs for Wine and Aromatized Wine Products". The structure for the Law "on Viticulture and Production of Wine Products" has also been finalised in line with new EU regulations and should now be discussed with the Ministry of Agrarian Policy and Food (MAPF) of Ukraine.

Eight hackathons were organized throughout the country in order to determine a new name that could replace “Cognac of Ukraine”. After a series of additional consultations, a list of 10 most popular brands were proposed to the MAPF for further consideration, in collaboration with the Industry.

A first cheese GI Association called “Association of producers of traditional Carpathian highland bryndzya” was established and officially registered on 31 August 2018. The specifications of “Hutsul sheep bryndzya” was developed and approved by the members of the producers association and the full dossier for application for registration of the PDO was sent to the Ministry of Economic Development and Trade on 19 December 2018.

4.9 Competition and State aid

In 2018 the Antimonopoly Committee of Ukraine (AMCU) continued drafting substantive and procedural rules in the field of antitrust and merger control. Several of these key drafts – such as guidelines on market definition and the concept of dominance - cannot however be adopted without amending the Ukrainian law on competition. Regarding the latter, AMCU continues working on draft amendments but it remains unclear if they will be submitted and adopted before the next Parliamentary elections in autumn 2019. In addition, AMCU and the EU national competition authorities have worked on a comparative analysis of EU and Ukrainian competition law. The EU expects that the findings will lead to a structured and holistic approach to continue legal approximation. Finally, there is a need to increase the rigour of the enforcement of competition rules in individual cases.

The State Aid rules in place have partially allowed controlling state aid by the Ukraine. This period has been useful for gaining experience on case enforcement. There is however a need to smarten up rules in view of addressing the main misalignments in the Law on State Aid, improving and simplifying the compatibility guidelines and shifting efforts from small to big cases. The quality of the State Aid decisions also needs to improve, notably as regards structure and substantiation. The government should also introduce mechanisms to ensure that large grantors notify state aid provided.

4.10 Public procurement

The Commission has continued its assistance and its active involvement with the Ukrainian authorities to progress towards building a transparent, non-discriminatory, competitive and open public procurement system. Discussion on public procurement between the EU and Ukraine also takes place in the Public Procurement Working Group of the High Level Industrial Dialogue that takes place annually. Intense cooperation between the EU and Ukrainian authorities, and through broad support and assistance by the EU throughout 2018, has helped Ukraine in drafting a new law on public procurement that intends to meet the requirements for legislation approximation under phase two of Annex XXI of Chapter 8 of the Association Agreement. This approximation process in different phases foresees gradual mutual market opening to each other’s public procurement market when conditions of the given phase have been met. The draft law is intended to be submitted to the Ukrainian Parliament in 2019.

5 C ONCLUSIONS AND OUTLOOK

In terms of trade, the DCFTA delivers. Trade in both directions continued to increase in 2018 and Ukrainian exports to the EU have reached their highest level ever. The EU has consolidated its position as Ukraine’s main trading partner representing around 42% of its trade.

On legal approximation, there is in general good progress in many areas, including a commitment by Ukraine to approximate legislation, harmonise standards and carry out reforms. At the same time, serious concerns remain about old and new trade irritants such as the wood export ban, the value added tax law 2440 and laws on intellectual property rights. Ukraine needs to step up efforts against counterfeiting and piracy and to align its enforcement laws on intellectual property rights and do more to remove existing trade irritants, including ensuring that no new irritants emerge. Implementation of DCFTA commitments, reforms and approximation are advancing steadily and are closely monitored and supported by the Commission. Ukraine should be encouraged to continue its reform process, which is the best way to fully benefit from the agreement.

6 S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Ukraine (mio €)

Imports 13.734 12.844 13.182 16.683 18.002 Exports 16.995 14.033 16.568 20.196 22.128 Balance 3.262 1.190 3.386 3.513 4.127 Share Ukraine in EU28 trade with Extra-EU28

Imports 0,8% 0,7% 0,8% 0,9% 0,9% Exports 1,0% 0,8% 0,9% 1,1% 1,1% Total (I+E) 0,9% 0,8% 0,9% 1,0% 1,0% Share EU28 in trade Ukraine with world

Imports 38,7% 40,9% 43,7% 42,2% 41,0% Exports 31,6% 34,1% 37,2% 40,7% 42,3% Total (I+E) 35,2% 37,5% 40,6% 41,5% 41,6%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Ukraine: IMF Dots

Total merchandise trade EU28 with Ukraine (mio €)

Growth

Ukraine 2017 2018 annual

mio € %

Imports 16.683 18.002 1.318 7,9%

Exports 20.196 22.128 1.932 9,6%

Balance 3.513 4.127 613

Total trade 36.880 40.130 3.250 8,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Ukraine (mio €)

Growth

Ukraine 2017 2018 annual

mio € %

Imports 5.415 5.617 202 3,7%

Exports 1.813 2.064 251 13,8%

Balance -3.602 -3.553 49

Total trade 7.229 7.681 452 6,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Ukraine (mio €)

Ukraine 2017 2018 Growth annual

mio € %

EU28 imports 11.268 12.385 1.117 9,9% EU28 exports 18.383 20.064 1.681 9,1%

Balance 7.115 7.680 564

Total trade 29.651 32.449 2.798 9,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Ukraine (mio €)

Growth

Ukraine 2016 2017 annual

mio € %

Imports 2.628 2.864 236 9,0%

Exports 5.508 6.677 1.169 21,2%

Balance 2.880 3.814 934

Total trade 8.136 9.541 1.405 17,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Ukraine (mio €)

2013 2014 2015 2016 2017

Imports 2.912 2.684 2.724 2.628 2.864

Exports 5.061 4.710 5.105 5.508 6.677

Balance 2.149 2.027 2.381 2.880 3.814

Total trade 7.973 7.394 7.829 8.136 9.541

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Ukraine (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 501 193 602 211 263

Outward 19.623 17.729 12.068 13.998 12.630 FDI Flows

Inward 135 129 208 79 152

Outward 169 -1.880 756 -252 245

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND GEORGIA

The Deep and Comprehensive Free Trade Area (DCFTA) of the EU-Georgia Association Agreement (AA) 32 entered into force on 1 July 2016 after being applied on provisional basis since 1 September 2014. 33 This is the third report on the implementation of the EU-Georgia DCFTA. It responds also to the requirements of the Regulation implementing the anticircumvention mechanism provided for in the EU-Georgia Association Agreement. 34

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- 35 2017, outlining the priorities of the Association Agenda, planned activities related to each priority with indicators, responsible implementing institutions and timeframe for implementation.

• 1. 

  E VOLUTION OF TRADE

1.1 Trade in Goods overall

The scope of trade liberalisation

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, for which market access has also improved. In this context, the EU granted duty-free Tariff Rate Quotas for garlic originating from Georgia and, for 28 agricultural products (including fruits and vegetables) that are subject to entry prices, the EU 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, starches and sugars as well as to processed agricultural products such as: sweetcorn, processed sugars and cereals and cigarettes.

32 The EU-Georgia Association Agreement was published in OJ L 261, 30.08.2014. http://eur href="http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:261:FULL&from=EN">lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:261:FULL&from=EN

33 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.

34 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.

35 See http://www.dcfta.gov.ge/en/implementation

The 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 liberalisation of customs duties in bilateral trade.

Overall evolution of EU–Georgia trade in goods

In accordance with 2018 Eurostat data, the EU is the most important trade partner of Georgia with 27% share in its overall trade (22% in total export and 29% imports) and is followed by Turkey (14%), Russia (11%), Azerbaijan (9%), and China (8%). Georgia is the EU’s 77th trade partner and accounts for only 0.1% of its total trade.

In 2018 the overall trade between the EU and Georgia increased on year-on-year-basis by 3% and amounted to €2.8 billion. EU exports to Georgia increased in that time by 4 % while EU imports from Georgia noted a decrease of 1.6% compared to 2017. The top 5 products (mineral products, foodstuffs, beverages, tobacco, base metals, products of chemical or allied industries, and textiles and textile articles) account for 85 % of total Georgian exports to the EU.

In the analysed period the surplus in EU trade with Georgia has increased from €1.35 billion to €1.46 billion.

Sectoral structure of EU-Georgia trade in goods

As concerns the structure of EU exports to Georgia in 2018, 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 2018 in comparison to 2017 were as follows:

Machinery and appliances amounted to 21 % of overall EU exports to Georgia and increased by 17%; mineral products – 18%, decrease by 7%; products of chemical or allied industries - 17%, decrease by 7% (pharmaceutical products represented the largest proportion of EU exports to Georgia in this category, accounting for 10%). Other products categories that showed an increase in EU exports are optical and photographic instruments and prepared foodstuffs.

In terms of structure of EU imports from Georgia in 2018, the most important product categories were: mineral products, fruit and vegetables (notably nuts), base metals and chemical goods.

The following shares and dynamics in 2018 comparing to 2017 were observed: Mineral products accounted for 51 % of the total EU imports from Georgia and decreased by 2%; foodstuffs, beverages, tobacco accounted for 12% and increased by 29% (this is mainly due to an increase in beverages, spirits and vinegar (+38%); base metals and articles thereof accounted for 8% and decreased by 9%; products of chemical or allied industries accounted for 8% and decreased by 4%; textiles and textile articles accounted for 6% and decreased by 13%; other categories of products that have shown an increase in EU imports from Georgia are plastics and rubber and machinery and appliances.

1.2 Trade in agricultural goods

In 2018, EU imports of agricultural products from Georgia remained stable. Beverages, spirits and vinegar accounted for 53% of the EU's agri-food imports from Georgia in 2018, followed by fruit and nuts with 27%. EU exports of agricultural products to Georgia also remained stable over the same period. The EU's key agri-food exports to Georgia consisted of beverages, spirits and vinegar (24%), sugars and sugar confectionary (10%) and food preparations, chocolate, confectionery & ice cream (9%).

Throughout the first four years of DCFTA implementation Georgia started to export some new products to the EU e.g. kiwi fruit, blue berries and honey. This shows a potential of the DCFTA to attract new product categories to be commercialised on the markets of both Parties.

1.3 Use of Tariff Rate Quotas (TRQ)

In 2018, the annual duty-free Tariff Rate Quotas of 220 tonnes the EU offers for Georgian garlic was used to a minimum extent (0,5%), mainly due to market forces.

1.4 Establishment, trade in services and investments

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 liberalisation 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 recognised the importance of gradual approximation (over a period of 4 to 8 years) 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 liberalising 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.

Trade in services

Trade in services between the EU and Georgia has more than doubled between 2006 and

2017, both in terms of imports and exports. As Georgian exports are growing faster than EU

exports, EU positive trade balance has been gradually decreasing. Total trade in services

between the Partners increased by 22% from €704 to €857 million.

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.

Foreign Direct investment

In 2017 Foreign Direct investment (FDIs) stocks in Georgia originating from the EU

accounted for €1.6 billion (no change compared to 2016). The top three EU Member States

investing in Georgia include the United Kingdom, the Netherlands and the Czech Republic.

Inward FDIs flows in that year amounted to €150 million, which is a considerable increase

from the €37 million registered in 2016.

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 2019 World Bank Doing Business Index Georgia is on 6th position amongst 190 countries. In the 2018 Transparency International – Corruption

Perception Index Georgia appeared on 41st position among 180 countries.

• 2. 

  A CTIVITIES OF THE IMPLEMENTATION BODIES

2.1 Joint decisions of the Association Bodies

In 2018, the following amendments/updates were made to 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); 36  Standardisation: Annex III (rules applicable to standardisation, accreditation,

conformity assessment, technical regulation and metrology); pending signature

of the Joint Decision

 Public Procurement: Annex XVI (public procurement); pending signature of

the Joint Decision

36 OJ L 100, 19.4.2018.

2.2 Meetings of the Association Bodies

The 5 th meeting of the EU-Georgia Association Committee in Trade configuration was

held on 17-18 December 2018 in Brussels. The meeting provided an opportunity to review all

issues related to the comprehensive, timely and inclusive implementation of the EU-Georgia

DCFTA. The 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 four years of implementation of

the DCFTA. The Georgian side requested EU assistance in drafting a roadmap on identifying

products and services with export potential to the EU market.

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, Trade and

Sustainable Development and instructed the specialised 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 small and medium-sized enterprises (SMEs) to align with the acquis

and reap the benefits from the Agreement.

The 4th Customs Sub-Committee met in Brussels on 20 March 2018. The discussion

focused on the following matters: developments in customs legislation and procedures,

including the approximation process (Annex XIII of the Agreement), customs enforcement of

intellectual property rights, Georgia's accession to the Convention on a Common Transit

Procedure – preparatory phase to the Twinning Project, Mutual Administrative Assistance in Customs Matters, and World Customs Organisation matters, as well as rules of origin, linkage

to the pan-Euro-Mediterranean Convention (PEM) on rules of origin. The Joint Decision on

the linkage of the rules of origin in bilateral trade to the Protocol of PEM Convention was

adopted during the meeting. This allowed for diagonal cumulation to come into force between

the EU, Georgia and the Republic of Turkey as of June 2018. The parties confirmed the

harmonisation of Georgian legislation with the EU Regulation 608/2013 i.

The 4th Sub-Committee on SPS measures (SPS Sub-Committee), met on 17 October 2018

in Tbilisi, Georgia. During the meeting, the Georgian authorities presented progress in the

implementation of the operational conclusions from the previous Sub-Committee meeting of

October 2017 and updates as regards the implementation of the DCFTA SPS Chapter and institutional reforms. The EU underlined the importance for Georgian authorities to meet the

deadlines foreseen in Annex XI-B of the Association Agreement and to allocate human

resources in order to meet this priority. Parties discussed the need to make some slight

changes to the before mentioned Annex given amendments to the legal acts at the EU side.

Georgia gave detailed insights on the approximation process and the progress made.

The EU stressed the importance of providing regularly Tables of Correspondence that indicate

the transciption of EU rules and standards into Georgian legalisation at article level. Georgia hailed the assistance that has been provided by the EU over the last years under the

Comprehensive Institutional Building Program (CIB) and asked this to be continued. Parties

also had exchanges of thoughts about animal products from Georgia that would have potential

for future exports to the EU. Sectors that were mentioned were dairy, poultry and more exotic food products such as snails. However parties recognised that possible authorisations would

require significant preparations and hence serious commitments form the Georgian

government and the private industries. Finally the EU gave a presentation on the concept of

protected zones and plant passport and parties discussed the possible relevance for Georgia.

The 3 rd Geographical Indications Sub-Committee meeting 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 updates on EU as well as Georgian Geographical

Indications (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 Geographical Indications Annexes to the DCFTA.

• 3. 

  I MPLEMENTATION OF THE PROVISIONS ON TRADE AND SUSTAINABLE

  DEVELOPMENT

The 3rd TSD Sub-Committee took place on 26 March 2019. During the meeting, the EU and

Georgia reaffirmed their commitment to implement the TSD Work Plan 2018-20 agreed in June 2018, and reviewed the state of play of the areas covered. Accordingly, the Sub

Committee reviewed the implementation of the labour provisions of the TSD Chapter,

including the ratification and effective implementation of the ILO conventions and Decent

Work Agenda. The EU welcomed the adoption of the revised Georgian Occupational Safety

and Health (OSH) law and on-going strengthening of the Labour Inspection Department’s capacity as further steps towards aligning supervision and control in this area with

international and EU standards. The EU also took note of the plans to further developing the

Department to ensure supervision and control of labour legislation. The state of play relating

to the implementation of the environmental provisions of the TSD Chapter, including the

implementation of multilateral environmental agreements (MEAs) and their joint efforts and

cooperation to support multilateral environmental governance. Regarding climate change, the Parties recalled that, collectively, Nationally Determined Contributions (NDC) submitted by

the Parties under the Paris Agreement and current emission trajectories fall far short of what is

required to achieve the long-term goals of the Paris Agreement and discussed their respective

strategies on greenhouse gas emission. In addition, the EU emphasised the need for close

cooperation with civil society and highlighted the project it has put in place to support the functioning of civil society consultation mechanisms established under TSD chapters of its trade agreements. First workshop to build the capacity of the Domestic Advisory Groups was

also organised in the margins of the TSD subcommittee. An open Civil Society Forum was also organised during which the EU and Georgia presented the TSD Sub-Committee’s Joint

Statement and replied to the questions posed by the EU and Georgian Domestic Advisory

Groups.

• 4. 

  S PECIFIC AREAS SUBJECT TO REPORTING OR MONITORING

Anti-circumvention mechanism

For none of the products under the anti-circumvention mechanism the respective trigger levels

were exceeded in 2018, due to the low trade levels for those products. It is worth noting that

in the analysed period there were no or very little import of products to be potentially affected by anti-circumvention mechanism.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

The approximation commitments for 2015-2018 have not been entirely implemented to date.

These concern inter alia 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 (adopted in 2017); the completion of the first phase of the Public

Procurement Roadmap (pending); four EU directives under telecommunication; as well as the

approximation of Georgian law to EU legal acts on anti-money laundering (the 3 rd Directive

on anti-money laundering was due in 2017. However, its approximation has been overtaken

by events as the 4 th and 5 th Directives on anti-money laundering have been adopted. Georgia is working on the implementation of the 4 th Directive. 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 intensified 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 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.

The European Commission and the Georgian government held a ministerial meeting in November 2018 where Georgia’s trade potentials were discussed also with respect to

agricultural and food products. The EU again expressed its willingness to support the country

but also underlined that EU food and feed safety standards cannot be compromised. Ideas

were raised to establish closer relations of Georgian authorities with the European Food

Safety Authority that could help the country to align to the EU food safety systems.

In 2019, the Commission launched a process to verify Georgia’s efforts on approximating to

the EU legislation regarding sanitary and phytosanitary measures.

Technical Barriers to Trade

Georgia is on schedule with the approximation of legislation on market surveillance of

industrial and consumer products. The legislation on industrial products has been adopted and

the legislation on consumer products is being drafted. The twinning project launched in the

beginning of 2018 helps the young Technical and Construction Supervision Agency (TCSA)

to contribute to the approximation of legislation, apply relevant institutional changes and build capacity of the staff, especially in order to effectively implement the adopted legislation.

In 2018, TCSA made progress in capacity building and training on surveillance and

contributed to drafting regulations on risk assessment methodology for market surveillance

activities and cooperation between market surveillance authorities.

Public Procurement

The institutional part in public procurement approximation has been partially accomplished . 37

The setting up of the impartial and independent review body is still pending. Discussions are

ongoing for both Parties to formally adopt a roadmap developed by the Georgian side. The

roadmap will be a point of reference and facilitate the implementation of the Public

Procurement Chapter of the DCFTA, including on the step by step 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.

37 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 and 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.

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 DCFTA. 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. As one of the deliverables of the

meeting between the Government of Georgia and the Commission on 21 November 2018, the Commission decided to allocate resources to a cooperation programme between the Georgian

Intellectual Property Centre (Sakpatenti) and the European Intellectual Property Office,

aiming at e.g. aligning the Georgian laws and standards concerning registration and

management of IP rights with EU norms and standards.

Rules of Origin

On 1 July 2017 Georgia joined the Convention on pan-Euro-Mediterranean preferential

rules of origin . 38 The joint Decision on the linkage of the rules of origin in bilateral trade to

the Protocol of PEM Convention 39 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. (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

modernisation 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 Association Agreement/DCFTA to be

able to be applied in those areas.

38 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

39 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.

• 6. 

  EU SUPPORT TO DCFTA IMPLEMENTATION

EU Support to DCFTA-related reforms

The EU supports 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 DCFTA (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 Twinning projects by Member States to share their experience in the transciption of EU law.

DCFTA implementation is also supported by policy conditionality of the EU’s macrofinancial assistance (MFA) to Georgia. Conditions of the current MFA operation approved in 2018 include public procurement and labour market measures (the establishment of an independent review body in the area of public procurement and the completion of the employment-related legal framework).

An EU Twinning Project “Supporting the Accession of Georgia to the Conventions on Transit Area and Launching New Computerized Transit System (NCTS)" launched by the consortium Finland-Poland-Latvia in March 2018 aims to support the Revenue Service, Ministry of Finance of Georgia.

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 European

Bank for Reconstruction and Development and European Investment Bank. 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).

• 7. 

  C ONCLUSIONS AND OUTLOOK

After four years of the DCFTA implementation 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 in the EU created a relatively fragile but positive external environment for

Georgia’s trade in 2018.

The EU is constantly encouraging and assisting Georgia to accelerate the necessary

reforms, notably in the SPS area, as these reforms 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 in the 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. standardisation and metrology infrastructure; accreditation and surveillance system), SPS (notably in institutional capacity building in food safety control) as well as in promotion of

producers organisations, value chain optimisation and the SMEs development. Improving the

enforcement and governance of labour standards and working conditions is an important

factor for Georgia to fully reap the benefits of the DCFTA and of the Assocation Agreement.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Georgia (mio €)

Imports 659 735 521 663 653 Exports 1.909 1.846 1.969 2.018 2.114 Balance 1.250 1.111 1.448 1.355 1.460 Share Georgia in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Georgia with world

Imports 27,6% 32,6% 30,4% 27,7% 28,8% Exports 21,7% 29,3% 26,8% 24,0% 21,8% Total (I+E) 26,1% 31,9% 29,6% 26,7% 26,9%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Georgia: IMF Dots

Total merchandise trade EU28 with Georgia (mio €)

Growth

Georgia 2017 2018 annual

mio € %

Imports 663 653 -10 -1,5% Exports 2.018 2.114 95 4,7% Balance 1.355 1.460 106

Total trade 2.682 2.767 85 3,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Georgia (mio €)

Growth

Georgia 2017 2018 annual

mio € %

Imports 118 116 -1 -1,1%

Exports 247 247 0 -0,2% Balance 130 130 1

Total trade 365 363 -2 -0,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Georgia (mio €)

Growth

Georgia 2017 2018 annual

mio € %

EU28 imports 546 537 -9 -1,7%

EU28 exports 1.771 1.867 96 5,4% Balance 1.225 1.330 105

Total trade 2.317 2.403 87 3,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Georgia (mio €)

Growth

Georgia 2016 2017 annual

mio € %

Imports 287 365 78 27,1% Exports 417 492 75 17,9%

Balance 130 127 -3

Total trade 704 857 153 21,7%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Georgia (mio €)

2013 2014 2015 2016 2017

Imports 292 272 292 287 365

Exports 494 597 567 417 492

Balance 202 325 275 130 127

Total trade 786 869 860 704 857

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Georgia (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 97 89 141 37 150

Outward 3.101 3.984 3.918 1.636 1.610 FDI Flows

Inward -5 5 -12 -76 117

Outward 154 218 209 -1.797 115

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL REPORT ON THE IMPLEMENTATION OF THE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA) BETWEEN THE EU AND ITS MEMBER STATES AND MOLDOVA

The Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Moldova as the main economic pillar of the Association Agreement (AA) 40 has been provisionally applied since 1 September 2014 and fully entered into force on 1 July 2016. The DCFTA (Title V of the AA) also applies to Transnistria from 1 January 2016, as per Decision No 1/2015 of the EU-Republic of Moldova Association Council. The EU monitors the implementation of these arrangements and its adherence by the Republic of Moldova and Transnistria on a yearly basis, and progress is assessed in the framework of the annual Association Committee on Trade configuration.

This third 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. 41 In addition to providing an overview of the evolution of EU-Moldova trade, information about the application of trade defence measures and the anticircumvention mechanism has been included.

1 E VOLUTION OF TRADE

1.1 Trade in goods overall

The scope of trade liberalisation

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 Tariff Rate Quotas (TRQs). Further to that, the EU has eliminated the ad valorem component of the import duty for twenty agricultural products (the entry prices for fruits and vegetables remain). Import of 14 groups of agricultural and processed agricultural products (pig meat, poultry, dairy products and processed dairy products, eggs and albumins, cereals and processed cereals, sugar and sugar processed goods, cigarettes and sweet corn) is duty-free but monitored under anti-circumvention mechanism (if the imports to the EU

40 The EU-Republic Moldova Association Agreement was published in OJ L 260, 30.08.2014. http://eur href="http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:260:FULL&from=EN">lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:260:FULL&from=EN

41 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.

reaches certain agreed levels and Moldova fails to provide 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 (pork meat, poultry meat, dairy, prepared meat, sugar). 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 agri-food products). This schedule of tariff elimination reflects an asymmetric market opening for the benefit of Moldova.

Overall evolution of EU-Moldova trade in goods

The EU in 2018 remained a key trade partner of Moldova, accounting for 56% of its total trade (70% of total exports and 50% of Moldova’s total imports), followed by Russia (8%) and Belarus (3%). Moldova is EU’s 61 st trade partner. In 2018, the EU maintained a trade surplus with Moldova which increased to €880 million.

In 2018, the total trade between the EU and Moldova grew by 14% compared to 2017 to slighlty over €4.6 billion. Over the reporting period, EU exports increased by 13% from €2.44 billion to €2.76 billion while EU imports from Moldova increased by 16% from €1.61 billion to €1.88 billion in that period. This has been driven by economic growth as well as a better export performance of Moldovan companies as concerns machinery and appliances, vegetable products, textile products and base metals.

The number of companies involved in trade with the EU has continued to increase, with approximately 1 748 Moldovan companies exporting to the EU in 2017 up from 1 360 firms engaged in exporting to the EU in 2016. This figure diminished slightly in 2018 to 1 734.

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 2018 were machinery and appliances, mineral products, chemical products and transport equipment. Machinery and appliances and mineral products rose by respectively 26% (the main increase) and 13%. Exports of chemical products increased by 7% to €296 million while transport equipment exports saw an increase of 11% to €261 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 and 2018. This is evidenced both by the general 13% increase in EU exports to Moldova in 2018 (following a 2% decrease in 2016) as well as by the increase of EU exports across most of the main HS product categories (notable exceptions are exports of wood, which decreased by 16%, and live animals and animal producs, which decreased by 2%).

The main product categories in EU imports from Moldova in 2018 were machinery and appliances, vegetable products, textiles and textile articles and base metals. 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 manufacturing of wiring harnesses. From the categories of products most widely imported from Moldova, the highest increase in imports was for transport equipment (+102%) although remaining at a low level of €11 million.

Bilateral trade in non-agricultural products has experienced an increase of 19% (to €3.76 billion) in 2018, with EU imports of non-agricultural goods growing by 31% (to €1.29 billion) and EU exports of such goods increasing by 14% (to €2.5 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.

1.2 Trade in agricultural goods

In 2018, agricultural goods accounted for 19% (€873 million) of total bilateral trade with Moldova while non-agricultural products represented 81% (€3.8 billion). In terms of EU imports from Moldova in 2018, the share of agricultural goods stood at 31% while non agricultural goods represented 69% of imports. Agricultural goods constituted 10% of EU exports to Moldova, with 90% of EU exports being non-agricultural.

While trade in agri-food products with Moldova had gradually increased up to 2017 (it increased by 25% in the period 2016-2017) to the benefit of both sides, it has slightly decreased in 2018 by 4% (€908 million to €873 million). EU imports of agricultural products from Moldova have decreased by 7% (€588 million) while EU exports have increased by 5% (€285 million).

The main EU agricultural exports to Moldova included oilseeds, spirits and liqueurs, pork, pet food and other food preparations. Key EU imports from Moldova included oilseeds, wheat and other cereals, tropical fruits and nuts and vegetable oils. Imports of most of these products decreased in 2018 compared to 2017 (e.g. a decrease of 30% for wheat and 16% for oilseeds), while imports of other cereals increased (85%).

Review clause for agricultural products

The EU and Moldova agreed on a review clause which stipulates that three years 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.

In this regard, Moldova made a request to increase the volumes for Tariff Rate Quotas (TRQs) and as a separate exercise, the anti-circumvention thresholds under the DCFTA for certain agricultural products at the meeting of the Association Committee in Trade configuration (ACTC) in October 2017, thus triggering the third year review clause mentioned above. The Commission has examined this proposal, which has been subject to talks with the Moldovan side (a first informal discussion took place in the margins of the ACTC, last October 2018). This review may result in the modification of Annex XV of the Agreement through a joint Decision of the ACTC.

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. This means that 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 2018, those levels were exceeded for wheat, maize and processed cereals (ethanol). The Moldovan authorities provided due explanation about this in the context of the above mentioned review.

Use of Tariff Rate Quotas (TRQs)

In accordance with Annex XV-B of the Association Agreement the EU applies annual dutyfree TRQs for 6 agricultural products imported from Moldova: tomatoes, garlic, table grapes, apples, plums and grape juice. In 2018, only the TRQs for table grapes and plums were fully used (with a 100% utilisation for both products).

Utilisation of TRQs for imports from Moldova to the EU in 2018

Product TRQ volume (t) Imported volume TRQ use

(t)

Tomatoes, fresh or chilled 2.000 39,75 2,0%

Garlic, fresh or chilled 220 0 0,0%

Table grapes, fresh 10.000 10.000 100,0%

Apples, fresh 40.000 1.858,88 4,6%

Plums, fresh 10.000 9.899,39 99,0%

Grape juice 500 0 0,0%

Source: DG TAXUD

Moldova grants six duty-free TRQs for agricultural products exported by the EU (pork and poultry meat, dairy, processed meat, sugar and sweeteners). All EU exports were in excess of the quota amount in 2018 except for sweeteners.

Utilisation of TRQs for EU exports to Moldova in 2018

TRQ volume (tons) EU exports (tons) TRQ use Pork 4 000 4 907 100%

Poultry meat 4 000 8 280 100% Dairy 1 000 16 529 100% Processed meat 1 700 2 488 100% Sugar 5 400 13 659 100% Sweeteners 640 319 50%

Source: European Commission

1.3 Establishment, trade in services and investments

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 recognised 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).

Trade in Services

In 2017, total trade in services between the EU and Moldova increased by 3.4% when compared to 2016 (i.e., up from €1.3 billion). Over the same period of time, EU exports of services to Moldova decreased by 1.3% (from €483 million to €477 million) while EU imports increased by 6.4% (rising from €747 million to €795 million).

While import and export values had been evolving mostly in tandem with a slight surplus for the EU, this was 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. This trade deficit in services slightly widened in 2017. 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.

Foreign Direct investment (FDIs)

In 2017, EU FDI stocks in Moldova remained at similar levels as in previous years and amounted to around € 1 billion, with the EU ranking as a major foreign investor representing over 60% of overall FDI stocks. EU companies are present in many sectors (including energy, financial sector, industry, retail trade, agriculture and services). According to data provided by Moldova, 5 712 active companies with foreign investments coming from the EU are registered in Moldova. These are mainly from Romania (1 765), Italy (1 399), Germany (427), Cyprus (306) and France (242).

As in 2016, direct investment flows from the EU also increased in 2017 (to €105 million), following a decrease in 2015 and 2014 as a result of the banking fraud scandal.

• 2. 

  A CTIVITIES OF THE IMPLEMENTATION BODIES

2.1 Joint decisions of the Association Bodies

In 2018, the following amendments/updates have been adopted by the Association bodies in 2018 or are in the process of being adopted:

 Customs: Annex XXVI on approximation of customs legislation 42

 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) 43

 Public Procurement: Decision giving a favorable opinion regarding Moldova’s

comprehensive roadmap on public procurement 44

2.2 Meetings of the Association Bodies

The following section contains an overview of the most important meetings of the implementation bodies in 2018.

The 5 th Association Committee in Trade Configuration met on 19 October 2018. The 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, traderelated 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 underlined their commitment to respect the rule of law to the benefit of its citizens and the business environment, and also in order to gain the confidence of the EU. Moldova presented its latest achievements as regards the evolution of trade with the EU and harmonisation with the acquis in intellectual property, public procurement, trade in services, quality infrastructure, energy, competition, etc.

The EU side welcomed the legislative efforts made by Moldova so far to implement the DCFTA across different areas and stressed the need for further reform efforts to be made in order to reap the full benefits of the Agreement. It also recalled the positive trade dynamics since the start of application of the DCFTA, confirmed in the previous year (2017) by a 20% increase in bilateral trade. The EU nevertheless expressed concern about the particular circumstances under which the ACTC was taking place this year, and which have a negative impact on the stability and certainty of the Moldovan legal framework, its business and investment climate and, ultimately, on the results of the DCFTA.

42 Decision No 1/2018 of the EU-Republic of Moldova Association Council of 3 May 2018 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 [2018/984] , OJ L 176, 12.07.2018.

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22018D0984 43 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 (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. 44 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. https://eur-lex.europa.eu/legalcontent/EN/TXT/?toc=OJ%3AL%3A2018%3A168%3ATOC&uri=uriserv%3AOJ.L_.2018.168.01.0010.01. ENG

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 4th Sub-Committee on SPS measures (SPS Sub-Committee) met on 12 July 2018 in Brussels. The Moldovan authorities presented progress in the implementation of the operational conclusions from the previous Sub-Committee meeting of June 2017 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, the negotiation on veterinary-sanitary certificates for export from the EU to Moldova, Moldova’s application for export of poultry meat and eggs as well as continuing the working closely together combatting African swine fever (ASF).

The 4 th Sub-Committee on Customs and Trade Facilitation took place on 21-22 November 2018. Both sides welcomed the amendment to Annex XXVI referring to the Union Customs Code for harmonisation and the EU informed about the implementation phases of the Union Customs Code and the related IT systems. Moldova informed that the national legislation on Authorised Economic Operator (AEO) in approximation to EU provisions applies since 2017, with currently 117 AEOs in the Republic of Moldova, and mentioned the successful pilot project at RO-MD crossing Leuseni-Albita with unilateral recognition of EU AEOs.

The 4 th Geographical Indications (GIs) Sub-Committee met on 18 October 2018 and discussed the changes in the GIs system in the Common Agricultural policy post 2020, the respective agreements on GIs with third partners, the enforcement of the protection of GIs by customs, the update of the GIs lists, as well as the promotional events organised by Moldova to raise awareness and encourage producers to engage in the GIs system. 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 OF THE PROVISIONS ON TRADE AND SUSTAINABLE

  DEVELOPMENT

The TSD Sub-Committee established under the TSD Chapter of the Association Agreement did not meet in 2018. Nonetheless, exchanges on labour, environmental and climate matters took place in a more informal nature and both sides discussed further cooperation on priority areas such as 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.

The EU also stressed its expectation for civil society in Moldova to play an active role in overseeing the implementation of the TSD Chapter. The EU presented the new project it has put in place to support the functioning of civil society consultation mechanisms established under TSD chapters of its trade agreements that will benefit both EU and Moldova’s Domestic Advisory Groups.

• 4. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

4.1 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 being implemented (implementation period is from 2017-2022).

Moldova informed the EU that it is working to approximate to the EU acquis and that Tables of Correspondence will be shared twice a year to follow the progress. In the last ACTC meeting in October 2018, Moldova informed that 60% of acquis have been approximated.

Moldova has shown interest to be authorised to export poultry meat and table egg eto the EU. Moldova presented a draft roadmap describing how it will meet EU import requirements and, as a first step, the EU provided a questionnaire on the authorisation to export these products. Moldova will secure effective implementation of the roadmap and the Commission will carry out an audit for verifying Moldova’s readiness, when requested.

Moldova implemented articles 186 and 187 of the DCFTA (respectively related to SPS import conditions and certification) in autumn 2018, and consequently EU business operators reflected on the website of EU Member States are now eligible for exporting to Moldova without any further listing mechanisms being required.

Thirteen veterinary-sanitary certificates were agreed for export of animal products and live animals from the EU to Moldova.

4.2 Technical Barriers to Trade

Moldova informed that all acts were transposed according to Annex XVI. Moldova also indicated that it had decided to carry out a study in order to re-assess the priority sectors it had defined for the future negotiations of an Agreement on Conformity Assessment and Acceptance of industrial products (ACAA).

4.3 Customs and Trade Facilitation

Moldova reported on its ongoing legislative efforts to align to the Union Customs Code and the EU's provisions on customs enforcement of IPR. The amendment to the Annex XXVI (approximation of customs legislation) of the Association Agreement was adopted (via a Decision of the Association Council on 3 May 2018) with a view to clarifying that Moldova needs to approximate to the Union Customs Code, not the repealed Community Customs Code. The EU side voiced its concerns with regard to the Law #172 that allows tax-free sales of fuel at land border crossing points, which will provide additional incentives for smuggling and is not in line with Directive 2008/118/EC i.

4.4 Energy

With regards to trade-related energy, Moldova 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 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.

4.5 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.

4.6 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 Geographical Indication ‘Prosecco’. 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).

4.7 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. Moldova has developed an Action Plan to exit the ‘black list’. Moldova informed of delays in the implementation of the newly created naval agency, which is expected to be fully operational in 2019. 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 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 and is pending approval.

4.8 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 eprocurement for which an EU-funded pilot project is ongoing. This National Reform Plan received a favourable opinion via Decision No 1/2018 of the EU-Moldova ACTC of 16 April 2018.

• 5. 

  EU SUPPORT TO DCFTA IMPLEMENTATION

5.1 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 supports 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 also provides assistance for the development of value chains (e.g. textile) and of economic clusters in Moldova.

In addition to regular cooperation assistance, DCFTA implementation is also supported by policy conditionality of the EU’s MFA to Moldova. Reforms supported by the current MFA operation approved in 2017 include, among others, reduction of the administrative burden for starting and operating a business, facilitation of customs procedures (the adoption of a new Customs Service Law and a new Customs Code) as well as strengthening of the effectiveness and independence of the judiciary.

5.2 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 European Bank for Reconstruction and Development and European Investment Bank. 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).

• 6. 

  O UTLOOK AND C ONCLUSION

Moldova adopted ambitious legal approximation commitments under the DCFTA with extensive work required in the first four years of implementation. After four years of implementation of the trade and trade-related part of the Association Agreement, good progress could be 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 programmes, 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 the trade agreement 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 is 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 also provides 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 area in meeting EU import requirements. Besides food safety reform, in 2019 focus should remain on technical regulations and standards (TBT), implementation of the customs code and 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 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 modernise and diversify the economy.

Pursuing the fight against corruption 45 , 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.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Moldova (mio €)

Imports 1.160 1.223 1.320 1.615 1.877 Exports 2.352 2.066 2.053 2.447 2.757 Balance 1.192 842 733 832 880 Share Moldova in EU28 trade with Extra-EU28 Imports 0,1% 0,1% 0,1% 0,1% 0,1% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Moldova with world Imports 48,6% 49,0% 49,1% 49,4% 50,1% Exports 54,1% 61,4% 64,8% 65,7% 70,2% Total (I+E) 50,3% 53,1% 54,4% 54,9% 56,7%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Moldova: IMF Dots

Total merchandise trade EU28 with Moldova (mio €)

Growth

Moldova 2017 2018 annual

mio € %

Imports 1.615 1.877 262 16,2% Exports 2.447 2.757 310 12,7%

Balance 832 880 48

Total trade 4.063 4.634 572 14,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Moldova (mio €)

Growth

Moldova 2017 2018 annual

mio € %

Imports 634 588 -46 -7,3% Exports 271 285 13 4,9%

Balance -363 -304 59

Total trade 906 873 -33 -3,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Moldova (mio €)

Growth

Moldova 2017 2018 annual

mio € %

EU28 imports 981 1.289 308 31,4%

EU28 exports 2.176 2.473 297 13,6%

Balance 1.195 1.184 -12

Total trade 3.157 3.762 605 19,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Moldova (mio €)

Growth

Moldova 2016 2017 annual

mio € %

Imports 747 795 48 6,4%

45 According to the 2019 World Bank Doing Business Index, Moldova ranks as 47th out of 190 countries (down from 44 th in 2018). Corruption is widely spread which has been reflected by Transparency International in its 2017 Corruption Perceptions Index where Moldova has been ranked as 117th - out of 180 countries (+5 positions in comparison to the previous index) - with the score 33 (score 0 means highly corrupted and 100 very clean).

Exports 483 477 -6 -1,3%

Balance -264 -318 -54

Total trade 1.231 1.272 42 3,4%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Moldova (mio €)

2013 2014 2015 2016 2017

Imports 475 547 569 747 795

Exports 524 582 588 483 477

Balance 49 35 19 -264 -318

Total trade 999 1.130 1.157 1.231 1.272

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Moldova (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 52 64 95 92 100 Outward 941 1.001 1.128 957 1.008

FDI Flows

Inward 28 9 12 -5 -14

Outward 263 37 24 80 105

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

PART III: FIRST GENERATION FREE TRADE AGREEMENTS FIRST GENERATION FREE TRADE AGREEMENTS WITH MEDITERRANEAN PARTNERS

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ALGERIA

ASSOCIATION AGREEMENT

• 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, Tariff Rate Quotas (TRQ) or a reduction of Most Favoured Nation (MFN) rates respectively, for both Parties. 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 started negotiating its accession to the WTO in 1987. The negotiation process with the Accession Working Party has, however, stalled since 2014.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

The EU was Algeria’s first partner for merchandise trade in 2018, accounting for 59% of Algeria’s total trade, before the United States and China (both 7%) and Brazil (4%). The EU is Algeria’s first export market. The EU is also Algeria’s first source of imports.

Algeria is the EU’s first trading partner amongst all Euromed countries, ahead of Morocco and Israel: in 2018, taking into account the eight Euromed countries with which the EU has trade agreements, 30% of EU imports originated from Algeria and 18% of EU exports 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 2018, the total two-way trade amounted to €40 billion, an increase of 61% from its 2004 value of €24.8 billion, the year preceding the entry into force of the Association Agreement. Two-way trade peaked in 2012 at €53.9 billion.

EU- Algeria trade in goods (in thousands of euro)

35,000,000

30,000,000

25,000,000 EU Exports

20,000,000 EU Imports

15,000,000 EU imports of mineral fuels

10,000,000 (HS 27)

5,000,000 EU imports of agricultural products

0

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

EU exports to Algeria grew by 99% between 2004 and 2018, from €9.5 billion to €18.9 billion; the 2018 data, compared to the data from 2017 (€18.8 billion), marked a very small increase after several year of declining exports, from the peak of 2014 (€23.4 billion). In 2018, EU exports to Algeria were mainly made in the sectors of machinery and transport equipment (37%), agricultural and food products (14%) and chemicals (12%). The four biggest EU exporters to Algeria were France, Spain, Italy and Germany.

EU imports from Algeria are dominated by trade in the sectors of oil and gas (mineral fuels

amount to 96% of the total exports 46 to the EU) which has a significant impact on overall

volumes. EU imports from Algeria rose 38% between 2004 and 2018, from €15.2 billion to €21 billion (with a peak of €32.7 billion in 2012, which represented a 115% increase compared to 2004). EU imports increased (14%) between 2017 and 2018, with imports reaching €21 billion compared to €18.5 billion in 2017. The three biggest EU importers for Algeria in 2018 were Italy, Spain, and France.

Because of the absolute preminence of oil and gas in Algeria’s exports, their international price has a direct impact on the value of Algerian exports and on the merchandise trade balance with the EU. Historically, Algeria shows a trade suplus, but the decline in oil and gas prices led to the shrinking of that surplus from 2012 to 2014, while in 2015 and 2016, the EU recorded a trade surplus. In 2017, oil and gas prices began to rise, consequently Algeria’s trade balance with the EU reached the equilibrium in 2017 and became positive again in 2018 (plus €2.1 billion). This result is also due to the effect of several trade restrictive measures that Algerian authorities have put in place since 2016 (see section 5).

2.2 Trade in agricultural goods

Total trade in agricultural products between the EU and Algeria increased by 170% between 2003 (€1.0 billion) and 2018 (€2.7 billion). Between 2017 and 2018, EU agricultural exports

46 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.

increased by 10%, going from €2.4 billion to €2.6 billion. EU imports, on the other hand, decreased by 28%, from €100 million to €74 million. In 2018, among our Euromed partners, Algeria was the EU's most important destination for exports of agri-food products (1.9% of total exports). The main product categories the EU exported to Algeria were wheat (39%), milk powders & whey (11%), vegetable oils other than palm and olive oils (7%), infant food and other cereals, flour, starch or milk preparations and live animals (6%). EU agricultural imports from Algeria were dominated by tropical fruit, fresh or dried, nuts and spices (51%) and beet and cane sugar (18%).

Regarding agricultural tariff ate quotas (TRQ), Algeria’s 2018 fill rate was low for a limited rnumber of products such as couscous (33% - though an improvement if compared to the value of 7% which was recored in 2017), olive oil (7%), seed potatoes (5%) and pasta (3%). It remained nil or close to zero for the majority of products, such as tomato juice, fruit juices, apricots, strawberries or wine.

2.3 Trade in Services and Investment

The total trade in services between the EU and Algeria remained relatively stable from 2010 to 2017, going from €4.6 billion to almost €4.9 billion. In 2017, Algeria exported €1.6 billion in services to the EU and imported €3.3 billion from the EU.

FDI flows between the EU and Algeria remained volatile between 2013 and 2017, with most investments coming from the EU to Algeria (€1.3 billion in 2017, for the total stock of EU FDI of €14.9 billion). Algerian investments in the EU are extremely low: the stock in 2017 levelled at €1.8 billion, more or less the same level of 2016. The weakness of EU-Algeria FDI flows is mainly due to investors’ concerns regarding the business climate in the Algeria. In 2016, Algeria introduced some changes in its Investment Code, in an attempt to attract more investments; according to the Wold Bank ranking on Ease of Doing Business, Algeria improved its performances, which nevertheless remain poor and below the regional standards; as a matter of fact, according to 2019 data, the country ranks 157 th out of 190 (it was 166 th in 2018), with a distance to frontier (DTF) 47 score of 49.6 out of 100 (up from 47.6 in 2018).

• 3. 

  I SSUES ADDRESSED IN THE S UB -C OMMITTEE MEETINGS

The last Sub-Committee on Trade, Industry, and Services was held in October 2018. Major trade irritants addressed included chiefly the newly introduced DAPS (droit additionnel de prélevement spécial), a tax having an effect equivalent to custom duties, as well as outstanding import suspension on certain other products (mainly vehicles) (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 the issue of ship-owners’ disbursement accounts. Notwithstanding these issues, the EU recalled its commitment to support Algeria’s accession to the WTO.

The Sub-Committee on Agricultural and Fisheries Products met in October 2018. Several technical assistance programmes were discussed, as well as potential ways to reinforce EU technical assistance to Algeria in the field of quality policy and understanding the reasons behind Algeria’s poor utilisation rate of preferences.

47 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory performance in economies over time. The higher the score, the better.

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, the fight against counterfeiting and smuggling and modalities for setting in motion an ad-hoc working group on customs valuation.

A number of senior officials' meetings were held in 2018, in an effort to tackle several market access barriers that Algeria has been imposing on trade with the EU, especially from 2016.

The Association Council conclusions of May 2018 48 , provided that a negotiated solution

should be found by the end of 2018, but this has not proven possible, due to a lack of real commitment on the side of the Algerian authorities.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The recent fall in oil prices significantly impacted Algeria's finances. Algerian authorities resorted to severe measures to restrict imports, with a view to reducing trade deficits and countering shrinking foreign currency reserves. The EU reacted to these trade-restrictive measures and repeatedly requested full compliance with the provisions of the Association Agreement. Algeria argued that the present economic conjuncture justifies such exceptional measures while recognising 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 49 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 evaluation concluded that, as regards cooperation in the trade, economic and investment areas, 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 following the release of the study and Algeria was encouraged to commit to the improvement of business climate, new financing mechanisms for SMEs (e.g. the EU’s External Investment Plan), 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) 50 . 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 also supports 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 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

48 For more information see http://www.consilium.europa.eu/en/meetings/international-ministerial href="http://www.consilium.europa.eu/en/meetings/international-ministerial-meetings/2018/05/14/algeria/">meetings/2018/05/14/algeria/

49 They can be downloaded here: https://eeas.europa.eu/delegations/algeria/31985/les-nouvelles-priorites-du href="https://eeas.europa.eu/delegations/algeria/31985/les-nouvelles-priorites-du-partenariat-ue-algerie_en">partenariat-ue-algerie_en

50 See DG DEVCO for more information https://ec.europa.eu/europeaid/home_en

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 2018 was the introduction of a tax having an effect equivalent to a custom duty, ranging from 30% to 200% of the value of the goods, which was levied on 1 095 tariff lines, across all sectors of the economy. This measure replaces an import ban which, in 2017, affected 877 products. The suspension of import currently concerns only vehicles - which were, until 2017, subject to an import licence scheme which effectively resulted in a zero quota for three years. A custom duty hike imposed in 2017 on another goup of 129 products still applies.

Other trade-related issues include: a ban on imports of medicines for which exists a locallyproduced equivalent; technical standards; particularly stringent mandatory security devices for vehicles, coupled with obligatory inspections. The EU is engaging 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. Compliance with obligations in the field of competition and public aid has also to be enhanced. Numerous obstacles to foreign investment remain, most notably the horizontal ‘49%/51%’ foreign equity cap that applies across the board to all sectors. The Algerian government showed some willingness to consider changes in 2016, notably through the adoption of a new Investment Code, which no longer features the foreign equity cap. However, such a rule remains applicable as it is enshrined in the Budget Laws 2009 and 2012, and it will remain so until such a time these Budget Laws are repealed. Such a blanket foreign equity cap sends negative signals to potential investors and hampers 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.

• 6. 

