EUROPEAN COMMISSION

Brussels, 30.10.2019

COM(2019) 563 final

2019/0245(NLE)

Proposal for a

COUNCIL DECISION

on the position to be taken on behalf of the European Union in the General Council of the World Trade Organisation

EXPLANATORY MEMORANDUM

1.Subject matter of the proposal

This proposal concerns the decision establishing the position to be taken on Union's behalf in the General Council of the World Trade Organization (WTO) in connection with the envisaged adoption of a decision on the Review of the Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as Defined in Article 2 of the Agreement on Agriculture.

2.Context of the proposal

2.1.The Marrakesh Agreement establishing the World Trade Organization

The proposed Council Decision seeks to authorise the European Commission to support on Union’s behalf a decision to be taken in the General Council of the World Trade Organization (WTO). The World Trade Organization was established by Marrakesh Agreement (‘WTO Agreement’) that entered into force on 1 January 1995.

The European Union is a party to that Agreement.

2.2.Ministerial Conference and General Council of the World Trade Organization

Pursuant to paragraph 1 of Article IV of the WTO Agreement, the Ministerial Conference has the authority to take decisions on all matters under any of the Multilateral Trade Agreements.

However, pursuant to paragraph 2 of Article IV of the WTO Agreement, in the intervals between meetings of the Ministerial Conference, its functions are conducted by the General Council.

Pursuant to paragraph 1 of Article IX, the WTO bodies strive to take their decisions by consensus.

2.3.The envisaged act of the General Council of the WTO

In December 2013, at the Ninth Session of the WTO Ministerial Conference, (Trade) Ministers adopted a decision on ‘Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as defined in Article 2 of the Agreement on Agriculture’ (WT/MIN(13)/39) (‘TRQ Understanding’).

The objective of the TRQ Understanding is to streamline tariff rate quota administration for agricultural products. In Paragraph 13, the TRQ Understanding envisages its review, taking into account the experience with its operation to date. The review was to be commenced no later than four years following the adoption of the TRQ Understanding. In 2018, the Committee on Agriculture proceeded with the review process. Early 2019, the Secretariat of the Committee on Agriculture issued the draft report to be addressed to the General Council of the WTO giving an account of the developments to date.

Given the lack of consensus among the WTO members on the substantive changes to the TRQ Understanding, the Committee recommends to the General Council to extend the review period until end-2021 and to enhance transparency of TRQ administration (See Annex 2 of the report).

These recommendations (in Annex 2 of the report) should be presented to the General Council in December 2019. The General Council should adopt these recommendations in the form of a decision on the review of the TRQ Understanding.

3.Position to be taken on the Union's behalf

The objective of this proposal is to enable the Union to cause the adoption of a decision on the review of the TRQ Understanding in the December 2019 meeting of the WTO General Council.

From Union’s perspective, the extension of the review period until end of 2021 is crucial, because it allows for the continuation of the existing TRQ Understanding and permits WTO members to hold further discussions concerning the review of this TRQ Understanding.

4.Legal basis

4.1.Procedural legal basis

4.1.1.Principles

Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’

The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’ 1 .

4.1.2.Application to the present case

The General Council of the WTO is a body set up by an agreement, namely the WTO Agreement.

The act which the General Council is called upon to adopt constitutes an act having legal effects. The envisaged act will be binding under international law in accordance with paragraph 2 of Article II and paragraph 3 of Article IX of the WTO Agreement.

The envisaged act does not supplement or amend the institutional framework of the Agreement.

Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.

4.2.Substantive legal basis

4.2.1.Principles

The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union's behalf. If the envisaged act pursues two aims or has two components and if one of those aims or components is identifiable as the main one, whereas the other is merely incidental, the decision under Article 218(9) TFEU must be founded on a single substantive legal basis, namely that required by the main or predominant aim or component.

4.2.2.Application to the present case

4.3.Conclusion

The legal basis of the proposed decision should be the first subparagraph of Article 207(4), in conjunction with Article 218(9) TFEU.

5.Publication of the envisaged act

As the act of the WTO General Council will supplement the WTO Agreement by extending the application of the TRQ Understanding and by providing rules on the better utilization of tariff rate quotas, it is appropriate to publish the Act in the Official Journal of the European Union after its adoption.

2019/0245 (NLE)

Proposal for a

COUNCIL DECISION

on the position to be taken on behalf of the European Union in the General Council of the World Trade Organisation

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207(4) first subparagraph in conjunction with Article 218(9) thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1)The Marrakesh Agreement Establishing the World Trade Organization (‘the WTO Agreement’) was concluded by the Union by Council Decision 94/800/EC of 22 December 1994 2  and entered into force on 1 January 1995.

(2)Pursuant to paragraph 1 of Article IV of the WTO Agreement, the Ministerial Conference of the World Trade Organization (‘WTO’) has the authority to take decisions on all matters under any of the Multilateral Trade Agreements.

(3)Pursuant to paragraph 2 of Article IV of the WTO Agreement, in the intervals between meetings of the Ministerial Conference, its functions are to be conducted by the General Council of the WTO.

(4)Pursuant to paragraph 1 of Article IX, the WTO bodies usually take decisions by consensus.