  C ONCLUSIONS AND OUTLOOK

There has been a positive overall trend in EU-Algeria trade since the 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, as a result of the drop in international oil prices which had started in the second half of 2014. In 2018, following the upward trend in international oil prices, Algeria’s trade balance became positive again. The EU continues to offer its support to the Algerian government to diversify its economy. At the same time, the Commission has pursued its dialogue with Algerian authorities on trade restrictive measures, in order to bring them in line with the Association Agreement.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Algeria (mio €)

  Imports 29.458 20.908 16.509 18.522 21.047 Exports 23.442 22.253 20.400 18.834 18.905 Balance -6.016 1.345 3.891 312 -2.142 Share Algeria in EU28 trade with Extra-EU28

Imports 1,7% 1,2% 1,0% 1,0% 1,1% Exports 1,4% 1,2% 1,2% 1,0% 1,0% Total (I+E) 1,6% 1,2% 1,1% 1,0% 1,0%

Share EU28 in trade Algeria with world

Imports 51,1% 49,7% 47,5% 43,7% 53,6% Exports 64,3% 65,1% 58,5% 58,9% 63,2% Total (I+E) 57,9% 56,0% 51,7% 50,3% 58,3%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Algeria: IMF Dots

Total merchandise trade EU28 with Algeria (mio €)

Growth

Algeria 2017 2018 annual

mio € %

Imports 18.522 21.047 2.525 13,6%

Exports 18.834 18.905 71 0,4%

Balance 312 -2.142 -2.454 Total trade 37.356 39.952 2.596 6,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Algeria (mio €)

Growth

Algeria 2017 2018 annual

mio € %

Imports 103 74 -29 -28,4%

Exports 2.422 2.660 238 9,8%

Balance 2.318 2.586 267

Total trade 2.525 2.734 209 8,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Algeria (mio €)

Growth

Algeria 2017 2018 annual

mio € %

EU28 imports 18.419 20.973 2.554 13,9%

EU28 exports 16.412 16.245 -167 -1,0%

Balance -2.007 -4.728 -2.722

Total trade 34.831 37.218 2.387 6,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Algeria (mio €)

Growth

Algeria 2016 2017 annual

mio € %

Imports 1.500 1.558 58 3,9%

Exports 3.668 3.298 -370 -10,1%

Balance 2.168 1.740 -427 Total trade 5.168 4.856 -312 -6,0%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Algeria (mio €)

2013 2014 2015 2016 2017

Imports 1.487 1.619 1.728 1.500 1.558

Exports 2.839 3.295 3.529 3.668 3.298

Balance 1.352 1.676 1.802 2.168 1.740

Total trade 4.326 4.915 5.257 5.168 4.856

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Algeria (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 1.135 1.878 1.779 1.846 1.857

Outward 14.022 14.117 14.750 14.588 14.861 FDI Flows

Inward 357 222 157 26.661 21 Outward 2.196 769 2.495 1.921 1.339

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-EGYPT ASSOCIATION AGREEMENT

• 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: Egypt was able to export to the EU all industrial products covered by the Agreement tariff-free from the day of entry into force of the Agreement, while it benefited from a transitional period of 3 to 15 years, depending on the product, to dismantle tariffs on EU imports, Egypt finalized the process of fully dismantling tariffs applied to industrial goods on 1 January 2019.

In October 2008, the EU and Egypt signed an agreement providing for liberalisation in agricultural, processed agricultural and fisheries goods; the latter entered into force on 1 June 2010 and extended the list of agricultural products covered by the original Agreement. Today, 80% of trade in agricultural goods is 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.

In November 2011, the Commission received a Council mandate authorising it to negotiate a Deep and Comprehensive Free Trade Area (DCFTA) with Egypt, but Egypt has shown limited interest so far.

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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018, the EU remains Egypt’s main trading partner, accounting for 23% of the total Egyptian trade, before China (10%), the United States (8%) and Saudi Arabia (6%). The EU is Egypt’s first export market: 11% of Egyptian exports were directed towards the EU in 2018, followed by United States (8%), Ukraine (7%) and Jamaica (6%). The EU is also Egypts first source of imports, with 27% of Egyptian imports originating from the EU. Total trade in goods between the EU and Egypt has increased significantly over the period since the FTA entered into force: +176% in 16 years, from €10.1 billion in 2002 (the year preceding the provisional entry into force of the Association Agreement) to €27.7 billion in 2018. The level of total EU-Egypt trade in 2018 was very similar to the one achieved in 2017 (€27.9 billion) , which was a record year in the bilateral trade of goods.

EU-Egypt trade in goods (thousands of euro)

25,000 EU Exports

20,000 EU Imports

15,000 EU imports of mineral fuels (HS 27)

10,000 EU imports of agricultural products

5,000 EU imports of other products

0 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

EU exports increased by 193% between 2002 and 2018, from € 6.7 billion to €19.2 billion. Between 2017 and 2018, EU exports decreased by 3%, from €19.2 billion to €19.8 billion. In 2018, the EU mainly exported to Egypt goods in the sectors of: machinery and transport equipment (34%), chemicals (15%), fuels and mining products (11%), and agricultural products (7%). The three biggest EU exporters to Egypt were Germany, Italy and France.

EU imports increased by 142% between 2002 and 2018, from €3.3 billion to €8.5 billion. Between 2017 and 2018, EU imports increased by 4.7%, from €8.1 billion to €8.5 billion. In 2018, EU imports were principally in the sectors of: fuel and mining products (35%), manufactured products (18%), and chemicals (16%). 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 have been stable since 2011, increasing during 2017 – most notably agricultural and food imports increased by 10.5% in 2017 – but back to a slower 1% growth in 2018.

A reduction in Egyptian exports between 2012 and 2016, 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 was 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, in the past, they used to constitute almost half of them). In 2017, an upward trend in Egyptian exports to the EU was noted with an increase of 21.2% which continued in 2018 (+4.7%), while imports from the EU somewhat decreased in 2017 and 2018. This was 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 agri-food products between the EU and Egypt increased by 225% between 2003 and 2018, from €0.8 billion in 2003 to €2.6 billion in 2018. EU agri-food exports increased slightly (+7%), going from €1.4 billion in 2017 to €1.5 billion in 2018. EU imports remained the same at €1 billion in 2018 compared to 2017.

In 2018, Egypt was the EU’s second biggest supplier of agri-food products among our Euromed-partners. The EU imported mainly fruit (€426 million, 41%), including citrus fruit, and vegetables (€291 million, 28%) from Egypt. EU agri-food exports to Egypt were dominated by wheat (€224 million, 15%), vegetables (€176 million, 12%) and sugar (€153 million, 10%).

Regarding agri-food tariff rate quotas (TRQs), Egypt’s 2018 fill rate was high for a limited number of products such as sweet oranges (93%), strawberries (89%, and already 100% for the 2019 season), or garlic (87%), but remained nil or close to zero for the majority of products, such as cucumbers, brown rice, cereal preparations, etc.

2.3 Trade in Services and Foreign Direct Investment 51

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 €10 billion (€10.2 billion in 2010). In 2016, 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 €9.1 billion, a 14% decrease from 2015 levels; however, in 2017 it increased by 4% driven by increased exports of services by Egypt; total trade in services reached €9.5 billion.

As regards Foreign Direct Investment (FDI), the EU remains the biggest investor in Egypt but EU foreign investments in the country have been highly volatile, with divestments exceeding investments by €1.6 billion in 2015. Since 2016, the inflows of EU investments into Egypt have been increasing; they reached €2.7 billion in 2017, with the total EU investment stock amounting to €39.2 billion.

Overall, Egypt underperforms as regards its business climate. In 2018, it only ranked 120 th out of 190 in the World Bank ranking "Doing Business 2019", with a distance to frontier (DTF) 52

score of 58.5 out of 100 - an increase of 2.7 in DTF score compared to 2017. FDI remains concentrated in the oil and 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. Since November 2017, the Egyptian Government also applies an online "Investment Map", a dedicated website that displays the details of investment opportunities across the country.

• 3. 

  I SSUES ADDRESSED IN THE J OINT C OMMITTEE MEETINGS

No meeting took place in 2018. The next meetings of the Sub-Committees are in 2019.

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 (this issue has meanwhile been addressed by Egypt in January 2019 in accordance with the Association Agreement), and the draft tax incentive scheme targeting the automotive industry, which in 2019 is still under review by Egypt. Egypt was invited to ratify the Protocol on the Dispute Settlement Mechanism. Discussions also covered various trade irritants – see in more detail section 5. Other issues included the progress on a potential Agreement on Conformity Assessment and Acceptance (ACAA), the need for time

51 Full statistics available here http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122000.pdf

52 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory performance in economies over time.

to adapt Egyptian SPS legislation to EU requirements, and the continued possibility of a DCFTA in the long-term.

During the 2017 Sub-Committee on Agricultural and Fisheries products, the following issues were discussed, among others: agri-food trade developments with the recent increase of Egyptian agri-food exports to the EU market, the latest 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 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, in 2015 and 2016 the Egyptian government implemented a series of administrative measures aimed at restricting imports. In November 2016, the Egyptian authorities liberalised the exchange rate and adopted an economic reform programme supported by a three-year $12 billion IMF loan - the Extended Fund Facility (EFF) which is set to expire in mid-2019. Although challenging in the short term, bold economic measures were taken to address fiscal and external unbalances: flotation of the currency, energy subsidy reform, VAT introduction, and wage restraint.

Overall, since the start of the IMF programme, Egypt’s economy has improved markedly. Growth has accelerated, external and fiscal deficits have narrowed, and public debt, inflation and unemployment have declined while international reserves have increased. Prudent monetary and fiscal policies have significantly helped the Egyptian economy that is showing clear signs of stabilization including an accelerated GDP growth (4.1% in 2017 fiscal year and 5.3% in 2018 fiscal year), declining paths of inflation and unemployment, achievements in fiscal consolidation, and increased international currency reserves. Going forward, the government’s reform agenda is focused on public finance management, financial sector, energy sector, business climate, competition, social protection, and encouraging women 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 the 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 substitution is still prevalent. In addition, the business environment is hindered by excessive bureaucracy, and lack of transparency and predictability of regulations continue to affect economic operators.

In the light of the revised European Neighbourhood Policy, Partnership Priorities 53 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) 54 , structured around two components: i) foreign trade and trade agreements and ii)

industrial policy and quality infrastructure. The TDMEP assists Egypt with 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. 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 strategy.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Following extended bilateral consultations Egypt confirmed at the Association Committee in November 2018 that it would apply the staged reduction in tariffs on certain motor vehicles under the terms of its obligations under the FTA. In line with this commitment Egypt fully liberalised its tariffs on imports of certain EU motor vehicles as of January 2019.

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 exporting certain goods to Egypt. These measures apply to 25 categories of manufactured goods since the beginning of 2016 and have been extended to four further product categories in January 2019. 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 were raised in the trade Commissioner’s letters to the Egyptian Minister of Trade in 2018 and early 2019. The Commission also addressed this issue during bilateral meetings in 2018 and in early 2019, insisting on more transparency, rapidity, and streamlining of the administrative processes, in order to facilitate the registration from a practical point of view.

Other trade irritants include the following: arbitrary customs valuations by the Egyptian authorities, problems with acceptance of origin declarations by importers, restrictive labelling requirements, mainly affecting the ceramic tiles sectors, a prohibition on the import of certain motorcycles, and SPS issues, mainly affecting cereals and beef/live cattle importers. The issue of a ‘reference list’ of countries authorised to export milk formula that includes some, but not all, EU Member States was addressed by Egypt in early 2019. The implementation of the new approach will be now monitored. 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.

The SPS workshop organised in September 2018 in Cairo was successful and appreciated. Reinforced control measures imposed by Commission Regulation 669/2009 i on strawberries and grapes were finally lifted in 2018 and the same is expected to happen for gelatine in 2019.

53 See http://www.consilium.europa.eu/media/23942/eu-egypt.pdf

54 This programme will end in 2020.

Compliance with obligations in the field of competition and public aid, including transparency on the latter, has to be enhanced.

Egypt still 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 traderelated assistance projects with Egypt in order to create the conditions in which the FTA can deliver. In effect, in 2017 and 2018, Egypt’s exports to the EU increased resulting in a decrease of Egypt’s trade deficit.

Discussion on implementation focuses on the above-mentioned trade irritants. The EU and Egypt are engaged in an active dialogue to address these, both at 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 55 , which should cover issues such as reduction of

trade barriers as well as technical assistance on SPS issues and ACAA-related fields. Upgrading bilateral trade and investment relations remains a medium-term objective to be followed once Egypt is ready for it.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Egypt (mio €)

Imports 8.579 7.263 6.703 8.124 8.503 Exports 16.894 20.426 20.618 19.807 19.218 Balance 8.315 13.163 13.915 11.683 10.715 Share Egypt in EU28 trade with Extra-EU28 Imports 0,5% 0,4% 0,4% 0,4% 0,4% Exports 1,0% 1,1% 1,2% 1,1% 1,0% Total (I+E) 0,8% 0,8% 0,8% 0,7% 0,7% Share EU28 in trade Egypt with world Imports 32,2% 32,4% 29,7% 26,9% 26,5% Exports 29,5% 27,7% 30,4% 34,1% 10,6% Total (I+E) 31,4% 31,3% 29,9% 28,9% 22,3%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Egypt: IMF Dots

Total merchandise trade EU28 with Egypt (mio €)

Growth

Egypt 2017 2018 annual

mio € %

Imports 8.124 8.503 379 4,7%

Exports 19.807 19.218 -590 -3,0%

Balance 11.683 10.715 -969 Total trade 27.931 27.721 -211 -0,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

55 See: http://www.consilium.europa.eu/media/23942/eu-egypt.pdf

Agrifood trade EU28 with Egypt (mio €)

Growth

Egypt 2017 2018 annual

mio € %

Imports 1.017 1.027 10 1,0%

Exports 1.351 1.528 177 13,1%

Balance 334 502 168

Total trade 2.368 2.555 187 7,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Egypt (mio €)

Growth

Egypt 2017 2018 annual

mio € %

EU28 imports 7.107 7.476 369 5,2%

EU28 exports 18.456 17.689 -767 -4,2%

Balance 11.349 10.213 -1.136

Total trade 25.563 25.166 -398 -1,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Egypt (mio €)

Growth

Egypt 2016 2017 annual

mio € %

Imports 4.587 5.092 504 11,0%

Exports 4.594 4.462 -132 -2,9%

Balance 6 -630 -636

Total trade 9.181 9.553 373 4,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Egypt (mio €)

2013 2014 2015 2016 2017

Imports 4.982 4.658 5.281 4.587 5.092 Exports 3.343 3.439 5.125 4.594 4.462

Balance -1.640 -1.220 -156 6 -630

Total trade 8.325 8.097 10.406 9.181 9.553

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Egypt (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 6.550 836 185 683 875

Outward 43.327 49.492 39.462 37.939 39.285 FDI Flows

Inward 137 76 357 -1 99

Outward 3.542 1.519 -2.360 2.865 2.179

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-ISRAEL ASSOCIATION AGREEMENT

• 1. 

  I NTRODUCTION

The EU and Israel have an Association Agreement (AA), which further liberalised two-way trade in industrial goods, creating a free trade area, hereinafter called ‘the Agreement’. This Agreement provisionally has been applied since 1996 and fully entered into force on 1 June 2000. The EU and Israel had already signed a Free Trade Agreement (FTA) in 1975: such agreement provided reciprocal free trade for industrial products (applied for the EU since 1977 for Israeli originated goods and since 1989 in Israel for community goods) and duty free entry into the EU of 70% of Israeli agricultural products. The Association Agreement improved the provisions on rules of origin and included a series of reciprocal agricultural concessions, but does not include obligatory provisions on services and investments. 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. An adaptation to this agreement on agri-food products due to the accession of Croatia to the EU started to be implemented in 2018. 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 signed in 1999 a "Good Laboratory Practice" (GLP) agreement, ensuring the high quality, validity and reliability of health and environmental data generated during the testing of cosmetics, industrial chemicals, pharmaceuticals, food additives, animal feed additives, pesticides by means of mutual recognition of OECD principles of good laboratory practice (GLP) and compliance monitoring programmes. The EU and Israel also have Conformity Assessment and Agreement (ACAA) on pharmaceuticals, in force since January 2013, which facilitates trade on both sides, as it recognises each partner’s certification of conformity of pharmaceutical products without the need for re-testing at import. Finally, the Open Skies agreement provisionally entered into force in 2013 and substantially increased cooperation in civil aviation services.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018 the EU was Israel’s first trading partner, representing 36% of Israeli trade, followed by the US (19%) and China (8%). Israel is the EU’s 28 th largest trading partner and the 3 rd largest in the Euro-Mediterranean region, behind Algeria and Morocco. The EU was the largest exporter to Israel, holding a 41% market share, ahead of the US (13%) and Switzerland (10%). The EU was also Israel’s largest export market in 2018, receiving 29% of Israeli exports, closely followed by the USA with 28%.

Since the Agreement is in place the value of EU exports to Israel has been increasing and the EU’s trade surplus increased from €4.8 billion in 2002 to €7.1 billion in 2018.

Since the Association Agreement came into force, the value of imports and exports between

the EU and Israel has been increasing in both directions. In 2002, the first year in which data

is available, the value of trade in goods was €23.1 billion and in 2018 it was €34.3 billion,

thus representing an increase by 48%.

The value of EU exports to Israel has risen by 49% from €13.9 billion in 2002 to €20.7 billion in 2018. Though, EU exports between 2017 and 2018 contracted by 3%, going from

€21.4 billion in 2017 to €20.7 billlion in 2018. Nevertheless, with the exception of 2009

(financial crash), EU exports to Israel have shown a fairly consistent growth. In 2018, the

most important export items by value were machinery and appliances (41%), transport equipment (23%), and chemical products (23%).

The value of EU imports from Israel has risen from €9.1 billion in 2002 to €13.6 billion in 2018, representing a 49% rise. Nevertheless, EU imports between 2017 and 2018 decreased

by 8%, from €14.8 billion to €13.6 billion. At the same time, imports from Israel have been

steadily increasing (with the exception of 2009 due to the financial crash). In 2018 the most

important groups for import by value were chemicals (33%), machinery and appliances (18%) and mineral products (9%).

2.2 Trade in agricultural goods

Total trade in agri-food products between the EU and Israel increased by 100% between 2003

and 2018, from €1.4 billion in 2003 to €2.8 billion in 2018. EU agri-food exports increased by

11% over the past year, going from €1.8 billion in 2017 to €2 billion in 2018. By contrast,

over the same time period, EU imports decreased by 10%, from €1 billion to €0.9 billion. In

2018, Israel was the EU's second most important destination for exports of agri-food products

in the region and the EU's third largest supplier of agri-food products. Among the EU's

agricultural imports from Israel 49% were fruit and vegetables, including citrus fruit while the EU mainly exported live animals (9%), chocolate, confectionary & ice cream (8%),

followed by sugar (8%).

Regarding agricultural Tariff Rate Quotas (TRQ), Israel’s 2018 fill rate was 100% for some

products (new potatoes, sweet peppers and wine). For the year-round clementime quota, the

fill rate was 100%. For the spring and summer clementine quota, the fill rate was 35%. Other

products with a relatively higher share of used quota were processed starch (48%), cut flowers

(around a quarter - an exact number is not given, because the quota year does not coincide with the calendar year for one of the two quotas for these products), dried tomatoes (24%) and chicken preparations (25%), orange juice (21%), cucumbers (18%), whey (18%), turkey preparations (17%), fresh tomatoes other than cherry tomatoes (11%) and canned tomatoes (6%). Fill rates were below 5% for other products, including fresh oranges, fresh melons, orange and citrus juices, cherry tomatoes, sweetcorn, strawberries, live turkeys, gingerbread and fried peach slices.

2.3 Trade in Services and Foreign Direct Investment (FDI)

In 2017 trade in services between the EU and Israel was worth €12.3 billion. Between 2010 and 2017, there has been an overall increase in the value of services imported from Israel from €3.2 billion to €5.2 billion. Over the same period there has been an increase in EU exports of services to Israel from €3.8 billion to €7.1 billion.

On FDI flows there is no consistent image on volume or partner country. Figures show fluctuations every year and no trend can be identified. 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. 56

According to The World Bank Doing Business Index 2019 which ranks 190 countries, Israel, an OECD member, was ranked 49 th in the world (up from the 54 th position of 2018) with a distance to frontrier (DTF) 57 score of 73.23 out of 100 – an improvement from the value of 2018 (72.59).

• 3. 

  I SSUES ADDRESSED IN THE A NNUAL (J OINT C OMMITTEE /T RADE C OMMITTEE )

  MEETING

The EU-Israeli Sub-committees on Industry, Trade and Services met in 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. Regarding trade barriers, the EU stressed the need to resolve the distinction between ‘new’ and ‘old’ Member States (pre and post-2004) for imports of medical devices, as well as the situation of the EU's request for granting IPR protection to biological pharmaceuticals and the EU's comments regarding the legislation on cosmetics in Israel. Parties also exchanged information regarding the implementation of the so-called “Technical Arrangement" on zip codes. 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 May 2018. A range of issues were discussed, including the current trade in agri-food products and related issues, such as SPS regulations in both directions, Israel's policy on imports of live animals and Kosher slaugthering. Israel provided an update on changes to its agricultural policy reform as well as the state of play of Geographincal Indications in Israel. Parties also discussed Israel's request to open negotiations of a bilateral agreement on organics, in order to adjust Israel's exports to the EU, following the new EU's organic regulation which will be

56 Both Eurostat and IMF data was used for investment figures. 57 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory

performance in economies over time. The higher the score, the better.

applicable as of January 2021. On fisheries, Israel’s position in the framework of the General Fisheries Commission for the Mediterranean was discussed.

The EU-Israel Customs Cooperation and Taxation Subcommittee did not meet in 2018.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The Israeli economy stayed on its path of steady growth, relatively 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 on 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. On the other side, recent growing budget deficit/GDP and debt/GDP ratios deserve an increased attention by the government. It should be also noted that there is a growing duality in the economy, with the traditional industrial agriculture and services lagging behind. Also, the increased shortage of skilled labour could become an impediment for growth in the high-tech sector.

With a clear understanding of the importance and the economic potential of EU regulations and best-practice in many fields, 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 transport, environment, energy, statistics, agriculture and telecomm) EU regulatory practice (norms, standards and procedures) has been shared with the Israeli authorities, thus helping specific policy formulation and implementation. For trade, it is particularly important to continue providing 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 and increase competition in Israel. It should also be noted that some important European regulations such as the General Data Protection Regulation (GDPR), waste management and others, became relevant and economically important in the Israeli context. Also, there is an increasing number of European companies establishing research centers, tech hubs and scouting companies in Israel, particularily in the automative sector.

Exports of gas to the EU are also on the agenda, with the final aim, pending feasibility, to export natural gas from Israel to Cyprus, Greece and Italy as of 2025.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

No significant roll back of commitments in the Agreement has been recorded; however there are a number of persistent trade irritants. These include the discriminatory treatment of EU Member States, who have joined since 2004 and of Luxembourg, with particular reference to restrictions on import authorization of medical devices, the lack of data protection on biological medicines, the rigid regime of kosher certification of slaughtered meat, the difficulties in registration of imported food products as well as restrictions to the import of live animals. A number of official and technical meetings have taken place to look into these issues. On trade defence policy, an anti-dumping investigation on imports of cement from Greece took longer than the WTO ceiling of 18 months. The EU has drawn Israel's attention to this issue and asked that no duty would be imposed. Israel ignored the EU's request and imposed a minimal 0.25% duty.

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, competition, etc.

• 6. 

  C ONCLUSIONS AND OUTLOOK

Overall the value of trade between the EU and Israel has increased during the period of implementation of the 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.

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 2019 working with Israel on cosmetics, food and other areas, advocating for rules that are aligned with international and, possibly, EU standards.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Israel (mio €)

Imports 13.255 13.385 13.178 14.809 13.602 Exports 16.992 18.930 21.108 21.426 20.736 Balance 3.737 5.545 7.931 6.617 7.134 Share Israel in EU28 trade with Extra-EU28 Imports 0,8% 0,8% 0,8% 0,8% 0,7% Exports 1,0% 1,1% 1,2% 1,1% 1,1% Total (I+E) 0,9% 0,9% 1,0% 1,0% 0,9% Share EU28 in trade Israel with world Imports 33,4% 36,4% 40,6% 41,2% 41,2% Exports 27,4% 24,3% 26,2% 29,7% 28,4% Total (I+E) 30,4% 30,2% 33,7% 35,8% 35,7%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Israel: IMF Dots

Total merchandise trade EU28 with Israel (mio €)

Growth

Israel 2017 2018 annual

mio € %

Imports 14.809 13.602 -1.207 -8,2% Exports 21.426 20.736 -690 -3,2%

Balance 6.617 7.134 517

Total trade 36.235 34.337 -1.898 -5,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Israel (mio €)

Growth

Israel 2017 2018 annual

mio € %

Imports 990 874 -116 -11,7% Exports 1.798 1.955 157 8,8%

Balance 808 1.081 274

Total trade 2.788 2.829 41 1,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Israel (mio €)

Growth

Israel 2017 2018 annual

mio € %

EU28 imports 13.819 12.728 -1.091 -7,9% EU28 exports 19.628 18.781 -848 -4,3%

Balance 5.809 6.053 243

Total trade 33.447 31.508 -1.939 -5,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Israel (mio €)

Growth

Israel 2016 2017 annual

mio € %

Imports 4.756 5.186 430 9,0%

Exports 6.830 7.154 324 4,7%

Balance 2.074 1.967 -106

Total trade 11.586 12.340 754 6,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Israel (mio €)

2013 2014 2015 2016 2017

Imports 4.272 3.913 4.633 4.756 5.186

Exports 4.579 4.969 6.983 6.830 7.154

Balance 307 1.057 2.350 2.074 1.967

Total trade 8.851 8.882 11.616 11.586 12.340

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Israel (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 32.237 40.872 33.445 45.155 58.254

Outward 11.544 16.066 17.491 28.464 30.079 FDI Flows

Inward 2.023 7.094 2.348 13.948 205

Outward 4.194 1.855 1.231 904 2.613

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-JORDAN ASSOCIATION AGREEMENT

• 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. This allowed Jordan to phase in tariff reductions over a 12 year period. Tariff dismantling has now 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 tariff rate quotas (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. In December 2018, the EU and Jordan agreed to review their initiative from July 2016 to simplify the rules of origin that Jordanian exporters use in their trade with

the EU 58 .

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 Council of the European Union adopted negotiating directives to further enhance the trade relationship through a Deep and Comprehensive Free Trade Area (DCFTA) with Jordan, but negotiations have not yet started.

• 2. 

  E VOLUTION OF TRADE

2.1. Trade in Goods

58 https://trade.ec.europa.eu/doclib/docs/2018/december/tradoc_157588.pdf

In 2018 the EU was Jordan’s largest trade partner, representing 21.5% of its total trade. The EU was the largest importer into Jordan with a 16.8% 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 in goods between the EU and Jordan has increased in both directions since the Agreement entered into force, from €2.4 billion in 2002 to €3.87 billion in 2018.

In 2018, the outlook for EU-Jordan trade reflects the concerns of the state of the Jordanian

economy, with consumption levels contracting. Jordan was 64 th on the list of the EU’s main

trading partners, accounting for 0.1 % of the EU’s total trade with the rest of the world. Total trade in goods between the EU and Jordan in 2018 declined by 14% from €4.5 in 2017 to €3.9 billion in 2018.

The value of EU exports in goods to Jordan has increased more than EU’s imports. Jordan’s trade deficit with the EU has grown over the period 2002-2018. 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 – i.e. €3.27 billion (35.8%) of its €9.13 billion total deficit. In 2018 the overall trade in goods deficit of Jordan with the EU decreased by 4.6% when compared to 2017.

The value of EU exports to Jordan has risen by 80% between 2002 and 2018 (from €2 billion to €3.6 billion in 2018), but show a 13% decline in 2018 compared to 2017. Exports to Jordan have risen year-on-year with the exception of 2009 (financial crisis), 2014 and 2018; which may be related to regional political and economic instability. The most important export sectors were machinery and transport equipment (32.4%), agricultural products (23.3%) and chemicals (16.5%).

In 2018, the EU imported for €300 million in goods from Jordan, mostly chemicals (36.4%) and textiles and clothing (17.7%).

The value of EU imports from Jordan has risen from €314 million in 2002 to €358 million in 2017, but declined in 2018 to reach €300 million. Within the lifespan of the agreement the value of imports has fluctuated. In 2015, imports reached an all-time high of €386 million, but have since declined. In8, the most important import sectors were chemicals (38.3 %) and textiles and clothing (17.8 %).

2.2. Trade in agricultural goods

Total trade in agricultural products between the EU and Jordan increased more than eight times between 2003 and 2018, from €0.1 billion in 2003 to €0.87 billion in 2018. Between 2017 and 2018, EU agricultural exports remained stable. EU imports decreased (5%) from €45 million in 2017 to €43 million in 2018. In 2018 the EU mainly exported wheat, live animals, chocolate and infant food and other cereals, flour, starch or milk preparations to Jordan. The EU's key agricultural imports from Jordan were cigars and cigarettes, vegetables and preparations of vegetables, fruits and nuts.

Regarding agricultural tariff rate quotas (TRQs), Jordan’s 2018 fill rate of the two TRQs on virgin olive oil and fresh cut flowers and buds was close to 0% (very low imports of virgin olive oil – 229 kg in 2018 and 48 kg in 2019 until 10/04; no imports of fresh cut flowers).

2.3. Trade in Services and Investment

In 2017 trade in services between the EU and Jordan was worth €1.5 billion. There has been an overall decline in the value of services imported from Jordan from €0.6 billion in 2010 to €0.5 billion in 2017, due to instability in the region. Over the same time period, EU services exports to Jordan increased from €0.6 billion to €1.0 billion. Jordan’s services exports are dominated by services in the travel sector, while Jordan’s imports of services are dominated by the transport sector.

In 2017, FDI stocks were worth €4.3 billion (i.e. €3.3 billion of EU FDI in Jordan and €1 billion of Jordanian FDI in the EU). According to the World Bank 2019 "Ease of Doing Business" index which ranks 190 countries, Jordan ranked 104 th in the world for overall ease of doing business, with a distance to frontier (DTF) 59 score of 60.98 out of 100 – an increase

of 1.42 in DTF score compared to 2018.

• 3. 

  I SSUES ADDRESSED IN THE A NNUAL (J OINT C OMMITTEE /T RADE C OMMITTEE )

  MEETING

There were no sub-committee meetings in 2018. The latest committee meeting took place in 2017 and were reported in the 2018 Staff Working Document (SWD (2018)454 Final) attached to the 2018 Report on the implementation of Free Trade Agreements.

• 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 resulted in significant losses and downscaling

of production for the export market. The presence of over 650,000 Syrian refugees in Jordan 60

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. In 2016, Jordan agreed with the IMF on a three-year programme foreseeing longdelayed structural reforms. Additionally, Jordan (together with Tunisia) continued to benefit from Macro-Financial Assistance (MFA) from the EU and the country is currently implementing a second MFA operation aimed at strengthening the its 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 provided Jordan with a package of support, including the simplification of the rules of origin applicable to Jordanian exports to the EU and trade support programs. The initiative to simplify rules of origin was agreed in July 2016 and, based on Jordan’s request for additional flexibility, further reviewed in December 2018. 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 the Least Developed Countries, provided that certain conditions are met. These rules are simpler than those that would otherwise apply under the Agreement. The simplification applies to 52 product groups. To qualify to use the simpler rules, production must take place in the territory of Jordan and Syrian refugees must also account for no less than 15% of a manufacturer’s workforce. The parties have also foreseen a possibility to extend the scheme to all companies operating in Jordan (without the 15% requirement as above) once Jordan reaches a target of

59 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory performance in economies over time. The higher score the better.

60 According to UNHCR data, see http://data2.unhcr.org/en/situations/syria/location/36

60,000 legal and active jobs for Syrian refugees. The scheme will apply until 2030. The government of Jordan has also agreed to put in place specific monitoring procedures to ensure companies who benefit comply with all the requirements of the scheme. Monitoring and capacity building for the Ministry of Labour will be carried out by the International Labour Organisation (ILO).

Regarding the Rules of Origin initiative there is interest on both sides to further incentivise economic operators to use the scheme. Thirteen companies have already registered and six of them exported their products into the EU for a total value of €19.26 million.

A renewed effort towards enhancing regulatory coherence features among the Partnership Priorities adopted in December 2016 61 . The Priorities, which also cover actions to enhance Jordan’s social and economic resilience, were extended until the end of 2020. 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 thus will 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 to the economy.

Trade policy featured prominently in both the government's Renaissance/Nahda Plan and in the five-year growth plan presented during the London Conference of February 2019. The government identified trade as one of the engines for growth, with the aim to grow exports by 5% annually and reduce imports by 15% by the end of 2020. In the coming 3 years the government plans to work towards the following objectives: i) providing technical assistance and financial incentives for companies that export utilising Jordanian workers; ii) establishing a company that is concerned with export promotion; iii) rehabilitating border crossings with Syria, Iraq and Palestine; establishing a Jordanian–Iraqi joint free zone close to both borders; and iv) expanding the scope of insurance coverage for Jordanian exporters within the export credit guarantee program to reach 100 million Dinars annually by the end of 2020. The government is also requesting support in its efforts to reform the national quality infrastructure and attract FDI.

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 the needs and potential technical assistance.

On trade-related assistance, the EU continued to provide direct and indirect assistance. The EU is also providing one million euros to the Jordan Standards and Metrology Organisation for capacity-building for accreditation and market surveillance. Progress is being made on regulatory approximation in preparation of the possible launch of an Agreement on Conformity Assessment and Acceptance (ACAA). In addition, to support the government's objectives, the EU is also preparing to sign a programme with the International Finance Cooperation/World Bank Group for technical assistance for the review of Jordan's national quality infrastructure.

Trade-related assistance projects to improve the trade and investment climate also include a €55 million Private Sector Development programme comprising a budget support component,

61 See http://www.consilium.europa.eu/en/press/press-releases/2016/12/20/eu-jordan-partnership-priorities-and href="http://www.consilium.europa.eu/en/press/press-releases/2016/12/20/eu-jordan-partnership-priorities-and-compact/">compact/

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 at stimulating innovation, increasing the competitiveness of Jordanian exports and supporting the Rules of Origin initiative.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Jordan has recently started to be more active in enacting/adopting trade restrictive measures: e.g. Jordan has banned (or significantly reduced) imports of several categories of dairy products. Discussions between the EU side and the relevant authorities are ongoing.

There is also a continuing difference of views concerning Jordan’s commitments on the import conditions for alcoholic drinks, arising from the interaction between the initial and the subsequently 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 Agreement, such as a lack of clear trade and development policies and administrative weaknesses. There is a lack of interest from the Jordanian private sector, which still prefers to focus on neighbouring markets as the EU is seen as a highly competitive and demanding market with high regulatory requirements. In addition, production costs in Jordan are high due to water shortages, high electricity prices and transportation costs, which tend to reduce the international 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 has come into force. Goods continue to account for the majority of trade, although services and foreign investment are also present. However, in 2018, both EU exports to EU imports from Jordan have decreased in comparison to 2017. Over the same time period, Jordan’s exports to the EU decreased below the 2002 level. 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 used by Jordan. The Decision on relaxation of Rules of Origin, adopted in July 2016 and revised in 2018, was designed to boost Jordanian exports to 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.

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 62 . 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 when the time is right.

62 See http://data.consilium.europa.eu/doc/document/ST-12384-2016-ADD-1/en/pdf

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Jordan (mio €)

Imports 338 384 337 359 300 Exports 3.672 3.985 4.056 4.105 3.569 Balance 3.335 3.601 3.719 3.746 3.269 Share Jordan in EU28 trade with Extra-EU28 Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,2% 0,2% 0,2% 0,2% 0,2% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Jordan with world Imports 19,7% 21,6% 24,4% 22,0% 21,5% Exports 4,2% 2,5% 2,8% 2,8% 3,2% Total (I+E) 16,0% 16,9% 19,1% 17,4% 17,1%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Jordan: IMF Dots

Total merchandise trade EU28 with Jordan (mio €)

Growth

Jordan 2017 2018 annual

mio € %

Imports 359 300 -58 -16,3%

Exports 4.105 3.569 -536 -13,1%

Balance 3.746 3.269 -477

Total trade 4.463 3.869 -594 -13,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Jordan (mio €)

Growth

Jordan 2017 2018 annual

mio € %

Imports 45 43 -2 -5,4%

Exports 767 764 -3 -0,4%

Balance 722 722 0

Total trade 813 807 -5 -0,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Jordan (mio €)

Growth

Jordan 2017 2018 annual

mio € %

EU28 imports 313 257 -56 -17,9%

EU28 exports 3.337 2.804 -533 -16,0%

Balance 3.024 2.547 -477

Total trade 3.650 3.062 -589 -16,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Jordan (mio €)

Growth

Jordan 2016 2017 annual

mio € %

Imports 538 507 -30 -5,6%

Exports 897 974 78 8,7%

Balance 359 467 108

Total trade 1.434 1.481 47 3,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Jordan (mio €)

2013 2014 2015 2016 2017

Imports 460 668 471 538 507

Exports 856 1.485 932 897 974

Balance 396 817 461 359 467

Total trade 1.316 2.154 1.403 1.434 1.481

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Jordan (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 500 496 453 510 991 Outward 2.424 2.977 2.914 3.193 3.261 FDI Flows

Inward 72 20 -27 -381 -7

Outward -153 335 235 227 216

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-LEBANON ASSOCIATION AGREEMENT

• 1. 

  I NTRODUCTION

The EU and Lebanon have an Association Agreement, creating a tree 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-in liberalisation of industrial products by Lebanon started in 2008 and was completed in 2015. In regard to agri-food trade, the Agreement as of its provisional application, granted tariff-free access of most Lebanese agricultural and processed agricultural products to the EU market (i.e. 89% of products enter tariff and quota free) with only 27 agricultural products facing a specific tariff treatment, mostly Tariff Rate Quotas (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. Lebanon notified the ratification of the protocol at the end of 2018.

In 2014, Lebanon signed the Regional Convention on Pan-Euro-Mediterranean preferential rules of origin (PEM Convention). The country notified its ratification in October 2017 and

formally joined on 1 December 2017 63 . The Convention’s main objective is to provide a more

unified framework for origin protocols.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Since 2012, the EU has been consistently ranking as Lebanon’s number one trading partner. In 2018, the EU represented 37% of Lebanese trade. Over the last sixteen years, the value of EU exports to Lebanon has increased more than in the other direction, leading to a progressive widening of Lebanon’s trade deficit with the EU, from €3.0 billion in 2002 to €6.7 billion in 2018.

63 For more information see https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules href="https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-convention_en">origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem

href="https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-convention_en">convention_en

EU-Lebanon trade in goods (thousands of euro)

8,000,000

7,000,000

6,000,000

5,000,000 EU Exports

4,000,000 EU Imports

3,000,000

2,000,000 EU imports of agricultural

1,000,000 products (excl. fisheries)

0 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Since the 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 €3.4 billion and by 2018 it reached €7.7 billion (an increase of 130%).

The value of EU exports to Lebanon has risen by 128% from €3.2 billion in 2002 to €7.2 billion in 2018. In 2018 the EU exports were substantially stable, decreasing by less than 1%. The most export sectors by value were fuel and mining products (33%), machinery and transport equipment (16%) and chemicals (14%).

The value of EU imports from Lebanon has risen from less than €0.2 billion in 2002 to more than €0.5 billion in 2018. 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 2017 and 2018, EU imports increased by 13%, going from €455 million to €513 million. The most important groups for import by value were base metals (32%), agricultural and food products (16%) and chemical products (11%).

2.2 Trade in agricultural goods

Total trade in agri-food products between the EU and Lebanon increased by 140% between 2003 and 2018, from €0.5 billion to €1.2 billion. Between 2017 and 2018, EU agri-food exports increased slightly (4%) from €1.03 billion to €1.07 billion. Over the same period, EU agri-food imports increased very slightly (0.1%) from €103 million to €104 million. In 2018, the EU mainly exported live animals (17%), cheese (9%), spirits and liqueurs (6%), cereals other than wheat & rice (6%) and milk powder & whey (6%). The EU's key agri-food imports were preparations of vegetables, fruits and nuts (23%), offal, animals fats & other meats (16%) and raw tobacco (11%).

Regarding agricultural tariff rate quotas (TRQs), the fill rate by Lebanon was very low in 2018. The country only used 8% of its olive oil quota. For table grapes, where the quota year does not coincide with the calendar year, it used 8% for 2017-18. It used less than 1% of its quotas for tomatoes, apples, apricots, peaches, or plums. All other quotas remained unused.

2.3 Trade in Services and Foreign Direct Investment (FDI)

In 2017, trade in services between the EU and Lebanon was worth €2.5 billion. Over the last 5 years, trade in services increased in both directions, albeit with a fluctuating trend. EU services imports from Lebanon have risen from €0.9 billion in 2010 to €1.1 billion in 2014 and then have again shrunk to €1.0 billion in 2017, while EU services exports have risen from €1.2 billion in 2010 to €1.9 billion in 2014, before shrinking again to reach €1.5 billion in 2017. The EU’s trade surplus has increased from €0.3 billion in 2010 to €0.4 billion in 2017.

In 2017, EU FDI stocks in Lebanon amounted to €2.0 billion, with inward FDI stocks from Lebanon to the EU accounting for €4.6 billion. In 2017, EU FDI flows accounted for €256 million, while flow of Lebanese FDI reached €184 million.

According to The World Bank Doing Business Index 2019 ranking 190 countries, Lebanon

ranked 142 nd in the world on the ease of doing business (it ranked 133 rd in 2018), with a distance to frontier (DTF) 64 score of 54.04 out of 100 – stable if compared to 2018, when the value was 53.97.

• 3. 

  I SSUES ADDRESSED IN THE A NNUAL J OINT C OMMITTEE MEETINGS

The EU-Lebanon Sub-Committee on Industry, Trade and Services, Customs met 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 65 and the WTO membership bid – which the EU supports. The parties also discussed the EU support to the strengthening of Lebanese capacity in key sectors that were identified in the

Joint Working Group on Trade and Investment 66 of July 2017 and included in an Action

Plan: 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 affect EU exports, notably additional duties on imports of wine and spirits and the exemption of oil from customs duties that have been suspended. Agricultural topics were also discussed. In this context, the Parties exchanged views on the latest developments in Lebanese and EU agricultural and rural development policies, the state of play regarding the review of the Lebanese draft law on geographical indications (GIs), organic farming and the technical assistance for increasing competitiveness of the agricultural and agro-food sectors.

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 economicrelated areas. The latter discussed 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

64 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory performance in economies over time. The higher the score, the better.

65 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. 66 See in the following paragraph. For more information see https://eeas.europa.eu/headquarters/headquarters

Homepage/26716/european-union-and-lebanon-set-joint-working-group-trade-and-investment_en

growth and job creation, waste management, energy and other issues. The CEDRE 67 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.

Furthermore, the EU and Lebanon had technical discussions in July 2018 and January 2019 in the framework of the EU-Lebanon Joint Working Group on Trade and Investment (JWG). The JWG is a forum for technical level discussions aimed at improving economic cooperation and trade, in particular with a view to support Lebanon’s capacity to beneft from the trade preferences that are granted in the Agreement. Work in the JWG informs the Sub Committees. The JWG 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 addressed by thr JWG include the following, inter alia: 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. The last JWG of January 2019 focussed on rules of origin, EU support to Lebanese export capacity in the agri-food and pharmaceutical sector, Lebanese participation in the Enterprise Europe Network, update on Geographical Indications as well as Lebanon’s accession to the Agadir Agreement.

• 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. The number of Syrian refugees is extremely high (between 1 million and 1.5 million in a country of 6 million people, which alread hosts half a million of Palestinian refugees). These shocks have resulted in a decline in economic activity, such as tourism and investments. Economic growth has been falling sharply from the 7%-9% growth rates experienced between 2008 and 2010 to sluggish rates: in 2017, the annual GDP only grew by 0.6% and by only 0.3% in 2018. The unstable political environment and budgetary constraints (exacerbated by the high debt levels, currently at 152% of GDP) have made it difficult for Jordan to address issues such as poverty, unemployment, poor infrastructures and the ‘brain drain’. On a positive note, a government was formed on 31 January 2019, following nine months of deadlock after the national elections of May 2018. The new government vowed to revive the reform agenda that is linked to the CEDRE Conference (see section 3), where international donors – the EU among them – pledged $11 billion in grants and loans, conditional upon the implementation of a fiscal and structural adjustment plan.

At bilateral level, following the commitments undertaken by the EU and Lebanon (reflected in the Partnership Priorities and Compact) to address the factors hindering trade towards the EU, the Joint Working Group on Trade and Investment (JWG) was set. Its aim is to address issues hindering Jordan-EU trade and to help Lebanon to upgrade its local production standards (see in more detail section 3 above). Lebanon also receives assistance under the TAIEX program 68 . 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 € 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.

67 Conférence économique pour le développement, par les réformes et avec les entreprises

68 More information can be found here: https://ec.europa.eu/neighbourhood-enlargement/tenders/taiex_en

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

The EU and Lebanon are committed to strengthen their dialogue on trade, with a view to identifying pragmatic solutions to help Lebanon take advantage of trade opportunities provided for by the Agreement. The EU-Lebanon Joint Working Group on Trade and Investment created in 2017 will continue its works in a sustained way in the following months and years.

In 2018, an intense dialogue took place on rules of origin: EU and Lebanon are cooperating in the revision of the PEM rules; this modernisation will allow, most probably between the end of 2019 and 2020, the implementation of much more modern rules of origins in the trade between EU and Lebanon and the rest of the Euro-mediterranean region. Lebanon is still in the process of applying to join the WTO and announced its intention to rediscuss its offers in terms of schedule of concession of goods. The accession process to join the Agadir Agreement is also ongoing and Lebanon now has to comply with the institutional and administrative requirements that follow the approval of its candidature by the four current members. The EU will continue to support and encourage Lebanon to pursue these accessions.

• 6. 

  C ONCLUSIONS AND OUTLOOK

Overall the value of trade between the EU and Lebanon has increased in both directions since the Agreement entered into force. EU exports have grown more strongly than Lebanese exports and consequently the EU trade surplus has widened. Goods continue to account for the majority of trade, although services and foreign investment are also noteworthy.

Services are the main driver of Lebanon’s economy. Enhancing the competitiveness of the Lebanese service sector could thus lead to economic growth in selected sectors of strategic importance for the country. There is therefore untapped potential in services sectors 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 restricting trade and investment in Lebanon and preventing the country from taking full advantage of the Agreement. Amongst others, compliance with EU standards, for example for SPS and Pharmaceutical products, will be key. The private sector, in particular SMEs, forms the cornerstone of the Lebanese economy and remains the main source of job creation in Lebanon. Despite its dynamism and high resilience, the private sector continues to 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.

Finally, Lebanon remains constrained by the spill-over of the Syrian conflict: apart from the high number of Syrian migrants in the country, traditional trade routes for both Lebanese imports and exports remain closed. The EU and Lebanon continue to consider further collaboration to ease the strain of the refugee crisis.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Lebanon (mio €)

Imports 332 408 407 455 513 Exports 6.545 6.699 6.668 7.265 7.222 Balance 6.213 6.291 6.261 6.810 6.709 Share Lebanon in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,4% 0,4% 0,4% 0,4% 0,4% Total (I+E) 0,2% 0,2% 0,2% 0,2% 0,2% Share EU28 in trade Lebanon with world

Imports 41,9% 42,4% 40,5% 42,4% 41,3% Exports 10,3% 12,0% 10,7% 8,9% 13,1% Total (I+E) 36,5% 37,1% 35,5% 36,8% 36,8%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Lebanon: IMF Dots

Total merchandise trade EU28 with Lebanon (mio €)

Growth

Lebanon 2017 2018 annual

mio € %

Imports 455 513 59 12,9%

Exports 7.265 7.222 -43 -0,6%

Balance 6.810 6.709 -101

Total trade 7.719 7.736 16 0,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Lebanon (mio €)

Growth

Lebanon 2017 2018 annual

mio € %

Imports 103 104 2 1,6%

Exports 1.039 1.065 26 2,5% Balance 936 960 24

Total trade 1.142 1.169 27 2,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Lebanon (mio €)

Growth

Lebanon 2017 2018 annual

mio € %

EU28 imports 352 409 57 16,3%

EU28 exports 6.226 6.158 -68 -1,1%

Balance 5.874 5.749 -126

Total trade 6.578 6.567 -11 -0,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Lebanon (mio €)

Growth

Lebanon 2016 2017 annual

mio € %

Imports 1.074 1.025 -49 -4,5%

Exports 1.410 1.473 63 4,5%

Balance 336 448 112

Total trade 2.484 2.498 15 0,6%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Lebanon (mio €)

2013 2014 2015 2016 2017

Imports 981 1.121 967 1.074 1.025

Exports 1.480 1.908 1.572 1.410 1.473

Balance 499 788 605 336 448

Total trade 2.460 3.029 2.539 2.484 2.498

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Lebanon (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 3.645 3.774 2.677 4.434 4.629

Outward 1.331 1.601 1.866 2.232 2.046 FDI Flows

Inward 320 261 1.231 133 184

Outward 234 190 -46 213 256

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-MOROCCO ASSOCIATION AGREEMENT

• 1. 

  I NTRODUCTION

The EU and Morocco established a Free Trade Area as part of the EU-Morocco Association Agreement (AA; the “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 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 products, processed agricultural products, fish and fisheries products, which entered into force in October 2012. Trade for industrial products is now entirely liberalised, while market opening for agricultural products is also substantial with only a few limited number of Moroccan products subject to TRQs on each side when imported into the EU. The tariff dismantling for EU exports will be completed by 1 October 2020, with a considerable number of products still subject to quotas when exported to Morocco. Negotiations for a DCFTA started in 2013. The last round took place in April 2014.

A protocol establishing a Dispute Settlement Mechanism was agreed upon by the EU and Morocco and entered into force in 2012. Morocco also signed the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention) on 18 April 2012 and ratified it in May 2019. The ratification process is still pending, though it could be accelerated in view light of the upcoming conclusion of negotiations of the modernisation of the PEM Convention. The main objective of the PEM Convention is to provide a more unified framework for origin protocols. Negotiations in view of an Agreement for the Protection of geographical indications (GIs) were concluded in 2015, and ratification is pending on both the EU and Morocco's sides.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018, the EU was Morocco’s first trading partner for goods, accounting for almost 55% of Morocco’s total trade. Other trading partners fell far behind the EU, such as China (9.9%), the United States (7.8%), and Turkey (4.6%). Morocco is the EU’s 29th largest trading partner and the second trading partner in the Euro-Mediterranean region (after Algeria).

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 €14.3 billion in 2002 to €39.3 billion in 2018 (170%). Between 2017 and 2018, total trade increased by 4.9%, from €37.5 billion to €39.3 billion.

EU exports rose by 196% between 2002 and 2018, from €7.8 billion to €23.3 billion. Between 2017 and 2018, EU exports increased (4%) from €22.4 billion to €23.3 billion. In 2018, EU exports to Morocco were mainly made of machinery and transport equipment (38.3%), fuels and mineral products (12.9%) and textiles (6.8%).

EU imports increased by 148% between 2002 and 2018. Between 2017 and 2018, EU imports increased (6.3%) from €15.0 billion to €16.0 billion. In 2018, the main EU imports were machinery and transport equipment (41.6%), agricultural products (21.3%) and textiles and clothing (18.6%).

The agreement has proven mutually beneficial. While the first years of implementation of the EU-Morocco Free Trade Area led to an increase of the trade surplus for the EU, the trade balance between the two partners has now stabilised to slightly below 20% of total trade in goods.

2.2 Trade in agricultural goods

Morocco is the largest exporter of vegetables to the EU. Among the EU’s Euromed partners, Morocco is the largest supplier of agricultural products. Total trade in agricultural products between the EU and Morocco tripled since 2003, from €1.3 billion in 2003 to €3.9 billion in 2018.

EU agricultural exports to Morocco were stable in 2018 at €1.5 billion. Agricultural imports have been increasing by 7% on average year-on-year, from €2.2 billion in 2017 to €2.4 billion in 2018, mainly driven by fruit imports.

Under the association agreement, the EU grants tariff rate quotas for 7 categories of Moroccan agricultural products, mostly fruit and vegetables. Most quotas are opened for periods split over two calendar years; as a result, quota fill rates set at the end of 2018 might not be fully representative. As in previous years, at the end of 2018, the tomato monthly sub-quotas were entirely utilised. Fill rates remained high for courgettes (72%) and intermediate for clementines (52%), cucumbers (40%) and strawberries (35%). The quotas for garlic and fructose remained unused by Morocco.

2.3 Trade in Services and Foreign Direct investment (FDIs)

Total trade in services between the EU and Morocco increased between 2010 and 2017, from €7.5 billion to €10.4 billion. Moroccan exports of services to the EU rose by 9% between 2016 and 2017 and EU exports of services to Morocco increased by 10.1% over the same period. In 2017, the EU exported €4.3 billion in services to Morocco and Morocco exported €6.1 billion in services to the EU.

EU-Morocco FDI flows remained relatively steady between 2013 and 2017, despite some volatility, resulting in a total EU FDI stock of €18.5 billion in Morocco at the end of 2017.

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 – AMDI).

Morocco currently ranks 69 th out of 190 in the World Bank ranking ‘Doing Business 2018’, with a distance to frontier (DTF) 69 score of 67.9 out of 100 – this means 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 but are expected to start reconvening in 2019.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

Safeguard measures

Morocco is a user of trade defence measures, some of which affect imports from the EU.

69 The DTF score is a measurement used by the World Bank to assess the absolute score of regulatory performance in economies over time.

On 20 December 2018 the Moroccan Ministry of Trade published the results of its investigations on the extension of two safeguard measures in the steel sector (one on wire rods and reinforcing bars, another on cold-rolled sheets, neither plated nor coated, and plated or coated sheets), which were due to expire by the end of 2018. Having found that the concerned sectors are still vulnerable from a surge of imports, the Ministry decided that the safeguard measures should be extended for a further three years i.e. until end of 2021. The EU requested consultations with Morocco, which were held on 22 March 2019, to complain about the absence of prior consultation with the EU before imposing the measures (as foreseen by the EU-Morocco Association agreement) and the insufficient rhythm of liberalisation during the extension period (which does not meet the requirements of the WTO safeguard agreement).

On another front, on 28 February 2019, the Moroccan Ministry of Trade organised a public hearing on the safeguard investigation on coated wood boards. The hearing brought together a large number of representatives of governments (EU, France, Italy, Spain, Portugal and Turkey), wood board exporters and associations from the EU and Turkey, as well as domestic importers and industrial users, opposing the request for safeguard measures by the sole Moroccan manufacturer of coated wood boards CEMA Bois de l'Atlas. On 26 February 2019, the Ministry opened a mid-term review investigation on the implementation of the safeguard measure on imports of paper reels and reams, which have been applied since 1 January 2017 for a 4 year period.

Law N°24-09 on consumer protection makes it compulsory to affix the Cmim marking on products subject to specific technical regulation, whether locally produced or imported. As of

1 st February 2019, the new Moroccan (reads Cmim) marking became compulsory for the sale in Morocco of electrical products subject to technical regulations 2573-14 (low voltage) and 2574-14 (electromagnetic compatibility), as well as toys subject to technical regulation 2574-15 on toy safety. These three technical regulations are aligned to relevant EU directives, and their drafting and adoption back in July 2015 was supported by EU development cooperation. Although the Cmim marking is largely equivalent to the European CE marking, the latter will no longer suffice on products imported into Morocco. In due course, the Moroccan Ministry of industry would be interested in negotiating a mutual recognition agreement with the EU.

Once the Ministry finalises the technical regulations applicable to other sectors (detergents, building materials, gas appliances, personal protection equipment and industrial machinery), the Cmim marking will be extended to further families of products.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Negotiations on the amendments to the Protocols of the Association Agreement and the fisheries agreement

On 25 October 2018, the EU and Morocco signed the amendment of the Protocols to the Association Agreement extending trade preferences to goods originating in Western Sahara.

On 16 January 2019 the European Parliament approved the amendment of the relevant protocols of the EU-Morocco Association, thereby extending the tariff preferences laid down in the Association Agreement to products originating in Western Sahara. The European Parliament on 12 February 2019 also approved the new Sustainable Fisheries Partnership Agreement (SFPA) with Morocco, which also covers the waters of Western Sahara.

On 4 th March 2019, the Council of the European Union adopted the decision on conclusion of the EU-Morocco Sustainable Fisheries Partnership Agreement, extending the fishing zone to waters of Western Sahara.

The ratification of both agreements still needs to be finalised in accordance with the Moroccan procedure.

On 27 April 2019, Polisario Front has brought a case against the Council of the EU where it requests the Court of Justice to annul the Decision of the Council of the EU amending the EU- Morocco Association Agreement. Other cases brought by Polisario are also pending before national and European courts (the Court of Justice and the General Court) including the EU- Morocco Aviation Agreement and the Sustainable Fisheries Partnership Agreement (SFPA) in which the fishing zone extends to waters adjacent to the territory of Western Sahara.

• 6. 

  C ONCLUSIONS AND OUTLOOK

EU-Morocco trade and investment relations are intense and are expected to be further strengthened in view of the willingness on both sides to relaunch and reinvigorate all the dimensions of the EU-Morocco partnership following the resumption of full political relations throughout 2019.

The overall impact of the Free Trade Area on EU-Morocco trade has been positive, bringing both economies closer together 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 thus be all the more important to resume the technical work under the EU-Morocco trade sub-committee. Compliance with obligations in the field of competition and public aid, including transparency on the latter, has to be enhanced. Negotiations are meant to cover areas such as access to public procurement, disciplines on non-tariff measures, but also standards and regulatory issues (bringing them closer to the EU acquis), SPS measures, intellectual property rights, consumer protection, competition, investment as well as trade in services and sustainable development.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Morocco (mio €)

Imports 11.053 12.456 13.792 15.117 16.073 Exports 18.213 18.142 20.966 22.366 23.260 Balance 7.160 5.686 7.175 7.249 7.187 Share Morocco in EU28 trade with Extra-EU28 Imports 0,7% 0,7% 0,8% 0,8% 0,8% Exports 1,1% 1,0% 1,2% 1,2% 1,2% Total (I+E) 0,9% 0,9% 1,0% 1,0% 1,0% Share EU28 in trade Morocco with world Imports 51,0% 52,5% 55,6% 56,5% 54,6% Exports 63,4% 61,3% 64,9% 64,6% 64,1% Total (I+E) 55,2% 55,7% 58,9% 59,4% 57,9%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Morocco: IMF Dots

Total merchandise trade EU28 with Morocco (mio €)

Growth

Morocco 2017 2018 annual

mio € %

Imports 15.117 16.073 955 6,3%

Exports 22.366 23.260 893 4,0%

Balance 7.249 7.187 -62 Total trade 37.484 39.332 1.849 4,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Morocco (mio €)

Growth

Morocco 2017 2018 annual

mio € %

Imports 2.248 2.396 148 6,6%

Exports 1.504 1.485 -19 -1,2%

Balance -745 -911 -167

Total trade 3.752 3.881 130 3,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Morocco (mio €)

Growth Morocco 2017 2018 annual

mio € %

EU28 imports 12.869 13.676 807 6,3%

EU28 exports 20.863 21.775 912 4,4% Balance 7.994 8.098 104

Total trade 33.732 35.451 1.719 5,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Morocco (mio €)

Growth

Morocco 2016 2017 annual

mio € %

Imports 5.548 6.074 526 9,5%

Exports 3.933 4.331 398 10,1% Balance -1.615 -1.743 -128

Total trade 9.481 10.405 923 9,7%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Morocco (mio €)

2013 2014 2015 2016 2017

Imports 4.483 5.456 5.094 5.548 6.074

Exports 3.080 3.369 4.101 3.933 4.331

Balance -1.403 -2.087 -993 -1.615 -1.743

Total trade 7.563 8.826 9.194 9.481 10.405

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Morocco (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 707 948 927 543 869 Outward 17.508 14.156 14.862 15.337 18.478

FDI Flows

Inward -19 195 42 -314 73

Outward 860 -3.456 770 608 340

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-PALESTINE INTERIM ASSOCIATION AGREEMENT

• 1. 

  I NTRODUCTION

The Interim Association Agreement creating a free trade area between the EU and Palestine 70 (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 EU 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) 71 , 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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018, the EU was Palestine’s second largest trade partner behind Israel, representing 11% of its total trade. With a 11% share, the EU was the second largest exporter to Palestine behind Israel (53%). Together with Kuwait the EU was Palestine’s fourth largest export destination (2%), behind Israel (80%), Jordan (7%) and UAE (3%).

The value of trade between the EU and Palestine has increased since the Association Agreement came into force, in both directions. In 2002 the value of trade in goods was € 41 million and in 2018 it was € 243 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

70 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

71 More information can be found at : https://ec.europa.eu/taxation_customs/business/calculation-customs href="https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-convention_en">duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation

href="https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-convention_en">pem-convention_en to the EU market. This is largely due to obstacles facing Palestinian trade, as well as

competitiveness issues and the Palestinian difficulty in meeting EU standards, in particular

SPS and technical standards.

The value of EU exports to Palestine has risen from €33 million in 2002 to €243 million in 2018 (an increase of more than 600%). EU exports decreased (7%) between 2017 and 2018,

declining from €261 million to €243 million. This was the first decline after the period 2008-

• 09. 

  The main export sectors in 2018 were machinery and transport equipment (49%), food and live animals (20%) and chemicals (13%).

The value of EU imports from Palestine has risen from less than €8 million in 2002 to more

than €18 million in 2018, which represents an increase of 137%. Within the lifespan of the

agreement, however, the value of imports has been fluctuating: Between 2017 and 2018, EU

imports increased by 12% from €16 million to €18 million. In 2018 the most important import

sectors were agri-food products (94% out of which 50% are fruits and nuts) and chemicals (6%).

2.2 Trade in agricultural goods

Total trade in agri-food products between the EU and Palestine increased by 863% between

2003 and 2018, from €8 million to €77 million in 2018. EU exports remained the same between 2017 and 2018, accounting for €60 million. EU imports increased (31%) between 2017 and 2018, from €13 million to €17 million.

In 2018, agri-food products represented the majority of EU imports from Palestine,

accounting for €17 million (over 90%) of the EU's total imports. Palestine exports a limited

number of agri-food products including: fruit, nuts and spices, olive oil, bulbs, roots, live plants, and vegetables. Overall the level of Palestinian agri-food exports has grown since the

Agricultural Agreement of 2012, rising from €9 million in 2011 to its current value. The biggest increase has been in olive oil, which has risen from €1 million to €5 million in the

same period, with year-on-year variations. Export levels of vegetables, bulbs, roots and live

plants have remained relatively static over the same period and even fell slightly in the last

couple of years; the “star export item” more recently has been dates. The EU exported mainly

infant food and other cereals, flour & starch or milk preparations, followed by chocolate, confectionary and ice cream, and live animals to Palestine.

2.3 Trade in Services and Foreign Direct investment (FDIs)

In 2017 trade in services between the EU and Palestine was worth €113 million, which represents a 23% increase as compared to €92 million in 2010. There have been year-on-year fluctuations in the value of services imported from Palestine, which has declined slightly overall between 2011 and 2015. In 2016, EU imports from Palestine reached a high of €95 million, but then declined to €36 million in 2017. As for EU exports of services, they have been growing since 2014, with a slight fluctuation in 2016, to reach an all-time high of €78 million in 2017.

In 2017, EU FDI stocks in Palestine amounted to €28 million, an increase from €15 million in 2013. In 2016, EU FDI flows accounted for €14 million.

According to the World Bank 2018 "Ease of Doing Business" index which ranks 190 countries, Palestine ranked 116 th in the World for overall ease of doing business, slightly down from the 114 th position held in 2018. The distance to frontier (DTF) 72 score is 59.11 out of 100 – a slight improvement from the value achieved in 2018 (58.7).

• 3. 

  I SSUES ADDRESSED IN THE A NNUAL (J OINT C OMMITTEE /T RADE C OMMITTEE )

  MEETING

The most recent meeting of the EU-Palestinian Sub-committee on Trade and Internal Market, Industry, Agriculture and Fisheries, and Customs took place 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 73 and to materialise this in practice. A 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 2018 accounted for 53% of Palestinian imports and absorbed 80% 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.

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’.

72 The DTF score is a measurement used by the World Bank to assess the absolute score of regulatory performance in economies over time. The higher the score, the better.

73 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.

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 cofunds, 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 has started in 2018.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

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 in 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 Programme 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 EU for preparing a Technical Progress Report 74

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 with the Agreement. The EU trade surplus continues to increase since 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 promotes trilateral discussions on trade to facilitate progress and will continue to engage with both sides to remove the obstacles to Palestinian trade.

• 7. 

  S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Occupied Palestinian Territory (mio €)

Imports 14 16 19 16 18 Exports 141 195 254 261 243 Balance 127 179 235 245 225

Share Occupied Palestinian Territory in EU28 trade with Extra-EU28 Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

74 For more information see http://trade.ec.europa.eu/doclib/docs/2018/june/tradoc_156946.pdf

Share EU28 in trade Occupied Palestinian Territory with world

Imports 9,0% 11,7% 12,4% 13,7% 15,0% Exports 2,1% 1,6% 1,9% 1,6% 2,5% Total (I+E) 8,1% 10,1% 10,8% 11,8% 11,5%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Occupied Palestinian Territory: IMF Dots

Total merchandise trade EU28 with Occupied Palestinian Territory (mio €)

Growth

Occupied Palestinian Territory 2017 2018 annual

mio € %

Imports 16 18 2 12,3%

Exports 261 243 -19 -7,1%

Balance 245 225 -21

Total trade 278 261 -17 -6,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Occupied Palestinian Territory (mio €)

Growth

Occupied Palestinian Territory 2017 2018 annual

mio € %

Imports 13 17 3 25,2%

Exports 60 60 0 0,1%

Balance 46 43 -3

Total trade 73 77 3 4,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Occupied Palestinian Territory (mio €)

Growth

Occupied Palestinian Territory 2017 2018 annual

mio € %

EU28 imports 3 1 -1 -49,2%

EU28 exports 202 183 -19 -9,2%

Balance 199 182 -17

Total trade 204 184 -20 -9,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Occupied Palestinian Territory (mio €)

Growth

Occupied Palestinian Territory 2016 2017 annual

mio € %

Imports 98 36 -62 -63,3%

Exports 70 78 8 11,2%

Balance -28 42 70

Total trade 168 113 -54 -32,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Occupied Palestinian Territory (mio €)

2013 2014 2015 2016 2017

Imports 37 31 39 98 36

Exports 47 58 73 70 78 Balance 10 28 35 -28 42

Total trade 84 89 112 168 113

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Occupied Palestinian Territory (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 3 5 13 14 15

Outward 15 16 17 24 28 FDI Flows

Inward -1 -0 2 1 Outward -91 0 0 2 14

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE EU-TUNISIA ASSOCIATION AGREEMENT

• 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 can 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 opened its market (with only one product subject to tariff rate quota) while the Tunisian market remains closed. In 2011, the EU and Tunisia signed a protocol establishing a Dispute Settlement Mechanism, which came into force. Both sides are currently discussing the steps to undertake in order to make the system operational.

The Regional Convention on Pan-Euro-Mediterranean preferential rules of origin (PEM convention) was signed by Tunisia on 16 January 2013. The Convention seeks to provide a more unified framework for origin protocols. The EU hopes that Tunisia will grasp this opportunity and join the PEM revised rules that will strongly benefit Tunisian companies and help them to hook into new and profitable regional value chains.

Negotiations on a Deep and Comprehensive Free Trade Area (DCFTA) with Tunisia were launched in Tunis in October 2015 and the first full round of negotiations took place in April

2016.

One of the main objectives of the negotiations is to support economic reforms in Tunisia and to bring Tunisian legislation closer to EU legislation in trade-related areas. This means atypical trade negotiations where the principles of asymmetry and progressiveness in favour of Tunisia guide both market access (especially in agriculture, services and investment) and regulatory approximation.

The first two rounds covered all chapters and were very constructive, which reaffirms the

Tunisian commitment to the DCFTA. Ahead of the 2 nd and the 3 rd negotiating rounds, the EU

submitted a number of new or updated negotiating texts, modified to take account of the latest legislative and policy developments.

The negotiations have been carried out in utmost transparency both on the EU side and on the Tunisian side. All EU initial proposals are public and civil society consultations are held in the margins of negotiating rounds, including jointly. Joint reports are also published after each round, including in Tunisia. After the third round (which took place in December 2018), good progress was made.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

The EU is Tunisia’s main trading partner and Tunisia is the 33 rd trading partner for the EU – 4 th in the Euro-Med region. In 2018, the EU accounted for 73% of Tunisian total exports of goods, and 53% of its total imports. Overall the EU accounted for 61% of Tunisia’s total trade.

EU-Tunisia trade in goods (thousands of euro)

14,000

12,000 EU Exports

10,000

8,000 EU Imports

6,000

4,000 EU imports of agricultural products

2,000 EU imports of other products (excl.

0 fuels and minerals)

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Trade in goods between the EU and Tunisia has increased significantly over the period since the Agreement entered into force: between 2002 and 2018, the total trade in goods increased by 58%, from €13.9 billion to €21.9 billion.

EU exports rose by 52% between 2002 and 2018, up to €11.7 billion. Between 2017 and 2018, they increased by 5%. In 2018, the EU mainly exported machinery and transport equipment (33%), manufactured products (23%), and fuels and mining products (15%).

EU imports rose by 65% since 2002, reaching €10.2 billion in 2018. Year-on-year, they increased by 8% in 2018. Tunisia’s exports of non-fuel industrial products (machinery, transport equipment, textiles and clothing) increased steadily over the period, while the exports of agricultural products have remained at a comparatively low level, even though they have quadrupled since 2002. In 2018, EU imports consisted mainly of machinery and transport equipment (39%), miscellaneous manufactured articles (mainly textiles) at 34% and mineral fuels (7%).

Overall, the agreement has proven mutually beneficial. Tunisia’s trade deficit with the EU is relatively small when compared to the one Tunisia has with China, Russia or Turkey – three 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 reached a plateau between 2011 and 2016, and then picked up more vigorously. Ongoing negotiations for the

DCFTA aim at making room for further progress in trade between the EU and Tunisia, including further liberalisation of agricultural and fisheries’ 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 Tunisia increased by 140% between 2003 and 2018, from €0.5 billion to nearly €1.2 billion.

Year-on-year, EU agricultural exports slightly decreased by 1.3%, from €555 million in 2017 to €547 million in 2018. The decrease was mainly due to a €39 million decrease in wheat exports, but exports grew for various other agricultural goods such as other cereals, live animals and beef.

Tunisia is by far the main origin for olive oil imports into the EU (69% of olive oil imports in 2018). EU agricultural imports increased by 44% from €459 million in 2017 to €662 million in 2018, driven by dynamic olive oil imports. Despite that increase, agri-food imports remained well below their 2015 level (€811 million).

The 56 700 tonne tariff rate quota (TRQ) for olive oil imports from Tunisia set out in the bilateral agreement was almost filled in 2018 (fill rate of 98%). The fill rate was intermediate for fresh oranges (31%) and low for prepared tomatoes (12%), wine and cut flowers (4%).

Several quotas for Tunisian products were not utilised at all in 2018 (including wine with geographical indication, apricot pulp, new potatoes, natural honey and truffles).

2.4 Trade in Services and Investment 75

Total trade in services between the EU and Tunisia decreased between 2010 and 2017, from €5.9 billion to €3.8 billion, 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 43% between 2010 and 2017 and EU exports of services to Tunisia falling by 20% over the same period. In 2017, the EU exported

€ 1.3 billion in services to Tunisia, compared to € 1.4 billion in 2016 and Tunisia exported € 2.5 billion in services to the EU compared to € 2.3 billion in 2016.

FDI flows remained relatively steady between 2013 and 2017, despite a slowdown of EU FDI in Tunisia, resulting in the total EU FDI stock of € 4.0 billion in Tunisia at the end of 2017.

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. 76

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

80 th out of 190 in the Doing Business 2018 ranking – up from the 88 th place in 2017– with a distance to frontier (DTF) 77 score of 66.11 out of 100 – an improvement from the score of

2018 (64.60).

75 For more information see http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_111593.pdf .

76 Tunisian Foreign Investment Promotion Agency, 2017.

77 The DTF score is a measurement used by the World Bank to assess the absolute level of regulatory performance in economies over time.

• 3. 

  I SSUES ADDRESSED IN THE J OINT C OMMITTEE MEETINGS

The last 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 geographical indications (GIs). Both Parties discussed Tunisian requests for a reintegration into the Generalized System of Preferences, an additional olive oil quota and a possibility to renew a quota for eels. The EU raised several SPS issues, notably regarding the exports of apples, live plants, and poultry products from the EU to Tunisia.

Tunisia touched on the SPS issues related to its exports of fishery products and inquired about a possibility to export dairy products to the EU. The EU raised concerns about the increase of customs duties by Tunisia on some agricultural products and import restrictions on red meat and live animals.

The Tunisian authorities did not follow up in 2018 on the issue of exporting dairy products to the EU.

The Sub-Committee on Customs Cooperation and Taxation met in February 2017. Several issues were discussed covering both customs and taxation. On customs, the main issues considered were 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), the fight against counterfeiting goods, methods of mutual administrative assistance and preferential origin, including a state of play of the revision of the pan-euro-Mediterranean preferential rules of origin. On

Taxation, Tunisia informed about the reform of its taxation rules. In general, both Parties agreed on the need to support Tunisian customs in preparing projects relating to customs legislation, as well as modernisation.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

Tunisia’s economic situation remains fragile. Multiple shocks, including the fall in EU demand for Tunisian products because of the economic crisis, the 2011 Revolution and the political transition that ensued, led to 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 continues to provide support to Tunisia and its authorities, and has been stepping up its political and financial support considerably since 2011.

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 Neighbourhood

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’, 78 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

78 http://europa.eu/rapid/press-release_IP-16-3192_en.htm

concessions on agricultural market access under 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 concluded that Tunisia has achieved considerable progress in terms of regulatory alignment in the areas to be covered by the future DCFTA. Nevertheless, some challenges remain in terms of implementation of some key and of institutional capacity, such as for meeting the obligations in the field of competition and public aid, including transparency on the latter.

In addition to the benefits emitted from the deeper economic exchange, the EU provides substantial trade-related assistance to help Tunisia adjust to the new conditions of competition following the signature of the EU-Tunisia Association Agreement, as well as to adapt to the possible impact of the DCFTA agreement. Ongoing European projects provide not only assistance to wide range of Tunisian companies to increase their competitiveness on the local and international markets, but equally favour reforms and help upgrading the quality infrastructure which benefits Tunisian consumers. The signature of a new programme

“Programme d’appui à la compétitivité et aux exportations (PACE)” in November 2018 shows ongoing European support to the industrial and agriculture sectors and complements another programme, the “Programme d’Appui à la Compétitivité des Services (PACS)" launched in 2016 which focuses mainly on the services sector. Upon request by the Tunisian authorities, the European Union also provides financial resources to hire technical expertise in order to understand the gap between the EU and the Tunisian legislation, the potential effect of the conclusion of the DCFTA agreement and the strategic orientations and eventual reforms to undertake. Current and recent projects include studies on public procurement, competition and state aid, postal services, the EU sanitary and phytosanitary requirements to protect human and animal health, Conformity Assessment and Acceptance of Industrial

Products in the sectors identified by the Tunisian authorities.

• 5. 

  P ROGRESS , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Since the end of last year contentious trade issues between the EU and Tunisia have substantially increased. On 29 November 2018, without prior notice to private operators,

Tunisia enforced by surprise a new restrictive measure imposing import authorizations on a very long list of products. The import authorizations should in theory be guided by objective technical specifications ("cahier des charges") but these have not yet been defined and the

Ministry of Trade intends to evaluate and decide on importation requests on a case-by-case basis in the absence of specific criteria. Quantitative restrictions are also being applied.

The measure imposes de facto non-automatic import licenses and appears to be a clear violation of Article 19 of the EU-Tunisia Association Agreement which prohibits quantitative restrictions. The new measure has not been notified to the WTO and appears contrary to WTO provisions.

The list includes many agricultural and agri-food products, textiles & clothing, cosmetics, leather products, shoes, toys, electrical goods.

 The products affected represent roughly 4% of total EU exports to Tunisia (€398

million in 2017).

 Key sectors affected (2017 EU export data): clothing €155 million, cosmetics

€94 million, agri-food products €35 million, cleaning products €26 million, toys & sports €21 million, textile €17 million.

 Member States most affected: France €126 million (including €49 million in

cosmetics); Italy €115 million (incl. €65 million in clothing), Spain €44 million.

All affected EU Member States clearly voiced their concerns and asked for a prompt resolution of this issue. A letter by Commissioner Malmström was addressed to the Tunisian

Minister of Trade on 19/12/2018, calling for the elimination of the new measure as soon as possible. In his reply Tunisia trade minister reaffirms the compatibility of these measures with

WTO rules and underlines the necessity of these measures for ensuring consumer protection. A reply to the Minister's letter has been sent on 12/02/2019 dismissing the Minister's arguments and suggesting in the immediate term ways to except EU exports in the application of the erga omnes measure (e.g. considering the CE mark as sufficient as well as suggesting discussions on other technical options for products not covered by CE mark).

This issue was also debated at length during the trade sub-committee meeting that took place on 28 February 2019 in Tunis, during the WTO licence committee meeting on 4 April in

Geneva and during the Association committee meeting on 11 April. The EU raised again the issue during the Association Council meeting in May 2019. In July 2019, following bilateral cooperation efforts and extensive calls for the withdrawal of these measures, the Tunisian government informed that it cancelled the import restrictive authorisation measures as of 26

July 2019).

Several other open issues include:

 technical and administrative difficulties met by EU exporters on pharmaceutical

products, ceramic tiles, tyres and cars  Export declaration requested to EU operators.

 longstanding SPS issues related to exports of apples.

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.

• 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 (notably related to the exlusion of agricultural products), 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.

DCFTA talks take place at delicate political times in Tunisia ahead of two elections in Tunisia: parliamentary and presidential elections. These are scheduled for October and December 2019, respectively. After four full rounds some texts have been practically closed at technical level (GIs and most of the IP text), while for other texts more than 60% of provisions have been agreed (this is the case for sustainable development, competition, digital trade). Good progress has also been made on TBT, SPS and trade facilitation. In other areas, progress is slower, (e.g. public procurement). Some texts have led to intense debates with civil society in Tunisia (e.g. intellectual property).

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Tunisia (mio €)

Imports 9.365 9.506 9.309 9.433 10.179 Exports 10.992 10.758 10.550 11.163 11.676 Balance 1.627 1.252 1.241 1.731 1.497 Share Tunisia in EU28 trade with Extra-EU28 Imports 0,6% 0,6% 0,5% 0,5% 0,5% Exports 0,6% 0,6% 0,6% 0,6% 0,6% Total (I+E) 0,6% 0,6% 0,6% 0,6% 0,6% Share EU28 in trade Tunisia with world Imports 52,5% 55,2% 54,4% 54,0% 53,4% Exports 77,8% 78,1% 77,5% 74,3% 73,3% Total (I+E) 62,4% 64,3% 63,7% 62,3% 61,5%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Tunisia: IMF Dots

Total merchandise trade EU28 with Tunisia (mio €)

Growth

Tunisia 2017 2018 annual

mio € %

Imports 9.433 10.179 747 7,9%

Exports 11.163 11.676 513 4,6%

Balance 1.731 1.497 -234

Total trade 20.596 21.855 1.260 6,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Tunisia (mio €)

Growth

Tunisia 2017 2018 annual

mio € %

Imports 459 662 203 44,2%

Exports 555 547 -7 -1,3%

Balance 96 -114 -210

Total trade 1.014 1.209 195 19,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Tunisia (mio €)

Growth

Tunisia 2017 2018 annual

mio € %

EU28 imports 8.974 9.517 544 6,1%

EU28 exports 10.609 11.129 520 4,9%

Balance 1.635 1.611 -24

Total trade 19.582 20.646 1.064 5,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Tunisia (mio €)

Growth

Tunisia 2016 2017 annual

mio € %

Imports 2.253 2.451 197 8,8%

Exports 1.359 1.329 -29 -2,1%

Balance -895 -1.121 -227

Total trade 3.612 3.780 168 4,7%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Tunisia (mio €)

2013 2014 2015 2016 2017

Imports 3.630 3.511 3.310 2.253 2.451

Exports 1.492 1.135 1.401 1.359 1.329

Balance -2.138 -2.376 -1.909 -895 -1.121 Total trade 5.122 4.646 4.711 3.612 3.780

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Tunisia (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 170 248 246 284 357

Outward 2.945 4.307 4.026 4.181 4.019 FDI Flows

Inward -92 -25 -43 39 52

Outward 92 754 503 734 351

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FIRST GENERATION FREE TRADE AGREEMENTS WITH THE WESTERN BALKAN PARTNERS

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 79 . 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 liberalised 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 liberalised (with very few exceptions). On the other hand, EU agricultural exports to Albania are subject to tariffs and tariff rate quotas (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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Total bilateral trade between the EU and Albania increased by 10% between 2017 and 2018 reaching a total of €5 billion. This represents a 150% increase in trade since the implementation of the trade agreement in 2006. The EU remains Albania’s first trading partner accounting for 76% of total exports and 62% of total imports of goods. More specifically, Germany, Greece, Italy, and Spain are responsible for 73% of the EU’s exports to Albania and 85% of the EU’s imports from Albania. The main traded products concern the following sectors: machinery and appliances; footwear; hats and other headgear; textiles and textile articles and mineral products. The overall trade balance is in favour of the EU, which has enjoyed a stable surplus of €1.4 billion over the last 3 years, which is partly offset by a small surplus in the balance of services.

79 See http://ec.europa.eu/trade/policy/countries-and-regions/regions/western-balkans/ for more information

2.2 Trade in agricultural goods

In 2018, trade in agricultural products increased by 8% reaching a total of €500 million, which represents 10% of the total bilateral trade. Only 5% of Albania’s exports to the EU are agricultural products versus 13% of all EU’s exports to Albania. However, another 5% of Albania’s exports include fishery products versus only 2% for the EU. The EU imported mainly edible vegetables, fruits and nuts, and oil seeds and oleaginous fruits from Albania and exported primarily beverages, food preparations and tobacco to Albania.

A limited share of the EU-Albania agricultural trade is subject to duty-free Tariff Rate Quotas (TRQs). Three out of five TRQs granted by Albania were fully utilised by EU exporters whereas two were not used or almost not used in 2018. On the EU side, the two TRQs in place for wine and sugar suffered again a low uptake from Albanian exporters in 2018 (see table below.

TRQ identification TRQ availability TRQ use

Code Description of goods Weight Weight

Milk and cream, not concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, not exceeding 1 %, in immediate packings of a net

04011010 content not exceeding two litres

Milk and cream, not concentrated nor containing added sugar or other sweetening

matter, of a fat content, by weight, not 790 tonnes 789.80 tonnes

exceeding 3 %, in immediate packings of a net 04012011 content not exceeding two litres

Milk and cream, not concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, exceeding 3 %, in immediate packings of a net content

04012091 not exceeding two litres

10019120 Common wheat and meslin

10019900 Other 42,000 ton 471.61 tonnes

10059000 Maize (except seeds) 10,000 ton 0 tonne

220410 Sparkling wine

220421 In containers holding 2 litres or less 10,000 HL 10,000 HL

21032000 Tomato ketchup and other tomato sauces 60 tonnes 60 tonnes

2.3 Trade in Services and Foreign Direct investment (FDIs)

Total bilateral trade in services increased by 4% in 2017, reaching a total of €1.6 billion. Albania enjoys a small surplus of €78 million in its trade in services with the EU, mainly resulting from a continued solid growth of its foreign tourism. This is also reflected in the increasing share of services in Albania’s total trade of goods and services with the EU, which grew from 28% in 2016 to 33% in 2017. In contrast, trade in services only make up 20% of the EU’s total trade in goods and services with Albania.

The EU remains the main source of Foreign Direct investment into Albania holding over half of the total FDI stock (€5.5 billion) by end of 2017. The main EU countries investing in Albania are Greece, the Netherlands, Italy, Austria and France. EU FDI inflows to Albania were modest in 2017, reaching only just €100 million.

• 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 meeting took place 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-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 riskbased inspections by customs authorities.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

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 remain essential issues that affect EU companies doing business in Albania. Although the procurement legislation improved over the last period, the implementation of public procurement still needs to be improved and be made more transparent. In addition, the enforcement of competition rules needs to be enhanced, and significant efforts are needed with regards to the adoption of legislation and enforcement in the field of state aid control, including transparency of aid granted.

Equally, progress of the ongoing judicial and institutional reforms has yet to be translated into a more favourable business environment. In spite of measures taken to address the informal economy, it is estimated to account for about one third of GDP causing unfair competition in the market. Lack of effective regulatory implementation of legislation, ad-hoc regulatory changes are also major concerns raised by the business community.

Some positive outcome is expected from the ongoing implementation of the activities planned in the country’s National Plan on Trade Facilitation. Furthermore, the acceleration of the European integration progress is also expected to 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 more than doubled their total trade since the entry into force of the trade agreement. The EU is Albania’s main trading partner, accounting for 76% of total exports and 62% 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 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. A big milestone was in fact reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement that envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Albania (mio €)

Imports 1.246 1.165 1.290 1.503 1.757 Exports 2.468 2.519 2.706 2.989 3.195 Balance 1.222 1.355 1.415 1.486 1.438 Share Albania in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,1% 0,1% Exports 0,1% 0,1% 0,2% 0,2% 0,2% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Albania with world

Imports 60,5% 61,1% 63,2% 61,5% 61,6% Exports 73,8% 72,1% 77,9% 77,2% 76,4% Total (I+E) 64,8% 64,5% 67,5% 66,2% 66,5%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Albania: IMF Dots

Total merchandise trade EU28 with Albania (mio €)

Growth

Albania 2017 2018 annual

mio € %

Imports 1.503 1.757 253 16,9%

Exports 2.989 3.195 206 6,9%

Balance 1.486 1.438 -48

Total trade 4.492 4.952 459 10,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Albania (mio €)

Growth

Albania 2017 2018 annual

mio € %

Imports 79 90 12 14,7%

Exports 389 417 28 7,3%

Balance 310 327 17

Total trade 468 508 40 8,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Albania (mio €)

Growth

Albania 2017 2018 annual

mio € %

EU28 imports 1.424 1.666 242 17,0% EU28 exports 2.600 2.778 178 6,8%

Balance 1.176 1.112 -64

Total trade 4.025 4.444 419 10,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Albania (mio €)

Growth

Albania 2016 2017 annual

mio € %

Imports 813 858 45 5,6%

Exports 764 780 16 2,1%

Balance -49 -78 -29

Total trade 1.577 1.638 61 3,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Albania (mio €)

2013 2014 2015 2016 2017

Imports 686 730 723 813 858

Exports 629 722 724 764 780

Balance -57 -8 1 -49 -78

Total trade 1.315 1.452 1.446 1.577 1.638

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Albania (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward -21 50 -109 198 168

Outward 2.504 5.723 5.920 5.430 5.456 FDI Flows

Inward -84 21 -160 243 1

Outward 266 162 189 -177 96

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

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. 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 liberalised (with very few exceptions). On the other hand, EU agricultural exports to Bosnia and Herzegovina are subject to tariffs and tariff rate quotas (TRQs).

The Agreement also includes provisions concerning competition and State aid, 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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Total bilateral trade between the EU and Bosnia and Herzegovina increased by 5% between 2017 and 2018 reaching a total amount of €11 billion. This represents a modest increase of 38% since the implementation of the trade agreement in 2008. The EU remains Bosnia and Herzegovina’s first trading partner accounting for 73% of total exports and 61% of total imports of goods. More specifically, Croatia, Italy, Germany and Slovenia are responsible for 67% of the EU’s exports to Bosnia and Herzegovina and for 68% of the EU’s imports from Bosnia and Herzegovina. The main traded products concern the following sectors: machinery and appliances; base metals and articles thereof and mineral products. The overall trade balance is in favour of the EU, however, last year Bosnia and Herzegovina reduced the deficit to its lowest since 2008 at €1.45 billion.

2.2 Trade in agricultural goods

In 2018, trade in agricultural products increased by 2.6% - on both imports and exports - reaching a total of €1.1 billion, which represents 10% of the total bilateral trade. Only 4.5% of Bosnia and Herzegovina’s exports to the EU are agricultural products versus 14% of all EU’s exports to Bosnia and Herzegovina. The EU imported mainly fruits and vegetables; raw hides, skins and fur and waters and soft drinks while its main exports to Bosnia and Herzegovina included meat, chocolate, confectionary and ice cream; food preparations; cheese and wheat.

A limited share of EU-Bosnia and Herzegovina agricultural trade is subject to duty-free Tariff Rate Quotas (TRQs).

Data on the utilisation of the TRQs have been provided by Bosnia and Herzegovina authorities and are included in Section 7 Statistics.

The EU grants very few agricultural TRQs to Bosnia and Herzegovina: beef (not used by exporters from the country, mainly due to SPS reasons: Bosnia and Herzegovina is indeed not authorised to export beef to the EU), sugar (37% used in 2018) and wine (85% used for sparkling wine and 62% for fresh wine in 2018).

2.3 Trade in Services and Foreign Direct investment (FDIs)

In 2017, Bosnia and Herzegovina’s exports of services to the EU dropped by nearly 11% since 2016 causing it to lose its positive balance with the EU. Overall total bilateral trade in services dropped by 5% from €2.2 billion to €2.1 billion.

Nearly 63% of the country’s stock in FDI is originating from EU countries with total stocks amounting to €2.1 billion. Most of the investment is concentrated in the financial sector, retail and tourism. The biggest EU investors in 2017 were Austria (24%), followed by Croatia (13%) and Slovenia (13%). Recently, inflows increasingly consisted of reinvested earnings while the net EU outflows show a divestment of up to €0.9 billion. The legal framework provides in principle favourable treatment and protection guarantees for FDI. There are no restrictions on FDI entry and few limitations on foreign ownership; however, the low level of FDI flows (the lowest in the Western Balkans) reflects the reality of the country’s poor and fragmented business environment.

• 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 latest meeting took place on 18 October 2018, during which the 13% growth of the bilateral trade in 2017 was welcome, particularly as bilateral trade for the first time reached the €10 billion threshold. 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.  Business environment: the EU urged the country to address key issues faced by

businesses: tackling infrastructure bottlenecks; improving the complex and inefficient administrative structures, in particular to unify the fragmented economic space, and

also curbing the high political and regulatory uncertainty.

Commission took note of Bosnia and Herzegovina’s concerns regarding the EU steel provisional safeguard measures and reiterated that the key objective was to avoid any disruption of the traditional trade flows. It indicated that bilateral consultations in the framework of the SAA would be held before the end of 2018.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The business environment is a key area of importance, in particular:

 Market entry and exit regulations are lengthy and cumbersome, in particular, as the

high degree of regional fragmentation leads to a high number of different rules and

different interpretations.

 The large size of the informal economy - estimated at 25% of GDP - distorts

competition and has a negative impact on the business environment.

 The institutional and regulatory environment is unstable and unpredictable.

Contract enforcement is a very time consuming procedure and settling commercial disputes remains difficult, partly due to the missing possibilities of alternative dispute

resolution methods but also due to a lack of courts specialised on commercial disputes.

 Public procurement procedures are complex and prone to corruption.  Lack of adequate enforcement of State aid control.

• 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 and the informal economy 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. In line with SAA obligations, enforcement of competition rules needs to be enhanced, and significant efforts are needed with regards to adoption of legislation and enforcement in the field of state aid control.

Furthermore, in November 2018, Kosovo imposed a 100% import tariff for goods originating from Serbia and Bosnia and Herzegovina, indirectly affecting EU businesses operating in Bosnia and Herzegovina and trading in the region. These measures are politically motivated and the EU has repeatedly called on their termination.

• 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. Despite the 100% tariffs imposed by Kosovo, which have recently undermined regional cooperation efforts, a big milestone was reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement. This Agreement envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with Bosnia-Herzegovina (mio €)

Imports 3.330 3.493 3.782 4.256 4.629 Exports 5.024 5.077 5.254 5.921 6.083 Balance 1.694 1.584 1.473 1.665 1.454 Share Bosnia-Herzegovina in EU28 trade with Extra-EU28

Imports 0,2% 0,2% 0,2% 0,2% 0,2% Exports 0,3% 0,3% 0,3% 0,3% 0,3% Total (I+E) 0,2% 0,2% 0,3% 0,3% 0,3% Share EU28 in trade Bosnia-Herzegovina with world

Imports 58,7% 60,7% 61,7% 61,2% 60,6% Exports 73,4% 73,3% 71,5% 71,2% 72,9% Total (I+E) 63,8% 65,1% 65,3% 64,9% 65,3%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Bosnia-Herzegovina: IMF Dots

Total merchandise trade EU28 with Bosnia-Herzegovina (mio €)

Growth

Bosnia-Herzegovina 2017 2018 annual

mio € %

Imports 4.256 4.629 373 8,8%

Exports 5.921 6.083 161 2,7%

Balance 1.665 1.454 -211

Total trade 10.178 10.712 534 5,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Bosnia-Herzegovina (mio €)

Growth

Bosnia-Herzegovina 2017 2018 annual

mio € %

Imports 203 208 5 2,6%

Exports 829 851 22 2,6% Balance 627 643 16

Total trade 1.032 1.059 27 2,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Bosnia-Herzegovina (mio €)

Growth

Bosnia-Herzegovina 2017 2018 annual

mio € %

EU28 imports 4.054 4.421 367 9,1%

EU28 exports 5.092 5.232 140 2,7% Balance 1.038 811 -228

Total trade 9.146 9.653 507 5,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Bosnia-Herzegovina (mio €)

Growth

Bosnia-Herzegovina 2016 2017 annual

mio € %

Imports 1.138 1.014 -124 -10,9%

Exports 1.099 1.108 9 0,8%

Balance -39 94 133 Total trade 2.237 2.122 -115 -5,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Bosnia-Herzegovina (mio €)

2013 2014 2015 2016 2017

Imports 835 901 895 1.138 1.014 Exports 1.034 980 945 1.099 1.108

Balance 200 78 51 -39 94

Total trade 1.869 1.881 1.840 2.237 2.122

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Bosnia-Herzegovina (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 64 102 174 89 81

Outward 3.059 2.455 3.395 3.410 2.161

FDI Flows

Inward 30 7 38 64 60

Outward 70 -414 465 574 -941

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Fill rates of Bosnia-Herzegovina TRQs (all TRQs are duty free).

Agricultural TRQs Product codes Size of the TRQ (tonnes) TRQ usage (2017) TRQ usage (2018)

As of As of 1.1.2017 1.1.2018

Beef 0102 10 10 2200 2200 11% 9%

0102 29 61 1935 1935 51% 33%

0102 29 91 190 190 15% 21%

0102 90 49 2600 2600 8% 32%

0202 30 90 4000 4000 56% 51%

Pork 0103 91 90 700 700 90% 91%

0103 92 11 575 575 0%

0103 92 19 1755 1755 20% 33%

0103 92 90 195 195 29% 0%

0203 19 15 1200 1200 56% 73%

0203 22 11 300 300 0% 0%

0203 29 55 2000 2000 80% 80%

0209 00 11 100 100 82% 71%

0210 19 81 600 600 68% 71% Lamb 0104 10 30 450 450 110%

Poultry 0105 94 00 1455 1455 0%

0207 12 90 80 80 10%

0207 13 10 90 90 0%

0207 13 30 55 55 0%

0207 13 60 320 320 0%

0207 13 99 25 25 0%

0207 14 20 30 30 0% 157%

ex 0207 14 10 6000 6000 78% 72%

0207 14 60 130 130 0%

0207 14 99 50 50 58% 52%

Fish 0301 93 00 75 75 100%

Milk and cream 0401 20 11 5432 9506 65% 51%

0401 20 91 720 1440 26% 18%

0401 40 10 80 80 220% 100%

0401 50 11 30 30 347% 100%

0402 21 18 25 25 40% 30%

0403 10 11 1515 3030 134% 70%

0403 10 13 1520 3040 28% 15%

0403 10 91 480 480 176% 71%

0403 10 93 130 130 98% 76%

0403 10 99 25 25 124% 61%

0403 90 51 500 500 41% 48%

0403 90 53 290 290 264% 100%

0403 90 59 1762,5 3525 97% 39%

0403 90 91 530 530 254% 71%

0403 90 93 55 55 172% 88%

Butter 0405 10 11 160 160 494% 88%

0405 10 19 200 200 24% 45%

Cheese 0406 10 30 355 355 347% 94%

0406 10 50

0406 10 80 165 165 85% 53%

Honey 0409 00 00 165 165 71% 50%

Potatoes 0701 90 50 50 50 1300% 0%

0701 90 90 1265 1265 75% 56%

Cabbage 0704 90 10 280 280 26% 0%

Carrots and turnips 0706 10 00 50 50 542% 0%

Grapes 0806 10 10 45 45 4637% 15%

Cherries 0809 21 00 410 410 10% 67%

0811 90 75 70 70 141% 100%

Sausages 1601 00 91 285 285 107% 74%

1601 00 99 1692,5 3385 61% 41%

1602 10 10 75 75 7% 0%

1602 20 90 140 140 86% 59%

1602 31 19 40 40 8% 37%

1602 32 11 130 130 0%

1602 32 19 30 30 303% 83%

1602 32 30 170 170 78% 41%

1602 32 90 230 230 2% 0%

1602 41 10 360 360 21% 13%

1602 49 15 150 150 0% 0%

1602 49 30 445 445 93% 66%

1602 49 50 60 60 0%

1602 50 31 70 70 21% 28% 1602 50 95 295 295 56% 24%

Sugar 1701 91 00 55 55 360% 94%

1701 99 10 3470 3470 56% 74%

Biscuits 1905 31 19 365 365 92% 18%

1905 31 99 600 600 73% 46%

1905 32 19 300 300 49% 47%

1905 90 45 35 35 811% 59%

Vegetables, fruits and nuts 2001 10 00 265 265 9% 19%

2001 90 70 70 70 1% 6%

2005 99 50 245 245 52% 30%

2005 99 60 40 40 98% 5% Wine (hl) ex 2204 10

ex 2204 21 13765 19530 110% 85%

Spirits ex 2208 20 29 85 85 6%

Tobacco 2402 20 90 3200 3200 30% 24%

Source: Bosnia and Herzegovina authorities

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR OF THE STABILISATION AND ASSOCIATION AGREEMENT BETWEEN THE EU AND NORTH MACEDONIA

• 1. 

  I NTRODUCTION

On 9 April 2001, the EU and North 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. 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 North 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 North Macedonia are almost completely liberalized (with very few exceptions). On the other hand, EU agricultural exports to North Macedonia are subject to tariffs and Tariff Rate Quotas (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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Total bilateral trade between the EU and North Macedonia increased by 14% between 2017 and 2018 reaching a total amount of €10.5 billion. This represents a significant increase of 128% in the last ten years. The EU remains North Macedonia’s first trading partner accounting for 82% of total exports and 62% of total imports of goods. More specifically, Bulgaria, Germany, Greece and Hungary are responsible for 71% of the EU’s imports from North Macedonia and for 51% of the EU’s exports to North Macedonia. The United Kingdom accounts for less than 2% of the EU’s imports from North Macedonia but makes up 17% of total EU exports to the country, behind Germany (22%). The main imported products from North Macedonia are machinery and appliances; products of the chemical or allied industries and mineral products. The EU mainly exports machinery and appliances; pearls, precious metals and articles thereof and mineral products. The overall trade balance is in favour of the EU, however, it is gradually decreasing: from a peak of €1.3 billion in 2012 it is now around €0.6 billion.