(5)The Ninth Session of the WTO Ministerial Conference (Bali, December 2013) adopted a Ministerial Decision on Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as defined in Article 2 of the Agreement on Agriculture (WT/MIN(13)/39) (‘the TRQ Understanding’) that governs the management of tariff rate quotas of agricultural products.

(6)Pursuant to paragraph 13 of the TRQ Understanding, a review of operation of the Understanding is to be commenced no later than four years following its adoption, taking into account experience gained up to that time. The objective of this review is to promote a continuing process of improvement in the utilisation of tariff rate quotas.

(7)In accordance with paragraph 13, the Committee on Agriculture proceeded with the review of the TRQ Understanding in 2018. The review findings will be presented to the December 2019 meeting of the General Council in the form of a report issued by the Committee on Agriculture (Report No… ‘Review of the Operation of the Bali Decision on TRQ Administration’, dated ...).

(8)Given the lack of consensus among the WTO members on the substantive amendments to the TRQ Understanding, the report recommends to prolong the review period until the end of 2021, so that a consensus on substantive amendments may be reached. The report further includes recommendations aiming at the increased transparency of TRQ administration.

(9)In its December 2019 meeting, the General Council of the WTO should be invited to consider the adoption of the recommendations laid down in Annex 2 of the Report No… in the form of a decision on the review of the TRQ Understanding.

(10)It is appropriate to establish the position to be taken on the Union's behalf in the General Council of the WTO, as the decision to be adopted will be binding on the Union.

(11)In the General Council of the WTO, the Union is to be represented by the Commission, in accordance with Article 17(1) of the Treaty on European Union (TEU),

HAS ADOPTED THIS DECISION:

Article 1

The position to be taken by the European Commission on the Union's behalf in the December 2019 meeting of the General Council of the World Trade Organization shall be based on the draft Decision adopting the recommendations made to the General Council by the Committee on Agriculture in Annex 2 of its Report No … of ….. attached to this Decision.

Minor changes to the draft Decision may be agreed to by the representatives of the Union in the General Council of the World Trade Organization without further decision of the Council.

Article 2

This Decision is addressed to the Commission.

Done at Brussels,

(1)    Judgment of the Court of Justice of 7 October 2014, C-399/12, Germany v Council, EU:C:2014:2258, paragraphs 61 to 64.

(2)    Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ L 336, 23.12.1994, p. 1).

EUROPEAN COMMISSION

Brussels, 30.10.2019

COM(2019) 563 final

ANNEX

to the

Proposal for a

COUNCIL DECISION

on the position to be taken on behalf of the European Union in the General Council of the World Trade Organisation

ANNEX

REVIEW OF THE OPERATION OF THE BALI DECISION ON TRQ ADMINISTRATION

Report to the General Council

(1)At the Ninth Session of the Ministerial Conference, Ministers adopted the Decision on "Understanding of Tariff Rate Quota Administration Provisions of Agricultural Products, as defined in Article 2 of the Agreement on Agriculture" (WT/MIN(13)/39) (“Bali TRQ Decision”). Ministers instructed the Committee to review and monitor the implementation of Members’ obligations established under the Bali TRQ Decision with the objective that the review will promote a continuing process of improvement in the utilization of tariff rate quotas, commencing no later than 2017, taking into account experience gained up to that time. 1 The Review discussions commenced at the October 2017 meeting of the Committee. 2 At the February 2018 meeting, the Committee agreed to the process and timelines to conduct the Review in document G/AG/W/171. 3 As per the agreed procedure, the review has been conducted through open-ended informal meetings of the Committee scheduled back‑to‑back with the regular meetings of the Committee. 4

(2)Members discussed the Review in four informal meetings of the Committee in 2018 on 20 February, 11 June, 25 September and 26 November. A thematic session on tariff quota administration and underfill was held during the November informal meeting involving the participation of industry representatives. The review discussions also benefitted from a number of written contributions by Members. Similarly, in response to requests from Members and as per the agreed process and timelines to conduct the review, the Secretariat prepared a background paper 5 on tariff quota administration and fill rates to facilitate the Review. Annex 1 includes a list of all written documents considered thus far in the review.

(3)Members have identified the following themes in the review discussions: 1) Effective implementation and follow-up of the substantive obligations arising out of the Bali TRQ Decision; 2) TRQ transparency requirements; 3) Underfill Mechanism. Some elements 6 raised under each of the three themes, including during the thematic discussions in November, are indicated below.

EFFECTIVE IMPLEMENTATION AND FOLLOW-UP

i.Reallocation of unused-licenses within a TRQ; 

ii.Reallocation processes, including regarding country-specific allocations 7 ;

iii.Sharing of experiences and best practices on improving TRQ fill, including reallocation of TRQs under RTAs.

TRQ TRANSPARENCY REQUIREMENTS

i.Timely and complete TRQ notifications;

ii.Prompt reporting of changes in TRQ administration;

iii.Consistent reporting of fill-rates by all Members with TRQ commitments;

iv.Harmonized notifications practices (e.g. for TRQs not opened or scheduled TRQs with no tariff advantage);

v.Reporting of reasons of underfill;

vi.Sharing of national experiences and best practices of TRQ administration;

vii.Special and differential treatment (Burdensomeness of notification requirements);

viii.Linkage with notification requirements in the area of import licensing procedures;

ix.Technical assistance by the Secretariat towards improved notification compliance of Members.