2.2 Trade in agricultural goods

In 2018, trade in agricultural products increased by 5% reaching a total of €700 million, representing 6% of the total bilateral trade. Trade in agricultural products has gradually decreased since the application of the trade agreement when it represented nearly 12% of the total bilateral trade. The individual share of agricultural exports over total exports in 2018 was about 6% on both sides. Tobacco, vegetables, wine and preparations of cereals, flour, starch were the EU's key import products. The EU exported primarily meat followed by food preparations to North Macedonia.

For a number of agricultural products, EU exports to North Macedonia are subject to Tariff rate quotas (TRQs), either duty-free or at a reduced customs duty rate. No information was provided by North Macedonia on the use of the quotas. The EU grants three agricultural TRQs to North Macedonia (wine, beef and sugar) which were almost fully used for wine but unused for sugar and beef by exporters from North Macedonia in 2018.

2.3 Trade in Services and FDI

In 2017, total bilateral trade in services dropped by 8% from €2.1 billion to €1.9 billion. While the services sector accounts for over half of the country’s employment and over 60% of GDP, it only represents 13% of the value of North Macedonia’s export basket to the EU and has remained stable over the past two years at around €750 million. The main services sectors exported by North Macedonia are tourism and transport, followed by services to manufacturing companies, telecommunications and computer and other information services. On the other hand, in 2017, the EU’s exports of services to North Macedonia contracted by more than 12% levelling at €1.2 billion, which represents 18% of the EU’s total trade in goods and services with the country.

In the past two years, EU firms increased their share in the country's stock of foreign investment from 79% in 2016 to 82% in 2017 reaching a combined total stock of €2.5 billion. However, in 2017, the country experienced a slump in investment spending (-€2 million) impacted by a decline in confidence, resulting from the prolonged political crisis. The large informal economy and challenges in the labour market, including insufficiently high managerial skills negatively affect private investment behaviour.

• 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 13 November 2018, during which the continuing growth of the bilateral trade was positively noted as well as the very high level of utilisation of quotas. Information was exchanged on the legislative alignment to the external trade acquis, on the administrative capacity for various trade competencies and on relevant WTO matters. The country’s overall smooth implementation of the trade agreement was again welcome as well as its good co-operation in the context of WTO-related activities.

Commission took note of North Macedonia’s concerns regarding the EU steel provisional safeguard measures and reiterated that the key objective was to avoid any disruption of the traditional trade flows. It indicated that bilateral consultations in the framework of the SAA would be held before the end of 2018.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The business environment is a key area of importance. Challenges for doing business in North 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 parafiscal charges at different administrative levels. In addition, the size of the informal economy, -estimated at about 17% of total output in 2016- which creates unfair competition from unregistered companies and the entrenched corruption are defined by companies as major obstacles to doing business.

• 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 2019-2021 Economic Reform Programme, the government rolled over the measure on trade facilitation aimed at simplifying inspections and clearance procedures, which has the potential to improve competitiveness. Actions include the speeding up of 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.

In addition, the new Public Procurement Law, enacted early 2019, is expected to increase transparency and predictability on the market. By publishing public procurement plans electronically and in advance, the number of bidders per tender is expected to rise allowing for better quality and increasing competition. Finally, enforcement of competition rules needs to be enhanced, and significant efforts are needed with regards to adoption of legislation and enforcement in the field of state aid control, including transparency of aid granted.

• 6. 

  C ONCLUSIONS

North Macedonia and the EU are very close and growing trade partners having more than doubled their total trade in the last ten years. The EU is the country’s main trading partner, accounting for 82% of its total exports and 62% of its total imports of goods. While the trade agreement is generally implemented smoothly by North 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, and the possible opening of EU accession negotiations in the summer 2019, are expected to give further impetus to major reforms and consequently have a positive impact on the investment and business climate in North 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 to, has the potential to generate untapped growth. A big milestone was in fact reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement that envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with North Macedonia (mio €)

Imports 3.019 3.365 3.722 4.251 4.928

Exports 3.818 4.114 4.450 4.970 5.564

Balance 800 749 727 719 635

Share North Macedonia in EU28 trade with Extra-EU28

Imports 0,2% 0,2% 0,2% 0,2% 0,2%

Exports 0,2% 0,2% 0,3% 0,3% 0,3%

Total (I+E) 0,2% 0,2% 0,2% 0,2% 0,3%

Share EU28 in trade North Macedonia with world

Imports 63,1% 61,7% 62,0% 62,9% 62,4%

Exports 75,5% 75,7% 79,9% 81,2% 82,3%

Total (I+E) 68,1% 67,5% 69,4% 70,6% 71,0%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade North Macedonia: IMF Dots

Total merchandise trade EU28 with North Macedonia (mio €)

Growth

North Macedonia 2017 2018 annual

mio € %

Imports 4.251 4.928 677 15,9% Exports 4.970 5.564 594 11,9%

Balance 719 635 -83

Total trade 9.221 10.492 1.271 13,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with North Macedonia (mio €)

Growth

North Macedonia 2017 2018 annual

mio € %

Imports 276 284 8 2,9% Exports 369 395 26 7,1%

Balance 93 112 18

Total trade 645 679 34 5,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with North Macedonia (mio €)

Growth

North Macedonia 2017 2018 annual

mio € %

EU28 imports 3.975 4.644 669 16,8%

EU28 exports 4.601 5.168 567 12,3%

Balance 625 524 -102

Total trade 8.576 9.813 1.236 14,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with North Macedonia (mio €)

Growth

North Macedonia 2016 2017 annual

mio € %

Imports 754 747 -6 -0,8%

Exports 1.353 1.186 -167 -12,4%

Balance 599 438 -161

Total trade 2.107 1.933 -174 -8,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with North Macedonia (mio €)

2013 2014 2015 2016 2017

Imports 507 567 608 754 747

Exports 739 857 1.008 1.353 1.186

Balance 232 290 400 599 438

Total trade 1.246 1.424 1.616 2.107 1.933

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with North Macedonia (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward -154 -51 -21 -37 -40 Outward 1.967 2.050 2.636 2.468 2.449

FDI Flows

Inward -0 92 4 -24 16

Outward 232 112 110 206 -2

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE TRADE PILLAR

OF THE EU-KOSOVO 80 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. 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 a 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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Total bilateral trade between the EU and Kosovo increased by 15% between 2017 and 2018 reaching a total amount of €1.1 billion. Since the implementation of the trade agreement in 2016, total bilateral trade has increased by 32% but only to the advantage of the EU as Kosovo’s trade with the EU was lower in 2018 (€101 million) than in 2015 (€104 million). The EU is Kosovo’s first trading partner accounting for 31% of total exports and 43% of total imports of goods. More specifically, Germany, the Netherlands and Poland absorb 53% of the EU’s imports from Kosovo while Germany, Slovenia, Italy and Croatia are responsible for 54% of the EU’s exports to Kosovo. The main imported products from Kosovo are plastics, rubber and articles thereof; vegetable products and mineral products. The EU mainly exports machinery and appliances; foodstuffs, beverages, tobacco and transport equipment. The

80 The designation is without prejudice to position on status and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo Declaration of independence.

overall trade balance is overwhelmingly in favour of the EU, and further increasing from €0.8 billion in 2016 to €0.9 billion in 2018.

2.2 Trade in agricultural goods

In 2018, 25% of all EU’s imports from Kosovo were agricultural products versus 24% of all EU’s exports to Kosovo. While the EU exports increased by 9%, imports from Kosovo remained unchanged from the previous year. Fruits and non-edible products such as raw hides, skins and fur-skins were the EU’s key import products from Kosovo, on the other hand the EU exported primarily meat and meat preparations, dairy products, cigarettes and beverages.

The EU grants two tariff rate quotas (TRQs) to Kosovo (wine and beef) which in the case of beef was not used by Kosovo's exporters as the country is not yet authorised to export beef to the EU for SPS reasons; while in the wine quota was taken up by 57% for still wine but almost unused for sparkling wine.

2.4 Trade in Services and Foreign Direct investment (FDIs)

The service sector continues to dominate the economy in terms of GDP and it is the fastest growing export sector for Kosovo. Export of services are dominated by travel services to diaspora, but the role of IT and other business services increased, reaching almost 10% of total service exports in 2018.

The EU remains the main investor in Kosovo. The EU share stood at 36% of net FDI stock in the third quarter of 2018. Germany, which has a large Kosovar diaspora - accounted for 11% of the total. In terms of FDI flows, the share of the EU was at 47% of the total inflow in 2018, followed by 30% from Switzerland.

• 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 14 June 2018, during which trading trends were discussed as well specific issues such as the need for Kosovo to adopt legislation taking into account losses during the transportation of goods, in particular related to the evaporation of petroleum.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The business environment is struggling with a weak rule of law and corruption, a lack of transparency of public procurement procedures, slow and inconsistent contract enforcement, and a widespread informal economy.

• 5. 

  M AIN OPEN ISSUES AND FOLLOW - UP ACTIONS

The 21 November 2018 decision by Kosovo to impose 100% import tariffs for goods originating in Serbia and Bosnia and Herzegovina is indirectly affecting EU businesses established in these two countries and trading with Kosovo. These tariffs are in violation of the Central European Free Trade Agreement (CEFTA) and of the spirit of the Stabilisation and Association Agreement between the European Union and Kosovo. The EU has been calling on Kosovo to urgently lift these measures, while also proposing its support to mediate in the resolution of the regional trade issues.

On 9 October 2018, Kosovo government adopted a decision, which introduced a double excise tax regime for cigarettes, differentiating between domestically produced and imported products. This new excise regime is in clear violation of Article 39 of the SAA prohibiting fiscal discrimination and is being addressed in the different SAA subcommittee structures with a call on Kosovo to bring the legislation in line with the SAA.

Enforcement of competition rules also needs to be enhanced, and significant efforts are needed with regards to adoption of legislation and enforcement in the field of state aid control.

Finally, the high administrative costs linked to procedural, quality, logistical and border barriers are affecting EU businesses doing business in Kosovo and 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 30% 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. Despite the 100% tariffs imposed by Kosovo, which have recently undermined regional cooperation efforts, a big milestone was reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement. This Agreement envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Kosovo (mio €)

Imports 96 104 72 89 101 Exports 728 764 854 906 1.044 Balance 632 660 782 818 944 Share Kosovo in EU28 trade with Extra-EU28 Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,1% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0% Share EU28 in trade Kosovo with world Imports 43,4% 43,5% 43,1% 43,1% 43,0% Exports 25,0% 24,8% 22,6% 25,0% 30,6% Total (I+E) 41,3% 41,4% 41,0% 41,1% 41,8%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Kosovo: IMF Dots

Total merchandise trade EU28 with Kosovo (mio €)

Kosovo 2017 2018 Growth

annual mio € %

Imports 89 101 12 13,0% Exports 906 1.044 138 15,2%

Balance 818 944 126

Total trade 995 1.145 149 15,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Kosovo (mio €)

Growth

Kosovo 2017 2018 annual

mio € %

Imports 25 25 0 -0,8%

Exports 233 254 21 9,2% Balance 207 229 22

Total trade 258 279 21 8,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Kosovo (mio €)

Growth

Kosovo 2017 2018 annual

mio € %

EU28 imports 63 75 12 18,6% EU28 exports 674 790 116 17,3%

Balance 610 715 104

Total trade 737 865 128 17,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Kosovo (mio €)

Growth

Kosovo 2016 2017 annual

mio € %

Imports #DIV/0!

Exports #DIV/0!

Balance

Total trade #DIV/0!

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Kosovo (mio €)

2013 2014 2015 2016 2017

Imports

Exports

Balance

Total trade

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Kosovo (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 11 2 0

Outward 341 519 492 FDI Flows

Inward 2 -7 4

Outward -23 -1 -2

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

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. 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. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018, total bilateral trade between the EU and Montenegro increased by 13% reaching a total amount of nearly €1.4 billion, for the first time matching the total trade pre-dating the trade agreement in 2008. The overall stagnation of the bilateral trade can be partially explained by the fact that the structure of Montenegrin exports in the last ten years has substantially changed in favour of exports of services, which increased to over 70% of total exports of goods and services in 2017.

The EU is Montenegro’s main trading partner, accounting for 45% of its total exports and 48% of its total imports of goods. More specifically, Belgium, Germany, Hungary, Poland and Slovenia absorb 64% of the EU’s imports from Montenegro while Croatia, Germany, Greece, Italy and Slovenia are also responsible for 64% of the EU’s exports to Montenegro. The main imported products from Montenegro are base metals and articles thereof, transport equipment, mineral products and machinery and appliances. The EU mainly exports mineral products, transport equipment and machinery and appliances. The overall trade balance is overwhelmingly in favour of the EU, exceeding €1 billion in 2018.

2.2 Trade in Agricultural Goods

Trade in agricultural products represents around 15% of the total bilateral trade and has remained stable over the last five years. In 2018, only 4% of all EU’s imports from Montenegro were agricultural products versus 17% of all EU’s exports to Montenegro. The EU imported mainly fruits and vegetables from Montenegro and exported meat and food preparations to Montenegro.

For a number of agricultural products (poultry, cheese, meat products, waters and wine) EU exports to Montenegro are subject to tariff rate quotas (TRQs), either duty-free or at a reduced customs duty rate. All of these quotas - except those for certain fish products, namely trout, sea bream as well as prepared or preserved anchovies – were fully or nearly fully used by EU exporters. The EU also grants two agricultural TRQs to Montenegro (beef and wine). In 2018, the beef quota was not used by Montenegro's exporters and the wine quota was used at 19%.

2.3 Trade in Services and Foreign Direct investment (FDIs)

In 2017, services represented over 34% of the total bilateral trade of goods and services with a share of 69% for EU imports and a much more modest 19% share for EU exports. This large imbalance allows Montenegro to run a surplus in its services trade with the EU, mainly focussed on the travel and hospitality area.

Financial integration with the EU remains substantial, as the EU accounted for 86% of capital in local banks and 46% of total FDI inflows during the first nine months of 2018. The total EU FDI stocks in Montenegro exceeded €1.5 billion by end of 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 meeting of the Sub-committee on Trade, Industry, Customs and Taxation took place on 23 October 2018, during which the further recovery of the 2017 bilateral trade was positively noted, highlighting the benefits from the national policy with regard to services and sustainable tourism. The Commission welcomed the absence of trade irritants with Montenegro as well as efforts to improve the business environment, in particular its plans to cut border clearance time by 50% and related costs by 20%.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

The business environment is a key area of importance, in particular unfair competition from the informal economy and deficiencies of the regulatory environment. Businesses are negatively affected by inconsistent and arbitrary law enforcement as well as by inefficiencies and weak capacity in the public administration. In line with SAA obligations, enforcement of competition rules needs to be enhanced, and significant efforts are needed with regards to adoption of legislation and enforcement in the field of state aid control, including transparency of aid granted. 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 implementation and enforcement capacities at all levels.

• 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. They 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 valueadded 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. A big milestone was in fact reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement that envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Montenegro (mio €)

Imports 251 144 151 166 189 Exports 973 877 994 1.067 1.207 Balance 722 733 843 902 1.017 Share Montenegro in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,1% 0,0% 0,1% 0,1% 0,1% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0% Share EU28 in trade Montenegro with world

Imports 46,5% 41,2% 48,2% 47,4% 48,3% Exports 36,1% 35,8% 37,7% 34,5% 44,7% Total (I+E) 44,8% 40,4% 46,8% 45,6% 47,8%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Montenegro: IMF Dots

Total merchandise trade EU28 with Montenegro (mio €)

Growth

Montenegro 2017 2018 annual

mio € %

Imports 166 189 24 14,4%

Exports 1.067 1.207 139 13,1%

Balance 902 1.017 116

Total trade 1.233 1.396 163 13,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Montenegro (mio €)

Montenegro 2017 2018 Growth

mio € annual %

Imports 6 7 2 34,1%

Exports 184 200 16 8,7%

Balance 178 192 14 Total trade 189 207 18 9,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Montenegro (mio €)

Growth

Montenegro 2017 2018 annual

mio € %

EU28 imports 160 182 22 13,7%

EU28 exports 884 1.007 123 14,0% Balance 724 825 102

Total trade 1.044 1.189 145 13,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Montenegro (mio €)

Growth

Montenegro 2016 2017 annual

mio € %

Imports 264 377 113 42,7% Exports 214 256 41 19,3%

Balance -50 -122 -72

Total trade 479 633 154 32,3%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Montenegro (mio €)

2013 2014 2015 2016 2017

Imports 218 231 216 264 377

Exports 217 266 203 214 256

Balance -1 36 -13 -50 -122

Total trade 434 497 418 479 633

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Montenegro (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward -32 -3 99 5 14

Outward 1.799 1.663 2.926 1.512 1.544 FDI Flows

Inward 1 -29 82 -72 8

Outward 196 128 129 160 188

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

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 EU Member States.

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.

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 and State aid, 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, standardisation and the right of establishment.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

Total bilateral trade between the EU and Serbia increased by 10% between 2017 and 2018 reaching a total amount of €26 billion. This represents a significant increase of 110% since the start of implementation of the trade agreement. The EU remains Serbia’s first trading partner accounting for 71% of total exports and 61% of total imports of goods. More specifically, Germany, Hungary, Italy, and Slovenia are responsible for 50% of the EU’s imports and exports from and to Serbia. The main imported products are machinery and appliances; base metals and articles thereof; plastics, rubber and articles thereof; and transport equipment. The EU mainly exports machinery and appliances; products of the chemical or allied industries; base metals and articles thereof; and transport equipment. The overall trade balance is in favour of the EU, it increased by 10% in 2018 reaching €3.7 billion.

2.2 Trade in agricultural goods

Serbia has traditionally recorded a surplus in its agricultural trade with the EU, however, in 2018, due to a bad agricultural season for Serbia in the previous year, the balance turned in favour of the EU who enjoyed a small surplus of €34 million. Trade in agricultural products represents around 9% of the total bilateral trade. In 2018, Serbia’s agricultural exports to the EU dropped by nearly 5% but still represented over 10% of all its exports to the EU; while the EU’s agricultural exports to Serbia increased by nearly 3% and represented 8% of the EU’s total exports to Serbia. The EU imported mainly fruits & vegetables, cereals and vegetable oils (other than palm and olive oils) from Serbia, while its main export products to Serbia were meat and food preparations.

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 quotas were fully utilised or almost fully utilised (wine quota used at 92%) by EU exporters. Whereas quotas for wheat and cigars were underutilised at 43% and 33% respectively and the maize and fruit juices quotas remained completely unused by EU exporters in 2018.

The EU grants tariff quota to Serbia for beef, sugar and wine. Only 16.5% of the sugar quota and 5% of the beef quota were used by Serbian exporters in 2018, while the utilisation rate for sparkling wine was at 6.5% and for fresh wine only over 2%.

2.3 Trade in Services and Foreign Direct investment (FDIs)

In 2017, total trade in services represented 16% of the total bilateral trade of goods and services with an equal share between imports and exports. Overall, the EU records a surplus in its trade in services with Serbia, on average around €0.5 billion over the last 5 years.

Serbia’s financial system is dominated by commercial banks, and banks with majority ownership from EU countries hold more than 70% of all banking system assets.

The EU is also by far Serbia’s biggest investment partner, accounting for more than three quarters of net foreign direct investment inflows over the past eight years – amounting to over €13 billion in total.

• 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 latest meeting took place on 17 October 2018, during which the Commission expressed its satisfaction that in May 2018, after a series of bilateral consultations over several months, Serbia lifted its restrictions on the issuing of export licences for metal waste. In this context, the Commission highlighted the importance of respecting Article 36(2) of the SAA - standstill clause - to ensure the necessary legal predictability for investors in the country.

During the discussions, the Commission identified as a main obstacle to trade the unpredictable technical and phyto-sanitary controls. It asked Serbia for explanations how these controls are conducted and asked several questions on the draft law on sanitary inspections.

The Commission also pleaded that more administrative capacity be deployed in the Ministry of trade in view of growing challenges – WTO accession, Regional Economic Area agenda, increasing volumes of trade. In this regard, the Commission expressed concerns about the slow pace of Serbia’s accession negotiations to WTO.

Furthermore, it was noted with regret that Serbia continues to apply a discriminatory excise on grain-based spirits, which favours fruit based spirits at the expense of grain-based spirits. Serbia was asked for a date when this excise could be changed. In reply, Serbia announced that it was studying effects of such a change, but did not commit to any date.

Lastly, on Serbia’s request, the Commission explained the ongoing procedures regarding temporary safeguards on steel and announced that bilateral consultations with Serbia would be organised by the end of 2018 in line with the SAA requirements.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

Despite an overall improvement of the business environment, which had led Serbia to improve its standing in various international business rankings, further efforts are required to improve the predictability of the business environment, with the emphasis on involving business more closely into the process of regulation. The institutional and regulatory environment remains weak. Business-related laws continue to be adopted under urgent procedure without the necessary consultation of interested groups, reducing predictability and quality of legislation. Delays in the adoption of secondary legislation continue hampering the implementation of adopted laws. In addition, fair competition is negatively affected by the large informal economy.

• 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 noncompliance issues remain. These concern mainly fiscal discrimination on alcohol (article 37); restrictions to free movement of capital - in particular restrictions to the acquisition by foreigners, including EU citizens, of agricultural land - (article 63) and the respect for the transparency and non-discrimination principals in public procurement procedures (article 73). In line with SAA obligations, enforcement of competition rules needs to be enhanced, and significant efforts are needed with regards to adoption of legislation and enforcement in the field of state aid control, including transparency of aid granted. In particular, Serbia should ensure that intergovernmental agreements concluded with third countries and their implementation do not unduly restrict competition, comply with the basic principles of public procurement, such as transparency, equal treatment and non-discrimination, and are in line with the EU acquis.

All these pending issues were raised in the relevant EU-Serbia Sub-committee meetings held or planned in 2019.

Lastly, in November 2018, Kosovo imposed a 100% import tariff for goods originating from Serbia (and Bosnia and Herzegovina), indirectly affecting EU businesses operating in Serbia and trading in the region. These measures are politically motivated and the EU has repeatedly called for their termination.

• 6. 

  C ONCLUSIONS

Serbia and the EU have a very close and growing trade partnership, which increased their total trade by 110% since the entry into force of the trade agreement end of 2009. The EU is Serbia’s first trading partner accounting for 71% of its total exports and 61% of its total imports of goods. The EU continued to be the main source of foreign investment too, with total FDI flows reaching €1.2 billion in 2017.

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. Despite the 100% tariffs imposed by Kosovo, which have recently undermined regional cooperation efforts, a big milestone was reached on 4 April 2019 when Ministers of Telecommunications from the Western Balkans signed a Regional Roaming Agreement. This Agreement envisages a roaming-free region across the Western Balkans in 2021, also paving the way for further reductions of the roaming costs between the Western Balkans economies and the European Union.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Serbia (mio €)

Imports 7.109 7.880 8.721 9.998 11.007 Exports 10.357 11.145 11.668 13.390 14.742 Balance 3.247 3.265 2.947 3.392 3.735 Share Serbia in EU28 trade with Extra-EU28 Imports 0,4% 0,5% 0,5% 0,5% 0,6% Exports 0,6% 0,6% 0,7% 0,7% 0,8% Total (I+E) 0,5% 0,5% 0,6% 0,6% 0,7% Share EU28 in trade Serbia with world Imports 63,5% 62,5% 61,0% 62,3% 60,0% Exports 64,7% 65,8% 66,1% 67,6% 67,0% Total (I+E) 64,0% 63,9% 63,3% 64,5% 63,0%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Serbia: IMF Dots

Total merchandise trade EU28 with Serbia (mio €)

Growth

Serbia 2017 2018 annual

mio € %

Imports 9.998 11.007 1.008 10,1%

Exports 13.390 14.742 1.352 10,1%

Balance 3.392 3.735 343

Total trade 23.389 25.749 2.360 10,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Serbia (mio €)

Growth

Serbia 2017 2018 annual

mio € %

Imports 1.190 1.133 -58 -4,8%

Exports 1.138 1.167 29 2,6%

Balance -53 34 87 Total trade 2.328 2.299 -29 -1,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Serbia (mio €)

Growth Serbia 2017 2018 annual

mio € %

EU28 imports 8.808 9.874 1.066 12,1% EU28 exports 12.253 13.575 1.322 10,8%

Balance 3.444 3.701 257

Total trade 21.061 23.449 2.388 11,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Serbia (mio €)

Growth

Serbia 2016 2017 annual

mio € %

Imports 1.781 1.966 185 10,4%

Exports 2.284 2.530 246 10,8%

Balance 503 563 60

Total trade 4.065 4.496 431 10,6%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Serbia (mio €)

2013 2014 2015 2016 2017

Imports 1.583 1.820 1.990 1.781 1.966

Exports 2.300 2.507 2.315 2.284 2.530

Balance 717 687 325 503 563

Total trade 3.882 4.326 4.304 4.065 4.496

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Serbia (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward -118 1 142 188 267

Outward 12.501 12.564 12.883 12.486 13.162 FDI Flows

Inward 6 185 72 50 38

Outward 577 151 366 957 1.194

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FIRST GENERATION FREE TRADE AGREEMENTS WITH LATIN AMERICAN COUNTRIES

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF

THE EU-CHILE ASSOCIATION AGREEMENT

• 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 its impact. This study was concluded in 2012. Another study conducted in 2017 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 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. 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 agrifood products, (4) market access for services sectors of key EU and Chile interest, (5) comprehensive investment liberalisation and protection disciplines, (6) improved public procurement rules and coverage in terms of entities, (7) improved rules on intellectual property rights, including the protection of GIs on foodstuffs, (8) Trade and Sustainable Development, (9) competition and subsidies disciplines and (10) 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 sustainable development goals and reaffirming commitments of international conventions.

• 2. 

  E VOLUTION OF TRADE

Bilateral merchandise trade between 2014 and 2018 increased 15%. Overall, the rise is substantially sharper for EU exports, which increased 35% over the period, compared to a 2% decrease in EU imports from Chile, mainly due to copper price fluctuations. Chile’s share in total EU trade has remained stable since 2014, at around 0.5% of total EU trade. In 2018 EU- Chile bilateral trade grew by 8% in value compared to 2017, reaching €18.3 billion, the EU had a positive trade balance of around €1.5 billion. This is the most important trade surplus for the EU with Chile since the signing of the Agreement. However, Chile still has an accumulated trade surplus of €41.8 billion (2003-2018).

In 2018, the EU was Chile's third trade partner representing 13% of trade (behind China and the US).

2.1 Trade in Goods

In 2018, EU-Chile bilateral trade grew by 8% in value compared to 2017, reaching €18.3 billion. The EU experienced a trade surplus worth €1.5 billion. While EU exports increased 13% year-on-year, EU imports grew by 2%. The largest trade surpluses of the EU are in machinery and motor vehicles.

EU exports concentrate in three HS sections:

 Machinery and appliances, which increased 14% from 2017 reaching €3.2 billion.  Transport equipment EU exports reached €2.2 billion, increasing more than 27% from

2017.

 Products of the chemical or allied industries, which in 2018 reached €1.2 billion,

increasing 9% from 2017.

Chilean exports concentrate in two HS sections:

 Mineral products, whose value decreased 6.7% to €1.8 billion from 2017 to 2018,

having increased by almost 40% in the previous year.

 Base metals and articles thereof, whose value decreased almost 22% between 2017

and 2018, to €1.3 billion.

2.2 Trade in agricultural products

In 2018, EU-Chile bilateral trade grew by 6% in value compared to 2017, reaching €3.3 billion. The EU experienced a trade deficit worth €1.7 billion. While EU exports increased 8.6% year-on-year, EU imports grew by 5.6%. The largest trade deficits of the EU are in fruit and vegetables and beverages (wine). Exports of agricultural products represented 30% of Chile’s exports to the EU and are overwhelmingly dominated by fruit (notably coutner-season temperate fruit) and wines, which represent respectively 40% and 24% of Chile agro-food exports to the EU. EU agricultural exports only represented 8% of the EU’s exports to Chile. Chilean exports to the EU were concentrated in two main categories:

 Vegetable products, which reached a value of €1.6 billion, increasing almost 3% from

2017.

 Foodstuffs, beverages and tobacco, whose value increased 5% from 2017, reaching a

value of € 0.9 billion out of which more than €500 million of wine.

Regarding Tariff Rates Quotas, Chile used 100% of its TRQ for poultry meat (18,000 tonnes), 27% of its TRQ for sheep meat (8,000 tonnes), 24% of its TRQ for pig meat (8,750 tonnes), 7% of the sheep meat TRQ (8,000 tonnes). The rest of the TRQs were either not used at all (cheese and curd, cereal grains, mushrooms, cherries and swine products) or very little used (garlic – 0.25%). The EU also used 100% its cheese TRQs.

2.3 Trade in Services and Foreign Direct investment (FDIs)

Bilateral trade in services in 2017 stood at €6.4 billion (€4.5 billion in exports and €1.9 billion in imports), compared to €5.7 billion in 2016. Between 2013 and 2017, EU exports of services increased 47%, while EU imports increased 18%.

The EU remains Chile’s first FDI provider, with outward FDI stocks worth €51.8 billion in 2017 but EU FDI flows in 2016 (€4 billion) represented half the outward flows registered in 2014. In addition, EU outward FDI flows in 2017 were negative (€1.2 billion). This is the first time since 2013 that EU outward FDI flows are negative, although the same result is observable for the US in 2017 (€1.6 billion).

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. In quantities, mining production in 2017 dropped for the second consecutive year. Mining output in 2017, compared to 2016, contributed negatively to the Chilean GDP with -2%, and with -1.6% for copper alone.

With 2016 data, in 2017 Chile remained the third recipient of FDI in Latin America overall, after Mexico and Brazil, according to UNTACD. However, with 2017 data, in the 2018 report

Chile is not among the top 5 host regional economies 81 .

Since 1998, Chile has been the World Economic Forum’s most competitive nation in the Latin American region (in 2018 it ranked 32 of 138 globally) 82 . Chile also used to be regional leader on the World Bank Doing Business Report (DB) but it is now second after Mexico. In 2019 Chile ranks 56 of 190 on DB and 71.81 on the distance to frontier (DTF) measure (Mexico ranks 54 and 72.09 respectively) 83 .

• 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. Consequently, the meetings under the Agreement have been very regular since it came into force, the 15th EU-Chile Association Committee was held in Brussels on 22 June 2018. The Trade Coordinators meeting and Subcommittees on trade related matters were so far organised practically every year. The Joint Committee on Trade in Wine and Spirits/Aromatised drinks met in 2018 but there was no Trade Coordinators meeting of the EU-Chile Association Agreement in 2018 mainly due to the on-going negotiations for the modernisation of the Agreement.

The Joint Committee on Trade in Wine and Spirits/Aromatised drinks

During the Joint Committee on Trade in Wine and Spirits/Aromatised drinks the EU and Chile continued to discuss the textual modifications of the wine and spirits agreement and the update of the list of EU GIs

• 4. 

  P ROGRESS MADE , M AIN OPEN ISSUES AND FOLLOW - UP ACTIONS

The market access procedure derived from the SPS provisions of the Agreement has been beneficial for Member States. Chile applies the same import requirements to the entire EU. In addition, the market access procedure has been simplified, once the market is open for a commodity from one or more Member States and another Member State wants to export for the first time, Chile evaluates the information already provided by the Commission in the context of the first approval. Further information is only needed when Chile has doubts on specific aspects. Chile rarely requires to carry out on-the-spot verifications of the information provided. In such cases, Chile visits selected EU Member States and extends the conclusions to the entire European Union. For certain commodities such as gelatine, collagen, egg

81 UNCTAD, World Investment Report 2018 https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf page 50 . Top 5 economies in hosting FDI flows in 2017 in Latin America were Brasil, México, Colombia, Argentina and Peru. However, Chile was top economy on FDI outflows in 2017.

82 https://www.weforum.org/reports/the-global-competitveness-report-2018

83 http://www.doingbusiness.org/en/data/exploreeconomies/chile#

products, prepared meals and meat extract; all interested Member States are authorised. Chile approves the EU exporting establishments with a pre-listing procedure in a very short timeframe (within days).

In 2018, Chile opened its dairy market for four additional Member States (20 Member States authorised now), two additional Member States for beef (total authorised 10), one for pork (total 12 Member States), four for meat products (total 12 Member States), one for bovine semen (total 14 Member States) and one more for casing (total 10 Member States). Chile also harmonised the certificate for hatching eggs and egg products.

However, similar progress has not yet been achieved for the export of EU fruits and vegetables to Chile in 2018, but work continues to allow the export of EU apples to Chile.

The 2002 Wine and Spirits Agreements were amended for the last time in 2009. Therefore, they need to be up-dated to add the new wine and spirits geographical indications that have been protected in the EU and Chile since then. This process continues to be dependent on the lengthy Chilean internal assessment procedures.

In 2018, the longstanding swordfish issue was resolved. After Chile joined the IATTC (Inter American Tropical Tuna Commission) as a cooperating non-contracting party in July 2017 there were no longer any restrictions on EU swordfish vessels to access Chilean ports. In January 2018, Chile further specified that EU vessels are required to comply with certain administrative requirements, including the provision of VMS (vessel monitoring system) data. These conditions are applied in a non-discriminatory manner to all vessel disembarking swordfish in Chile and are in line with the FAO Agreement on Port State Measures.

On 1 January 2018, the EU-Chile Agreement on Mutual Recognition of Organic Products entered into force.

• 5. 

  C ONCLUSIONS AND OUTLOOK

The EU and Chile decided to replace the existing EU-Chile trade agreement with a completely new and ambitious framework for bilateral trade and investment. This process is under way and four rounds of negotiations have already taken place. The latest one took place in Santiago in April 2019 and the next round is scheduled for July 2019.

Current work on the implementation of the current agreement continues. The various trade related sub-committees and the Trade Coordinators Meeting did not meet in 2018 (except for the Joint Committee on Trade in Wine and Spirits/Aromatised drinks) but the dialogue with Chile remains fluid.

• 6. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Chile (mio €)

Imports 8.626 8.199 7.338 8.178 8.439 Exports 7.391 8.353 8.590 8.786 9.977 Balance -1.235 154 1.252 607 1.539 Share Chile in EU28 trade with Extra-EU28 Imports 0,5% 0,5% 0,4% 0,4% 0,4% Exports 0,4% 0,5% 0,5% 0,5% 0,5% Total (I+E) 0,5% 0,5% 0,5% 0,5% 0,5% Share EU28 in trade Chile with world

Imports 15,3% 15,6% 17,1% 15,1% 14,9% Exports 14,4% 13,2% 12,9% 12,8% 11,6% Total (I+E) 14,9% 14,4% 15,0% 13,9% 13,2%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Chile: IMF Dots

Total merchandise trade EU28 with Chile (mio €)

Growth

Chile 2017 2018 annual

mio € %

Imports 8.178 8.439 260 3,2%

Exports 8.786 9.977 1.192 13,6% Balance 607 1.539 931

Total trade 16.964 18.416 1.452 8,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Chile (mio €)

Growth

Chile 2017 2018 annual

mio € %

Imports 2.372 2.505 133 5,6%

Exports 714 776 62 8,6%

Balance -1.657 -1.729 -72

Total trade 3.086 3.281 195 6,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Chile (mio €)

Growth Chile 2017 2018 annual

mio € %

EU28 imports 5.807 5.934 127 2,2%

EU28 exports 8.071 9.201 1.130 14,0% Balance 2.265 3.267 1.003

Total trade 13.878 15.135 1.257 9,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Chile (mio €)

Growth

Chile 2016 2017 annual

mio € %

Imports 1.843 1.878 34 1,9% Exports 3.892 4.541 650 16,7%

Balance 2.048 2.664 615

Total trade 5.735 6.419 684 11,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Chile (mio €)

2013 2014 2015 2016 2017

Imports 1.586 1.684 1.909 1.843 1.878

Exports 3.080 3.414 3.735 3.892 4.541

Balance 1.494 1.729 1.826 2.048 2.664

Total trade 4.666 5.098 5.644 5.735 6.419

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Chile (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 998 1.710 1.961 1.794 1.860

Outward 29.174 42.760 47.937 55.830 51.863 FDI Flows

Inward 845 466 -705 223 -170

Outward 5.759 8.208 2.139 4.000 -1.185

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE TRADE PILLAR OF THE EU-MEXICO ASSOCIATION AGREEMENT

• 1. 

  I NTRODUCTION

Mexico is the second biggest trading partner of the EU in Latin America, after Brazil. In 1997 Mexico was the first country in Latin America to sign an Economic Partnership, Political Coordination and Cooperation Agreement with the EU (‘Global Agreement’), which came into force in 2000. Its trade provisions were later developed into a comprehensive Free Trade Agreement that entered into force in October 2000 for goods and 2001 for services (hereinafter called ‘the FTA’).

Over the close to twenty years of its operation, this ambitious agreement has yielded very positive results for both parties. Bilateral goods trade between the EU and Mexico has more than tripled with exports from the EU to Mexico growing slightly faster than exports from Mexico to the EU. Bilateral trade in services has also significantly expanded and the EU remains the main investor in Mexico, after the US.

In order to adapt the Global Agreement to the new realities of global trade and investment, negotiations on its modernisation were launched in 2016. On 21 April 2018, after nine rounds of negotiations, an ‘agreement in principle’ was reached outlining the numerous improvements to the legal framework of EU-Mexico bilateral trade relations. This modernisation will bring the trade and investment framework into the 21st century on a basis of reciprocity and promote new opportunities for business, while including strong and clear commitments on human rights, sustainable development and the fight against corruption. The trade part of the agreement is broadly described in section 5.

• 2. 

  E VOLUTION OF TRADE

2.2 Trade in goods

In 2018, bilateral trade in goods between the EU and Mexico totalled €65.4 billion, increasing by 5.8% compared to 2017 and tripling trade if compared to 2000 (€21.7 billion). Differently from the trend in 2017, EU exports to Mexico (€39.4 billion) grew faster than Mexican exports to the EU (€26 billion), that is, 8.8% and 3.9%, respectively.

The EU continues to register a trade surplus with Mexico, slightly decreasing from €14 to €13.4 billion in 2018. In 2018, the EU remains Mexico’s second largest export market, with a share of 6% of total exports and totalling €26 billion.

The structure of Mexico’s trade with the EU maintains a coherent pattern with the respective

share of the bilateral trade increasing at similar rates over the years resulting in a rather stable

trade balance. Moreover, as explained below, bilateral trade is concentrated in a number of

sectors.

Imports into the EU from Mexico: Mexican goods imported into the EU totalled €26 billion

and import increases were observed across most sectors, following the same trend as in 2017. The largest export categories of products imported from Mexico to the EU were:

 transport equipment (€6.4 billion – 24.5% of EU imports from Mexico);  machinery and appliances (€6.3 billion – 24.3% of EU imports from Mexico);  mineral products (€4.8 billion – 18.7% of EU imports from Mexico);

 optical/photographic instruments (€3billion – 11.9% of EU imports from Mexico

11.9%).

EU Exports to Mexico: European exports to Mexico totalled €39.4 billion, with increase in

exports widespread throughout the different sectors. The main export categories remain the

same in comparison to previous years, namely:

 machinery and appliances (€13.5 billion – 34.3% of EU exports to Mexico);  transport equipment (€7 billion – 17.9% of EU exports to Mexico);  products of the chemical or allied industries (€5.3 billion – 13.5% of EU exports to

Mexico);

 base metals (€3.4 billion – 8.7% of EU exports to Mexico).

2.2 Trade in agricultural goods

Trade in agricultural and fisheries products totalled €2.8 billion, consisting of €1.3 billion EU imports from Mexico and €1.5 billion EU exports to Mexico.

EU imports of agricultural and fisheries products from Mexico were stable and were

dominated by:

 Beverages and spirits at €353 million increased by 13.9%, now representing 27% of

EU imports of agricultural and fisheries products from Mexico;

 Fruits and nuts at €294 million, or 22% of EU imports of agricultural and fisheries

products from Mexico;

 Fish and crustaceans at €73 million increasing by 97% compared to 2017, now

representing 13% of EU imports of agricultural and fisheries products from Mexico.

EU exports to Mexico of agricultural products increased by 4.2% in 2018, and were dominated by:

 Beverages and spirits at €443 million increased by 10.6% in 2018, now representing

29% of EU exports of agricultural products to Mexico;

 Oil seeds & oleaginous fruit at €137 million, or 9% of EU exports of agricultural

products to Mexico;

 Miscellaneous edible preparations at €102 million, or 7% of EU exports of agricultural

products to Mexico.

Three of the tariff rate quotas (TRQs) opened under the agreement by the EU for imports from Mexico were filled completely, namely those for bananas, asparagus and orange juice. For both frozen orange juice and for natural honey, the fill rate was around two thirds. Precise numbers are not given for these quotas, since the quota years do not coincide with the calendar year. For egg albumin, the fill rate was 11% for the quota year 2017-2018. For other quotas, the fill rate was below 3%.

2.3 Trade in services and Foreign Direct investment (FDIs)

In terms of services, EU imports from Mexico are dominated by travel services, and transport services. EU services exports to Mexico consist mainly of business services, transport services, travel services and telecommunications, computer and information services. Latest statistics in trade in services show that Trade in services increased from €15.7 billion in 2016 to €16.9 billion in 2017 (+7.4%), in fact growing faster than trade in goods (+5.8%). The EU has a trade surplus with Mexico that has slightly decreased in 2017 (latest data available) as the EU registered a €4.9 billion surplus with Mexico in 2017 compared to €5.3 billion in 2016.

As for foreign direct investment, according to Eurostat statistics, the Mexican investment stock to the EU accounts for €48.4 billion and EU investment stock to Mexico accounts for €154.5 billion in 2017. This positions the EU as the second largest investor in Mexico behind the US.

According to report on investment of the Mexican Ministry of Economy 84 , the EU contributed

to 28.3% (€7.6 billion) of the total FDI flows in 2017. Over 60% of the EU’s contribution came from two Member States (Spain and Germany).

• 3. 

  I SSUES ADDRESSED IN THE JOINT COMMITTEE MEETINGS

In 2018, the EU and Mexico focussed their efforts in advancing in the negotiations for modernising the existing Global Agreement. No joint committee meeting was held in 2018 but the EU and Mexico were also able to address some existing trade irritants in the regular negotiation meetings. A meeting of the Joint Committee has been scheduled for 2019.

• 4. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

This section presents the evolution of the barriers registered under the EU market access database 85 . The Commission continued to monitor trade barriers and address bilateral issues with Mexican authorities as appropriate.

On SPS matters, during 2018 regular exchanges/meetings took place between the EU and Mexico to progress on pending market access issues. Since 2018, Mexico started to forgo to apply costly pre-shipment inspections in the country of origin to be paid by the industry (preclearance) to new Member States authorisation.

In relation to imports of meat and meat products, Mexico applies a burdensome application procedure. When market access is granted for a limited number of approved establishments,

84 “Inversion Extranjera Directa en Mexico y en el Mundo” 4 June 2018 Secretaria de Economia 85 See: http://madb.europa.eu/madb/barriers_crossTables.htm?isSps=false

further on-the-spot inspections have to be carried out by Mexico for each new establishment with the costs of this procedure to be covered by the EU establishments visited. In 2018, the EU has continued to carry out regular meetings with the competent Mexican authorities, SENASICA, in order to speed up the approval of pending applications by Member States. This method has proved successful with many applications approved, some of which were longstanding. These applications related to some key EU exports such as pork (The Netherlands was added to the list of Member States already authorised, and additional establishments were approved for already authorised Member States). However, some authorized Member States still do not export due to strict requirement on post-mortem inspection or non-application of regionalisation on African Swine Disease by Mexico. Also in 2018, some EU Member States were granted market access for some products such as fruit, dairy, and other animal products.

• 5. 

  C ONCLUSIONS AND OUTLOOK

In 2018, EU trade relations with Mexico confirmed their positive trends with both goods and services showing an upward trend.

In 2018, the EU and Mexico focussed on concluding the negotiations for modernising the Global Agreement and reached an ‘agreement in principle’ on 21 April 2018 on the trade

part. 86 . The rest of the year was used to finalise the technical details of the deal. The EU and

Mexico have started the process for legal revision of the political, cooperation and trade parts of the modernised Agreement.

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 ambitious FTAs signed by the EU. As a result, the modernised Agreement will bring improvements across the board of EU- Mexico trade and investment relations, notably as regards:

 Goods: the EU has obtained significant market access on key EU exports (e.g. pork,

poultry, Processed Agricultural Products and dairy products, the latter benefitting from large TRQs), resulting in the eventual liberalisation of 99% of tariff lines.

 Services: Mexico committed to open up its services market with comprehensive and

ambitious concessions, including on Maritime Transport, Financial Services and Telecommunication, thereby making it easier for EU companies to make business in

Mexico.

 Investment protection: Mexico has agreed that investor-State disputes are

adjudicated under an Investment Court System and to the substantive rules for protection and to replace the existing 16 bilateral investment traties with EU Member

States by the agreement with the EU.

 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, in reducing the number of audits and the timeframe to process an

application and will shift the burden of cost to the auditing Party.

86 http://trade.ec.europa.eu/doclib/docs/2018/april/tradoc_156791.pdf

 Public Procurement: the outcome is also very ambitious and include commitments at

sub central level, the details of which are still being finalised.

 Competition, subsidies and State owned Enterprises (SOEs): Mexico has to ensure

that companies have to respect competition principles. It also agreed to provisions enhancing the level playing field between private companies and SOEs, as well as between all companies when it comes to subsidies, in particular through more

transparency.

 Geographical Indications (GIs): Mexico has agreed to protect the shortlist of 340 EU

GIs with a high level of protection, and to incorporate the Spirits Agreement under the modernised Agreement with the same level of protection for EU spirits GIS therein recognised, that includes allusions and evocations. Enforcement is provided by administrative and judicial measures, at the request of an interested party and ex

officio.

 Trade and Sustainable Development (TSD): the modernised FTA will contain a

fully-fledged TSD Chapter in which Mexico committed to effectively implement labour and environmental standards and agreements.

 Anti-corruption: for the first time ever in an EU agreement there will be a protocol

on anti-corruption to fight against bribery and money laundering in trade and investment, including a mechanism for the resolution of disputes.

 Civil society mechanism: 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.

• 6. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Mexico (mio €)

Imports 17.978 19.487 20.744 23.896 26.002 Exports 28.439 33.620 33.867 37.916 39.384 Balance 10.461 14.133 13.123 14.020 13.381 Share Mexico in EU28 trade with Extra-EU28 Imports 1,1% 1,1% 1,2% 1,3% 1,3% Exports 1,7% 1,9% 1,9% 2,0% 2,0% Total (I+E) 1,4% 1,5% 1,6% 1,7% 1,7% Share EU28 in trade Mexico with world Imports 11,1% 11,1% 11,0% 11,6% 11,4% Exports 5,1% 4,8% 5,1% 5,7% 5,6% Total (I+E) 8,2% 8,1% 8,2% 8,8% 8,6%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade Mexico: IMF Dots

Total merchandise trade EU28 with Mexico (mio €)

Growth

Mexico 2017 2018 annual

mio € %

Imports 23.896 26.002 2.106 8,8%

Exports 37.916 39.384 1.468 3,9%

Balance 14.020 13.381 -639

Total trade 61.812 65.386 3.574 5,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Mexico (mio €)

Mexico 2017 2018 Growth

mio € annual %

Imports 1.305 1.312 7 0,6%

Exports 1.446 1.507 61 4,2%

Balance 141 195 54 Total trade 2.751 2.820 69 2,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Mexico (mio €)

Growth

Mexico 2017 2018 annual

mio € %

EU28 imports 22.591 24.690 2.099 9,3%

EU28 exports 36.470 37.876 1.406 3,9% Balance 13.878 13.186 -693

Total trade 59.061 62.566 3.505 5,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Mexico (mio €)

Growth

Mexico 2016 2017 annual

mio € %

Imports 5.196 5.935 739 14,2% Exports 10.498 10.920 423 4,0%

Balance 5.302 4.985 -316

Total trade 15.694 16.855 1.162 7,4%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Mexico (mio €)

2013 2014 2015 2016 2017

Imports 3.749 4.032 4.954 5.196 5.935

Exports 7.884 8.282 9.730 10.498 10.920

Balance 4.135 4.250 4.775 5.302 4.985

Total trade 11.634 12.315 14.684 15.694 16.855

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Mexico (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 25.119 31.002 32.166 36.091 48.367

Outward 110.424 135.168 162.287 142.830 154.483 FDI Flows

Inward 1.834 7.569 3.498 9.072 1.800

Outward 22.873 24.441 16.728 -10.703 12.957

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FIRST GENERATION FREE TRADE AGREEMENTS WITH THE EFTA COUNTRIES NORWAY AND SWITZERLAND

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 concerns goods only and is one of the oldest trade agreements signed by the EU.

Although 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, which means that agricultural and fisheries products are not in free circulation between the EU and Norway and quotas exist in a number of areas. Processed agricultural products are covered by a dedicated protocol to the EEA agreement but are not in free circulation neither.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

The EU remains the first import and export partner for Norway, capturing 74% of the latter’s

trade. Norway is the 6 th trading partner for goods of the EU. Norway’s trade with the EU

shows a surplus that has doubled in value terms from 2016 to 2018. The Member States that import the most from Norway are the United Kingdom, followed by the Netherlands, Germany and Sweden. The greatest exporters to Norway are Sweden, Germany and Denmark. Mineral products represents more than half of EU imports from Norway, with an increase of 14% between 2017 and 2018. The largest share of exports in value are represented by “machinery and mechanical appliances”, followed by “motor vehicles” and “electrical machinery and equipment”. Trade is dynamic and continues its expansion both ways. Exports to Norway increased by 6% between 2017 and 2018 while imports increased by 13%.

2.2 Trade in agricultural goods

Trade in agricultural goods clearly presents a surplus for the EU that exports eight times the value of the agricultural goods it imports from Norway. The EU exports for more than €4.5 billion agricultural products to Norway – a level that has been stable in the last three years – and imports for half a billion euros.

Agriculture is not covered by the EEA agreement, which however 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. Signed on 4 December 2017, this agreement 87 entered into force on 1 October 2018. The concessions consist of 36 fully liberalised tariff lines and tariff rate quotas (TRQs) to be opened by both sides, opening new trade opportunities for EU and Norwegian exporters of agricultural products.

Overall, trade in agricultural products is partially liberalised on both sides.

In general, Norway makes little use of the agri-food TRQs granted by the EU. Out of 28 TRQs in operation prior to 1 October 2018, 14 are completely or largely unused (below 3%). Only four TRQs are fully or nearly fully used (feedingstuff for fish, potatoe slices, sheep or goat meat and waters with sugar, without milk) followed by boneless sheep meat, (used at 75%), chocolate and other food preparations containing cocoa (used at 67%) and dog or cat put up for retail sale (used at 53%).

The EU makes good use of the Norwegian TRQs, but with large discrepancies with TRQs used above 90% (16 out of 40 TRQs) and a few TRQs not been used at all or barely used (fruit and nuts, meat and edible offal - bovine and poultry). Data on TRQ fill rates provided by Norwegian authorities are included in Section 7 “Statistics”.

2.3 Trade in Services and Foreign Direct investment (FDIs)

With approximately €44 billion of services exchanges between the parties in 2017 (€16 billion of services imported and €29 billion exported), Norway and the EU are very important trading

partners when it comes to services. Norway is in fact the 6 th trading partner of the EU for

services. The balance for trade in services between Norway and the EU is positive for the EU – and rather stable over the last years.

FDI between the EU and Norway are at a high level – and rather balanced - on both sides: Norwegian FDI stock in the EU in 2017 represents €94 billion while EU investment in Norway is worth €90 billion.

• 3. 

  I SSUES ADDRESSED IN THE EEA AND FTA J OINT COMMITTEES

In practice, since the signing of the EEA agreement, the bilateral FTA has 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. Bilateral trade issues such as trade irritants are discussed on a case-by-case basis, at technical and political level.

The EEA Joint Committee, where the European External Action Service represents the EU

side, meets six to eight times per year 88 . Four subcommittees assist the Joint Committee 89 .

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.

87 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

88 https://eeas.europa.eu/diplomatic-network/european-economic-area-eea/348/european-economic-area-eea_en

89 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

At the occasion of the 25 th anniversary of the entry into force of the EEA agreement on 1 January 2019, the EEA Council confirmed its “support for the EEA agreement as the continued basis for future relations between the EU and EEA EFTA States”.

On a more specific and trade-related issue, the EEA Council “acknowledged the importance of predictable trade conditions for economic operators within the EEA. In this regard, the EEA Council welcomed the exemption of Iceland, Liechtenstein and Norway from the EU’s provisional safeguard measures concerning imports of a number of steel products, which came into effect on 19 July 2018” 90 .

• 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 the bilateral trade relations. Norwegian companies participate in the Single Market almost under the same conditions as Member States, and vice-versa. The same rules apply to ensure a level-playing field, such as technical requirements of certain products or competition rules. EU Internal 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 pending incorporation into the EEA Agreement has created the so-called "backlog" in this dynamic approximation. A joint effort of both the EU and the EEA EFTA States resulted in historical reduction of the backlog by 234 acts in March 2019, especially in the area of financial services, where the backlog was particularly high.

As Norway is not part of the EU Customs Union neither linked with the EU by a customs union, customs procedures apply to goods exchanged between EU Member States and Norway. Norway is free to negotiate its own trade agreements and is not bound by the European Common Customs Tariff. If goods originating in third countries are imported in Norway before being re-exported to the EU, the customs procedure in place between Norway and the EU will ensure that the duties applicable to the end-destination are being levied.

• 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 to a certain extent by Protocol 2 to the FTA 91 . 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 and this has been a long-standing trade barrier.

In 2018, the EEA Council encouraged EEA members to continue the dialogue on the review of the trade regime for processed agricultural products within the framework of Article 2(2) and Article 6 of Protocol 3 to the EEA Agreement, in order to further promote trade in this area 92 . The EU expects the discussions with Norway, stalled in 2014, to resume.

90 https://www.consilium.europa.eu/fr/press/press-releases/2018/11/20/conclusions-of-the-50th-meeting-of-the href="https://www.consilium.europa.eu/fr/press/press-releases/2018/11/20/conclusions-of-the-50th-meeting-of-the-eea-council/pdf">eea-council/pdf

91 which still offers a more preferential treatment than the EEA for a few products

92 https://www.consilium.europa.eu/fr/press/press-releases/2018/11/20/conclusions-of-the-50th-meeting-of-the href="https://www.consilium.europa.eu/fr/press/press-releases/2018/11/20/conclusions-of-the-50th-meeting-of-the-eea-council/pdf">eea-council/pdf

Geographical Indications

The EU-Norway committed themselves to encourage trade in agricultural products with Geographical Indications (GIs). The GIs negotiations were launched in 2013 and suspended at the request of the Norwegian side in April 2016. The Council of the European Union in its Conclusions of December 2018 calls on Norway to “resume the negotiations on the protection of geographical indications, which is an important element of international trade in

agricultural products and foodstuffs 93 ”. 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 latest Article 19 agreement between the EU and Norway, which entered into force in October 2018 as mentioned above.

• 6. 

  C ONCLUSIONS AND OUTLOOK

Politically, Norway and the EU are close allies. Norway notably 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.

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 trade in basic and processed agricultural products, where the EU hopes to see progress in the coming months.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Norway (mio €)

Imports 85.107 74.156 63.336 73.757 83.837 Exports 50.199 48.782 48.322 50.659 53.867 Balance -34.908 -25.374 -15.014 -23.099 -29.970 Share Norway in EU28 trade with Extra-EU28

Imports 5,0% 4,3% 3,7% 4,0% 4,2% Exports 2,9% 2,7% 2,8% 2,7% 2,8% Total (I+E) 4,0% 3,5% 3,2% 3,3% 3,5% Share EU28 in trade Norway with world

Imports 64,9% 63,6% 63,5% 61,4% 63,6% Exports 83,0% 81,0% 79,1% 80,9% 81,8% Total (I+E) 76,1% 73,8% 72,1% 72,3% 74,2%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Norway: IMF Dots

Total merchandise trade EU28 with Norway (mio €)

Growth

Norway 2017 2018 annual

mio € %

Imports 73.757 83.837 10.080 13,7%

Exports 50.659 53.867 3.208 6,3%

93 https://www.consilium.europa.eu/en/press/press-releases/2018/12/11/council-conclusions-on-a href="https://www.consilium.europa.eu/en/press/press-releases/2018/12/11/council-conclusions-on-a-homogeneous-extended-single-market-and-eu-relations-with-non-eu-western-european-countries/">homogeneous-extended-single-market-and-eu-relations-with-non-eu-western-european-countries/

Balance -23.099 -29.970 -6.872

Total trade 124.416 137.704 13.288 10,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Norway (mio €)

Growth

Norway 2017 2018 annual

mio € %

Imports 575 579 4 0,7%

Exports 4.474 4.496 22 0,5% Balance 3.899 3.917 18

Total trade 5.049 5.075 26 0,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Norway (mio €)

Growth

Norway 2017 2018 annual

mio € %

EU28 imports 73.182 83.258 10.076 13,8%

EU28 exports 46.185 49.371 3.186 6,9% Balance -26.997 -33.888 -6.890

Total trade 119.367 132.629 13.262 11,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Norway (mio €)

Growth

Norway 2016 2017 annual

mio € %

Imports 15.868 15.553 -315 -2,0% Exports 28.497 28.720 223 0,8%

Balance 12.629 13.167 538

Total trade 44.364 44.273 -91 -0,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Norway (mio €)

2013 2014 2015 2016 2017

Imports 14.396 16.526 16.046 15.868 15.553

Exports 27.050 28.131 30.479 28.497 28.720

Balance 12.653 11.605 14.434 12.629 13.167

Total trade 41.446 44.657 46.525 44.364 44.273

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Norway (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 68.282 73.807 89.838 103.251 94.452

Outward 72.212 81.414 90.716 102.962 90.293 FDI Flows

Inward 938 4.964 3.361 1.868 2.794

Outward 9.202 5.052 8.114 4.022 4.478

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Fill rates of Norwegian TRQs (Source Norwegian authorities)

Norwegian customs tariff Fill rate Fill rate

2012 Description of products

Quota volume 2018 2018 2017

02.01 Meat of bovine animals, fresh or chilled.

02.01.1000 - Carcasses and half-carcasses

 - Other cuts with bone in : 02.01.2001 - - "Compensated quarters", i.e. forequarters and the

hindquarters of the same animal are presented at the

same time 1300 93% 100%

02.01.2002 - - Other forequarters 02.01.2003 - - Other hindquarters 02.01.2004 - - So-called "Pistola cuts" 02.02 Meat of bovine animals, frozen.

02.02.1000 - Carcasses and half-carcasses

 - Other cuts with bone in : 02.02.2001 - - "Compensated quarters", i.e. forequarters and the

hindquarters of the same animal are presented at the same time

02.02.2002 - - Other forequarters

02.02.2003 - - Other hindquarters

02.02.2004 - - So-called "Pistola cuts"

02.03 Meat of swine, fresh, chilled or frozen.

 - Fresh or chilled :

 - - Carcasses and half-carcasses :

02.03.1101 - - - Of domestic swine 600 83% 98%

 - Frozen :

 - - Carcasses and half-carcasses :

02.03.2101 - - - Of domestic swine

02.03 Meat of swine, fresh, chilled or frozen.

 - Fresh or chilled :

 - - Other: 75 99%

 - - - Of domestic swine :

 - - - - Bellies (streaky) and cuts thereof :

02-03-1904 - - - - - With bone in

02.06 Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or

frozen. 350 0% 0%

 - Of swine, frozen :

02.06.4100 - - Livers

02.07 Meat and edible offal, of the poultry of heading 01.05,

fresh, chilled or frozen.

 - Of fowls of the species Gallus domesticus :

02.07.1100 - - Not cut in pieces, fresh or chilled

02.07.1200 - - Not cut in pieces, frozen 837,5 63% 62%

 - Of turkeys :

02.07.2400 - - Not cut in pieces, fresh or chilled

02.07.2500 - - Not cut in pieces, frozen

02.07 Meat and edible offal, of the poultry of heading 01.05,

fresh, chilled or frozen.

 - Of ducks : 125 3% 8%

 - - Other, fresh or chilled :

02.07.4401 - - - Breasts and cuts thereof

02.10 Meat and edible meat offal, salted, in brine, dried or smoked; edible flours and meals of meat or meat

offal.

 - Meat of swine: 450 96% 99%

 - - Hams, shoulders and cuts thereof, with bone in :

02.10.1101 - - - Containing 15 % or more by weight of bones

04.06 Cheese and curd.

 - Fresh (unripened or uncured) cheese, including whey cheese and curd :

04.06.1001 - - Whey cheese

04.06.1009 - - Other

04.06.2000 - Grated or powdered cheese, of all kinds

04.06.3000 - Processed cheese, not grated or powdered

 - Blue-veined cheese and other cheese containing veins

produced by Penicillium roqueforti : 7500 98% 100%

04.06.4001 - - Roquefort

04.06.4005 - - Gorgonzola

 - - Other :

04.06.4008 - - - Unpasteurized

04.06.4009 - - - Other

 - Other cheese :

04.06.9030 - - Feta and similar cheeses

 - - White-veined cheese :

04.06.9082 - - - Camembert

04.06.9084 - - - Brie

04.06.9089 - - - Other

 - - Other :

04.06.9091 - - - Unpasteurized

04.06.9099 - - - Other

04.07 Birds' eggs in shell, fresh preserved or cooked.

 - Fertilised eggs for incubation :

04.07.1100 - - Of fowls of the species Gallus domesticus

 - Other fresh eggs : 290 57% 65%

04.07.2100 - - Of fowls of the species Gallus domesticus ex 04.07.9000 - Other

05.11 Animal products not elsewhere specified or included; dead animals of Chapter 1 or 3, unfit for human

consumption. 350

 - Other :

 - - Other : 0% 0%

 - - - Blood powder, unfit for human consumption : Duty free access granted

05.11.9911

 - - - - For feed purpose 01.10.2018

06.02 Other live plants (including their roots), cuttings and

slips; mushroom spawn.

 - Unrootened cuttings and slips : 2 million

 - - Cuttings for nursery or horticultural purposes, except

of green plants from 15 December - 30 April : 100% 100%

06.02.1021 - - - Begonia, all sorts, Campanula isophylla, Euphorbia

pulcherrima, Poinsettia pulcherrima, Fuchsia, Hibiscus, Duty free

Kalanchoe and Petunia-hanging (Petunia hybrida, access granted

Petunia atkinsiana) 01.10.2018

06.02.1024 - - - Pelargonium

06.02 Other live plants (including their roots), cuttings and

slips; mushroom spawn.

 - Other :

 - - With balled roots or other culture media :

 - - - Other pot plants or bedding plants :

 - - - - Pot plants or bedding plants, in flower :

ex 06.02.9043 - - - - - Begonia x cheimantha, Begonia x semperflorens,

Begonia x tuberhybrida, Bidens, Brachycome, Callistephus, Cyclamen persicum, Dahlia, Dianthus,

Fuchsia, Gerbera, Hydrangea macrophylla, Impatiens, 11 million 89% 99%

Lobelia, Lobularia, Petunia (all species), Scaevola, Senecio cineraria, Senecio bicolor, Tagetes, Tropaeolum, Verbena, Viola and Zinnia, also when imported as part of mixed groups of plants

06.02.9044 - - - - - Achimenes, Aster novi-belgii, Calceolaria

herbeohybrida, Capsicum annum, Catharanthus roseus, Vinca rosea, Dipladenia, Nematanthus, Hypocyrta, Osteospermum, Schlumbergera, Senecio x hybridus, Cineraria, Sinningia speciosa, Gloxinia, Solanum and Streptocarpus, also when imported as part of mixed groups of plants

06.02 Other live plants (including their roots), cuttings and

slips; mushroom spawn.

 - Other :

 - - With balled roots or other culture media : 4,75 million 90% 100%

 - - - Other pot plants or bedding plants :

 - - - - Green pot plants from 1 May to 14 December :

06.02.9031

 - - - - - Condiaeum, Croton, Dieffenbacchia, Epipremnum, Scindapsus aureum, Hedera, Nephrolepis, Peperomia obtusifolia, Peperomia rotundifolia, Schefflera, Soleirolia and Helxine, also when imported as part of mixed groups of plants

06.02 Other live plants (including their roots), cuttings and

slips; mushroom spawn.

 - Other : 4 million 64% 0%

 - - Other :

06.02.9091 - - - Grass in rolls or plates (lawn)

07.01 Potatoes, fresh or chilled.

 - Other : 2500 12% 19%

 - - From 16 July to 14 May :

07.01.9022 - - - New potatoes imported 1 April - 14 May

07.05 Lettuce (Lactuca sativa) and chicory (Cichorium

spp.), fresh or chilled.

 - Lettuce :

 - - Cabbage lettuce (head lettuce) :

 - - - Iceberg lettuce : 600 74% 60%

 - - - - From 1 March to 31 May :

07.05.1112 - - - - - Whole

 - - - - From 1 June to 30 November :

07.05.1122 - - - - - Whole

07.05 Lettuce (Lactuca sativa) and chicory (Cichorium

spp.), fresh or chilled.

 - Lettuce :

 - - Cabbage lettuce (head lettuce) :

 - - - Iceberg lettuce : 400 78% 88%

 - - - - From 1 March to 31 May :

07.05.1112 - - - - - Whole

07.05.1119 - - - - - Other

07.12

Dried vegetables, whole, cut, sliced, broken or in powder, but not further prepared.

 - Other vegetables; mixtures of vegetables : 300 35% 36%

 - - Potatoes : 07.12.9011 - - - Whether or not cut or sliced but not further

prepared

08.08 Apples, pears and quinces, fresh. - Apples : 2000 50% 98%

ex 08.08.1011 - - From 1 May to 1. August

08.10 Other fruit, fresh.

 - Strawberries :

 - - From 9 June to 31 October : 300 72% 77% 08.10.1023 - - - From 9 June to 30 June

08.10.1024 - - - From 1 July to 9 September

08.11 Fruit and nuts, uncooked or cooked by steaming or

boiling in water, frozen, whether or not containing added sugar or other sweetening matter.

08.11.1000 - Strawberries : 2200 97% 95%

08.11 Fruit and nuts, uncooked or cooked by steaming or

boiling in water, frozen, whether or not containing added sugar or other sweetening matter.

 - Raspberries, blackberries, mulberries, loganberries,

black, white or red currants and gooseberries : 950 99% 99%

 - - Other :

08.11.2091 - - - Raspberries

08.11.2092 - - - Blackberries, mulberries or loganberries

08.11.2093 - - - Black currants

08.11.2094 - - - White or red currants

08.11.2095 - - - Gooseberries

08.12 Fruit and nuts, provisionally preserved (for example,

by sulphur dioxide gas, in brine, in sulphur water or

in other preservative solutions), but unsuitable in 100 0% 0%

that state for immediate consumption.

08.12.1000 - Cherries

10.01 Wheat and meslin.

 - Durum wheat : 5000 24% 30%

10.01.1900 - - Other

10.02 Rye.

ex 10.02.1000 1000 24% 27% - Autumn rye

10.05 Maize (corn).

 - Other : 11250 97% 100%

10.05.9010 - - For feed purpose

11.03 Cereal groats, meal and pellets.

 - Groats and meal : 10000 98% 100%

 - - Of maize (corn) :

11.03.1310 - - - For feed purpose

12.09 Seeds, fruit and spores, of a kind used for sowing.

 - Seeds of forage plants : 400 95% 89%

12.09.2300 - - Fescue seeds

12.09 Seeds, fruit and spores, of a kind used for sowing.

 - Seeds of forage plants : 75 92% 96%

12.09.2300 - - Fescue seeds

12.09 Seeds, fruit and spores, of a kind used for sowing.

 - Seeds of forage plants : 200 74% 77%

12.09.2400 - - Kentucky blue grass (Poa pratensis L.) seeds

12.09 Seeds, fruit and spores, of a kind used for sowing. - Seeds of forage plants : 50 53% 92%

12.09.2400 - - Kentucky blue grass (Poa pratensis L.) seeds

12.09 Seeds, fruit and spores, of a kind used for sowing.

 - Seeds of forage plants :

12.09.2500 700 99% 87% - - Rye grass (Lolium multiflorum Lam., Lolium

perenne L.) seeds 12.14 Swedes, mangolds, fodder roots, hay, lucerne

(alfalfa), clover, sainfoin, forage kale, lupines, vetches and similar forage products, whether or not in the

form of pellets. 35000 53% 52%

 - Other :

 - - Other :

12.14.9091 - - - Hay

16.01.0000 Sausages and similar products, of meat, meat offal or

blood; food preparations based on these products. 450 91% 88%

16.02 Other prepared or preserved meat, meat offal or blood.

 - Of swine : 350 32% 30%

 - - Other, including mixtures :

16.02.4910 - - - "Bacon crisp"

16.02 Other prepared or preserved meat, meat offal or blood.

 - Of bovine animals 200 50% 43%

16.02.5001 - - Meatballs, each of a weight of 25 grams or less,

diameter 3 cm or less and containing 18% fat or less

20.05 Other vegetables prepared or preserved otherwise

than by vinegar or acetic acid, not frozen, other than products of heading 20.06.

 - Potatoes : 3000 58% 57%

 - - Other :

20.05.2091 - - - Semi-manufactures for the production of snacks

20.09 Fruit juices (including grape must) and vegetable

juices, unfermented and not containing added spirit, whether or not containing added sugar or other

sweetening matter. 3300 99% 100%

 - Apple juice :

20.09.7100 - - Of a Brix value not exceeding 20

20.09.7900 - - Other

20.09 Fruit juices (including grape must) and vegetable

juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter.

 - Unmixted juices of other fruites and vegetables: 100%

 - - Other :

 - - - Black currant juice: 20.09.8911 - - - - Containing added sugar or other sweetening

matter

20.09.8919 - - - - Other

20.09 Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other 200 sweetening matter.

 - Unmixted juices of other fruites and vegetables: 25% 58%

 - - Other : Duty free

• - 

  - - Other : access granted

ex. 20.09.8999 - - - - Bilberry concentrate 01.10.2018

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-SWITZERLAND FREE TRADE AGREEMENT

• 1. 

  I NTRODUCTION

The EU-Swiss trade relations are among the deepest worldwide outside the context of a customs union/internal market. For Switzerland, the EU is by far the most important trading partner. For the EU, Switzerland is the third overall trading partner, number 2 for services.

The cornerstone of EU-Swiss trade relation is the EU-Switzerland Free Trade Agreement of

1972 94 . It concerns goods only and is one of the oldest trade agreements signed by the EU. It

does not contain provisions on services, investment, Intellectual Property Rights (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 95 allows for the provision of services,

limited in time.

 The Mutual Recognition Agreement in relation to conformity assessment 96 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 97 , that builds on the WTO Government

Procurement Agreement.

 The Agreement on trade in agricultural products 98 , which includes sanitary and

phytosanitary 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.

In the last two decades, there was no major evolution to this rather complex setting. The gap is growing between the current legal arrangements of EU and Switzerland and the standards of modern and comprehensive FTAs concluded by the EU and Switzerland/EFTA, respectively. A modernisation of the FTA is needed to unlock potential for further bilateral trade.

94 https://eur-lex.europa.eu/legal-content/en/ALL/?uri=OJ:L:1972:300:TOC

95 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22002A0430%2801%29

96 http://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_152006.pdf

97 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:22002A0430(06)

98 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2002.114.01.0132.01.ENG

Between 2014 and 2018, both parties have been 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 as well as State aid rules. The negotiation was concluded in November 2018 and was subject to a public consultation in Switzerland in Spring 2019. The Commission expects the consultation to be swift and hope that its outcome will be positive, as this is necessary to put relations between the EU and Switzerland on a solid institutional footing. A Joint declaration is annexed to the International Framework Agreement, where both parties commit to modernise the trade-related agreements, with negotiations starting in 2020.

• 2. 

  E VOLUTION OF TRADE

2.1. Trade in Goods

Trade in goods is very dynamic between the EU and Switzerland, amounting to €265 billion in 2018. The EU is Switzerland’s main trading partner by far, representing, in 2018, 62% of its exports of goods, and 44% of its imports. Overall, the EU concentrated 53% of Switzerland’s trade in goods, followed by the United States (with approximately 10%) and China (with around 8%). Switzerland is the EU’s third trading partner, representing 7% of its trade in goods, after the USA (17%) and China (15%). Trade grew by almost 2% between 2017 and 2018, whereby European exports to Switzerland grew by 4% and its imports decreased by almost 2%. The trade balance has been positive for the EU in the last years, and amounted to almost €48 billion in 2018.

71% of EU imports from Switzerland are directed to Germany, France, Italy and the United Kingdom. The biggest exporters to Switzerland are Germany, Italy, the United Kingdom and France, representing 72% of EU exports.

Chemicals and related products represent 39% of EU imports from Switzerland, followed by miscellaneous manufactured articles (20%) and machinery and transport equipment (18%).

EU exports to Switzerland concentrate on the same product categories: machinery and transport equipment (23%); chemicals and related products (22%) and miscellaneous manufactured articles (20%).

2.2. Trade in agricultural goods

With almost €5 billion agri-food products imported in 2018 from Switzerland, representing 4% of the goods imported, and €8 billion exported from the EU to the Swiss market, representing 5% of exported goods, the Swiss and European markets for agricultural products are closely linked.

The EU imports mainly coffee and tea (HS 09), which represent 30% of the agri-food imports, followed by beverages (HS 22) and edible preparations (HS 21). The EU exports mainly beverages (HS 22), fruits & nuts (HS 08) and cereals, flour and starch (HS 19). Between 2017 and 2018, EU agri-food exports to Switzerland grew by 1% whereas EU imports from Switzerland declined by 1%.

In general, Switzerland makes little use of the agri-food tariff rate quotas (TRQs) granted by the EU and the use has been decreasing compared to 2017. Out of 32 TRQs, 27 are completely or largely unused (below 10%). The five quotas that are used most are the one for beef (91% fill rate), potatoes (35%), cherries (21%), hams or domestic swine (20%) and cream and yogurt (15%).

In 2018, the EU fully (100%) utilised 28 out of 50 Swiss agricultural TRQs (including EU key export products such as cured ham & pork products) while the fill rate exceeded 50% for a further 12 of these 50 Swiss TRQs. Five TRQs were utilised between 35-49%, and the remaining five were utilised at a rate below 35%.

2.3. Trade in Services and Foreign Direct investment (FDIs)

Switzerland is the second trading partner of the EU when it comes to services. The value of the services provided by the EU in Switzerland has been on a constant rise in the past five years, reaching €119 billion in 2017, which represent an increase of 2% compared to 2016. The services provided by Switzerland in the EU were worth €72 billion in 2017, which represented a decrease of 23% compared to the previous year. The balance of trade in services is positive for the EU.

The stocks of FDI in the EU held by Switzerland reached in 2017 €802 billion, with an annual average increase of 15% over the past four years. The stocks of FDI of the EU in Switzerland amount to €979 billion in 2017, with an average annual increase of 10%. Switzerland gathers about 13% of the total EU28 stocks invested outside the EU28.

• 3. 

  I SSUES ADDRESSED IN THE ANNUAL JOINT COMMITTEE MEETING

Two FTA Joint Committee meetings took place in 2018 chaired by the Swiss party.

At the Joint committee meeting of 17 September 2018, the EU presented the on-going investigation on certain steel products and discussed with its Swiss partners how EU safeguard measures should be shaped to be least distortive to bilateral trade, if such measures were deemed necessary to prevent trade distortion worldwide.

At the FTA Joint Committee on 13 November 2018, a wider range of topics were discussed, including the latest price references for processed agricultural products, the Company tax reform and some market access issues.

Joint committees under other bilateral agreements of trade relevance also take place on a regular basis. The Annual Joint Committee meeting on agriculture took place on 11 October 2018 and several working group met on technical issues such as Geographical Indications, organics and wine & spirits drinks.

• 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 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, the Swiss are 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

Progress was made on several issues: the long-awaited Company tax reform, modifying the discriminatory cantonal fiscal status of companies, which was also problematic from a State aid point of view, was approved by the Swiss Parliament in September 2018 and should enter into force on 1 January 2020.

In the context of the WTO Nairobi decision on export subsidies, Switzerland abolished by a decision of the Federal Council of September 2018, its agricultural export subsidies laid down in the "loi chocolatière", as of January 2019.

The process of adapting the price reference of basic agricultural products needed in the context of the price compensation mechanism for processed agricultural products (protocol 2 to the FTA) ran particularly smoothly this year so parties agreed to further develop their methodology, in a spirit of greater transparency and simplicity.

Progress was made towards solving the issue related to the Swiss reclassification of “seasoned meat”, which resulted in significantly higher import tariffs for seasoned meat, affecting particularly EU exporters. In 2018, Switzerland notified in WTO its intention to launch negotiations to modify the tariff concessions for 'meat not further prepared than seasoned'. The EU negotiating directives were adopted in December 2018, so that progress can be expected in 2019.

Negotiations to extend the scope of the SPS rules currently applicable between Switzerland and the EU made progress in 2018. A new agreement addressing notably labelling or food safety issues could facilitate trade between the parties.

The shaping of the EU safeguard measures on certain products of steel was subject to intense discussions with Switzerland in order to find a solution that is as least distortive to trade as possible. Their implementation will be closely monitored in the coming months.

When it comes to market access barriers, the Parliament of the Ticino region abolished in November 2018 the law on artisanal enterprises, which was welcomed by the EU as it represented a trade barrier to European cross-border service providers. However, the issue will have to be monitored closely since there have been voices in Ticino asking for similar measures to be reintroduced.

Access to market in the services sector remains however a major issue. The so-called “flanking measures” that the Swiss put in place to accompany the implementation of the EU-

Switzerland Free Movement of Persons Agreement 99 are a long-standing issue, as the EU

considers them burdensome and disproportionate. A compromise solution was found in the context of the EU-Swiss Institutional Framework Agreement, which the EU side hopes will be endorsed politically in Switzerland at the end of the consultation process. The lack of a level playing field as regards State aid also remains an issue, as existing agreements between the EU and Switzerland do not include effective State aid rules. A solution was found in the context of the EU-Swiss Institutional Framework Agreement, which

99 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22002A0430%2801%29

includes State aid rules for existing and future market access agreements between the EU and Switzerland.

• 6. 

  C ONCLUSIONS AND OUTLOOK

The Council adopted on 19 February 2019 the following conclusions 100 that summarise the situation and will guide Commission work in the coming months.

On the Institutional Framework:

“In May 2014, the EU and Switzerland have entered into negotiations on a common institutional framework for existing and future agreements, with a view to consolidating the bilateral approach and to developing the EU-Swiss comprehensive partnership to its full potential. After more than four years, negotiations have come to a close at the end of 2018. Negotiators have found fair and balanced solutions in areas such as the rules for dynamic take-over of EU acquis by Switzerland, the mechanism for independent dispute settlement and the provisions to ensure increased legal certainty, as well as a level playing field for our citizens and economic operators. The Council strongly regrets that the Swiss Federal Council did not endorse this outcome in December 2018 and calls on the Federal Council to stand behind the negotiated text of the Institutional Framework Agreement and submit it for adoption to the Federal Assembly as soon as the consultation of stakeholders is completed in spring 2019. The Council emphasises that the conclusion of the Institutional Framework Agreement on the basis of the present text is a precondition for the EU for the conclusion of future agreements on Swiss participation in the EU's internal market and also an essential element for deciding upon further progress towards mutually beneficial market access. This will allow for a consolidation of the bilateral approach, in such a way as to ensure its sustainability and further development”.

On the trade relationship:

“The EU and Switzerland continue to enjoy a strong and stable trading relationship, to the benefit of both sides. However, the free trade agreement of 1972, which is at the basis of our close economic relationship, has not been adjusted to developments in international trade rules since. The Council therefore calls for embarking on a path of modernising the agreements governing the trade relations between Switzerland and the European Union, in particular the free trade agreement. Enhanced access to the Swiss market for operators from the EU, notably in the agri-food and services sectors, should be urgently addressed”.

• 7. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Switzerland (mio €)

Imports 96.546 102.356 121.371 110.728 108.980 Exports 140.288 150.513 142.218 150.245 156.484 Balance 43.742 48.157 20.847 39.517 47.504 Share Switzerland in EU28 trade with Extra-EU28 Imports 5,7% 5,9% 7,1% 6,0% 5,5% Exports 8,2% 8,4% 8,1% 8,0% 8,0% Total (I+E) 7,0% 7,2% 7,6% 7,0% 6,7% Share EU28 in trade Switzerland with world Imports 66,3% 64,6% 55,8% 59,7% 63,0% Exports 45,2% 43,5% 48,4% 45,3% 44,4%

100 https://www.consilium.europa.eu/en/press/press-releases/2019/02/19/council-conclusions-on-eu-relations href="https://www.consilium.europa.eu/en/press/press-releases/2019/02/19/council-conclusions-on-eu-relations-with-the-swiss-confederation/">with-the-swiss-confederation/

Total (I+E) 55,1% 53,3% 51,9% 52,1% 53,1%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Switzerland: IMF Dots

Total merchandise trade EU28 with Switzerland (mio €)

Growth

Switzerland 2017 2018 annual

mio € %

Imports 110.728 108.980 -1.749 -1,6%

Exports 150.245 156.484 6.239 4,2% Balance 39.517 47.504 7.988

Total trade 260.973 265.464 4.490 1,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Switzerland (mio €)

Growth

Switzerland 2017 2018 annual

mio € %

Imports 4.660 4.593 -67 -1,4%

Exports 8.204 8.254 51 0,6%

Balance 3.543 3.661 118

Total trade 12.864 12.847 -17 -0,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Switzerland (mio €)

Growth Switzerland 2017 2018 annual

mio € %

EU28 imports 106.068 104.387 -1.681 -1,6%

EU28 exports 142.041 148.230 6.189 4,4% Balance 35.973 43.843 7.870

Total trade 248.110 252.617 4.507 1,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Switzerland (mio €)

Growth

Switzerland 2016 2017 annual

mio € %

Imports 93.080 71.676 -21.404 -23,0% Exports 116.568 118.986 2.418 2,1%

Balance 23.487 47.309 23.822

Total trade 209.648 190.662 -18.986 -9,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Switzerland (mio €)

2013 2014 2015 2016 2017

Imports 54.252 62.897 73.017 93.080 71.676

Exports 101.554 107.363 115.139 116.568 118.986

Balance 47.302 44.465 42.122 23.487 47.309

Total trade 155.806 170.260 188.155 209.648 190.662

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Switzerland (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 503.054 516.232 685.515 762.270 802.444

Outward 709.272 731.320 894.365 984.936 978.969 FDI Flows

Inward 24.911 38.329 121.712 100.848 28.383

Outward 35.934 -30.615 56.335 98.349 18.315

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

THE CUSTOMS UNION WITH TURKEY

ANNUAL INFO SHEET ON IMPLEMENTATION OF THE EU-TURKEY CUSTOMS UNION AND TRADE AGREEMENTS

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 in the shape of the EU-Turkey Association Council Decision No 1/95,

which is currently in force. 101

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 and State aid policy and 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 102 in 1996, along with relevant competition rules. The Association Council Decision No 1/98 103 (amended by Decision No 2/2006 104 ) 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. In that respect, the conclusions of the General Affairs Council meeting of 26 June 2018 noted that "Turkey has been moving further away from the European Union. Turkey's accession negotiations have therefore effectively come to a standstill and no further chapters can be considered for opening or closing and no further work towards the modernisation of the EU- Turkey Customs Union is foreseen."

• 1. 

  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 105 . The

rise in Foreign Direct investment (FDI) to Turkey from the EU has been similarly significant,

101 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:21996D0213(01):EN:HTML

102 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:21996A0907(01):en:HTML

103 http://eur-lex.europa.eu/legal-content/en/ALL/?uri=OJ:L:1998:086:TOC

104 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22006D0999&from=EN

105 World Bank: Evaluation of the EU - Turkey Customs Union, March 2014

as has been the deeper integration in production networks between Turkish and European firms. In 2018, Turkey remained the EU’s 5 th largest trading partner overall (it is the EU’s 5 th biggest export market as well as source of imports), while the EU is by far Turkey’s most important trading partner. The share of Turkish exports going to the EU increased from 47% to 50%, while the share of Turkish imports coming from the EU declined marginally from 36.4% to 36.2% between 2017 and 2018.

1.1 Trade in Goods

While EU-Turkey bilateral trade in goods increased rapidly in recent years, in 2018 trade showed a mixed picture, in particular due to the Turkish lira losing as much as 40% of its value against the euro over summer - before recovering some of its losses. This lead to an overall decrease in Turkish imports while at the same time facilitating exports, resulting in an improvement in the Turkish current account deficit. According to Eurostat data, EU goods exports to Turkey hence fell by 9% to €77 billion while imports from Turkey rose by 9% to €76 billion. Overall trade in goods thus amounted to €153 billion in 2018, down slightly from €154.5 billion in 2017.

Regarding the sectoral split, the EU’s biggest export category in 2018 was machinery and appliances (26% of overall EU exports), followed by transport equipment (14%), base metals and article thereof (13%) and chemical products (12%). Turkey’s biggest export sector was transport equipment (26%), followed by textiles and textile articles (19%) and machinery and appliances (17%).

On the basis of this diverse set of goods, Turkey has a significant trade relationship with many Member States, almost all of which were affected by the general trend reflected in the overall figure in 2018, i.e. falling exports to and increasing imports from Turkey.

1.2 Trade in agricultural goods

In 2018, Turkey was the EU’s 7 th largest supplier of agricultural goods, but is no longer in the

top 10 export destination countries. The EU had a trade deficit in agriculture with Turkey of €1.3 billion, considerably widened from €823 million in 2017 due to a sharp decline in exports.

EU agri-food exports to Turkey are well diversified, with only one category exceeding 10% of all extra-EU agri-food exports in 2018, namely live animals (13%). Agri-food imports from Turkey are also diverse, with the top category ‘preparations of vegetables, fruits, nuts and plants’ accounting for 19% of all imports.

1.3 Trade in Services and Foreign Direct investment (FDIs)

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 2017. As the table in Section 7 sets out, data continue to show a substantial trade surplus for Turkey, although down from earlier years in large part due to the decrease in Turkey-bound tourism in the aftermath of the attempted coup and terrorist attacks. These will therefore likely show a rebound in 2018. Besides the importance of the tourism sector, however, the figures also reflect the high barriers to enter the Turkish services market.

As for foreign direct investment (FDI), the EU remained by far the biggest source in Turkey, though the total FDI stock shrank significantly to €69 billion in 2017. While FDI flows with Turkey are relatively volatile, some of the decrease in stock is likely due to the same instability factors that affected trade in 2016 and 2017. In 2017, European investment in Turkey was along the same limited lines as in the previous year at €1 billion, down significantly from the previous trend. Another notable development over the longer term is the sustained increase of Turkish FDI in the EU, with stocks at €19 billion in 2017.

2 I SSUES ADDRESSED IN THE C OMMITTEE M EETINGS

The 36 th Customs Union Joint Committee (CUJC) meetings took place on 16 and 17 May

2018 in Ankara, and was already included in the 2018 FTA Implementation Report. 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.

 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 Intellectual Property Rights (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 such as State aid.

 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.

In addition, the 49 th meeting of the EU-Turkey Customs Co-operation Committee (CCC) took

place in Ankara on 29 November 2018. The main topics addressed by the Committee were the following:

 Recent developments in relation to customs legislation.

 Updates regarding rules of origin, including the state of play regarding their internal

procedures for the linkage to the Regional Convention on pan-Euro-Mediterranean

preferential rules of origin.

 Implementation issues around the electronic issuance of movement certificates

(A.TR, EUR.1, and EUR-MED).

 Trade barriers and breaches of the Customs Union by Turkey that affect customs,

including in particular the requirement of proof of origin applied by Turkey and

additional documentation requirements at customs.

 Information exchange on recent legislative developments and on the risk analysis

customs enforcement of IPR in Turkey and in the EU.

3 S PECIFIC AREAS OF IMPORTANCE

Turkey had a difficult year 2018, as the economy slowed markedly during the year after strong growth in the preceding years. From 2013 to 2017, GDP grew by 5% a year on average and per capita income converged significantly with EU levels, from 52% in 2010 to 65% in 2017. However, against the backdrop of Turkish public policy choices, investors lost confidence in the sustainability of this boom, which led to a sharp deterioration in external financing conditions, and in turn to a rapid depreciation in the Turkish lira, high inflation and a technical recession from the third quarter of 2018. In line with this, the current account reversed to a surplus as imports contracted and exports increased. Over the entire year 2018, Turkey still recorded a current account deficit of 3.6% of GDP, but the trade balance in particular with the EU changed drastically to a now quite balanced relationship.

Of particular importance regarding the implementation of both the Customs Union and the ECSC-Turkey free trade agreement for coal, iron and steel products in 2018 was the imposition of safeguard measures. As a response to the 25% import duties on steel applied by the United States from 23 March 2018, both Turkey and the EU initiated a safeguard procedure. After concluding its investigation, the European Commission instated first a provisional measure on 17 July 2018, and then definitive safeguard measures that entered into force on 2 February 2019. These take the form of a Tariff Rate Quota and a 25% out-of-quota duty on certain steel products, and were designed to be the least disturbing to trade in accordance with WTO rules and bilateral agreements. Turkey on 20 September 2018 also adopted provisional safeguard measures and continued its investigation. A series of exchanges and consultations took place in 2018 in that regard.

4 P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

As regards the implementation of the existing bilateral preferential trade framework, limited progress was achieved in 2018 on several relatively minor issues, such as the rules on management of tariff quotas.

However, on balance Turkey created further market access barriers in breach of the Customs Union rules, and aggravated previous open issues in 2018. Overall, Turkey thus continued its course of maintaining and introducing trade barriers that also affect European companies.

Turkey has notably upheld trade barriers that breach the Customs Union agreement in continuing - and broadening - its deviation from the common customs tariff through additional duties on products originating outside the EU or Turkey’s FTA partners. These additional duties by now cover a large part of all product lines that are subject to the Customs Union, including more sophisticated products that potentially affect not only logistics and distribution, but also assembly in the EU. In addition, given this practice as well as other documentation requirements, Turkey imposes a proof of origin contrary to Customs Union rules. Other main open issues concern the continued localisation policy in the pharmaceutical sector, discrimination against EU exports of tractors and export restrictions on leather products.

As reflected in the above, the European Commission has raised concerns about these barriers in various fora, including the Customs Union Joint Committee and other bilateral meetings as well as in written exchanges. It will continue to follow up on these and any arising issues in detail with the Turkish authorities, as well as all relevant stakeholders. In the case of the localisation requirements in the pharmaceutical sector imposed by Turkey that are in clear breach not only of bilateral agreements, but also WTO rules, the European Commission, as a last resort, after repeated warnings, decided to bring this case to WTO dispute settlement and, on 2 April 2019, requested WTO consultations with Turkey. The case is ongoing.

Finally, another area of concern is state aid control. Turkey has not adopted the necessary secondary legislation, and therefore there is no control of state aid, contrary to Turkey’s obligations under the Customs Union Agreement.

5 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. This is reflected in the open issues discussed above. The European Commission had 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, 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.

While the Commission proposal is pending adoption by the Council given political circumstances, Turkish measures diverging from the present agreements have to be remedied, and in particular the present trend of increasing market access barriers has to be reversed.

• 6. 

  S TATISTICS

  Merchandise trade EU28 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Turkey (mio €)

Imports 54.409 61.696 66.592 69.784 76.139 Exports 74.757 78.964 77.919 84.827 77.270 Balance 20.347 17.269 11.327 15.043 1.131 Share Turkey in EU28 trade with Extra-EU28 Imports 3,2% 3,6% 3,9% 3,8% 3,8% Exports 4,4% 4,4% 4,5% 4,5% 4,0% Total (I+E) 3,8% 4,0% 4,2% 4,1% 3,9% Share EU28 in trade Turkey with world Imports 36,7% 38,0% 39,0% 36,4% 36,2% Exports 43,5% 44,5% 48,0% 47,1% 50,0% Total (I+E) 39,3% 40,6% 42,8% 40,7% 42,1%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Turkey: IMF Dots

Total merchandise trade EU28 with Turkey (mio €)

Growth

Turkey 2017 2018 annual

mio € %

Imports 69.784 76.139 6.355 9,1%

Exports 84.827 77.270 -7.556 -8,9% -

Balance 15.043 1.131 13.912

Total trade 154.610 153.409 -1.201 -0,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Turkey (mio €)

Growth

Turkey 2017 2018 annual

mio € %

Imports 4.492 4.482 -10 -0,2%

Exports 3.669 3.147 -522 -14,2%

Balance -823 -1.335 -512

Total trade 8.161 7.629 -531 -6,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Turkey (mio €)

Growth Turkey 2017 2018 annual

mio € %

EU28 imports 65.292 71.657 6.365 9,7%

EU28 exports 81.158 74.123 -7.035 -8,7% -

Balance 15.866 2.466 13.400

Total trade 146.450 145.780 -670 -0,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Turkey (mio €)

Growth

Turkey 2016 2017 annual

mio € %

Imports 14.041 14.109 68 0,5%

Exports 12.644 12.557 -87 -0,7%

Balance -1.398 -1.552 -155

Total trade 26.685 26.666 -19 -0,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Turkey (mio €)

2013 2014 2015 2016 2017

Imports 15.295 15.890 16.725 14.041 14.109

Exports 10.387 10.662 13.055 12.644 12.557

Balance -4.908 -5.228 -3.670 -1.398 -1.552

Total trade 25.682 26.551 29.780 26.685 26.666

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Turkey (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 7.977 9.210 12.200 21.733 19.477

Outward 62.288 66.889 77.723 75.921 68.701 FDI Flows

Inward 3.095 1.743 1.522 867 303

Outward 5.947 4.727 12.364 1.132 1.042

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

PART IV: ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENTS (EPAs) WITH AFRICAN, CARRIBEAN AND PACIFIC COUNTRIES

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, Eswatini, Lesotho, Mozambique, Namibia and South Africa. 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 was the first year in which all SADC EPA states fully implement the agreement.

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.

Under the EU-SADC EPA, the Southern African Customs Union (SACU) 106 grants 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 tariff rate quotas). As a least developed country, Mozambique liberalises a smaller percentage of exports from the EU. All SADC EPA States except South Africa receive duty free and quota free treatment for all their goods (except arms and ammunition) imported into 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 preferential tariff rate quotas.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

The EU remains the main trading partner for the six SADC EPA States, accounting for 24% of their exports (ahead of China with 8.5%, the US with 6% and India with 5.8%) and 25% of their imports (ahead of China with 16% and South Africa with 9.7%).

Main destination for SADC EPA States’ exports within the EU are the UK (25%), Germany (24%), Belgium (18%) and the Netherlands (10%), followed by Italy (7.5%) and Spain (5.6%). EU exports to SADC EPA States come from Germany (36%), the Netherlands (9.5%), the UK (9%), Italy (8.2%) and France (6.8%).

Total trade between the EU and SADC EPA States has been increasing since implementation of the EPA. In particular, EU imports from SADC EPA states have increased continuously over the past five years, while EU exports have evolved irregularly with a slight decrease since November 2016. The balance of trade is positive for SADC EPA states, for both agrifood and non-agricultural trade, and even increasing since the implementation of the

106 Botswana, Eswatini, Lesotho, Namibia and South Africa

EPA. South Africa accounts for 83% of EU imports from and 94% of EU exports to SADC

EPA States. The trade balance with South Africa is positive for the EU but the surplus has

been shrinking (down to €100 million in 2018).

In 2018, EU imports from SADC EPA States increased by €1.5 billion or 5.5% to €28.9

billion, while EU exports to SADC EPA States slightly contracted by €98 million or 0.4% to

€25.7 billion. EU

imports from Lesotho, South Africa,

Mozambique and

Namibia increased or

remained stable, while imports from Botswana

and Eswatini decreased.

EU exports to Botswana and Mozambique

increased, while exports

to Lesotho, Namibia, South Africa and

Eswatini decreased.

In 2018, imports from Botswana decreased by €90 million (-6.5%) to €1.3 billion due to a decrease in diamond exports (-€101 million or -7.5%), offset only slightly by re-exports of

aircraft (+€12 million). Exports of the only other significant export to the EU, fresh or frozen beef, decreased by €2 million to €28 million.

EU imports from Mozambique increased by €203 million (+12%) to €1.7 billion, mostly

fueled by increasing raw material exports, such as aluminium (+9.7%), mineral fuels (+25%),

ores (+30%) and salt (+40%). Main exports in 2018 were aluminium (€1 billion), mineral fuels (€431 million) and tobacco products (€120 million). Other agri-food exports in 2018 were crustaceans (€31 million, -17%), sugar (€16 million, -46%) and cashew nuts (€11

million, +76%).

EU imports from Namibia have increased continuously over the past years (from €963

million in 2014 to €1.3 billion in 2018). Most important exports in 2018 were copper (€528 million, +6%), fish and crustaceans (€341 million, +6%), diamonds (€114 million, -10%), zinc (€110 million, +9%) and grapes (€65 million, +28%). Exports of inorganic chemicals (Uranium) are down €61 million or 92%.

Both Lesotho and Eswatini trade mostly with South Africa. EU imports of diamonds from

Lesotho increased by €81 million (or 30%) to €345 million in 2018 – accounting for 98% of

Lesotho's total exports to the EU. The remaining exports are mostly apparel and clothing, and some tropical fruits. EU imports of sugar from Eswatini (accounting for 50% of total EU

imports) decreased for the fifth year in a row, by €24million or -42.6%. However, Eswatini is

slowly diversifying its exports to the EU, with increasing exports of citrus fruit (+€3 million,

+72%), rum (+€4 million, +435%) and exports of prepared or preserved fruits and nuts,

including fruit juices (+€2 million, +21%).

EU imports from South Africa continued to increase in 2018, by €1.3 billion or 6% to a new

total of €24 billion. Main imports in 2018 were precious stones and metals (€8 billion,

+6.4%), motor vehicles (€5.2 billion, +24%), edible fruits and nuts (€1.9 billion, +5%), ores, slag and ash (€1.5 billion, +4%), machinery and mechanical appliances (€1.2 billion, +2.8%) and iron and steel (€1.1 billion, -9.7%)

Strongest increases in absolute terms: motor vehicles (+€1 billion or 24%), precious stones and metals (+€481 million or 6%) and chemical products (+€146 or 159%). Strongest

decreases in absolute terms: mineral fuels (-€218 million or 33%), iron and steel (-€117

million or 10%) and electrical machinery and equipment (-€40 million or 25%).

Main agri-food imports from South Africa in 2018 were fresh grapes (€471 million, -1.5%),

wine (€405 million, +7.2%) and fresh sweet oranges (€333 million, -5.2%).