UNDERFILL MECHANISM

i.Differing obligations of Members (paragraph 4 of Annex A);

ii.Special and differential treatment;

iii.Potential less-than-universal applicability in future;

iv.Linkage between Annex B and paragraph 4 of Annex A;

v.Exploration of the causes of underfill;

vi.Targeted examination of TRQ underfill in some specific sectors;

vii.Practical applicability of the Underfill Mechanism (exploration of reasons including potential complexity, as to why it has not yet been invoked, sharing of experiences, simplification of procedural requirements);

viii.Maintenance of list of underfilled TRQs by the Secretariat.

(4)On the issue of future operation of paragraph 4 of the Underfill Mechanism and the associated S&D provision, Members' positions were divergent. Some developing Members maintained that S&D provisions in the Bali TRQ Decision should not be diluted; some other Members argued that the S&D treatment for developing countries should not lead to a carve out and that the beneficiary developing countries should rather assume commitments with regard to the management of TRQs taking into account their development status.

(5)Several Members considered the scope of this review to be limited to seeking improvement in TRQ administration to distinguish it from the market access negotiations. Some others referred to the possibility of taking up the TRQ-related issues in the market access negotiations.

(6)Some Members considered that based on Members' submissions, the Committee should examine the reasons why the underfill mechanism has not yet been invoked.

(7)Pursuant to paragraphs 13-15 of the Bali TRQ Decision (WT/MIN(13)/39), the Committee at its meeting on 30 October 2019 agrees to the following recommendations as included in Annex 2 to this report for consideration by the General Council.

Annex 1

Annex 2

(1)[The timeframe specified in Paragraph 14 and footnote 2 of the Bali TRQ Decision for a decision on Paragraph 4 of Annex A shall be extended to the end of 2021 or MC13, whichever comes first. [For greater certainty, if neither Ministerial Conference nor the General Council decides, prior to the end of 2021, to extend paragraph 4 of Annex A of the Bali TRQ Decision in its current or a modified form, paragraph 4 of Annex A shall, subject to paragraph 15 of that Decision, no longer apply as of January 1, 2022 [in respect of those Members listed in Annex B, as well as any Member which requests before the end of 2021 to be added to Annex B].]

(2)In the interim, the Committee on Agriculture ("the Committee") will continue subject to discussions on the application of paragraph 4 of Annex A. [For greater certainty, while this discussion is underway, the Bali TRQ Decision, along with its Annexes, shall be maintained.]

(3)The Committee will provide recommendations to the General Council with regard to the application of paragraph 4 [of Annex A and in accordance with paragraph 14] before the end of 2021.]

(4)Recognizing the importance of enhanced transparency of TRQ administration and fill rates as well as a timely submission of notifications by Members, and acknowledging that the on-line agriculture notification system should lead to improved harmonization, the Committee agrees on the following:

(a)The Secretariat will prepare a list of the existing TRQ notification practices of Members including in cases where a scheduled TRQ was not opened.

(b)The Committee will initiate discussions on harmonization of Members' TRQ notification practices, including for the TRQ fill rates.

(c)The Committee encourages Members to include an explanation in their Table MA:2 notifications in cases where scheduled TRQs are not opened.

(d)The Secretariat will regularly update the information on TRQ administration and fill rates as included in G/AG/W/183 10 as well the updated information on which Members have notified fill rates and on questions raised in the Committee concerning fill rates.

(e)The Committee will examine based on submissions by Members the reasons why the Underfill Mechanism has not yet been invoked.

(5)The Committee agrees to undertake regular reviews of the operation of the Bali TRQ Decision every 3 years after the conclusion of this review. These regular reviews will include, inter alia, an examination of the utilization of the Underfill Mechanism by Members based on submissions by Members.

__________

(1)    Paragraph 13 of WT/MIN(13)/39. No experience with regard to recourse to the Underfill Mechanism has yet been reported.

(2)    Section 2.2.1 of G/AG/R/86 refers.

(3)    Section 2.5.1 of G/AG/R/87 refers.

(4)    At the June 2019 meeting, the Committee agreed to extend the timeline to the October 2019 meeting of the Committee to finalize the report of the Review.

(5)    G/AG/W/183.

(6)    There is no agreement among Members on these elements or their treatment in the recommendations.

(7)    Paragraph 9 of the Bali Ministerial Decision on TRQ refers to the reallocation process. Additionally, footnotes 3 and 5 of Annex A of the Bali Decision refer to the rights of Members holding a country-specific allocation specifically in the context of the underfill mechanism.

(8)    Document G/AG/W/171 of 9 February 2018.

(9)    WT/MIN (13)/39 AND WT/L/914 dated 11 December 2013.

(10)    The Secretariat background note may specifically include a list of TRQs where no Table MA:2 notification has been submitted or where the fill rate is below 65%.