Cuttle fish and squid (+€45 million), maize (+€41), lemons (+€32 million),

avocados (+€26) and apples (+€25 million) saw the strongest increases in

absolute values. In relative terms 107 ,

exports of maize (+1413%), fresh cut flowers (+472%), grapefruit juice

(+118%) and citrus fruit (+72%) went

up the most. South Africa faced slight

losses in absolute values for its exports of oranges (-€18 million),

fresh pears (-€15 million) and other

fresh tropical fruits (-€12 million).

South Africa has benefited from new and additional preferences for a number of its agrifood

exports to the EU. Exports of

wine have increased strongly to €405

million in 2018, due to expanded tariff

rate quotas. Fill rates for 2018 were

95%. Sugar exports from South

Africa have considerably increased

due to new zero duty tariff rate quotas:

while there were only 2,400 tonnes imported in 2016, in 2018 the tariff

rate quotas of 150,000 tonnes were

fully used by South African operators.

Export earnings in values have

decreased slightly in 2018 compared

to 2017 (from €57 million to €50 million) due to market prices. Finally, South Africa fully or

nearly fully used the EU tariff rate quotas for frozen orange juice and apple juice. Other tariff rates quotas were not used or used only partially.

TRQs granted and TRQ usage for South African exports to the EU in 2018

Description Volume of TRQ in 2018 Imports in 2018 2018 quota fill

(t) (t)

Skimmed milk powder 500 0 0,0%

Butter 500 0 0,0%

Strawberries, frozen 392,5 0 0,0%

107 For South African exports with a value above €10 million

Cane sugar for refining and white sugar 50.000 49.725 99,4%

Cane sugar for refining 100.000 100.000 100,0%

White cristalline powder 500 0 0,0%

White cristalline powder 500 0 0%

Citrus jams 100 0 0%

Canned fruit, except tropical canned fruit 57.156 25.406 44,5%

Tropical canned fruit 3.080 237 7,7%

Frozen orange juice 1.078 1.078 100%

Apple juice 3.712 3.199 86,2%

Active yeast 350 74 21,2%

Wines - quota A (in hectolitres) 784.826 722.816 92,1%

Wines - quota B (in hectolitres) 336.354 336.354 100%

Source: DG AGRI, DG TAXUD

Exports of SADC EPA States to the EU are still little diversified. The share of fuels,

mining products and precious stones and metals in total SADC exports to the EU has slightly

decreased since

implementation of the

EPA, but nevertheless

remains dominant. Exports are largely

concentrated in a few

products: the share of the top 10 export

products in their total

exports to the EU is

relatively low for South Africa (46.4%), but

extremely high for

Botswana (99.7%), Lesotho (99.9%) and

Mozambique (94.2%).

Eswatini (88.8%) and

Namibia (87.3%) are showing signs of diversification.

Preference utilization rates (PUR) for exports to the EU are in the 92-99% range for

Botswana, Lesotho, Mozambique and Namibia. They were a bit lower for Eswatini and South

Africa in 2018 where they stood at about 86%.

In 2018, total EU exports to SADC EPA States were €25.7 billion. EU exports to Botswana,

Eswatini, Lesotho, Mozambique and Namibia increased by €159 million (12%) to €1.51 billion, while EU exports to South Africa decreased by €257 million to €24.2 billion. Main

exports were machinery and mechanical appliances (€5.3 billion, -2%), motor vehicles (€4.5

billion, -3.6%), electrical machinery and equipment (€2.5 billion, -1.4%) and pharmaceutical

products (€1.2 billion, +0.3%).

Main increases in exports to SADC EPA States in absolute terms: mineral fuels (+€125

million, +13%), precious stones and metals (+€92 million, +29%), inorganic chemicals (+€55 million, +15%), plastics (+€49 million, +5%) and iron and steel (+€47 million, +16%). Main increases in relative terms 108 : ships, boats and floating structures (+102%), live trees and other plants (+94%), pulp of wood (+57%), fish (+41%), precious stones and metals (+29%) and sugar (+22.5%)

Exports of aircraft (-€200 million, -61%), motor vehicles (-€166 million, -3.6%), machinery and mechanical appliances (-€108 million, -2%) and cereals (-€84 million, -34%) have shown

the largest absolute losses in 2018. In relative terms 109 , exports of aircrafts (-61%), products

of animal origin (-40%), animal feed (-32%) and diary produce (-23%) decreased the most.

According to South African statistics, preference utilization rates (PUR) for EU exports to South Africa (hence to SACU overall) stood at around 64% in 2018 compared to 60% in 2017.

EU agri-food exports account for 7.7% of total exports to SADC EPA states. EU agrifood exports to SADC EPA states shrank by €94 million or 4.8% in 2018. Main agri-food exports in 2018 were wheat (€160 million), whiskies (€154 million), food preparations (€100 million), frozen chicken parts (€80 million) and sunflower oil (€73 million).

Export increases in absolute values were highest for beer (+€32 million), spirits obtained by distilling grape wine or marc (+€13 million) and food preparations (+€12.5 million). In relative terms, apple juice (+1113%), gin (+191%) and beer (+158%) increased the most.

Export decreases in absolute terms were highest for wheat (-€78 million, -33%), animal feed (-€34 million, -32%), whiskies (-€17 million, -10%), sunflower oil (-€14 million, -65%) and cheese (-€12 million, -46%). In relative terms, sunflower oil (-65%), milk and cream (-63%) and crude soya oil (-51%) decreased the most.

Since 2015, SADC EPA States poultry imports from the EU have decreased dramatically by more than 72%. The adoption of anti-dumping and safeguard measures by SADC against EU imports, as well as bans by South Africa allegedly based on SPS considerations are behind this trend.

Even though the available data for the use of TRQs granted by SACU to the EU do not cover the whole year 2018, they indicate high use of the quotas for pork, pig fat, butter and wheat.

Usage of TRQs granted by SACU to the EU from 1 January to 31 August 2018

Product Annual quota in 2018 (t) Quota fill till 31 August 2018 (t) Pork 1 500 1 275 Pig fat 200 140

Butter 500 350 Cheese 7 700 2 377 Wheat 300 000 264 495 Barley 10 000 0

Cereal Based Food Preparations 2 300 0 Ice cream 150 80 Mortadella Bologna 100 0 Source: Ministry of Investment, Trade and Industry, Republic of Botswana

108 For EU exports of products/product groups with a value of at least €10 million or more

109 For EU exports of products/product groups with a value of at least €10 million or more

2.2 Trade in services

The EPA does not cover trade in services. Total services trade with South Africa increased by 8.7% to €14.5 billion in 2017 (latest year for which data is available), with EU imports from South Africa increasing by 5% to €5.4 billion and EU exports increasing by 11% to €9.1 billion. The balance of trade is positive for the EU and increasing.

Trade in services with Botswana, Eswatini, Lesotho, Mozambique and Namibia is marginal: €583 million with Botswana (+58%), €153 with Eswatini (-7%), €12 million with Lesotho (+66.5%), €716 million with Mozambique (-5.5%) and €669 million with Namibia (+15%) (Figures for 2017). EU services imports from Botswana and Namibia are increasing (mostly tourism), albeit from very low levels.

2.3 Foreign Direct Investment (FDI)

The EU-SADC EPA does not contain provisions on investment. Most EU investment is concentrated in South Africa, with current stocks of €59.8 billion. EU investment in South Africa has slowed down since 2013. According to Eurostat, FDI inflows in 2017 were negative, at -€8.4 billion (taking into account de-commitments). New commitments, according to South African national statistics, amounted to €1.16 billion in 2017 and €6.2 billion in 2018.

EU presence (more than 2,000 companies) is spread over almost all sectors of the economy. The largest shares of FDI stock are in finance (45%), mining (20%), manufacturing (20%) and transport (10%). FDI stock in finance and mining has stalled in recent years due to the economic situation and legislative uncertainty; most new investment has taken place in manufacturing (mainly in the automotive, machinery and food sectors).

A number of new investments were announced in 2017-2019, including:

 BMW completed a €350 million (ZAR 6.2 billion) investment in its assembly plant

towards the X3 model which launched in 2018.

 Mercedes-Benz announced in 2018 that it will invest €600 million (ZAR 10 billion) in

expanding its South African plant to accommodate production of the new generation of C-Class model that will now be exported to the EU instead of the United States.

 VW invested € 350 million (ZAR 6.1 billion) in its new plant to launch in 2018 the

new Polo.

 In the renewables sector, 27 new projects were signed in 2018 under the 4 th bidding

round of the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPP), with a total planned investment of €3.3 billion

(ZAR 56 billion) – an important part of which is European direct investment.

Since 2011, a total of 92 projects, amounting to €17 billion, have been signed, with a number of prominent EU contractors (often setting up subsidiary companies in South Africa), including: Vestas (Denmark); Acciona, ACS Cobra, Abengoa, Iberdrola, Gestamp (Spain); Juwi Renewable Energies and Nordex Energy (Germany), Enel Green Power and Temi Energia (Italy). The main suppliers of wind towers and turbines and PV equipment include Vestas (Denmark), Siemens, SMA Solar Tech,

AEG and Nordex (German), ABB (Sweden), 3 Sun (UK).

The penetration of small and medium sized companies (SMEs) in the South African economy is still low. Nevertheless, in 2018 different EU SMEs have again announced investment in South Africa:

 Industrial silicon tubes: Spanish company Venair has opened in 2018 its first

subsidiary in South Africa.

 Spunmelt nonwoven: Czech company Pegas Nonvwovens, the largest producer of

spunmelt nonwovens in Europe, the Middle East and Africa, is investing ZAR 1.3 billion (production to start in 2019).

 PV module manufacturing: In 2018, Seraphim Southern Africa, a joint venture by

Chinese Jiangsu Seraphim Solar System Co. Ltd. and Spanish ILB Helios (with IDC collaboration), will establish a €12.3 billion new PV module manufacturing factory in

East London IDZ.

 Automotive components: Austrian automotive supplier the Polytec Group is investing

€10m in a new parts production plant in South Africa to supply German OEM. Production is scheduled to start in for 2021.

South African FDI in the EU stood at €12.1 billion in 2017, with also negative inflows of - €31 million.

FDI stocks in Botswana, Eswatini, Lesotho, Mozambique and Namibia are mostly tied to extractive industries. EU FDI stocks are highest in Mozambique, at €1.9 billion, with new inflows of €84 million in 2017. Dominant investment partner for all five countries is South Africa. In Namibia (EU investment stock in 2017 was €283 million), Spain is mostly investing in the fishery sector and the UK in extractives (zinc and copper). Recent EU investments were also in renewable energy, such as the Ombepo wind farm and two major solar plants, funded by a French-Namibian joint venture. French Peugeot built an assembly plant, inaugurated in 2018; Namibian-assembled vehicles will be sold mainly within SACU.

The EU-SADC EPA facilitating the localisation and transformation of the South African automotive sector South Africa is the dominant vehicle producer on the African continent, with an automotive industry that is highly export oriented and FDI dependant; thus strategically relying on modern free trade

agreements to flourish.

South Africa now produces more than 600,000 vehicles annually, of which more than half are exported.

Exports of motor vehicles, parts and accessories contribute more than 13% to the national export basket. More than half of South African vehicles exports are to the EU (66% in 2018). EU imports of motor vehicles and components from South Africa increased to €5.1 billion in 2018 (up from €1.8

billion in 2014). Motor cars for passenger transport account for €4.1 billion of this sum.

The automotive sector is therefore highly anchored in the EU-SADC EPA which provides for duty free

export of cars and components to the EU. Four of the seven Original Equipment Manufacturers (OEM) present in South Africa are European (see newly announced investments above).

The automotive industry not only impacts directly on the GDP (7% GDP) and employment (+110,000

jobs), it increasingly plays an important strategic and catalytic role in the overall South African economy. Through its integration into the global supply chains of OEMs, the sector contributes to overall skills development, technology penetration and innovation intensity in the economy.

A number of initiatives are underway to strengthen the localisation and foster transformation of the automotive industry in the country. The Automotive Supply Chain Competitiveness Initiative (ASCCI) is a collaborative initiative between the OEMs, suppliers, government and labour, with the specific task of

coordinating supply chain development activities in the South African auto industry, to increase the share and value added of locally based suppliers. In Gauteng province, the automotive incubation centres create hubs linked to a single OEM where the participants are subcontracted to Tier 1

component suppliers who provide technical mentoring for black entrepreneurs or black-owned suppliers until they are ready to supply directly to the OEM’s production line.

• 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 (at senior official level) has met five times (in February 2017, October 2017, February 2018, November 2018 and February 2019). Moreover, on 19 February 2019 the first meeting of the EU-SADC EPA Joint Council (at ministerial level) took place. This first meeting of the Joint Council in particular allowed for the adoption of the ‘institutional set-up’ of the Agreement, notably the rules of procedure for the bodies under the agreement and the procedural rules for dispute settlement. Moreover, at its latest meeting, the Trade and Development Committee also adopted the list of arbitrators for dispute settlement.

Other issues discussed at the first meeting of the Joint Council and the different meetings of the Trade and Development Committee included: differences of interpretation on specific provisions of the Agreement (in particular on the bilateral safeguard measure against imports of EU poultry products and on tariff dismantling concerning certain textile products), the setting up of annual meetings with non-state actors on the implementation of the EPA,

monitoring of the EPA, tariff rate quota management, cumulation of origin 110 , trade-related

development cooperation and the agricultural safeguard.

Since the entry into provisional application, there have also been two meetings of the Special Committee on Trade Facilitation and Customs Cooperation (SCTFCC), three meetings of the Special Committee on Geographical Indications and Trade in Wines and Spirits (a bilateral Committee with South Africa only) and one meeting of the Agricultural Partnership. The meeting of the SCTFCC allowed partners to advance preparatory work for the start of diagonal cumulation of origin, but this work is not finalised yet. The meetings of the Special Committee on Geographical Indications and Trade in Wines and Spirits in particular discussed updates on protection of different Geographical Indications (GIs) and on the divergent interpretation concerning the laws and regulations governing oenological practices and restrictions in South Africa.

In November 2018, non-state actors from both the EU and SADC held a second Civil Society Dialogue Meeting in Windhoek, Namibia. Stakeholders elaborated recommendations on a range of trade and EPA related topics relevant to EPA implementation and monitoring.

• 4. 

  S PECIFIC AREAS OF IMPORTANCE

Sanitary and Phytosanitary Standards: SPS issues concern primarily EU trade with South Africa and are discussed mostly bilaterally with South Africa. Foremost among the issues

110 SADC EPA States have the possibility to use non-originating materials through the rules on cumulation of origin. This means that in certain circumstances, a factory in for example Botswana can use materials from another country and further process them. In calculating whether the final product can be considered to originate in Botswana within the meaning of the EPA, the materials from the other country are considered to be Botswana inputs and count towards the originating status of the final product. The SADC EPA allows SADC EPA States to cumulate with originating materials products from other countries party to the EPA, as well as many other countries (ACP and others).

related to the EU exports was the suspension of nearly all exports of EU poultry (which had reached over €200 billion in 2015 and 2016) by South Africa following the avian influenza (HPAI) outbreaks of the winter of 2016-2017. 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, some of which took place in 2018. On that basis, South Africa has reopened trade from two of the eight banned Member States, but it has not indicated how it plans to proceed for the remaining six Member States. As regards to South African exports, South Africa regained market access on the EU territory for Ostrich meat in March 2019 (Annex of Decision 2011/163 i).

Development Cooperation: Trade-related technical assistance and other relevant support measures are an integral part of the EPA. Regional economic integration was a key focal sector under the 10 th European Development Fund (EDF) for the SADC region. 111 In 2018, implementation of the Trade Related Facility (TRF) (€32 million) continued, supporting national administrations to better implement regional integration policies at national level, such as the SADC Trade Protocol.

SADC Member States currently also implement the Eastern and Southern Africa Transport and Transit Facilitation Programme (€18 million): This programme promotes the implementation of harmonised road transport policies, laws, regulations, systems and standards in the countries of the EA-SA region with the aim to facilitate increased trade.

2018 was a transition phase, with the Regional Integration Support Programme (€20 million)

under the 10 th EDF coming to an end and a number of regional programmes to support trade and investment in the SADC region under the 11 th EDF currently in the pipeline:

EU-SADC Support to Improving the Investment and the Business Environment in the SADC region (SIBE) (€14 million): The programme will support the implementation of the SADC protocol on investment and finance. This programme will target the improvement of the investment policy framework and harmonisation in the region to facilitate and enhanced integration of financial markets.

EU- SADC Support to Industrialisation and Productive Sectors in SADC Region (SIPS) (€18 million): This programme will support the development of two regional value chains (leather and anti-retroviral) through the enhancement of the policy and regulatory environment along these two value chains and the improvement of the private sector participation.

EU-SADC Trade Facilitation Programme (TFP) (€15 million): this programme will aim at reducing the cost of intraregional trade by enhancing the efficiency of border posts. It will harness the benefits from the EU-SADC Economic Partnership Agreement (EPA) as well as support implementation of trade facilitation measures at corridor level

Furthermore, national programmes to support EPA implementation more specifically are also under preparation:

111 More on the European Development Fund: https://ec.europa.eu/europeaid/funding/funding-instruments href="https://ec.europa.eu/europeaid/funding/funding-instruments-programming/funding-instruments/european-development-fund_en">programming/funding-instruments/european-development-fund_en

Each SADC EPA State has drawn up, jointly with the EU, National EPA Implementation Plans (NEIPs) (some are still in the process of being finalized). The purpose is to identify necessary steps and measures to fully implement the EPA and maximize the contribution of the EPA to long-term sustainable development. Under the 11 th EDF, the EU will support the operationalization of the NEIPs with €30 million in Botswana, Eswatini, Lesotho, Mozambique and Namibia. Under the Development Cooperation Instrument (DCI), €10 million have been earmarked for the same purpose to South Africa.

An EPA outreach project in South Africa ended in February 2018 with great results, such as the SADC EPA outreach website, bringing together user-friendly and up-to-date information on the EPA from the different South African implementing institutions. The project also successfully organized the first civil society forum in 2017. A follow-up project (EU SA Partners for Growth, €3.5 million) was launched in October 2018, aiming at maximising bilateral trade and investment flows and strengthening EPA implementation.

Finally, the EU maintains strong support to economic development at bilateral level in all six SADC EPA States. The large bilateral portfolios in the six countries include projects on employment promotion, vocational education, private sector development, SME promotion, agricultural value chains, as well as renewable energy and transport infrastructure, among others.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

2018 marks the first year in which the Agreement was provisionally applied between all parties, including Mozambique. Moreover, in the beginning of 2019, the Joint Council and the Trade and Development Committee adopted the institutional set-up of the Agreement. There are a number of outstanding issues with regard to the implementation of the EU-SADC EPA, as well as challenges ahead.

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.

In addition, differences of views about the interpretation of certain provisions of the Agreement will need to be resolved, particularly on a SACU safeguard measure, based on Article 34 of the EPA, on poultry imports from the EU and on the SACU tariffs that apply to specific textiles imports from the EU. The fact that the EPA’s chapter on dispute settlement and avoidance is now fully operational may be helpful in this regard.

On SPS issues, South Africa regained market access on the EU territory for Ostrich meat (Annex of Decision 2011/163 i).

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

Implementation of the EU-SADC EPA has reached full speed, with the parties progressing on multiple issues from the institutional set-up of the agreement to monitoring and civil society involvement. Trade figures are also positive, as SADC EPA States' exports to the EU are mostly increasing. In particular, South Africa is clearly benefitting from newly granted tariff and TRQ concessions. However, there are trade irritants particularly for EU exports to South Africa, poultry being the main priority, which the parties will need to resolve for the agreement to become successful. In June 2019, the EU decided to request consultation with SACU under the bilateral dispute settlement regime to address the poultry issue.

• 7. 

  S TATISTICS

SADC EPA States (aggregate):

Merchandise trade EU28 with SADC EPA States 2014-2018

2014 2015 2016 2017 2018

EU28 trade with SADC EPA States (mio €)

Imports 23.088 23.769 27.917 27.436 28.952

Exports 25.124 27.164 24.442 25.800 25.702

Balance 2.036 3.395 -3.475 -1.636 -3.251

Share SADC EPA States in EU28 trade with Extra-EU28

Imports 1,4% 1,4% 1,6% 1,5% 1,5%

Exports 1,5% 1,5% 1,4% 1,4% 1,3%

Total (I+E) 1,4% 1,4% 1,5% 1,4% 1,4%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade EPA SADC: IMF Dots

Growth of merchandise trade EU28 with SADC EPA States (mio €)

EPA SADC 2017 2018 Growth mio € annual %

Imports 27.436 28.952 1.516 5,5% Exports 25.800 25.702 -98 -0,4% Balance -1.636 -3.251 -1.614 Total trade 53.235 54.654 1.418 2,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with SADC EPA States (mio €)

EPA SADC 2017 2018 Growth mio € annual %

Imports 3.078 3.254 176 5,7% Exports 1.941 1.847 -94 -4,8% Balance -1.138 -1.407 -269 Total trade 5.019 5.101 82 1,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with SADC EPA States (mio €)

EPA SADC 2017 2018 Growth mio € annual %

EU28 imports 24.357 25.698 1.340 5,5% EU28 exports 23.859 23.854 -4 0,0% Balance -499 -1.843 -1.345 Total trade 48.216 49.552 1.336 2,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

South Africa:

Merchandise trade EU28 with South Africa 2014-2018

2014 2015 2016 2017 2018

EU28 trade with South Africa (mio €)

Imports 18.538 19.399 22.970 22.722 24.070

Exports 23.331 25.455 22.995 24.447 24.190

Balance 4.794 6.056 25 1.725 120

Share South Africa in EU28 trade with Extra-EU28

Imports 1,1% 1,1% 1,3% 1,2% 1,2%

Exports 1,4% 1,4% 1,3% 1,3% 1,2%

Total (I+E) 1,2% 1,3% 1,3% 1,3% 1,2%

Share EU28 in trade South Africa with world

Imports 27,9% 29,5% 31,0% 30,9% 29,0%

Exports 20,0% 20,8% 22,9% 22,2% 23,3%

Total (I+E) 24,2% 25,3% 27,1% 26,5% 26,3%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade South Africa: IMF Dots

Total merchandise trade EU28 with South Africa (mio €)

Growth

South Africa 2017 2018 annual

mio € %

Imports 22.722 24.070 1.348 5,9%

Exports 24.447 24.190 -257 -1,1%

Balance 1.725 120 -1.605

Total trade 47.169 48.260 1.090 2,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with South Africa (mio €)

Growth

South Africa 2017 2018 annual

mio € % Imports 2.705 2.898 193 7,1% Exports 1.780 1.711 -69 -3,9% Balance -925 -1.187 -262

Total trade 4.485 4.609 124 2,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with South Africa (mio €)

Growth

South Africa 2017 2018 annual

mio € %

EU28 imports 20.017 21.171 1.155 5,8%

EU28 exports 22.667 22.479 -188 -0,8%

Balance 2.650 1.307 -1.343

Total trade 42.684 43.650 966 2,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with South Africa (mio €)

Growth

South Africa 2016 2017 annual

mio € %

Imports 5.109 5.387 278 5,4%

Exports 8.207 9.086 879 10,7%

Balance 3.099 3.699 600

Total trade 13.316 14.473 1.157 8,7%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Total Services trade EU28 with South Africa (mio €)

2013 2014 2015 2016 2017 Imports 4.449 4.361 5.310 5.109 5.387 Exports 7.232 7.180 8.446 8.207 9.086 Balance 2.783 2.818 3.136 3.099 3.699 Total trade 11.681 11.541 13.757 13.316 14.473

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with South Africa (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 7.698 12.014 11.521 11.796 12.116

Outward 58.872 59.946 96.298 70.081 59.787

FDI Flows

Inward -404 698 4 4.988 -31

Outward 2.046 4.034 22.611 -10.865 -8.433

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Botswana:

Merchandise trade EU28 with Botswana 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Botswana (mio €)

Imports 1.822 1.503 2.198 1.384 1.294

Exports 273 275 331 267 329

Balance -1.549 -1.228 -1.868 -1.117 -966

Share Botswana in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,1% 0,1%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,1% 0,1% 0,1% 0,0% 0,0%

Share EU28 in trade Botswana with world

Imports 6,5% 5,5% 6,7% 5,1% 4,4%

Exports 28,0% 22,2% 21,0% 23,3% 17,4%

Total (I+E) 17,3% 13,0% 14,5% 14,6% 11,4%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Botswana: IMF Dots

Growth of merchandise trade EU28 with Botswana (mio €)

Botswana 2017 2018 Growth mio € annual %

Imports 1.384 1.294 -90 -6,5% Exports 267 329 61 23,0%

Balance -1.117 -966 151 Total trade 1.652 1.623 -28 -1,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Botswana (mio €)

Botswana 2017 2018 Growth

mio € annual % Imports 30 28 -2 -7,9% Exports 3 2 -1 -38,9% Balance -27 -26 1

Total trade 34 30 -4 -11,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Botswana (mio €)

Botswana 2017 2018 Growth mio € annual %

EU28 imports 1.354 1.266 -87 -6,5% EU28 exports 264 327 63 23,8%

Balance -1.090 -940 150 Total trade 1.618 1.593 -25 -1,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Botswana (mio €)

Botswana 2016 2017 Growth mio € annual %

Imports 77 97 20 26,3% Exports 292 486 194 66,3%

Balance 216 390 174 Total trade 369 583 214 58,0%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Botswana (mio €)

2013 2014 2015 2016 2017

Imports 88 80 79 77 97

Exports 171 198 417 292 486

Balance 84 118 338 216 390

Total trade 259 277 496 369 583

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Botswana (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 9 4 0 5 17

Outward 238 305 299 236 247

FDI Flows

Inward 1 0 -6 2 12

Outward 64 39 -18 -2 5

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Eswatini:

Merchandise trade EU28 with Eswatini 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Eswatini (mio €)

Imports 151 139 124 87 64

Exports 29 35 51 49 46

Balance -122 -104 -73 -38 -18

Share Eswatini in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Eswatini with world

Imports 2,0% 4,0% 3,8% 3,5% 2,6%

Exports 8,0% 6,7% 7,3% 4,3% 3,5%

Total (I+E) 5,2% 5,5% 5,7% 3,9% 3,0%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Eswatini: IMF Dots

Total merchandise trade EU28 with Eswatini (mio €)

Eswatini 2017 2018 Growth mio € annual %

Imports 87 64 -23 -26,5% Exports 49 46 -3 -5,8%

Balance -38 -18 20 Total trade 136 110 -26 -19,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Eswatini (mio €)

Eswatini 2017 2018 Growth mio € annual %

Imports 70 56 -14 -20,2% Exports 5 5 0 -0,9%

Balance -65 -51 14 Total trade 75 61 -14 -18,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Eswatini (mio €)

Eswatini 2017 2018 Growth mio € annual %

EU28 imports 17 8 -9 -52,1% EU28 exports 44 41 -3 -6,4%

Balance 26 32 6 Total trade 61 49 -12 -19,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Eswatini (mio €)

Eswatini 2016 2017 Growth mio € annual %

Imports 65 61 -4 -6,4% Exports 100 92 -8 -7,5%

Balance 35 31 -3 Total trade 165 153 -12 -7,1%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Eswatini (mio €)

2013 2014 2015 2016 2017 Imports 67 29 24 65 61 Exports 86 57 72 100 92 Balance 19 28 47 35 31 Total trade 153 86 96 165 153

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Eswatini (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 155 42 128 130 68

Outward 580 578 606 608 601

FDI Flows

Inward -16 19 4 69 -283

Outward -3 18 30 -194 7

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Lesotho:

Merchandise trade EU28 with Lesotho 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Lesotho (mio €)

Imports 247 254 208 271 352

Exports 11 12 12 12 10

Balance -237 -242 -196 -259 -343

Share Lesotho in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Lesotho with world

Imports 1,0% 0,9% 0,9% 0,9% 0,7%

Exports 46,2% 14,6% 13,4% 34,9% 34,0%

Total (I+E) 16,7% 4,4% 5,1% 13,2% 13,7%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Lesotho: IMF Dots

Total merchandise trade EU28 with Lesotho (mio €)

Lesotho 2017 2018 Growth mio € annual %

Imports 271 352 81 30,1% Exports 12 10 -2 -16,4% Balance -259 -343 -83 Total trade 282 362 80 28,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Lesotho (mio €)

Lesotho 2017 2018 Growth

mio € annual % Imports 2 2 0 -9,3% Exports 1 0 0 -49,9% Balance -1 -2 0

Total trade 3 3 -1 -21,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Lesotho (mio €)

Lesotho 2017 2018 Growth mio € annual %

EU28 imports 268 350 82 30,4% EU28 exports 11 9 -1 -13,3% Balance -258 -341 -83 Total trade 279 359 80 28,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Lesotho (mio €)

Lesotho 2016 2017 Growth mio € annual %

Imports 4 15 11 271,8% Exports 13 14 1 6,7% Balance 10 -0 -10 Total trade 17 29 12 66,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Lesotho (mio €)

2013 2014 2015 2016 2017 Imports 7 31 3 4 15 Exports 20 13 15 13 14 Balance 14 -19 13 10 -0 Total trade 27 44 18 17 29

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Lesotho (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 3 3 4 5 6 Outward 3 10 16 -2 -3 FDI Flows Inward 0 0 0 Outward 6 -1 11 -4 10

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Mozambique:

Merchandise trade EU28 with Mozambique 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Mozambique (mio €)

Imports 1.366 1.435 1.320 1.664 1.867

Exports 895 983 681 532 697

Balance -472 -452 -638 -1.132 -1.170

Share Mozambique in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,1% 0,1%

Exports 0,1% 0,1% 0,0% 0,0% 0,0%

Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1%

Share EU28 in trade Mozambique with world

Imports 19,1% 22,5% 19,5% 22,5% 18,1%

Exports 38,5% 45,9% 32,0% 27,2% 31,6%

Total (I+E) 25,8% 29,2% 24,3% 24,6% 24,0%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Mozambique: IMF Dots

Total merchandise trade EU28 with Mozambique (mio €)

Mozambique 2017 2018 Growth mio € annual %

Imports 1.664 1.867 203 12,2% Exports 532 697 165 31,0%

Balance -1.132 -1.170 -38 Total trade 2.196 2.564 368 16,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Mozambique (mio €)

Mozambique 2017 2018 Growth

mio € annual % Imports 175 166 -8 -4,7% Exports 105 88 -18 -16,7% Balance -70 -79 -9

Total trade 280 254 -26 -9,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Mozambique (mio €)

Mozambique 2017 2018 Growth mio € annual %

EU28 imports 1.489 1.700 211 14,2% EU28 exports 427 609 183 42,8%

Balance -1.062 -1.091 -29 Total trade 1.916 2.310 394 20,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Mozambique (mio €)

Mozambique 2016 2017 Growth mio € annual %

Imports 177 245 68 38,1% Exports 580 471 -109 -18,8%

Balance 403 226 -176 Total trade 757 716 -41 -5,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Mozambique (mio €)

2013 2014 2015 2016 2017

Imports 225 264 327 177 245

Exports 600 718 970 580 471

Balance 375 454 643 403 226

Total trade 825 983 1.297 757 716

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Mozambique (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 11 388 21 -309 -105

Outward 1.463 1.869 2.572 2.367 1.879

FDI Flows

Inward 10 -1 -405 -255 175

Outward 132 202 223 67 84

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Namibia:

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Namibia (mio €)

Imports 963 1.039 1.097 1.308 1.305

Exports 586 404 372 493 430

Balance -378 -635 -725 -815 -875

Share Namibia in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,1% 0,1%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Namibia with world

Imports 9,6% 6,8% 6,6% 13,5% 12,3%

Exports 11,9% 15,0% 17,3% 20,5% 37,4%

Total (I+E) 10,6% 10,0% 11,2% 16,5% 24,1%

Source Trade G2 Statistics/ISDB 25-mars-19

Trade EU28: Eurostat COMEXT; Trade Namibia: IMF Dots

Total merchandise trade EU28 with Namibia (mio €)

Namibia 2017 2018 Growth mio € annual %

Imports 1.308 1.305 -3 -0,2% Exports 493 430 -63 -12,7%

Balance -815 -875 -60 Total trade 1.800 1.735 -65 -3,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Namibia (mio €)

Namibia 2017 2018 Growth

mio € annual % Imports 96 104 8 8,2% Exports 46 41 -5 -11,5% Balance -50 -63 -13

Total trade 142 144 3 1,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Namibia (mio €)

Namibia 2017 2018 Growth mio € annual %

EU28 imports 1.212 1.201 -11 -0,9% EU28 exports 447 390 -57 -12,8% Balance -765 -812 -47

Total trade 1.659 1.591 -68 -4,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Namibia (mio €)

Namibia 2016 2017 Growth mio € annual %

Imports 399 478 78 19,6% Exports 184 192 8 4,2% Balance -216 -286 -71

Total trade 583 669 86 14,8%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Namibia (mio €)

2013 2014 2015 2016 2017 Imports 305 387 276 399 478 Exports 215 202 255 184 192 Balance -90 -185 -20 -216 -286 Total trade 519 589 531 583 669

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Namibia (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 115 149 187 167 390

Outward 344 240 668 351 283

FDI Flows

Inward -20 -19 -40 3 5

Outward -974 223 37 137 75

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE INTERIM ECONOMIC PARTNERSHIP AGREEMENT BETWEEN THE EU AND EASTERN AND SOUTHERN AFRICAN STATES

• 1. 

  I NTRODUCTION

Pending an EPA with the full Eastern and Southern African region, an interim EPA was signed in 2009 by four ESA countries (Madagascar, Mauritius, Seychelles and Zimbabwe). This ESA-EU interim EPA (iEPA) has been provisionally applied since 14 May 2012 for the four countries. Comoros signed the EPA in 2017, ratified it in December 2018 and implements it since 7 February 2019. Zambia took part in the negotiations of the interim EPA and it may decide to sign the agreement in the near future.

The interim EPA offers duty free quota free access in the EU for all imports from ESA as of

1 st January 2008. ESA partner countries are in the process of liberalising their market to EU

imports in line with the individual schedules of each ESA partner country, annexed to the

interim EPA. 112 By 2022, Madagascar and Zimbabwe will liberalise around 80% of their

trade, while Mauritius and Seychelles will liberalise 96 and 98%, respectively. Goods excluded from liberalisation vary according to the individual offer but include predominantly

agricultural products and some industrial goods such as plastics, paper, or textiles. 113 Comoros

will liberalise over a period of 9 years, after a 5 year preparatory period.

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 partner countries expressed their interest to deepen the agreement beyond trade in goods. Scoping missions conducted in 2018 made substantial progress. A joint scoping paper was concluded in May 2019 and negotiations may be launched in due time.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in Goods

In 2018, the EPA was implemented by Madagascar, Mauritius, Seychelles and Zimbabwe. While the EU’s share as a destination for ESA4 exports has been shrinking over the past decade, the bloc remains the second largest trade partner for ESA4 after South Africa. In 2018, the main export destination of ESA4 was South Africa (27%), followed by the EU (26%), the United Arab Emirates (11%) and the US (8%). In 2008, the EU still accounted for 51% of ESA4 exports. ESA4 imports in 2018 mainly came from South Africa (30%), the EU (16%), China (12%) and India (9%). Within the EU, France accounts for almost half of imports from ESA4, followed by the UK, Germany and Belgium.

112 The ESA countries were not in a position to table a common regional market access offer and each country presented an individual offer based on its specificities.

113 More details can be found here: http://trade.ec.europa.eu/doclib/docs/2012/march/tradoc_149213.pdf

In 2018, total trade between the EU and ESA4 is highest with Madagascar (€1.9 billion)

and Mauritius (€1.8 billion), followed by Zimbabwe (€689 million) and Seychelles (€596

million).

Although total trade with ESA4 decreased by €173 million (-3.3%) in 2018, the trade balance remains positive for ESA4. EU imports from ESA4 decreased by €100 million (-3.5%) to

€2.75 billion and EU exports to ESA4 decreased by €73 million (-3.1%) to €2.26 billion.

However, regional

aggregated figures

mask differences

between the four ESA partner states:

Importantly, EU

imports from

Madagascar

increased by €62

million (5.3%) and imports from

Seychelles are up €8

million (2.8%). By

contrast, imports from Mauritius

decreased by €168 million (18%) and imports from Zimbabwe are relatively unchanged (-

0.3%). EU exports to Madagascar (-1.8%), Mauritius (-8.7%) and Seychelles (-0.4%)

decreased, but exports to Zimbabwe increased (+€42 million or 22%).

The overall decrease in EU imports from ESA4 in 2018 is mainly caused by a sharp fall in

sugar imports from Mauritius (-€101 million or 56%) and Zimbabwe (-€25 million or 100%),

as well as declining imports of tobacco from Zimbabwe (-26 million or 23%) and nickel from

Madagascar (-€25 million or 33%).

EU imports have risen for iron and steel from Zimbabwe (+€30 million or 27%), vanilla

from Madagascar (+€50 million or 12.7%) and apparel and clothing from Madagascar (+€25

million or 7.3%). At the same time, Mauritius’ exports of apparel and clothing decreased slightly by €16 million or 7%.

For Mauritius and Seychelles, exports of fresh or frozen fish to the EU increased (Mauritius

+€4 million or 21%, Seychelles +€8 million or 18.5%). However, export values of prepared and preserved fish increased for Seychelles (+€6.3 million or 2.8%) but decreased for

Mauritius (-€13 million or 5.2%).

Preference utilisation rates for ESA4 exports to the EU are high, ranging from 92-98% for the

four countries.

Exports are becoming increasingly diversified for Madagascar and Mauritius, but

diversification is stagnating for Zimbabwe and Seychelles. In 2018, the top 10 export

products (HS 6-digit) accounted for 63% of Madagascar’s total exports to the EU, 62% for

Mauritius, 64% for Zimbabwe, but 98% for Seychelles. Looking at the number of different products exported to the EU with a minimum value of €1 million: in 2018, the EU imported

100 different products from Madagascar (up from 69 in 2008; mostly different textile

products, however), 75 from Mauritius (up from 69), 25 from Zimbabwe (26 in 2008) and 9 from Seychelles (up from 6).

A number of structural problems impact the (diminishing) competitiveness of the economy of Mauritius. Traditional export sectors are breaking away. For example, the end of the sugar quota in the EU is causing a heavy contraction in sugar exports to the EU of almost all ACP countries; and the Mauritian textile industry is endangered by increasing labour costs and strong competitors such as Bangladesh, Vietnam and even Madagascar now. Recently, Mauritius has taken important steps towards an economy based on more sophisticated and high-tech manufacturing and services. For example, exports of medical devices are growing. According to Mauritian national statistics, global exports of medical devices (HS 9018) have reached €25.9 million in 2018, €17 million of which are going to the EU. According to Eurostat data, EU imports of medical devices from Mauritius stood at €12 million in 2018, a strong increase from €4 million in 2008, but still small compared to the earnings in the “old” export sectors such as textile and sugar.

For Madagascar, the outlook is brighter; exports could accelerate even more with changes in the overall business environment and investment climate. Similarly, Zimbabwe has enormous export potential but as long as the economic situation remains uncertain, with no serious business climate reforms and no foreign capital inflows, necessary investments will not take place. For Seychelles, the lack of diversification is serious; the country is aiming at exporting more fisheries by-products and processed fish products but is hindered by human resource limitations.

Top 10 EU imports from ESA4 in 2018

Madagascar Mauritius Seychelles Zimbabwe

1 Vanilla Prepared or preserved Prepared or preserved Tobacco tunas, skipjack etc. tunas, skipjack etc.

2 Cobalt matters T-shirts, singlets and Frozen yellowfin tunas Diamonds, unsorted

other vests of cotton

3 Frozen shrimps and Cane sugar (170199) Frozen skipjack or Ferro-chromium, prawns stripe-bellied bonito containing by weight > 4% of carbon

4 Jerseys, pullovers, Raw cane sugar not Light oils and Fresh or dried oranges

cardigans, waistcoats containing flavouring or preparations (etc.) of Kashmir colouring (170114)

5 Nickel Men’s or boys’ trousers, Frozen bigeye tunas Raw hides and skins of bib and brace overalls reptiles

(etc.) of cotton

6 Shawls, scarves (etc.) of Men's or boys' shirts of Prepared or preserved Fresh or chilled peas silk cotton fish

7 Vegetables saps and Articles of jewellery Fresh or chilled fillets Black tea

extracts of fish, n.e.s.

8 Fresh tamarinds, cashew Jerseys, pullovers, Fresh or chilled Granite, crude or apples, jackfruit, lychees, cardigans, waistcoats yellowfin tunas roughly trimmed passion fruit, other etc., of cotton

9 Prepared or preserved T-shirts, singlets and Instruments and Arsenic sulfides,

tunas, skipjack, etc. other vests of textile appliances used in alunite, pozzuolana, materials medical, surgical or earth colours and

veterinary sciences, other mineral

n.e.s. substances, n.e.s.

10 Jerseys, pullovers, Women's or girls' Fats and oils of fish Leather further cardigans, waistcoats trousers, bib and brace prepared after tanning (etc.) of wool overalls (etc.) of cotton or crusting, of reptiles

Source: Eurostat, product names partly simplified

Decreasing EU exports to ESA4 (-€73 million) can be explained by the unusual spike in aircraft exports in 2017 which did not happen in 2018 (a decrease of €179 million). Disregarding the aircraft sector, EU exports to ESA4 actually increased by 0.5% in 2018.

Main export increases in 2018 are mineral fuels and oils (€45 million or 574%), machinery and mechanical appliances (€28 million or 8%), textiles (€15 million or 10%), silk (€14 million or 84%) and cereals (€14 million or 68%). Besides aircraft and aircraft parts, main export decreases concern frozen fish (-€26 million or -20%) and chemical products (-€19 million or -38%).

In 2018, the agri-food trade balance was positive for ESA4 (€504 million). While EU imports of sugar shrunk by 62% (from €204 million in 2017 to €78 million in 2018), imports of tropical fruits increased (from €350 million in 2017 to €392 million in 2018), which however did not offset the decrease of sugar imports. EU exported mainly wheat (€33 million), followed by pet food, food preparation not specified, pasta and pastry, and infant food and other cereals, starch or milk preparations.

Jewellery exported from Mauritius and Zimbabwe – Patrick Mavros

Jewellery exports from Mauritius to the EU have increased by 30% from 2008 to

2018, reaching €20.1 million (3% of total exports to the EU). For Zimbabwe, jewellery

exports are still a niche product, with exports worth around €400,000 in 2018.

Patrick Mavros is a self-taught jewellery artist from Zimbabwe. He started up in the

1970s and, against all odds, runs a successful company with 60 employees in Harare,

producing nature-inspired jewellery pieces and sculptures, exported to overseas

markets.

His son, Forbes Mavros, migrated to Mauritius in the early 2000s and started up his

own jewellery workshop, slowly growing form a one-person business into a large

open-space atelier with a factory, employing 50 persons. He has invested in a

Swedish purification system to guarantee environmentally friendly production and

donates part of the proceeds to the Mauritian Wildlife Foundation.

Both ateliers sell more than 60% of their products abroad, including particularly the

EU, which offers both Mauritius and Zimbabwe duty free quota free market access

for their products under the EPA. Patrick Mavros also has a physical store in London.

Another target audience are tourists visiting the country, which goes in line with

joint efforts of the EU and Mauritius and Zimbabwe to further boost sustainable

tourism and increase local value added in the tourism value chain.

2.2 Trade in Services

The interim EPA does not include provisions on services. In 2017 (latest year for which data is available), total EU services imports from ESA4 decreased by €176 million to €2.2 billion, The change was driven by a decrease of services imports from Mauritius (the most important services trade partner among ESA4) by €143 million or 9.5%, to €1.4 billion.

Services imports from Madagascar are growing, albeit from low levels – total imports reached €376 million in 2017 (+13.2%). Services imports from Seychelles decreased by 16%; services imports from Zimbabwe are marginal and decreased by 6.6%.

On the other hand, EU services exports to ESA4 in total increased to €2.6 billion in 2017, an increase of 43.8% over 2016. The EU runs a surplus with Zimbabwe and Mauritius, but a deficit with Madagascar and Seychelles.

The four ESA countries are very keen on negotiating provisions on trade in services; in particular Mauritius hopes to find a new growth engine in services exports. Mauritius took part in the WTO’s negotiations for a Trade in Services Agreement (TISA) and now would be interested to use the ESA EPA opportunities, as TISA is not going forward. Financial services and tourism are the main sectors of interest.

2.3 Foreign Direct investment (FDI)

Current EU FDI stocks in ESA4 stand at €23.2 billion for Mauritius, €982 million for Seychelles, €457 million for Zimbabwe and €55 million for Madagascar.

FDI inflows in 2017 amounted to €1.3 billion for Mauritius, €26 million for Zimbabwe, €17 million for Madagascar and €9 million for Seychelles.

According to Mauritian national statistics, investment inflows from the EU amounted to Rs. 10.6 billion (approx. €271 million) in 2017 and Rs 8.4 billion (approx. €2 million) in 2018. While in 2017, the EU accounted for about half of Mauritius’s gross direct investment flows,

this figure was down to one quarter in 2018. 114

Mauritius stands out as the single most important jurisdiction in Africa offering a stable legal environment. In particular, Mauritius has gathered a reliable reputation regarding its banking structures and increasingly expanded its financial sector. As such, Mauritius is the largest EU FDI recipient among the ESA4 partners but also a partner to work within the context of antimoney laundering and taxation policy.

FDI in Mauritius is mostly in financial sector and real estate. The same is true for Seychelles where the financial/offshore sector is growing rapidly; the government considers the financial sector as the third pillar of economic development after tourism and fisheries. Productive investment in both countries can be found in tourism, but also in manufacturing for Mauritius. For Seychelles, an example for productive investment is a German-Seychelles joint venture,

Sun Tech Seychelles 115 , which provides solar photovoltaic technology and after sales services

in the Seychelles.

• 3. 

  I SSUES ADDRESSED IN THE ANNUAL EPA C OMMITTEE M EETING

The main issues addressed by the 7 th Meeting of the EPA Committee in January 2019 (in

Brussels) were:

 Agreement on modernisation of rules of origin and adoption by the EPA Committee

by mid-2019;

114 Government of Mauritius, https://www.bom.mu/sites/default/files/di_2018q4_website.pdf

115 https://sts.sc/index.html

 Agreement to put in place a Monitoring and Evaluation Mechanism to ensure an

effective implementation of the interim EPA;

 Initiated discussions on the scope and objectives of the envisioned deepening of the

agreement (covering additional topics) which the ESA4 have asked for. The deepening will evolve around the issues mentioned in the rendez-vous clause of the interim

agreement;

 th Progress on the support to EPA implementation under both the 10 and the 11 th

European Development Fund (EDF);

 Agreement to setup a coordination mechanism financed by the EU to assist ESA side

in the negotiations that may be launched in 2019 after conclusion of the joint scoping

paper, which the Parties are currently discussing;

 Discussion on the ESA commitments to the development of internationally agreed

standards for cooperation between tax jurisdictions.

• 4. 

  D EVELOPMENT C OOPERATION

Development cooperation is essential for EPA implementation and for ensuring the long-term sustainable development impact of the agreement. Each of the four ESA EPA countries benefits from an envelope of €10 million under the SADC regional programme to support EPA implementation and export competitiveness. The respective technical assistance programmes are currently in different states of preparation or implementation. Comoros having recently joined the EPA will also benefit from similar support measures.

Under the EPA-dedicated programmes, Mauritius is 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, technical assistance will for the implementation of Intellectual Property Rights (IPR), a key reform to support the transformation to a knowledge-based economy.

Under the intra-ACP TRADECOM programme, 32 SMEs benefitted from capacity building in 2018 in the area of productivity and marketing, which has enabled a number of them to start exporting to regional markets. Furthermore, from its national envelope, Mauritius and the EU are preparing a programme on tertiary education and innovation that may launch next year.

In Seychelles, the EPA-related project is focusing on trade policy capacity building (longterm technical assistance for the Trade Ministry) and private sector development in manufacturing and agriculture & fisheries, with an emphasis on niche sectors that could generate exports. The project will support the realisation of the EPA Implementation Strategy, the first of its kind in the trade domain in Seychelles, formulated with active participation from public and private sector actors.

In Zimbabwe, the inception phase of a project that will focus on capacity development for the Trade Ministry, as well as SME development in selected value-chains, was successfully concluded in 2018. Capacity building measures for the government are ongoing, while the work on SME development will start in 2019.

In Madagascar, a project focusing on trade facilitation and export promotion (establishment of an export promotion agency) is under preparation but delayed due to the on-going government formation process after the 2018 presidential elections. The project should also support competitiveness in tourism, IT and textile sectors. With EU support, Madagascar has already 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. The annual roundtables organised by the delegation are also important dialogue platforms for private business and the government.

For the upcoming negotiations to deepen the EPA, the EU supports ESA4 (or in future ESA5) with an EPA Coordination Hub (€1 million) to facilitate the preparations of the negotiations.

Furthermore, there are currently two infrastructure sector blending projects on-going or under preparation, that would strongly facilitate trade opportunities, namely the extension of Port Victoria in Seychelles (€5 million) and the extension of the airport in Rodrigues in Mauritius (€10 million grant).

In addition to EPA specific programmes, the EU and the four ESA countries have embarked on a number of cooperation initiatives in the area of sustainable economic development. The EU in particular provides funding to the Indian Ocean Commission (IOC), to a total amount of €107 million under the 10 th European Development Fund (EDF). Some key projects include:

 SMARTFISH (€37 million): the project supported the implementation of the ESA-IO

fisheries strategic priorities for sustainable management and development of the inland

and marine fisheries and aquaculture sector. (Project activities ended in April 2018)

 ISLANDS (€17.5 million): the project addressed specific development constraints of

Small Islands Developing States (SIDS) beneficiary countries (their natural characteristics linked to insularity, relative smallness, proneness to natural disasters

and limited access to capital) and fostered regional and global SIDS-SIDS crossfertilisation. (Project ended in December 2017)

 Regional Integration Support Programme (€6.15 million): objective is to

contribute to deepened integration and competitiveness of the ESA-IO region.

New projects under the 11 th EDF on competitiveness and business facilitation (€8 million),

natural resource management/climate change and disaster risk management (€16 million) and regional food security (€16 million) are currently under preparation.

As all ESA4 states are also members of the Southern African Development Community (SADC), they benefit from significant development assistance provided to regional integration and private sector development in the SADC region (more details see chapter on the SADC EPA).

• 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. Nevertheless, Zimbabwe has recently paused the implementation of new tariff cuts; discussions are ongoing to find a solution.

Following the ESA States’ expressed interest in "deepening" (new issues) and "widening"

(new members) the existing iEPA 116 , both sides undertook to jointly define the scope and objectives of the deepening before launching the negotiation process. A joint scoping paper has been concluded in May 2019 and the launch of negotiations is expected shortly.

As for widening, Comoros has already joined the EPA (it signed the agreement in July 2017, ratified it in January 2019 and deposited the instrument of ratification on 7 February 2019). Zambia can, at any time, also sign and ratify the agreement that it initialled in 2007. As for the

other ESA States 117 , the EPA is open for accession by all of them but they 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 ESA5 Business Forum, an awareness-raising EPA seminar in Zimbabwe and specific training on geographical indications have been raised.

• 6. 

  C ONCLUSIONS AND OUTLOOK

In 2018, EU imports from Madagascar, Seychelles and Zimbabwe increased, while imports from Mauritius decreased, as did overall EU exports to ESA4. Comoros joined the EPA on 7 February 2019. Zambia may follow in 2019. The year 2019 may see the launch of negotiations to deepen the EPA towards a comprehensive agreement covering a range of modern trade policy topics.

Overall, the very different economic profiles and levels of development of ESA4, now ESA5, render implementation and negotiation challenging. Nevertheless, there are natural complementarities and the countries see the potential for cooperation among themselves, both in the context of the EPA and beyond: Labour shortages in Mauritius can be addressed by employing Malagasy and by delocalising e.g. textile production to Madagascar. Madagascar can supply Mauritius and Seychelles with needed fruits and vegetables, if SPS issues are resolved. Mauritius experience in reforming the business environment is key for Madagascar, Seychelles and Zimbabwe in unblocking their development prospects. Zimbabwe, finally, features high in Mauritius’ Africa Strategy, as a close partner to invest in.

• 7. 

  S TATISTICS

Merchandise trade EU28 with ESA4 States 2014-2018

2014 2015 2016 2017 2018 EU28 trade with ESA4 States (mio €)

Imports 2.580 2.450 2.470 2.853 2.754 Exports 1.865 1.981 1.955 2.332 2.259 Balance -715 -469 -514 -521 -494

Share ESA4 States in EU28 trade with Extra-EU28 Imports 0,2% 0,1% 0,1% 0,2% 0,1% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1%

Source Trade G2 Statistics/ISDB 25-mars-19 Trade EU28: Eurostat COMEXT; Trade EPA (interim) Eastern and Southern Africa (ESA): IMF Dots

116 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.

117 Djibouti, Ethiopia, Eritrea, Sudan and Malawi

Growth of merchandise trade EU28 with ESA4 States (mio €)

Growth

EPA (interim) Eastern and Southern Africa (ESA) 2017 2018 annual

mio € %

Imports 2.853 2.754 -100 -3,5%

Exports 2.332 2.259 -73 -3,1%

Balance -521 -494 26 Total trade 5.185 5.013 -173 -3,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with ESA4 States (mio €)

Growth

EPA (interim) Eastern and Southern Africa (ESA) 2017 2018 annual

mio € %

Imports 924 839 -86 -9,3%

Exports 308 335 27 8,7%

Balance -616 -504 113

Total trade 1.233 1.174 -59 -4,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with ESA4 States (mio €)

Growth EPA (interim) Eastern and Southern Africa (ESA) 2017 2018 annual

mio € %

EU28 imports 1.929 1.915 -14 -0,7%

EU28 exports 2.024 1.924 -100 -4,9% Balance 95 9 -86

Total trade 3.953 3.839 -114 -2,9%

Growth in Services trade EU28 with ESA4 (mio €)

2016 2017 Growth mio € annual %

Imports 2.381 2.205 -176 -7,4% Exports 1.962 2.569 607 30,9% Balance -419 365 784

Total trade 4.343 4.774 431 9,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Total Services trade EU28 with ESA4 (mio €)

2013 2014 2015 2016 2017

Imports 2.051 2.348 2.602 2.381 2.205

Exports 1.425 1.804 1.730 1.962 2.569

Balance -627 -544 -872 -419 365

Total trade 3.476 4.151 4.332 4.343 4.774

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with ESA4 (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 2.568 5.811 4.422 8.843 6.710

Outward 15.223 21.518 21.815 21.099 24.671

FDI Flows

Inward 1.878 1.328 -1.839 678 -1.240

Outward 1.706 210 1.412 -5.496 1.331

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Madagascar

Merchandise trade EU28 2014-2018 2014 2015 2016 2017 2018

EU28 trade with Madagascar (mio €) Imports 840 904 988 1.181 1.243 Exports 532 560 552 674 662 Balance -309 -344 -436 -507 -581

Share Madagascar in EU28 trade with Extra-EU28 Imports 0,0% 0,1% 0,1% 0,1% 0,1% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Madagascar with world

Imports 15,5% 16,5% 16,3% 17,0% 16,9% Exports 51,9% 47,2% 46,9% 43,2% 33,5% Total (I+E) 29,7% 29,1% 29,2% 28,2% 24,1%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Madagascar: IMF Dots

Total merchandise trade EU28 with Madagascar (mio €)

Growth

Madagascar 2017 2018 annual

mio € %

Imports 1.181 1.243 62 5,3% Exports 674 662 -12 -1,8% Balance -507 -581 -74

Total trade 1.855 1.905 50 2,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Madagascar (mio €)

Growth

Madagascar 2017 2018 annual

mio € %

Imports 477 533 56 11,6% Exports 72 65 -6 -9,0% Balance -405 -468 -62

Total trade 549 598 49 8,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Madagascar (mio €)

Growth

Madagascar 2017 2018 annual

mio € %

EU28 imports 704 710 6 0,9%

EU28 exports 602 596 -6 -1,0%

Balance -101 -114 -12

Total trade 1.306 1.307 1 0,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Madagascar (mio €)

Growth

Madagascar 2016 2017 annual

mio € %

Imports 332 376 44 13,2% Exports 192 266 74 38,7% Balance -141 -110 30

Total trade 524 641 118 22,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Madagascar (mio €)

2013 2014 2015 2016 2017

Imports 254 374 419 332 376 Exports 183 226 187 192 266 Balance -70 -148 -232 -141 -110

Total trade 437 600 606 524 641

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Madagascar (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 5 4 2 10 -11

Outward 206 460 469 145 55 FDI Flows

Inward -19 -3 -1 2 -21

Outward -36 37 -116 -129 17

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Mauritius

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Mauritius (mio €)

Imports 960 895 861 925 756

Exports 875 899 950 1.169 1.067

Balance -85 4 89 244 310

Share Mauritius in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,0% 0,0%

Exports 0,1% 0,1% 0,1% 0,1% 0,1%

Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,0%

Share EU28 in trade Mauritius with world

Imports 20,8% 20,3% 22,8% 23,5% 23,0%

Exports 49,4% 43,4% 48,4% 51,5% 47,7%

Total (I+E) 30,0% 28,1% 31,0% 31,5% 29,0%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Mauritius: IMF Dots

Total merchandise trade EU28 with Mauritius (mio €)

Growth

Mauritius 2017 2018 annual

mio € %

Imports 925 756 -168 -18,2% Exports 1.169 1.067 -102 -8,7%

Balance 244 310 66

Total trade 2.093 1.823 -270 -12,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Mauritius (mio €)

Growth

Mauritius 2017 2018 annual

mio € %

Imports 213 111 -102 -48,0% Exports 176 204 29 16,4%

Balance -38 94 131

Total trade 389 315 -74 -18,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Mauritius (mio €)

Growth

Mauritius 2017 2018 annual

mio € %

EU28 imports 711 646 -66 -9,3%

EU28 exports 993 862 -131 -13,2%

Balance 281 217 -65

Total trade 1.704 1.508 -197 -11,5%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Mauritius (mio €)

Growth

Mauritius 2016 2017 annual

mio € %

Imports 1.512 1.369 -143 -9,5% Exports 1.356 1.688 332 24,5%

Balance -156 320 476

Total trade 2.868 3.057 189 6,6%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Mauritius (mio €)

2013 2014 2015 2016 2017

Imports 1.403 1.522 1.563 1.512 1.369 Exports 901 1.161 1.010 1.356 1.688 Balance -502 -361 -553 -156 320

Total trade 2.305 2.683 2.572 2.868 3.057

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Mauritius (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 1.843 5.039 3.643 6.706 4.494

Outward 14.507 20.475 20.109 19.541 23.177

FDI Flows

Inward 2.004 1.356 -1.824 613 -1.265

Outward 1.795 166 1.322 -5.391 1.280

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Seychelles

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Seychelles (mio €)

Imports 270 249 282 291 299

Exports 238 302 279 298 297

Balance -32 53 -2 7 -2

Share Seychelles in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Seychelles with world

Imports 33,7% 30,5% 24,6% 34,4% 27,3%

Exports 58,9% 57,1% 58,1% 50,3% 54,5%

Total (I+E) 42,3% 39,2% 32,2% 39,3% 34,6%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Seychelles: IMF Dots

Total merchandise trade EU28 with Seychelles (mio €)

Growth Seychelles 2017 2018 annual

mio € %

Imports 291 299 8 2,8% Exports 298 297 -1 -0,4% Balance 7 -2 -9

Total trade 589 596 7 1,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Seychelles (mio €)

Growth

Seychelles 2017 2018 annual

mio € %

Imports 0 0 0 -14,6% Exports 45 36 -9 -19,7% Balance 45 36 -9

Total trade 46 37 -9 -19,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Seychelles (mio €)

Growth

Seychelles 2017 2018 annual

mio € %

EU28 imports 291 299 8 2,8%

EU28 exports 253 261 8 3,0%

Balance -38 -38 -1

Total trade 544 560 16 2,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Seychelles (mio €)

Seychelles 2016 2017 Growth

mio € annual %

Imports 447 376 -71 -15,9% Exports 236 235 -1 -0,2%

Balance -212 -141 70

Total trade 683 611 -71 -10,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Seychelles (mio €)

2013 2014 2015 2016 2017

Imports 255 305 426 447 376 Exports 140 206 301 236 235 Balance -115 -99 -126 -212 -141

Total trade 394 512 727 683 611

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Seychelles (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 712 759 730 2.124 2.218

Outward 313 304 321 1.060 982

FDI Flows

Inward -104 -23 -11 107 32

Outward -73 -29 30 6 9

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Zimbabwe

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Zimbabwe (mio €)

Imports 510 402 339 456 455

Exports 221 220 174 192 234

Balance -290 -182 -165 -265 -221

Share Zimbabwe in EU28 trade with Extra-EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Zimbabwe with world

Imports 4,8% 4,3% 3,5% 3,7% 4,6%

Exports 5,0% 1,0% 2,2% 2,1% 1,7%

Total (I+E) 4,9% 3,1% 3,0% 3,1% 3,4%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Zimbabwe: IMF Dots

Total merchandise trade EU28 with Zimbabwe (mio €)

Growth

Zimbabwe 2017 2018 mio annual

€ %

Imports 456 455 -2 -0,3% Exports 192 234 42 22,1% Balance -265 -221 44

Total trade 648 689 41 6,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Zimbabwe (mio €)

Growth

Zimbabwe 2017 2018 mio annual

€ %

Imports 234 195 -39 -16,7% Exports 15 29 14 88,8% Balance -218 -166 53

Total trade 249 223 -25 -10,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Zimbabwe (mio €)

Growth Zimbabwe 2017 2018 mio annual

€ %

EU28 imports 223 260 38 16,8%

EU28 exports 176 205 29 16,3%

Balance -47 -55 -9

Total trade 399 465 66 16,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Zimbabwe (mio €)

Growth

Zimbabwe 2016 2017 mio annual

€ %

Imports 90 84 -6 -6,6% Exports 179 381 201 112,2% Balance 89 297 207

Total trade 269 465 195 72,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Zimbabwe (mio €)

2013 2014 2015 2016 2017

Imports 140 147 195 90 84 Exports 200 211 233 179 381 Balance 61 64 38 89 297

Total trade 340 358 427 269 465

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Zimbabwe (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 9 10 46 3 9

Outward 199 279 916 353 457 FDI Flows

Inward -4 -1 -3 -44 14

Outward 19 37 175 18 26

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND COTE D’IVOIRE

• 1. 

  I NTRODUCTION

Pending an Economic Partnership Agreement (EPA) with the West African region, Côte d’Ivoire concluded a stepping stone or interim Economic Partnership Agreement with the EU

in November 2008. 118 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. The stepping stone or interim EPA (iEPA) will be substituted by the regional EU-West Africa EPA once the latter enters into force. 119 By the end of 2018, 14 out of 15 members of the Economic Community of Western African States (ECOWAS), as well as Mauritania, had signed the regional EPA which now misses only Nigeria’s signature.

Côte d'Ivoire has announced it will start to liberalize its market for a range of EU products. Agricultural products, including fruit and vegetables, are mostly excluded for liberalisation.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

The EU continues to be the most important trade partner for Côte d’Ivoire: in 2018, 37% of Ivorian exports went to the EU, 18% to the West African region, 9% to the US and 6% to Vietnam. While 18% regional exports is still a low amount, it is above the average of 10% in the ECOWAS region. Two thirds of these regional exports go Burkina Faso, Mali and Ghana. Regarding imports, the EU accounted for 41% of Ivorian imports from the world, followed by China (13%) and Nigeria (10%). Around 15% of Ivoirian imports come from the West African region, two thirds of it from Nigeria (mostly mineral fuels and other petrol-based products). Within the EU, the Netherlands, France and Germany are the main trading partners of Côte d’Ivoire.

Total trade with Côte d’Ivoire has decreased by €342 million or 4.6% in 2018. EU imports from Côte d’Ivoire decreased by €238 million (-5%) and EU exports to Côte d’Ivoire decreased by €105 million (-3.7%). The trade balance remains strongly in favour of Côte d’Ivoire (€1.7 billion), due to a large surplus in agrifood trade (€2.8 billion); however, Côte d’Ivoire runs a deficit for non-agricultural trade (-€1.1 billion).

The decrease in EU imports from Côte d’Ivoire in 2018 can be attributed to a decrease in value of imports of raw and processed cocoa products by €175 million or 5.6%, as well as a

118 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".

119 The Economic Partnership Agreement was signed in December 2014 by the European Union and 13 West African Countries. In 2018, the Gambia and Mauretania signed the agreement, making Nigeria the only remaining country opposed to the EPA. The agreement will enter into provisional application if the 16 West African Countries sign the agreement and 2/3 of these countries ratify it.

decrease in imports of rubber products by €79 million or 20%. EU imports of all main Ivorian export products have decreased in 2018, except for imports of mineral fuels (+ 7%) and coffee (+ 0.7%) which have slightly increased. The decrease in cocoa and rubber exports was caused by a drop in global market prices. The transmission of these external shocks to domestic prices has been significant due to inadequate institutional mechanisms to deal with such price fluctuations for its major commodities (e.g. in comparison to Ghana, where the value of both raw and processed cocoa exports increased in 2018).

Nevertheless, cocoa and transformed cocoa products remain Côte d’Ivoire’s main export products, accounting for 64% of total EU imports from Côte d’Ivoire in 2018. Ivorian exports of cocoa paste, butter and powder, as well as chocolate, have continuously increased in recent years and, being less sensitive to price fluctuations, are supporting the creation of a local agroindustry. Other imports from Côte d’Ivoire are mineral fuels, rubber and articles thereof, edible fruits and nuts (primarily bananas) and prepared fish products (mainly canned tuna).

Preference utilisation rates for Côte d’Ivoire are continuously in the 98-99% range.

Preferences are used in particular for cocoa and cocoa products, vegetables, prepared foodstuffs and wood products.

EU imports from Côte d’Ivoire are still little diversified. The total number of product lines a value of imports of at least €1 million was 46 in 2018, basically the same as in 2014 (49 product lines). The share of the top 10 products in total EU imports from Côte d’Ivoire is 91% in 2018.

2018 top 10 EU imports from Côte d’Ivoire 2018 top 10 EU exports to Côte d’Ivoire

Product Description Volume Share Product Description Volume Share

180100 Cocoa beans, whole or 2,031,132,131 46.1 % 300490 Medicaments for 115,742,480 4.2 % broken, raw or roasted therapeutic or prophylactic

purposes (…) 270900 Petroleum oils 439,047,913 10 % 271019 Medium oils, of petroleum 81,087,801 3 %

(…) 180400 Cocoa butter, fat and 359,104,444 8.2 % 240120 Tobacco 79,088,806 2.9 %

oil

180310 Cocoa paste (excl. 342,331,572 7.8 % 100199 Wheat and meslin 72,127,390 2.6 %

defatted)

400122 Technically specified 262,330,162 6 % 271012 Light oils, of petroleum 69,299,221 2.5 %

natural rubber "TSNR" (…) 080390 Fresh or dried bananas 237,878,059 5.4 % 870323 Motor cars / vehicles for 51,493,053 1.9 %

(excl. plantains) the transport of <10

persons 160414 Prepared or preserved 120,405,890 2.7 % 851762 Machines for the reception, 36,035,865 1.3 %

tunas, skipjack and conversion, transmission of Atlantic bonito voice (…)

180620 Chocolate and other 112,232,097 2.5 % 870120 Road tractors for semi 34,100,342 1.2 % food preparations trailers

containing cocoa (…)

180320 Cocoa paste, wholly or 82,022,685 1.9 % 190190 Malt extract; food 33,099,317 1.2 % partly defatted preparations of flour,

groats, meal, starch or malt extract, (..) food preparations of milk, cream, butter milk, sour milk, sour cream, whey, yogurt, kephir (…)

400129 Natural rubber in 43,454,296 1 % 870210 Motor vehicles for the 32,157,382 1.2 % primary forms or in transport of >= 10 persons

plates, sheets or strip (…)

(…)

Total top 10 products 4,029,939,200 91.6 % Total top 10 products 604,231,680 22 %

Source: Eurostat (Product descriptions are partly shortened)

The decrease in EU exports to Côte d’Ivoire in 2018 can be explained by an unusual spike in exports of aircrafts and aircraft parts in 2017. As part of its expansion, the national carrier Air Côte d’Ivoire is expanding and has made purchases of €123 million in 2017 – a figure that went down to €7 million in 2018. Disregarding the aircraft sector, EU exports to Côte d’Ivoire actually continue to increase, namely by 0.5% in 2018.

Main export increases in 2018 concern machinery and mechanical appliances (+€66 million,

+16%), motor vehicles, particularly cars (+€48 million, +24%), and articles of iron or steel

(+€28 million, +22%). Main export decreases concern pharmaceutical products (-€77 million,

-34%), ships and boats (-€30 million, -64%) and electrical machinery and equipment (-€22 million, -10%).

In the agri-food trade, Côte d’Ivoire continued enjoying huge surplus of €2.8 billion due to significant exports of cocoa products, followed by tropical fruits, mainly bananas. EU agrifood exports to Côte d’Ivoire are at much lower level (€584 million, compared to €3.4 billion of agri-food imports from Côte d’Ivoire) and diversified, with wheat being the lead export product, followed by tobacco, infant food and other cereals, starch or milk preparation, wine, vegetables and offal, animal fats and other meats.

2.2 Trade in services

The interim EPA with Côte d’Ivoire does not cover services. Trade in services between the

EU and Côte d’Ivoire increased by 2.8% in 2017, due to an increase of EU exports by 9.8% or

€84 million. EU services imports from Côte d’Ivoire decreased by 7.7% or €44 million. Total services trade balance is positive for the EU.

2.3 Foreign Direct investment (FDI)

The interim EPA with Côte d’Ivoire does not include provisions on investment. EU foreign direct investment stocks in Côte d’Ivoire stood at €3.3 billion in 2017. New outward investment in Côte d’Ivoire was €263 million in 2017.

Côte d’Ivoire is the second largest EU investment destination in West Africa after Nigeria.

EU FDI accounted for over half of total FDI stocks in Côte d’Ivoire in 2016 (other important investors are Switzerland and the US; Chinese stocks are still rather limited even if inflows are increasing). The activities of the 180 European companies, represented by European Chamber of Commerce in Côte d’Ivoire, account together for 26% of GDP and have created 100,000 jobs in the country. 120

Gas-operated minivans for public transport, assembled in Abidjan

One of the objectives of the EPA is to contribute to a stable and conducive

120 Eurocham Côte d’Ivoire, 2019: https://eurochamci.com/assets/files/livre-blanc-2019-version-numerique.pdf investment climate in the country, attracting foreign investors to produce for local,

regional and international markets. EU investment in Côte d’Ivoire has been

increasing over the past decade, reflecting the decisions of EU companies to locate

assembly or production lines in the country to increase their market share in the

domestic and regional market – or even export to Europe.

In 2018, the Italian automotive company IVECO has been the latest European

company to announce an investment into an assembly line in Abidjan. The

announcement to invest locally follows a first agreement for the acquisition of 450

gas-powered busses and 105 waste management vehicles between IVECO, the

Moroccan Premium Group, the city of Abidjan and Abidjan’s public transport

company (SOTRA).

Thanks to this partnership with SOTRA and the Ivorian government, IVECO is now

investing in a local assembly plant with an initial capacity of 500 vehicles per year

(minivans for urban and interurban transport) to serve the local market. In a second

phase, special purpose minivans are foreseen to be produced, such as vans for coldchain

transportation. This would be the first ever car assembly plant in the country.

The construction of the plant was launched in August 2018 – production is expected

to start in the first half of 2019. The investment of CFA 2 billion (€3 million) is

expected to create around 500 jobs in a first phase.

The Ivorian government is supporting the project in order to contribute to a renewal

of the Ivorian car fleet. The new minivans will also make transport in Côte d’Ivoire

more sustainable and efficient, with lower emission rates and noise disturbance, as

they will mostly operate with natural gas – a novelty in Sub-Saharan Africa.

• 3. 

  I SSUES ADDRESSED IN THE ANNUAL EPA C OMMITTEE MEETING

The 3 rd EPA Committee meeting between Côte d’Ivoire and the EU took place in April 2019. The parties took stock of the liberalisation process in Côte d’Ivoire, which started on 1 st

January 2019, as well as the preparation of the dispute settlement framework under the EPA. The parties also discussed the first joint monitoring report on the implementation of the EPA and agreed to finalize the report in the second half of 2019. The parties furthermore exchanged views on an on-going study to assess the impact of the iEPA on regional integration in the West African region.

In Côte d’Ivoire, a technical group on sustainable development was established under the presidency of civil society groups, to promote feedback from civil society on EPA implementation and impact. The group is formally part of the “Commission Nationale APE”, the governing body in charge of implementing the iEPA in Cote d’Ivoire. The technical group on sustainable development reported to the EPA Committee on its first meeting and provided a number of recommendations on how to tackle questions of sustainable development in the framework of the EPA and how to organise future collaboration between the Ivorian and European civil society.

• 4. 

  D EVELOPMENT C OOPERATION

Development cooperation, particularly trade-related assistance, is an important pillar of the EPA, as it contributes to operationalizing the development dimension of the partnership. In 2018, the EU already supported Côte d’Ivoire in undertaking an impact study to determine the potential effects of the interim EPA on regional integration and regional trade in West Africa, and suggest mediation measures.

The EU provides budget support to Côte d’Ivoire under a good governance budget support contract (€60 million, 2016-2020) with the aim to improve economic governance and the investment climate overall. Another budget support operation on-going is the Programme d'appui au foncier rural (PAFR) (€41 million 2016-2022) which aims at investing in rural infrastructure, agricultural modernisation and security in rural areas.

The Côte d’Ivoire EPA Implementation Strategy was adopted in October 2017. A dedicated EU-financed programme (€5 million in support of EPA implementation) and hence the operationalisation of the strategy, is currently under preparation. It will promote customs cooperation on tariff and non-tariff issues and provide support 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.

Côte d'Ivoire is benefiting from the regional West Africa Competitiveness programme that aims at: (1) Upgrading and supporting consortia 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 national component for Côte d'Ivoire (PACIR II) is €9 million and will further consolidate results achieved under the previous Trade and Regional Integration support programme (PACIR I, €16 million, 2010-2015). The project will start operations in 2019.

Côte d’Ivoire will also benefit from the other regional programmes, including the West Africa Trade Facilitation Programme (€20 million EU contribution) that aims at improving regional trade measures and movement of goods along selected priority corridors including the Abidjan - Ouagadougou corridor and also regional infrastructure investment programmes that foresee an investment of €28.6 million on the Bamako-San Pedro corridor between Mali and Côte d’Ivoire, as well as €9.43 million for pre-studies on the construction of a motorway between Abidjan and Lagos.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Côte d’Ivoire is becoming the driving force behind trade integration and liberalisation in West Africa. It is implementing the EPA despite a difficult regional situation, with Nigeria blocking progress towards both the regional EPA, as well as free movement of goods within ECOWAS itself.

As mentioned above, Côte d’Ivoire commissioned a study with the financial support of the EU to measure the impact of the interim EPAs (Côte d’Ivoire and Ghana) on regional trade. A technical workshop took place in Abidjan on 7-8 May 2019 to present its results and recommendations to EPA stakeholders in Côte d'Ivoire, Ghana, Burkina, Mali and to the regional organisations West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS).

The study shows that the possible impact is limited in terms of trade flows (affecting 2% of regional trade), products (about 15 products) and affected countries (2 countries). Trade distortions might thus occur but focused on few products and with limited scale. The study provides pragmatic solutions to mitigate the risk of distortion. Due to the progressive liberalisation, effects may become more significant as from 2024 for Côte d'Ivoire and 2026 for Ghana. In the medium and long term, the best solution would be of course to adopt the regional EPA.

• 6. 

  C ONCLUSIONS AND OUTLOOK

Côte d'Ivoire started the liberalisation of its market for EU exporters on 1 st of January 2019. This is an important step in EU trade's relationship with Côte d’Ivoire, making it the first country in West Africa to open its market in the context of the EPAs. Both parties are engaged to closely monitor and evaluate the process, including in cooperation with the regional organisations West African Economic and Monetary Union (WAEMU) 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.

• 7. 

  S TATISTICS

  Merchandise trade EU28 with Côte d'Ivoire 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Côte d'Ivoire (mio €)

Imports 3.256 4.255 4.573 4.641 4.404 Exports 2.310 2.672 2.437 2.846 2.742 Balance -946 -1.583 -2.136 -1.795 -1.662 Share Côte d'Ivoire in EU28 trade with Extra-EU28

Imports 0,2% 0,2% 0,3% 0,2% 0,2% Exports 0,1% 0,1% 0,1% 0,2% 0,1% Total (I+E) 0,2% 0,2% 0,2% 0,2% 0,2% Share EU28 in trade Côte d'Ivoire with world

Imports 26,9% 33,1% 31,1% 37,2% 37,2% Exports 35,3% 42,1% 40,7% 40,7% 41,2% Total (I+E) 31,4% 38,1% 36,4% 39,2% 39,3%

Source Trade G2 Statistics/ISDB, Trade EU28: Eurostat COMEXT; Trade Ivory Coast: IMF Dots

Growth of merchandise trade EU28 with Côte d'Ivoire (mio €)

Growth

Côte d'Ivoire 2017 2018 mio € annual

%

Imports 4.641 4.404 -238 -5,1%

Exports 2.846 2.742 -105 -3,7%

Balance -1.795 -1.662 133 Total trade 7.488 7.145 -342 -4,6% Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Côte d'Ivoire (mio €)

Growth

Côte d'Ivoire 2017 2018 annual

mio € %

Imports 3.543 3.361 -183 -5,2% Exports 575 584 8 1,5%

Balance -2.968 -2.777 191

Total trade 4.118 3.944 -174 -4,2% Source Trade G2 Statistics/ISDB from Eurostat COMEXT NAMA trade EU28 with Côte d'Ivoire (mio €)

Growth

Côte d'Ivoire 2017 2018 annual

mio € %

EU28 imports 1.098 1.043 -55 -5,0%

EU28 exports 2.271 2.158 -113 -5,0%

Balance 1.173 1.115 -58

Total trade 3.369 3.201 -168 -5,0% Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth of Services trade EU28 with Côte d'Ivoire (mio €)

Growth

Côte d'Ivoire 2016 2017 annual

mio € %

Imports 579 534 -44 -7,7%

Exports 854 938 84 9,8%

Balance 275 404 128

Total trade 1.433 1.472 40 2,8% Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Côte d'Ivoire (mio €)

2013 2014 2015 2016 2017

Imports 410 478 673 579 534 Exports 928 793 827 854 938

Balance 518 315 154 275 404

Total trade 1.338 1.271 1.500 1.433 1.472 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Côte d'Ivoire (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward -4 3 -215 -231 582 Outward 2.875 3.695 3.817 3.616 3.364

FDI Flows

Inward -195 35 -232 -96 668

Outward 125 -75 729 106 263 Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

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. 121 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. This agreement will be substituted by the

regional EU-West Africa EPA once the latter enters into force. 122

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

The EU is still Ghana’s largest trading partner, accounting for 21% of Ghana’s exports (ahead of India with 19% and China with 17% in 2018) and 31% of Ghana’s imports (ahead of China with 16% and the US with 8%). Only 13% of Ghana’s exports go to the West African region and less than 4% of Ghana’s imports come from the region.

Total trade between the EU and Ghana increased by 15% in 2018. This is mostly due to an increase in EU imports from Ghana by €1 billion or 48% to €3.1 billion. EU exports to Ghana decreased by €218 million or 7% to €2.8 billion. The overall trade balance is negative for the EU, for both agricultural and non-agricultural goods.

The strong increase in EU imports from Ghana has much to do with an increase in mineral oil imports by €833 million (+180%). But beyond oil, EU imports of raw cocoa beans from Ghana increased by €86 million (+14%) and imports of cocoa paste and butter increased by €25 million (+5.6%). Even though imports of further transformed cocoa powder and chocolate slightly decreased in 2018, processed cocoa products (paste, butter, powder and chocolate) now account for 42% of the overall value of Ghanaian cocoa exports to the EU.

In addition, EU imports from Ghana of aluminium (+€38 million, 78%), vegetable fats and oils (+ €10 million or 31%), prepared or preserved tuna (+€8.6 million or 6.7%), copper (+€5 million, 20%), and edible fruits and nuts (+4 million or 3%; mostly coconut and bananas) also increased in 2018. Some emerging sectors showed high growth rates, for example exports of fresh coconuts (+230%) or perfumes and “Eaux de toilette” (+100%).

On the other hand, EU imports of rubber from Ghana decreased by 30% and imports of fruit juices decreased by 40%.

121 The official name of the agreement ("stepping-stone agreement") reflects the fact that the initial and ultimate objective for an economic partnership in West Africa is a comprehensive, regional agreement. It is also called "interim EPA"

122 The Economic Partnership Agreement was signed in December 2014 by the European Union and 13 West African Countries. The agreement will enter into provisional application if the 16 West African Countries sign the agreement and 2/3 of these countries ratify it. In 2018, both the Gambia and Mauritania signed the agreement, which means that only Nigeria’s signature is still missing.

Main destination of Ghanaian exports in the EU are the Netherlands, the UK, France,

Germany and Spain. Preference utilisation rates for EU imports from Ghana are continuously around 98 or 99%.

EU imports from Ghana are diversifying only slowly. The 10 main EU import products (at HS

6-digit level), accounting for 89.8% of total imports, were petroleum oils, cocoa beans, cocoa butter, cocoa paste, prepared or preserved tuna, raw aluminium, bananas, vegetable fats and oils, cocoa powder, and finally wholly or partly defatted cocoa paste.

2018 top 10 EU imports from Ghana 2018 top 10 EU exports to Ghana

Product Description Volume Share Product Description Volume Share

270900 Petroleum 1,287,586,845 41.2 271019 Medium oils 301,419,989 10.7

oils % %

180100 Cocoa beans 700,951,960 22.4 271012 Light oils and 181,013,501 6.4 %

% preparations

180400 Cocoa 260,675,615 8.3 % 630900 Second hand 105,027,696 3.7 %

butter, fat textiles

and oil

180310 Cocoa paste 172,870,574 5.5 % 020714 Frozen chicken 104,132,301 3.7 %

(excl.

defatted)

160414 Prepared or 137,899,394 4.4 % 300490 Medicaments 72,103,801 2.6 %

preserved

tunas

760110 Aluminium, 80,526,891 2.6 % 843041 Self-propelled 41,208,810 1.5 %

not alloyed, boring or

unwrought sinking

machinery for boring earth or

extracting

minerals or

ores

080390 Fresh or 57,073,806 1.8 % 843143 Parts for 33,874,967 1.2 %

dried boring or

bananas sinking

(excl. machinery

plantains)

151590 Fixed 44,059,240 1.4 % 170199 Cane or beet 32,118,832 1.1 %

vegetable sugar

fats and oils

180500 Cocoa 37,839,836 1.2 % 830710 Flexible tubing 27,758,778 1 %

powder of iron or steel, with or

without fittings

180320 Cocoa 31,836,485 1 % 870410 Dumpers for 26,942,320 1 %

paste, off-highway

wholly or use partly

defatted

Total top 10 2,811,320,576 89.8 Total top 10 925,601,024 32.9

products % products % Source: Eurostat (product names partly shortened)

In 2018, the EU imported 58 different products (at HS 6-digit level) with a value of above

€1 million from Ghana (compared to 65 products in 2014). However, the degree of diversification is significantly higher than with other export partners (e.g. China imported

only 14 products with a value of above €1 million from Ghana in 2017) 123 .

The decrease in EU exports to Ghana was mostly driven by a decrease in exports of miscellaneous articles of base metal (-€119 million, -72%), as well as machinery and mechanical appliances (-€48 million, -8.7%), motor vehicles (-€33 million, -17.6%) and optical, medical or surgical instruments (-€22 million, -27%).

On the other hand, EU exports of pharmaceutical products (+€42 million, +51%), sugar (+€16 million, 95.2%) and chicken meat (+€14 million, +9.5%) increased in 2018.

EU imports of agri-food products from Ghana have increased by €118 million or 9% in 2018 to a total of €1.4 billion, while EU agri-food exports to Ghana increased by €5 million to €460 million. While, as mentioned above, Ghana´s agri-food exports are by far concentrated in cocoa products, followed by tropical fruits, EU exported to Ghana mainly poultry meat (25% of EU agri-food exports to Ghana), followed by sugar, vegetable oils, offal, animal fat and other meats. Ghana is not yet liberalizing its market for EU imports under the EPA, and most agricultural products will remain excluded from liberalization.

2.2 Trade in services

The interim EPA with Ghana does not cover trade in services. Total EU services trade with

Ghana decreased by 50% in 2017. EU imports of services from Ghana decreased by €845 million or 45% to 568 million. EU exports of services to Ghana decreased by €777 million or 58% to €1.022 billion. Overall balance is positive for the EU.

2.3 Foreign Direct investment (FDIs)

The interim EPA with Ghana does not contain provisions on investment. EU foreign direct investment stocks in Ghana stood at €1.7 billion in 2017, down from €2.5 billion in 2016. New EU FDI flows to Ghana amounted to €74 million in 2017, also down from €201 million in 2016.

Ghana remains a popular destination for doing business in West Africa due to its political stability, relatively open democratic institutions, free media and a fairly vibrant civil society. The 2018 Mo Ibrahim Index on African Governance ranks Ghana 6 out of 54 African countries with increasing improvement in such indicators as 'Sustainable Economic Opportunities' and 'Safety and Rule of Law'. 124 Ernst and Young, assessing attractiveness of

123 Source: COMTRADE, Reporter data for China, accessed May 2019

124 Mo Ibrahim Index on African Governance 2018. Available at: http://iiag.online/

countries as a FDI destination, rank Ghana 7 th out of 54 African countries in 2017. 125 European businesses are very interested in using Ghana as a gateway for the region. Large companies, such as Volkswagen and Bosch, have expressed interest in investing in assembly lines in Ghana.

The current Ghanaian administration appears determined to tackle increasing imports through nationwide policies as 'One District One Factory', attempting to boost private investment and local production capacity for local consumption and increased exports.

• 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 met again in a technical meeting in December 2018 to continue discussions on 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 are in the past and have to be updated. The Parties made substantial progress in the transposition of Ghana’s market access commitments from HS2002 (in which it was originally drafted) to HS2017 and which has been now fully endorsed. The Parties also agreed on the rules of origin and the institutional set up for the implementation of the EPA.

Following this meeting, Ghana made an announcement at the meeting of the WTO committee for regional trade agreement in late 2018 that it will start the liberalisation of its market to EU products by the beginning of 2020.

• 4. 

  D EVELOPMENT C OOPERATION

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 €12 million for 2018-2023 through the following projects: 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.

The first action, Support to the Ministry of Trade (€4.1 million, 2019-2021) aims at information dissemination, awareness raising and mainstreaming the EPA across public and private sector, as well as capacity building for EPA implementation and monitoring. Implementation will start in 2019.

125 Ernst and Young, 'Turning tides EY Attractiveness Program Africa, 2018'. Available at: https://www.ey.com/Publication/vwLUAssets/ey Africa-Attractiveness-2018/$FILE/ey-Africa-Attractiveness-2018.pdf

In 2018, the EU already launched the Ghana Employment and Social Protection Programme (GESP) – Investment Promotion Component (€2.8 million, 2018-2021) which aims at fostering access to business development services (BDS), promoting structured business advocacy initiatives and supporting investment promotion and business linkages in selected value chains. The project will undertake a structured sequence of investment promotion activities, such as identifying potential investors, lead companies and local suppliers, preparing investment briefs to key target investors, supporting promotion campaigns and providing investor management. In 2018, the project organised six large workshops across the country to identify SMEs in the agribusiness sector to be included in the business linkages and investment promotion activities.

Under the regional West Africa Competitiveness Programme, the national component in Ghana (€6.35 million, 2019-2022) will focus on value chain development in the fruits (pineapple and mango), cassava and cosmetics sector. Planned activities include value chain diagnostics, strengthening of intermediary organizations, and specific training of brokers, cluster development agents and micro, small and medium sized enterprises (MSMEs). Implementation has started in 2019. Ghana will also benefit from the other regional programmes, including the West Africa Trade Facilitation Programme (€20 million EU contribution), that aims at improving regional trade measures and movement of goods along selected priority corridors including the Tema - Ouagadougou corridor.

The EU further supports Ghana's agricultural sector through the Market Oriented Agricultural programme (MOAP) (€35 million, 2017-2024) and the programme to promote productive investments for sustainable agriculture in Northern Ghana (2018-2025, 102M€).

The EU is also implementing the Budget Support Programme to Promote Investment and Job Creation (SDG-Contract, 45 M€, 2019-2021) which aims at promoting domestic and foreign investment and strengthening public financial governance and fight against corruption, as well as boosting domestic revenue mobilisation.

• 5. 

  F OLLOW - UP ACTIONS

In relation to the next steps for the iEPA, EU and Ghana agreed to:

• a) 

  Review and endorse the updated liberalization schedule;

• b) 

  Set up an appropriate mechanism to monitor the operation and impact of the EPA;

  • c) 

    Start negotiating the dispute settlement mechanism.

• 6. 

  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.

• 7. 

  S TATISTICS

Merchandise trade EU28 with Ghana 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Ghana (mio €)

Imports 2.885 2.645 2.301 2.119 3.126

Exports 3.116 3.061 2.888 3.042 2.824

Balance 231 416 587 923 -302

Share Ghana in EU28 trade with Extra-EU28

Imports 0,2% 0,2% 0,1% 0,1% 0,2%

Exports 0,2% 0,2% 0,2% 0,2% 0,1%

Total (I+E) 0,2% 0,2% 0,2% 0,1% 0,2%

Share EU28 in trade Ghana with world

33,8 30,3 31,2 31,8

Imports % % % % 31,0%

21,2 14,4 13,3 17,5

Exports % % % % 21,3%

27,5 22,3 22,6 24,2

Total (I+E) % % % % 25,4%

25-

mars

Source Trade G2 Statistics/ISDB 19

Trade EU28: Eurostat COMEXT; Trade Ghana: IMF Dots

Growth of merchandise trade EU28 with Ghana (mio €)

Growth

Ghana 2017 2018 annual

mio € %

Imports 2.119 3.126 1.007 47,5%

Exports 3.042 2.824 -218 -7,2%

-

Balance 923 -302 1.225

Total trade 5.161 5.951 789 15,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agri-food trade EU28 with Ghana (mio €)

Growth

Ghana 2017 2018 annual

mio € %

Imports 1.314 1.431 118 9,0%

Exports 455 460 5 1,2%

Balance -859 -971 -112

Total trade 1.769 1.892 123 7,0%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Ghana (mio €)

Growth

Ghana 2017 2018 annual

mio € %

110,4

EU28 imports 805 1.695 889 %

EU28 exports 2.587 2.364 -223 -8,6%

-

Balance 1.782 669 1.113

Total trade 3.393 4.059 666 19,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Ghana (mio €)

Growth

Ghana 2016 2017 annual

mio € %

Imports 1.346 568 -777 -57,8%

Exports 1.866 1.022 -845 -45,2%

Balance 521 454 -67

-

Total trade 3.212 1.590 1.622 -50,5%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Ghana (mio €)

2013 2014 2015 2016 2017

Imports 577 1.171 1.361 1.346 568

Exports 992 1.541 2.004 1.866 1.022

Balance 415 370 643 521 454

Total trade 1.568 2.712 3.365 3.212 1.590

Source Trade G2 Statistics/ISDB from Eurostat

BOP statistics

Foreign Direct Investment (FDI) EU28 with Ghana (mio €)

2013 2014 2015 2016 2017

FDI Stocks

-

Inward -426 -567 1.074 -639 -924

Outward 1.999 2.665 4.855 2.536 1.709

FDI Flows

Inward -62 -41 -424 -291 -605

Outward 837 69 335 201 74

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC

PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CAMEROON

• 1. 

  I NTRODUCTION

On 17 December 2007, Cameroon and the EU initialled a stepping-stone EPA. They signed it

on 15 January 2009. The European Parliament approved this agreement on 13 June 2013 and

the Parliament of Cameroon proceeded to its ratification on 22 July 2014. On 4 August 2014, the agreement entered into provisional application. This EPA is a regional agreement and is

open to the accession of other Central African countries.

In August 2016, Cameroon started reciprocating its preferential access to the EU. After 3 years, the liberalisation process has now reached cruising speed. Cameroon will liberalize

80% of imports from the EU over 15 years. Products under liberalization are mainly industrial

machines (pumps, generators, turbines, etc.), electrical equipment (transformers, capacitors, resistors, etc.) and certain chemicals. These are mostly inputs used by Cameroon's industries

which are not produced locally. Eliminating import duties will reduce the costs of inputs for

local businesses and will also benefit consumers.

Cameroon has excluded a number of agricultural and non-agricultural processed goods from

liberalisation of EU imports, mainly to ensure the protection of certain sensitive agricultural

markets and industries but also to maintain fiscal revenues. The excluded products include most types of meat, wines and spirits, malt, milk products, flour, certain vegetables, wood and

wood products, used clothes and textiles, paintings, and used tyres.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

The EU is by far the most important trade partner of Cameroon: 48% of Cameroon's exports

go to the EU, followed by China (19%), India (8%), as well as the Central African region

(7%) and Nigeria (5%). In total 32% of Cameroon's imports come from the EU (followed by

China with 19%).

Total trade with

Cameroon has been relatively stable over the

last decade. In 2018, EU

imports from Cameroon

decreased by €146 million

(-7.6%) to €1.8 billion,

back to the level of 2016

after a spike in 2017. Exports from the EU to

Cameroon increased by

€106 million or 7.2% to €1.6 billion, recovering

from a pronounced drop in

2017. The balance of trade

is positive for Cameroon. All exports from Cameroon enter the EU duty free and quota free.

The decrease in EU imports from Cameroon in 2018 can be attributed to a decrease in the value of imports of mineral fuels (-€63 million, -7.7%), cocoa beans (-€46 million, -15%), bananas (-€41 million, -19%) and rubber (-€25 million, -50%).

On the other hand, EU imports of aluminum from Cameroon increased by €18 million

(+15.5%). Similarly, imports of wood and wood articles increased by €15 million (+6%).

While still fairly limited in value compared to imports of raw cocoa beans, EU imports of processed cocoa paste and cocoa butter, fat and oils from Cameroon amounted to €31 million (+10%) and 72 million (+27%), respectively. Main destination for Cameroonian exports in the EU are France, Italy, the Netherlands and Spain.

Imports from Cameroon are still little diversified. Main products exported from Cameroon to the EU are oil and gas (43% of total exports in value), cocoa beans (15%), wood (12%), bananas (10%) and aluminium (7%) (Figures for 2018). The top 10 products accounted for 91.4% of total imports in 2018, almost the same figure as in 2008. The total number of products exported with an exporting value of at least €1 million was 29 in 2018 (32 in 2008), while the number of products exported valued at least €500,000 was 44 (42 in 2008).

2018 top 10 EU imports from Cameroon 2018 top 10 EU exports to Cameroon

Product Description Volume Share Product Description Volume Share

270900 Petroleum 717,045,244 40.3 630900 Worn clothing 70,644,051 4.5 % oils and oils % and clothing

obtained accessories, from showing signs bituminous of appreciable minerals, wear and crude presented in bulk (…)

180100 Cocoa beans, 262,462,852 14.8 300490 Medicaments 65,669,391 4.2 % whole or % (…)

broken, raw or roasted

080390 Fresh or 175,086,969 9.8 271012 Light oils, of 61,976,452 3.9 % dried bananas % petroleum (…)

(excl. plantains)

440729 Tropical 122,580,425 6.9 730890 Structures and 49,996,245 3.2 % wood, sawn % parts of

or chipped structures, of lengthwise, iron or steel, sliced or n.e.s. (…) peeled (…)

760110 Aluminium, 120,386,985 6.8 252310 Cement 33,464,651 2.1 % not alloyed, % clinkers

unwrought 180400 Cocoa butter, 71,687,151 4 % 870323 Motor cars / 33,419,018 2.1 %

fat and oil vehicles principally designed for the transport of <10 persons (…)

440727 Sapelli, sawn 53,178,607 3 % 870422 Motor vehicles 30,543,146 1.9 % or chipped for the

lengthwise, transport of sliced or goods (…) peeled (…)

271111 Natural gas, 40,177,738 2.3 330210 Mixtures of 27,430,209 1.7 % liquefied % odoriferous

substances and mixtures (…)

440728 Iroko, sawn 37,204,358 2.1 110710 Malt (excl. 24,295,260 1.5 % or chipped % roasted)

lengthwise, sliced or peeled (…)

090111 Coffee (…) 25,010,253 1.4 100199 Wheat and 23,176,612 1.5 % % meslin (…)

Total top 10 1,624,820,608 91.4 Total top 10 420,615,040 26.6 products % products %

Source: Eurostat (product names partly shortened)

Considering the high share of raw materials in Cameroon’s exports, most 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 exported under EPA preferences. Preference utilisation rates are high, at 98% in 2018.

The increase in EU exports to Cameroon in 2018 can be attributed to an increase in exports of iron and steel (+€59 million or 166%), mineral fuels (+€51 million or 142%) and motor vehicles (+€30 million or 22.5%). Exports of cement increased from €3 million to €18 million (+494%) in 2018, while exports of cement clinkers decreased by €12 million or 26%. Exports of machinery and mechanical appliances decreased by €30 million or 12%.

The EPA foresees that Cameroon successively liberalizes 80% of imports from the EU.

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 necessities, industrial and agricultural inputs, machines, chemicals, vehicles and spare parts, computers, papers, consumer products for households.

The total value of goods imported into Cameroon under EPA preferences from August

2016 to January 2019 is estimated at €335 million (Source: Cameroon customs). The main products imported under EPA preferences according to Cameroon customs were clinker (28% of total value of imports under EPA preferences), chemical industries (24%), electrical machinery and equipment (17%), vehicles and transport equipment (16%), paper and cardboard (7,5%), fertilizers (5%). Over the period August 2016 – January 2019, the total value of forgone customs revenue due to liberalisation of tariff rates under the EPA was €10.68 million. 126 (Source: Cameroon Customs).

For agri-food trade, Cameroon continued enjoying a surplus (€330 million) with the EU in 2018, albeit smaller than in previous years. While the exports by Cameroon (€590 million) are heavily concentrated in cocoa products and tropical fruits, EU exports (€260 million) are much more diversified with malt (see below the case of brewery), wheat, milk powder and whey, infant food and other cereals, starch and milk preparation, and wines on top of the list.

2.2 Trade in services

The EPA does not include provisions on trade in services. Trade in services between the EU and Cameroon shows little variation over the last years. EU services imports from Cameroon decreased slightly in 2017 to €312 million, while EU services exports to Cameroon increased to €661 million. The trade balance in services is positive for the EU.

2.3 Foreign Direct investment (FDI)

The investment stock has been stable over the last four years, it currently stands at €1.3 billion. Inflows in 2017 have been lower than in previous years, at €2 million according to Eurostat statistics. The EU investment stock remains largely tied 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. The main investor is France with about 300 companies established that are estimated to contribute to about 30% of the government's corporate tax revenue.

In 2018, the French Development Fund, the World Bank’s IFC, the European Investment Bank and the Cameroon government signed the final and binding agreements for the construction of the Nachtigal Hydroelectric plant. The €1.2 billion project consists of designing, constructing and operating a dam and a 420MW power plant. The plant will cover 30% of the country’s energy needs. The project is expected to create up to 1,500 direct jobs, 65% of the local. Construction has started in 2019 and operation is foreseen in 2023.

Also in 2018, French retail company Carrefour announced its intention to construct its second supermarket in the country, representing a €46 million investment; however, there seem to be some difficulties related to the land ownership title for the allocated lot. Together, the existing supermarket in Douala and the new one in Yaoundé together would employ about 500 people. Cimencam (controlled by a Franco-Swiss-Moroccan consortium) opened its second cement factory in the country, an investment of €35 million. Brasserie du Cameroun, part of the French Castel group, invested in new bottling chains at three of its production locations, an investment estimated at €15 million (more below).

Cheaper inputs boosting local production and employment

La Société Anonyme des Brasseries du Cameroun (SABC), part of the French Castel group, is a

brewing company in Cameroun. It is the largest private sector employer in the country,

126 The 2018 Budget law estimate total yearly customs revenue at €670 million, including exports and imports taxes, stamp duties, etc. This would mean that losses due to EPA preferences amount to only 1.6% of total customs revenue. The IMF estimates customs revenues at €1.14 billion in 2017, also including VAT on imports.0

employing about 10,000 people across the group and its subsidiaries. Brasseries du Cameroun holds a 75% share of the Cameroonian market for beer and soft drinks.

SABC is to date the single biggest beneficiary of EPA preferences, accounting for one eight of

the total fiscal gain of Cameroonian companies due to lower import tariffs. It imports a range of products from the EU, e.g. larger machinery used to bottle its beverages, as well as ingredients such as yeast, hop, aromas or colorants used it their production.

While benefiting from EPA preferences, SABC is also increasingly trying to source locally. The

company has a local subsidiary producing bottles and is also buying 100% of Maïscam’s (one

of the large agro-industrial companies of the country) production of corn every year (10.000 tons).

• 3. 

  I SSUES ADDRESSED IN THE ANNUAL EPA C OMMITTEE MEETING

The fourth EPA Committee meeting between Cameroon and the EU took place in February 2019 in Yaoundé. During this meeting, the parties signed a Decision on the accession of Croatia to the EU and initialled two draft decisions on dispute settlement (procedures and list of arbitrators). These signatures and initials marked the end of the negotiations of the corresponding files.

Since the beginning of provisional application, an important issue consisted in adjusting the liberalization timetable (2008-2023) of the EU products to the delay in implementation resulting from Cameroon's EPA ratification in 2014. During the last EPA Committee, the parties reached an agreement on the implementation of the liberalisation schedule until 2029. This new schedule takes into account current Cameroon security and economic constraints. Cameroon official commitment to the schedule will provide predictability for parties and particularly for economic operators.

One of the main points of discussion was the assessment of the tariff dismantling process monitored by the Cameroon Customs and its impact in terms of products concerned and customs revenue losses (see 2.1 Trade in goods). However, we are still at the beginning of the process and the real impact of the liberalisation, the final beneficiaries and the effects on the economy remain to be identified.

Two projects currently in progress are the elaboration of an EPA Implementation Plan and a study on overall fiscal impact, both to be concluded during the second half of 2019. The EPA Implementation Plan aims to identify accompanying measures, particularly in terms of development cooperation and domestic reforms, to ensure that the country reaps full benefits from the EPA. The study on fiscal impact will help to define priority actions in the field of fiscal transition, to diversify revenue away from tariff duty collection.

A common protocol of rules of origin was not included in the EPA at the time the parties concluded the negotiations of the agreement in 2007. Negotiations of a protocol started end 2016 and are still ongoing. After conclusion of the negotiations, the parties will annex the protocol 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).

During the last EPA committee meeting, the parties took stock of the current negotiations on the protocol on Rules of Origin. The negotiations between experts should resume soon and a conclusion is foreseen before the next EPA Committee.

The parties agreed to develop a monitoring system for the agreement. This monitoring will make it possible to monitor the implementation of the agreement, identify its impacts on Cameroon value chains and consumers, and will contribute to the identification of political correction or incentive measures.

The parties also discussed trade barriers, Cameroonian export taxes and internal taxes/levies on imports.

• 4. 

  D EVELOPMENT C OOPERATION

In 2018, the EU supported Cameroun in elaborating a National EPA Implementation Strategy that will guide future EPA-related support. The EU also facilitated a study on evaluating the net fiscal impact of the EPA, thereby strengthening the economic modelling competences of principal government actors and supporting the identification of possible compensation and absorption measures. Both projects will be completed in 2019.

Development assistance from the EU in recent years focussed particularly on strengthening productivity and competitiveness. In 2018, the programme Programme d'appui à l'amélioration de la compétitivité de l'économie camerounaise (PACOM) (€10 million 2014-2018), which supported Cameroonian firms in upgrading their productive equipment and production processes and in acquiring international quality certifications (ISO, OHSAS), as well as improving the overall business environment, came to an end. Some results achieved by the end of the programme include:

 The creation of an e-registration portal for companies (mybusiness.cm);  The establishment and operationalization of the Centre technique agro-alimentaire du

Cameroun ( http://cta-cameroun.org/ ), including training of staff, purchasing of

equipment and international standardization;

 Capacity building for the National Standards Agency (ANOR), resulting in 30

companies accompanied in the process for achieving ISO certification, 8 companies ISO-certified, over 30 information session organised, and an increase in the number

of international norms transposed in Cameroun from 850 in 2013 to 2,600 in 2018.

As a follow up, Dispositif d'appui à la compétitivité du Cameroun (DACC), a €10 million

programme under the 11 th European Development Fund (EDF), has been launched mid-2018.

It will provide direct support to companies, start-ups and intermediary organizations and will improve the provision of business services.

In the agricultural sector, the EU provides budget support (€24 million in 2018, out of a total €100 million for the period 2017-2019) to improve the distribution and access to seeds and fertilizers, to improve agricultural productivity and competitiveness. Support measures for the banana sector are also still in place (€48 million, 2015-2020). EU Member States provide support to individual value chains (e.g. beef, chicken) and France in particular started in 2018 a €30 million project (TRANSFAGRI), combining budget support and technical assistance to strengthen financial and non-financial services to SMEs in the agri-food sector.

In 2018, preparations started for the regional project Programme d’Appui à l’Intégration Régionale et à l’Investissement en Afrique Centrale (PAIRIAC) (€19 million) which will include support to EPA implementation and outreach in Cameroun, along with for example capacity development on the implementation and monitoring of SPS and private standards such as GlobalGAP.

Finally, throughout 2018, the Cameroonian Administration and the EU Delegation to Cameroon organized various outreach and awareness raising events on the EPA with civil society, media, academia and private sector representatives.

• 5. 

  M AIN OPEN ISSUES AND FOLLOW - UP ACTIONS

The main important ongoing files are:

 Rules of origin: A conclusion on a common protocol is foreseen before the next EPA

Committee;

 Monitoring of the Agreement: Parties are planning to intensify discussion on the

development of a monitoring system;

 Accompanying measures: On the basis of the ongoing studies and in the post-Cotonou

perspective, the parties will reflect on accompanying measures, including development

cooperation and reforms;

 Two decisions of the EPA Committee on Dispute Settlement will be signed during the

next EPA Committee foreseen in December 2019.

In March 2017, the ministers in charge of EPA of the Central African region declared the availability of their countries to study their possible accession to the stepping stone agreement. Contacts are open between the regional organisations and the EU on accession by other Central Africa States to this EPA.

• 6. 

  C ONCLUSIONS AND OUTLOOK

In 2018, 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 2018, there was a clear increase in the number of import declarations from the EU in Cameroon, without major additional revenue losses.

The implementation of the agreement is now in its cruising phase. Several cases have been completed recently (Croatia accession, liberalisation schedule, dispute settlement) and others are expected to be launched soon (accompanying measures, monitoring). The discussion on rules of origin should be concluded by the end of 2019.

Uncertainty remains as to the effective resumption of negotiations and the possibility of extending the agreement to other Central Africa countries.

• 7. 

  S TATISTICS

  Merchandise trade EU28 with Cameroon 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with Cameroon (mio €)

Imports 2.150 1.799 1.771 1.924 1.778 Exports 1.631 1.581 1.564 1.471 1.577 Balance -520 -218 -207 -452 -201 Share Cameroon in EU28 trade with Extra-EU28

Imports 0,1% 0,1% 0,1% 0,1% 0,1% Exports 0,1% 0,1% 0,1% 0,1% 0,1% Total (I+E) 0,1% 0,1% 0,1% 0,1% 0,1% Share EU28 in trade Cameroon with world

Imports 26,7% 27,7% 32,1% 31,9% 32,0% Exports 51,8% 47,6% 53,6% 54,8% 48,3% Total (I+E) 36,9% 35,7% 38,7% 40,7% 38,6%

Source Trade G2 Statistics/ISDB 25-mars-19 Trade EU28: Eurostat COMEXT; Trade Cameroon: IMF Dots

Growth of merchandise trade EU28 with Cameroon (mio €)

Growth

Cameroon 2017 2018 mio € annual

%

Imports 1.924 1.778 -146 -7,6% Exports 1.471 1.577 106 7,2%

Balance -452 -201 251

Total trade 3.395 3.355 -40 -1,2%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agri-food trade EU28 with Cameroon (mio €)

Growth Cameroon 2017 2018

mio € annual %

Imports 674 590 -84 -12,5%

Exports 267 260 -7 -2,7%

Balance -407 -330 77 Total trade 941 850 -91 -9,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Cameroon (mio €)

Growth

Cameroon 2017 2018 annual

mio € %

EU28 imports 1.250 1.188 -61 -4,9%

EU28 exports 1.204 1.317 113 9,4% Balance -45 129 174

Total trade 2.454 2.505 52 2,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Cameroon (mio €)

Growth

Cameroon 2016 2017 annual

mio € %

Imports 349 312 -37 -10,7% Exports 641 661 20 3,1%

Balance 292 349 57

Total trade 990 972 -17 -1,7%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Cameroon (mio €)

2013 2014 2015 2016 2017

Imports 459 399 425 349 312

Exports 677 931 643 641 661

Balance 218 532 218 292 349

Total trade 1.136 1.331 1.068 990 972

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with Cameroon (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 25 43 -16 40 46

Outward 1.353 1.281 1.134 1.281 1.316 FDI Flows

Inward 105 1 -48 18 6 Outward 100 44 42 67 2

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

ANNUAL INFO SHEET ON THE IMPLEMENTATION OF THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) BETWEEN THE EU AND CARIFORUM

• 1. 

  I NTRODUCTION

The EU-CARIFORUM EPA is a regional agreement between the EU and its Member States and 15 Caribbean countries. 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 2018, this agreement was provisionally applied by the EU and its Member States and by 14 Caribbean States. 127 Haiti still needs to ratify the agreement in parliament before applying it. By the end of 2018, 23 EU Member States and 10 Caribbean States had ratified the EPA.

The EU-CARIFRUM 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). Furthermore, like all EPAs, the EU-CARIFORUM EPA is a developmentoriented trade agreement, geared towards fostering long-term sustainable economic growth in the Caribbean.

This means market liberalisation is asymmetric: while the EU provides immediate duty free quota free access for Caribbean exporters (all products except arms and ammunition), Caribbean states have up to 25 years (until 2033) to cut import tariffs. They have excluded

from these cuts around 17% of goods and services, which they consider sensitive. 128 The

exclusion list includes fresh fruit and vegetables, most alcoholic beverages, some garments, a number of processed agricultural products, fish, chemicals and furniture. In general, 75% of CARIFORUM's agricultural and fisheries products have been excluded from liberalisation under EPA.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

The EU is the third largest importer of Caribbean goods, accounting for 8.5% of total Caribbean exports (after the U.S. (28%) and Uruguay (9%)). EU exports, in turn, account for 10% of Caribbean imports, making the EU the second largest exporter to the region after the U.S. (41%), followed by China (9.7%). Intra-regional trade between the Caribbean countries is low: only 7% of the region’s imports originate from another Caribbean state. Similarly, only 5.5% of Caribbean exports go to the region.

127 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, St. Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago.

128 Note that the CARIFORUM countries submitted individual market access schedules and not one single regional offer. Hence figures and information provided here are an average over all 14 market access schedules. A factsheet on the EU-CARIFORUM EPA can be found here: http://trade.ec.europa.eu/doclib/docs/2012/april/tradoc_149286.pdf

Total trade between the EU and the CARIFORUM increased by €614 million or 7.3% in 2018, to €9 billion. Importantly, in 2018 the EU imported €3.9 billion worth of goods from the Caribbean region, a €387 million (11%) increase compared to 2017. EU exports to the CARIFORUM states rose by €227 million (4.6%) to €5.1 billion. The overall trade balance is positive for CARIFORUM for agricultural goods but negative for non-agricultural goods.

The largest EU trade partner in the Caribbean is the Dominican Republic (total trade of €2.9 billion), followed by Trinidad and Tobago (€2.1 billion), Bahamas (€1.45 billion) and Jamaica (€727 million).

Main EU imports from CARIFORUM countries in 2018 were mineral fuels (€792 million), organic chemicals (€569 million, most of it methanol), ships, boats and floating structures (€483 million), edible fruits and nuts (€333 million, most of it bananas), and inorganic chemicals (€296 million, most of it aluminium oxide and ammonia).

Rising EU imports from CARIFORUM countries were caused by increases in mineral fuels imports (+71%), organic chemicals (+80%), inorganic chemicals (+32%), as well as increases in certain agri-food imports from the Caribbean: fish and crustaceans (+€13 million or 18%), tobacco (+€12 million or 25%) and beverages and spirits (+€9 million or 6%). Imports decreased for sugar (-€54 million or -44%), gold (-€48 million or -23%) and bananas (-€47 million or -12%). The preference utilisation rates of the CARIFORUM EPA averaged 86% in 2018, down from 91% in 2017.

CARIFORUM countries exports to the EU show little diversification. The share of top ten products in total exports is above 90% for most States, with exports concentrated in very few commodities. Trinidad and Tobago exports mostly natural gas, rum, and ammonia. For Jamaica, it is largely aluminium oxide (70% of its exports), followed by rum. For the Bahamas and Barbados, the dominant export are boats and ships (re-exports/sales, not local production) and rum. Guyana and Suriname export predominantly gold (accounting for 23% and 42% of their exports in 2018, respectively); Guyana also exports aluminium ores and brown rice, while Suriname exports mainly bananas and frozen shrimps and prawns.

The Dominican Republic represents an exception, where the share of top 10 products is 70.4% and exports are diversified beyond natural resources to include certain manufacturing goods. Top 10 products exported by the Dominican Republic to the EU are bananas, cocoa beans, medical, surgical and veterinary instruments, rum and other spirits based on sugar cane, ferro-nickel, appliances for ostomy use (i.e. medical products), electro-diagnostic apparatus (i.e. medical instruments), cigars, tobacco, and fresh or dried guavas, mangoes and mangosteens. The total number of products imported from Dominican Republic (at HS 6-digit level) with a value of more than €1 million grew from 53 in 2008 to 62 in 2018 (i.e. a 17% increase).

Main EU exports to Cariforum in 2018 were machinery and mechanical appliances (€730 million, +9%), mineral fuels (€672 million, +57%), ships and boats (€520 million, -30%), electrical machinery and equipment (€316 million, +30%) and motor vehicles (€221 million, +1%). Railway equipment exports saw a spike in 2018 (€42 million, +560%), as well as art exports (€14 million, +660%).

In the agri-food trade, the EU negative balance of the previous years turned into a small surplus (€12 million) in 2018. Main EU export products to the CARIFORUM EPA states were beverages and spirits and liqueurs (€189 million, -2%), diary produce (mostly milk powder) (€181 million, +8%), preparations of cereals, flour and starch (€70 million, +2%) and preparations of vegetables, fruits, nuts and plants (€65 million, -8%).

2.2 Trade in services

The CARIFORUM EPA provides for services liberalisation. In 2017, total trade in services decreased slightly by €147 million (-3%) to €4.7 billion in 2017. EU services exports to the CARIFORUM countries grew by €42 million (+2%), whereas imports of services from the Caribbean region dropped by €189 million (-7.1%).

Total value of trade in services with Dominican Republic grew by €34 million (2%) to €1.7 billion in 2017, with imports increasing by €57 million (6%) and exports falling by €23 million (-4%).

2.3 Foreign Direct investment (FDI)

The CARIFORUM EPA contains provisions on investment liberalisation. EU FDI stocks in the Caribbean region stood at €112 billion in 2017, up from €85 billion in 2016 (+32%). The lion’s share of these stocks are held in Bahamas (€54.5 billion) and Barbados (€41 billion), which have large financial sectors, followed by Trinidad and Tobago (€7.2 billion) and Dominican Republic (€6.5 billion). New EU FDI flows to CARIFORUM amounted to €38.5 billion in 2017, with most investments going to Barbados (€38.5 billion) and Trinidad and Tobago (€1.4 billion).

Outside the financial sector, EU investment is found in fuel import and distribution (e.g. French company RUBIS), and in the rum industry, e.g. with Gruppo Campari (Italian) recently acquiring the Jamaican rum maker Lascelles de Mercado, whose brands include Appleton Estate and Wray and Nephew. Rum production of Appleton Estate has increased to over 2 million bottles a year and 500 new jobs have been added.

In the Dominican Republic, according to data presented by the Central Bank, the EU is the fourth largest investor for the period 2010-2018, after the US, Canada and Brazil, accounting for about 10% of FDI or €2 billion. The largest EU investor is Spain, accounting for around 6% of total FDI in the Dominican Republic between 2010 and 2018. 129 According to the Dominican Republic Central Bank, there are currently around 70 EU companies present in the country, including from Germany (18), Italy (13), the Netherlands (10), Spain (7) and UK (7). EU investment in the Dominican Republic is mostly in tourism and manufacturing and services for exports (so called free zones, zonas francas). Examples for recent investments include:

 Increasing European investment in renewable energy: for example, French Akuo

Energy is building a windfarm with an installed capacity of 50MW in Monte Cristi; operations are expected to start in 2019. There is also Spanish investment in a wind park (Dominicana Renovables INVERAVANTE) with 37MW capacity in

Matafongo, Bani province, with operations starting in June 2019.

 Vinci Airports (French) acquired, for approximately USD 500 million, 100% of

Aerodom, holder of a concession until 2030 for the operation of 6 of the 9 airports in the country (around 40% of air traffic), including the Las Americas Airport in the capital city of Santo Domingo. Vinci is now planning an extension of the concession in exchange for an investment plan of approximately USD 400 million.

• 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 (Ministerial level), the Trade and Development Committee (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 on Agriculture and Fisheries and Customs Cooperation and Trade Facilitation, which meet on an ad hoc basis.

The 8 th meeting of the Trade and Development Committee (TDC) took place in Saint Lucia in December 2018. The parties discussed, among other, the implementation of the CARIFORUM's tariff liberalisation schedule, transposition of the harmonised Commodity Coding Systems by CARIFORUM countries, participation of CARIFORUM countries in EU framework programmes, activation of the provisions on the technology transfer, as well as the Protocol on the cultural cooperation. The Parties also discussed the establishment of the joint monitoring system under the EPA and the way forward for development cooperation. It was agreed to establish a special committee on Trade in Services and the draft decision to establish the committee was exchanged prior to the meeting for discussion. The TDC also decided on the establishment of a joint EU-CARIFORUM Task Force for the next 5 years review of EPA, due in 2020. On Agriculture, the Parties referred to the progress achieved in the negotiations for the CARIFORUM-EU Geographical Indications Agreement.

129 According to the Central Bank of the Dominican Republic, total investment from Spain has been USD 292.4 million; however, the Spanish Embassy recorded only €50.6 million due to different accounting methodologies e.g. the embassy only takes into account direct flows from companies in Spain and excludes investment in real estate.

The 4 th meeting of the Consultative Committee took place in December 2018 in Saint Lucia, and its recommendations and conclusions were presented to the TDC meeting. The recommendations include the need to increase visibility and awareness of EPA and the need to analyse further any social and environmental implications of the implementation of the EPA. The committee stated its readiness to contribute to the 2020 review of the EPA. The Consultative Committee also expressed concern about the lack of implementation of the regional preference clause under the EPA, as well as the adverse effects of the application of the ‘Octroi de Mer’ in EU outermost regions. The committee also called for the timely adoption of a monitoring mechanism.

The 5 th meeting of the Special Committee on Customs Cooperation and Trade Facilitation (SCCCTF) took place in March 2018 in the Dominican Republic. The SCCCTF agreed that the Parties should establish a working group to carry out a comprehensive review of Protocol I on Rules of Origin to Annex III at triggered by CARIFORUM with the objective

to simplify the some concepts and methods. In November 2018, the 2 nd Meeting of the Special

Committee on Agriculture and Fisheries (SCAF) was held in Barbados, together with the 3rd round of GI negotiations.

• 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 second meeting in Barbados in November 2018. The meeting had a substantive agenda, discussing cooperation in agricultural research, use of new technologies in agriculture, food and nutrition security, creation of value addition in agri-food and rural employment, as well as the sustainable use of natural resources. CARIFORUM stressed its concerns with two specific matters, namely the rules of cumulation for sugar-based products (Annex X to Protocol I) and the revision of the EU spirits definition, which includes the proposed restriction on the use of the word “agricultural” (e.g. agricultural rum). Both regions underlined the expectations for the agricultural partnership to work more closely on policy issues of relevance for the development of the agricultural sector.

Geographical indications: A negotiation directive to negotiate an agreement on Geographical Indications (GI) under the CARIFORUM EPA was adopted by the Council of the EU in November 2017 and the 3rd round of GI negotiations took place in November 2018. The parties progressed on establishing a list of GIs to be protected under the EPA. Currently the Parties are exchanging information at technical level to clarify the outstanding issues. In parallel, the EU delegations in the region are actively promoting awareness on geographical indications through tailor-made events and workshops with business community, producer groups and other farmers' organizations.

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 and of particular interest for CARIFORUM countries. Going beyond the remit of the EPA, the Commission is preparing to extend the EU Immigration Portal to cover all categories of Mode 4 service suppliers. When completed, this will provide additional transparency as regards applicable rules. With regard to the institutional set up, both Parties agreed in 2017 to establish a Special Committee on Services. In 2018, the Parties further progressed with the legal work to establish the committee, with the aim to concluding the necessary decision in 2019.

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.

Launching of an ex-post evaluation, 10 years after the agreement entered into force: In February 2019, the Commission launched an ex-post evaluation to evaluate the level of implementation and the impact on sustainable development, 10 years after entering into force of the agreement. Consultations are on-going throughout 2019. Results are expected in 2020 and will feed into the Joint Review, as well as the next EU-CARIFORUM Joint Council, both foreseen for 2020.

Development cooperation: The EPA is a genuinely pro-development agreement and the EU provides considerable support to CARIFORUM and Caribbean governments for EPA implementation and export development. Under the 11 th European Development Fund (EDF) (2014-2020), the total allocation for the Caribbean region is approximately €1 billion, of which €326 million is allocated to the Regional Programme. Under this envelope, the EU supports Regional Economic Cooperation and Integration in the Caribbean, including EPA implementation, trade-related capacity building and private sector development, with €102 million (33% of total allocations to the region).

Out of the €102 million, the Caribbean Export Development Agency (CEDA) currently implements a Regional Private Sector Development Programme (RPSDP) (€27.2 million, 2017-2022). In 2018, CEDA awarded mini-grants to 53 SMEs across all CARIFORUM countries to help firms get ready to export or expand their exports; a number of firms were also invited to attend business fairs in Europe which resulted in new business contracts. In addition, 20 women-owned businesses benefitted from specific coaching on growing their business and attracting angel investment. 2018 also saw the launch of the Caribbean Export Intelligence portal of Caribbean Export, which should become an important provider of data in support of business decisions and for business support organizations in the delivery of their services.

Other projects under the 11 th EDF are currently under preparation (€21 million) and will include capacity building in the area of innovation and Intellectual Property Rights, technical barriers to trade, sanitary and phyto-sanitary measures, as well as competition, public procurement, customs and trade facilitation. The projects will build on the results achieved in

these areas under the 10 th EDF, which included, for example, improved ability of national and

regional regulatory bodies and the private sector to comply with the EU’s Sanitary and Phytosanitary (SPS) measures, as well as improved capacity for developing regionally harmonized SPS measures.

Under the 11 th EDF, the EU is also directly supporting the CARIFORUM Directorate

(€6.2 million) to fulfill its role in coordinating and facilitating EPA implementation in CARIFORUM Member States.

Caribbean swimwear – soon available in Europe

Vincentian-born, Trinidadian-raised and a citizen of the Caribbean, Kimya Glasgow, the

CEO and head designer of her self-named clothing and lifestyle brand, aims to bring a

modern version of classic Caribbean style to the world.

Her high-quality resort and swimwear pieces are currently delivered to Caribbean-based customers via LIAT Quick Pack or couriered by willing travelers. But she’s focused on building a sustainable production model to gain a foothold in overseas markets such as EU and UK, as well as the US and Dubai, where she has captured the attention of buyers.

“We have exceptional talent in St. Vincent that often does not go beyond our shores. So I’m working on raising the capital to enable me to partner with local artisans.” she said.

Glasgow credits programmes such as Women Empowered through Export (WE-Xport) with creating a space where women can access the mentorship, technical and financial support needed to grow their businesses. Through the programme, she successfully

scaled up her business and is getting export ready. The programme is part of the EU’s trade-related development assistance provided under the EU-CARIFORUM Economic Partnership Agreement.

The 2009 Caribbean Fashion Awards winner has shown at fashion weeks in Miami, Jamaica, Trinidad & Tobago, Barbados, St. Kitts and St. Vincent. Mustique, Bequia, Grenada and New York have also featured her collections. As she gears up for more

meaningful export in 2019, the Kimya Glasgow brand is shaping up to be one to watch.

In the Dominican Republic, the EU currently supports a project on Quality Strengthening for Micro, Small and Medium-sized Enterprises(MSMEs) Development (€11 million, 2014-2019), to strengthen the national quality system and improve quality orientation of MSMEs in order to access national, regional and international markets. Under the project, the EU supported the creation of a “chemical metrology and laboratories network” which will allow exporters and producers to benefit from local analysis and testing, as well as reducing costs of chemical calibration. Furthermore, more than 300 enterprises were selected to participate in a comprehensive initiative for implementing standards and quality assurance systems such as ISO/9001, ISO/27001, ISO/22000), as well as good practices and food safety measures. The results are expected by late 2019. In 2018, around 25 MSME dairy producers were supported to achieve conformity with the national normative RTD 53 related to labelling. This measure allowed such producers to access public procurement under the national programme for “school breakfast”.

The EU financed Banana Accompanying Measures for the Dominican Republic (€19.3 million, 2013-2018) ended last year with some impressive results. Around 2,000 banana producers in Dominican Republic sustain the livelihood of around 300,000 people directly or indirectly, including nearly 25,000 Haitian immigrant workers. The sector exports around 300,000 tonnes annually (80% organic). 95% of organic banana export goes to Europe, meaning around 50% or the organic banana in Europe is from Dominican Republic. The project trained 4,600 producers and technicians and 6,000 workers on environmental management, sustainable production and quality management. It also trained 1,000 producers on organic and fair trade certification, labour rights and social security to improve the working conditions of banana workers. 1,500 farm development plans were designed and implemented. The use of pesticides and fungicides decreased by 80% over the project duration. A credit revolving fund operated by a local microcredit bank was operationalised to improve access to finance for banana small and medium farmers. 2,500 people completed literacy courses and 15,800 Haitian workers were supported in their application for national regularization.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Discussions are ongoing on the monitoring system that needs to be agreed by CARIFORUM countries and established according to the EPA. Negotiations on geographical indications are ongoing. Parties also need to achieve progress on effective implementation of all tariff and regulatory provisions and making use of the Services chapter under EPA.

• 6. 

  C ONCLUSIONS AND OUTLOOK

In 2018, progress was achieved in the implementation of the agreement, including notably on agriculture issues including geographical indications and progress on setting up the Services Committee and further work on customs cooperation and facilitation. 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 and in particular to raise awareness among EU companies to make a full use the agreement and business opportunities with this region.

• 7. 

  S TATISTICS

  Merchandise trade EU28 and CARIFORUM EPA States, 2014-2018

  2014 2015 2016 2017 2018 EU28 trade with CARIFORUM EPA States (mio €)

Imports 4.025 4.009 3.194 3.522 3.909 Exports 3.970 5.084 4.750 4.896 5.123 Balance -56 1.075 1.555 1.374 1.213 Share CARIFORUM EPA States in EU28 trade with Extra-EU28 Imports 0,2% 0,2% 0,2% 0,2% 0,2% Exports 0,2% 0,3% 0,3% 0,3% 0,3% Total (I+E) 0,2% 0,3% 0,2% 0,2% 0,2%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade EPA Cariforum: IMF Dots

Growth of merchandise trade EU28 with CARIFORUM EPA States (mio €)

Growth

EPA Cariforum 2017 2018 annual

mio € %

Imports 3.522 3.909 387 11,0%

Exports 4.896 5.123 227 4,6%

Balance 1.374 1.213 -161

Total trade 8.418 9.032 614 7,3%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with CARIFORUM EPA States (mio €)

Growth

EPA Cariforum 2017 2018 annual

mio € %

Imports 910 839 -71 -7,8%

Exports 784 811 27 3,5%

Balance -126 -28 98

Total trade 1.694 1.651 -44 -2,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with CARIFORUM EPA States (mio €)

Growth

EPA Cariforum 2017 2018 annual

mio € %

EU28 imports 2.612 3.070 458 17,5%

EU28 exports 4.112 4.311 199 4,8%

Balance 1.500 1.241 -259

Total trade 6.724 7.381 657 9,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Growth in Services trade EU28 with CARIFORUM EPA States (mio €)

CF14 2016 2017 Growth mio € annual %

Imports 18.818 18.000 -818 -4,3% Exports 3.608 4.220 612 17,0% Balance -15.210 -13.780 1430

Total trade 22.427 22.220 -206 -0,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Total Services trade EU28 with CARIFORUM EPA States (mio €)

2013 2014 2015 2016 2017

Imports 3.365 13.529 21.150 18.818 18.000 Exports 3.385 3.276 3.145 3.608 4.220 Balance 20 -10.253 -18.005 -15.210 -13.780 Total trade 6.751 16.805 24.295 22.427 22.220

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Foreign Direct Investment (FDI) EU28 with CARIFORUM EPA States (mio €)

2013 2014 2015 2016 2017

FDI Stocks

Inward 57.968 80.216 76.794 87.235 142.106

Outward 18.235 22.452 68.572 84.653 111.880

FDI Flows

Inward -8.988 4.851 -6.970 2.413 42.323

Outward 2.174 5.063 1.275 50.618 38.525

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

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 were concluded on 23 November 2007 with Papua New

Guinea (PNG) and Fiji – two of the 14 Pacific countries 130 , representing the vast majority of

regional exports to the EU.

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 PNG’s 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. Samoa acceded to the Agreement on 21 December 2018 and is implementing it since 31 December 2018.

The objectives of this Agreement are to promote sustainable development and the gradual integration of Pacific States into the world economy. The EPA aims 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.

Since 1 January 2008, all exports from PNG and Fiji enter the EU market duty-free and quotafree, so do all the exports from Samoa since 31 December 2018, on a permanent basis. Taking full account of differences in levels of development and sensitive sectors, PNG has liberalised 88% of EU imports from day one (i.e. since 1 January 2008). Fiji is liberalising 87% of EU exports over 15 years, while Samoa is liberalising 80% of EU exports over 20 years.

This asymmetric and gradual liberalisation enables the countries to protect local producers; they keep tariffs on sensitive goods, such as foodstuffs. Indeed, Fiji, PNG and Samoa have excluded from liberalisation some products from sensitive sectors and/or important for revenue such as meat, fish, fruits and vegetables, etc. Should imports of other liberalised goods suddenly surge, the countries can apply safeguards.

The Agreement is open for accession of other Pacific Island States. Interested Parties will need to submit a market access offer that is compliant with GATT 1994 Article XXIV. Samoa joined at the end of 2018, and procedures are underway for the accession of Solomon Islands and Tonga to the EPA.

• 2. 

  E VOLUTION OF TRADE

2.1 Trade in goods

In 2018, the EPA was implemented between the EU and Fiji and PNG. Due to the geographical distance, the EU is only fifth largest destination for exports from PNG (after Australia, Singapore, China and Japan) and the third largest for Fiji, accounting for around

130 The other countries of the region are: Cook Islands, Kiribati, Marshall Islands, Micronesia, Nauru, Niue, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

10-11% of the two Pacific states’ exports. The EU only accounts for about 3% of their

imports, far behind Australia, China and Singapore. For Fiji, about 16% of its exports go to

the Pacific region, but for PNG the share is lower than 1%. For both countries, less than 1% of

their imports come from the region.

PNG accounts for 66% of the Pacific region’s exports to the EU. Fiji and PNG together account for 69% of Pacific states’ exports to the EU (Figures for 2018).

The EU’s total trade with Fiji and PNG decreased by €111 million (-9.1%) in 2018. EU imports from these two Pacific states decreased by €77 million (-7.7%) to €915, while EU exports to the two Pacific states dropped by €34 million (-14.9%) to €194 million. The overall

trade balance is positive for the Pacific countries, for both agricultural and non-agricultural

goods.

EU imports from Fiji dropped by more than half in 2018, from €95 million in 2017 to €36

million in 2018. The decrease is almost entirely due to sugar exports, which contracted by €63 million or 76%.

EU imports from PNG only decreased slightly, by 2%, to €879 million. Palm oil exports (by

far the main agri-food export to the EU) dropped by €81 million or 16%, while exports of

coffee decreased by €20 million or 28.6%. Exports of prepared or preserved tuna continued to increase, albeit at a slower rate than in previous years (+€4 million or 2.6%). Exports of copper ores and precious metal ores increased strongly by €91 million or 160%, while gold exports decreased by €16 million or 30%.

Main destinations for the Pacific EPA countries’ exports are the Netherlands, Germany, Spain

and the UK. Preference utilisation rates for EU imports from the Pacific states have risen from 85% in 2014 to 99% in 2018.

EU imports from the Pacific EPA States show little signs of diversification. The top 10 export products accounted for 97.2% of total exports from Papua New Guinea and 88.4% of

total exports from Fiji to the EU. The main export products were palm oil, prepared or

preserved tuna, copper ores and coffee from Papua New Guinea (see table below); and sugar

(€20 million), mineral water (€4 million) and frozen tuna (€7 million) from Fiji. Additionally,

the number of products (at HS 6-digit level) imported from Papua New Guinea with a value

of above €1 million increased marginally over a 10-year period (from 16 to 17). For Fiji, the number stayed at four.

The EU mostly exports machinery and mechanical appliances, electrical machinery and equipment, optical, medical or surgical instruments, certain chemicals, as well as aircrafts and motor vehicles to the two Pacific states. These exports are crucial for the local industry, which uses them as production inputs. Eliminating import duties on these items would reduce the costs of inputs for local businesses and would benefit consumers. The 2018 decrease in EU exports to the two Pacific countries in 2018 was mostly due to a decrease in aircraft exports.

EU agri-food exports to the EPA Pacific states are low (€22 million compared to €539 million of imports from these countries), with preparations of vegetables, fruits or nuts, and cigars and cigarettes leading the EU exports.

2018 top 10 EU imports from PNG 2018 top 10 EU exports to PNG

Product Description Volume Share Product Description Volume Share 151110 Crude palm oil 298,196,281 33.9 % 151110 Generating sets with 12,528,955 9.8 %

spark-ignition internal combustion piston engine

160414 Prepared or 157,011,754 17.9 % 160414 Parts of gas turbines, n.e.s. 9,854,441 7.7 % preserved tunas,

skipjack and Atlantic bonito

260300 Copper ores and 99,517,525 11.3 % 260300 Parts suitable for use 5,831,377 4.6 % concentrates solely or principally with

electric motors and generators, electric generating sets and rotary converters, n.e.s.

151190 Palm oil and its 78,556,162 8.9 % 151190 Vaccines for human 4,836,443 3.8 % fractions medicine

151321 Crude palm kernel 59,746,205 6.8 % 151321 Prepared or preserved 4,089,829 3.2 % and babassu oil meat and offal of swine,

incl. mixtures 090111 Coffee (excl. roasted 51,057,024 5.8 % 090111 Self-propelled mechanical 4,003,760 3.1 %

and decaffeinated) shovels, excavators and shovel loaders

261690 Precious-metal ores 48,925,760 5.6 % 261690 Parts of steam and other 3,806,844 3 % and concentrates vapour turbines, n.e.s.

710812 Gold, incl. gold 39,088,492 4.4 % 710812 Potatoes, prepared or 2,603,110 2 % plated with platinum preserved, frozen

090510 Vanilla, neither 12,755,856 1.5 % 090510 Parts of aeroplanes or 2,136,026 1.7 % crushed nor ground helicopters, n.e.s.

180100 Cocoa beans, whole 9,652,498 1.1 % 180100 Appliances for pipes, 2,091,399 1.6 % or broken, raw or boiler shells, tanks, vats or

roasted the like Total top 10 854,507,584 97.2 Total top 10 products 51,782,184 40.5 % products %

Source: Eurostat (HS code product descriptions have been partly simplified)

2.2 Trade in services

The EPA with the Pacific states does not cover services. In 2017, total trade in services with Papua New Guinea grew by €123 million or 45.9%, and with Fiji by €89 million or 44.2%. EU exports to Papua New Guinea and Fiji rose by €101 million (45.3%) and €9 million (5.9%) respectively, while imports increased by €21 million (49.1%) and €80 million (162.8%). The total services trade balance is positive for the EU with Papua New Guinea and negative with Fiji.

2.3 Foreign Direct investment (FDI)

The EPA with the Pacific countries does not include provisions on investment. In 2017, EU foreign direct investment stocks in Papua New Guinea stood at €1.680 billion, with new outward investments of €737 million. FDI stocks in Fiji were €169 million, with outward FDI flows of -€43 million, in 2017.

In PNG, most EU FDI remains tied to the mining and petroleum sector, as well as the construction sector. However, in the past 10 years, FDI in manufacturing has risen, as well as wholesale and retail. The main investors are from the Netherlands, UK, France, Spain and Denmark (Source: PNG Investment Promotion Authority). In 2018, a new investment project in liquid natural gas (LNG) was announced, led by French company Total. A formal agreement was signed in April 2019 with total investment of around €13 billion. Production is

expected to start in 2024. 131

As identified in previous reports, the EPA has given rise to significant foreign and domestic investment in the fish processing sectors in PNG. A number of new and expanded canneries are making use of the global sourcing provision in the EPA, which allows PNG to source fish (mostly tuna) from third countries, process it on its shores (mostly canning) and export it duty free to the EU. According to the government, investment in factories and other facilities have greatly increased the volume of production with capacity now at 2,000 metric tons of fish per day, contributing to around 40,000 jobs; women accounting for 90% of these jobs. 132

In Fiji, there is significant French investment, mostly in banking and retail services, as well as fuel supply, storage and distribution.

• 3. 

  I SSUES ADDRESSED IN THE EPA C OMMITTEE MEETINGS

Six meetings of the Trade Committee established under the EPA have taken place between the Parties to the Agreement. During the latest Committee meeting in October 2018, the parties discussed the state of play of EPA implementation (particularly PNG and Fiji's tariff schedules) and ratification, the rules of procedure and the arbitrators’ code of conduct. Parties also examined other outstanding decisions, namely on the accession of Croatia and rules of origin (amendments of Annexes II and VIII to Protocol II as regards the update of the tariff classification and the list of OCTs). Other topics under discussion were monitoring and evaluation, trade and sustainable development issues (fisheries management and regulations, progress on labour issues, environmental protection reforms, etc.) and possible areas for deepening cooperation under the EPA on these matters. Communication (dissemination and outreach) and development cooperation were also discussed.

Parties furthermore exchanged views on the way forward of developing the EPA, including current and future accessions of other interested parties, and related technical modifications to the Agreement. Solomon Islands and Tonga were invited and participated as observers to the Committee meeting.

131 https://www.total.com/en/media/news/press-releases/total-and-state-papua-new-guinea-sign-gas-agreement href="https://www.total.com/en/media/news/press-releases/total-and-state-papua-new-guinea-sign-gas-agreement-papua-lng-project">papua-lng-project

132 PNG Trade Report 2018, p. 4

• 4. 

  D EVELOPMENT C OOPERATION

Development cooperation is essential for EPA implementation, although it is not formally part

of the Pacific-EU EPA. Under the Pacific Regional Indicative Programme of the 11 th

European Development Fund (EDF), €37 million were allocated to trade and private sector development, aiming at strengthening the business enabling environment and regional economic integration in the Pacific, through trade facilitation in particular. Acceding and implementing EPA countries will be supported to take advantage of the EPA opportunities.

At bilateral level, focal areas of EU Aid for Trade include agriculture (mainly Melanesian countries), energy (Micronesian countries), fisheries and waste management. In Fiji, focal areas include agriculture/sugar, with a budget support sector reform contract, also contributing to trade-related adjustment.

In PNG, the second phase of a Trade Related Assistance Programme finished in 2018. The project focused on institutional reform and capacity building, trade policy development and trade facilitation. The project supported the PNG government to draft its first national trade policy paper, as well as a range of trade legislation, such as on trade defence. In 2017-2018, 450 public and private stakeholders attended training courses on topics ranging from trade policy analysis to export promotion and SPS measures. For example, a training course for 44 food safety inspectors lead to a review of existing legislation on food safety and the drafting of Memorandum of Understandings between implementing agencies. The project has started supplying five public laboratories with specialised equipment to improve effectiveness and efficiency of food quality and food safety testing.

In the past years, the EU also provided assistance on customs and trade-related matters via intra-ACP programmes (Hub & Spokes II and TradeCom II), helping Pacific countries for example to conduct trade needs assessments and develop trade policy frameworks as well as national trade policy consultation mechanisms. The EU provided targeted support to the authorities of Samoa, Solomon Islands and Tonga during the process of accession and preparation for EPA implementation, with a view to extending EPA benefits to them.

• 5. 

  P ROGRESS MADE , MAIN OPEN ISSUES AND FOLLOW - UP ACTIONS

Samoa acceded the EPA at the end of 2018 and the procedures for the accession of Solomon Islands and Tonga are expected to be completed by the end of 2019.

Vanuatu will graduate from Least Developed Countries (LDC) status in 2020, and the date of graduation of Kiribati and Tuvalu will be decided in 2021. Upon graduation from LDC status, these countries will lose the EU's Everything-But-Arms (EBA) preferences. They will fall under the less generous General Scheme of Preferences (GSP) unless they decide to accede to the current EU EPA with PNG, Fiji and Samoa. The Parties to the Agreement are open to consider each country's accession. Vanuatu has already indicated its interest to join the EPA if there is a Services Chapter.

The Pacific countries have raised the importance of services for their economies and asked to initiate discussions to examine the specific market access commitments for a possible Services Chapter. The Parties are open to consider the issue once the ongoing accession procedures are over.

• 6. 

  C ONCLUSIONS AND OUTLOOK

EPA implementation and accession are top priorities, with Fiji still to ratify, PNG having made all its tariff cuts and now seeking to extend export diversification beyond the fisheries sector, Samoa following suite and other Pacific States (Solomon Islands and Tonga) seeking to accede to the Agreement.

• 7. 

  S TATISTICS

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018 EU28 trade with EPA (interim) Pacific countries (mio €)

Imports 893 833 746 992 915 Exports 235 342 279 228 194 Balance -658 -491 -468 -764 -721

Share EPA (interim) Pacific countries in EU28 trade with Extra-EU28 Imports 0,1% 0,0% 0,0% 0,1% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

25-mars-19 Source Trade G2 Statistics/ISDB

Trade EU28: Eurostat COMEXT; Trade EPA (interim) Pacific countries: IMF Dots

Total merchandise trade EU28 with EPA (interim) Pacific countries (mio €)

Growth

EPA (interim) Pacific countries 2017 2018 annual

mio € %

Imports 992 915 -77 -7,7%

Exports 228 194 -34 -14,9%

Balance -764 -721 43

Total trade 1.220 1.109 -111 -9,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with EPA (interim) Pacific countries (mio €)

Growth

EPA (interim) Pacific countries 2017 2018 annual

mio € %

Imports 699 539 -160 -22,8%

Exports 18 22 5 25,6%

Balance -681 -517 164

Total trade 717 562 -155 -21,6%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with EPA (interim) Pacific countries (mio €)

Growth

EPA (interim) Pacific countries 2017 2018 annual

mio € %

EU28 imports 293 376 83 28,3%

EU28 exports 210 171 -39 -18,4%

Balance -83 -204 -122

Total trade 503 547 44 8,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

FIJI

Merchandise trade EU28 2014-2018 2014 2015 2016 2017 2018

EU28 trade with Fiji (mio €) Imports 99 86 61 95 36 Exports 100 177 64 64 67 Balance 1 90 3 -31 31

Share Fiji in EU28 trade with Extra EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0% Exports 0,0% 0,0% 0,0% 0,0% 0,0% Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0% Share EU28 in trade Fiji with world Imports 7,2% 5,1% 3,8% 3,2% 2,9% Exports 10,5% 9,8% 7,4% 12,1% 9,6% Total (I+E) 8,0% 6,3% 4,7% 5,4% 4,2%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Fiji: IMF Dots

Total merchandise trade EU28 with Fiji (mio €)

Growth

Fiji 2017 2018 annual

mio € %

Imports 95 36 -59 -62,1% Exports 64 67 2 3,5% Balance -31 31 61

Total trade 159 103 -57 -35,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Fiji (mio €)

Growth

Fiji 2017 2018 annual

mio € %

Imports 87 25 -62 -71,8% Exports 6 13 7 113,2% Balance -81 -12 69

Total trade 93 37 -56 -59,8%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Fiji (mio €)

Growth

Fiji 2017 2018 annual

mio € %

EU28 imports 8 11 3 42,5%

EU28 exports 58 54 -5 -7,8%

Balance 50 42 -8

Total trade 66 65 -1 -1,7%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Fiji (mio €)

Growth

Fiji 2016 2017 annual

mio € %

Imports 49 130 80 162,8% Exports 153 162 9 5,9% Balance 104 32 -71

Total trade 202 292 89 44,2%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Fiji (mio €)

2013 2014 2015 2016 2017

Imports 100 91 58 49 130 Exports 66 40 233 153 162 Balance -35 -51 175 104 32

Total trade 166 131 291 202 292

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Fiji (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 0 -3

Outward 159 195 185 146 169 FDI Flows

Inward -15 -2

Outward 12 19 -2 44 -34

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

PAPUA NEW GUINEA

Merchandise trade EU28 2014-2018

2014 2015 2016 2017 2018

EU28 trade with Papua New Guinea (mio €)

Imports 794 747 685 897 879

Exports 135 165 214 164 127

Balance -659 -582 -471 -733 -752

Share Papua New Guinea in EU28 trade with Extra

EU28

Imports 0,0% 0,0% 0,0% 0,0% 0,0%

Exports 0,0% 0,0% 0,0% 0,0% 0,0%

Total (I+E) 0,0% 0,0% 0,0% 0,0% 0,0%

Share EU28 in trade Papua New Guinea with world

Imports 3,2% 3,7% 5,3% 4,0% 3,1%

Exports 13,2% 9,4% 9,2% 11,5% 11,2%

Total (I+E) 8,1% 6,8% 7,5% 8,3% 7,7%

25-mars Source Trade G2 Statistics/ISDB 19 Trade EU28: Eurostat COMEXT; Trade Papua New Guinea: IMF Dots

Total merchandise trade EU28 with Papua New Guinea (mio €)

Growth

Papua New Guinea 2017 2018 annual

mio € %

Imports 897 879 -18 -2,0% Exports 164 127 -36 -22,2%

Balance -733 -752 -19

Total trade 1.060 1.006 -54 -5,1%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Agrifood trade EU28 with Papua New Guinea (mio €)

Growth

Papua New Guinea 2017 2018 annual

mio € %

Imports 612 515 -97 -15,9% Exports 12 10 -2 -18,8%

Balance -600 -505 95

Total trade 624 524 -99 -15,9%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

NAMA trade EU28 with Papua New Guinea (mio €)

Growth Papua New Guinea 2017 2018 annual

mio € %

EU28 imports 285 364 79 27,9%

EU28 exports 152 118 -34 -22,4%

Balance -133 -246 -114

Total trade 437 482 45 10,4%

Source Trade G2 Statistics/ISDB from Eurostat COMEXT

Services trade EU28 with Papua New Guinea (mio €)

Growth

Papua New Guinea 2016 2017 annual

mio € %

Imports 43 65 21 49,1% Exports 224 325 101 45,3%

Balance 180 260 80

Total trade 267 390 123 45,9%

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

Services trade EU28 with Papua New Guinea (mio €)

2013 2014 2015 2016 2017

Imports 43 42 68 43 65 Exports 482 176 265 224 325 Balance 439 134 197 180 260

Total trade 525 217 332 267 390

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics

FDI EU28 with Papua New Guinea (mio €)

2013 2014 2015 2016 2017 FDI Stocks

Inward 2 4 2 4 13

Outward 660 1.056 1.441 1.014 1.680 FDI Flows

Inward -1 1 -1 1 8

Outward 133 -87 192 80 737

Source Trade G2 Statistics/ISDB from Eurostat BOP statistics