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2014

Annual Activity Report

Directorate-General for Trade

Model template

2013

Ref. Ares(2015)1422896 - 31/03/2015

trade_aar_2014_final

Table of Contents

ACRONYMS 1

INTRODUCTION: 2

THE DIRECTORATE GENERAL IN BRIEF ..................................................................................................................................... 2 THE YEAR IN BRIEF .............................................................................................................................................................. 3

EXECUTIVE SUMMARY 5

KEY PERFORMANCE INDICATORS ........................................................................................................................................... 5 POLICY HIGHLIGHTS OF THE YEAR .......................................................................................................................................... 7 KEY CONCLUSIONS ON RESOURCE MANAGEMENT AND INTERNAL CONTROL EFFECTIVENESS ............................................................... 8 INFORMATION TO THE COMMISSIONER(S) ................................................................................................................................ 8

1. POLICY ACHIEVEMENTS 9

1.1 ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES ........................................................................................... 9 1.1.1 TRADE POLICY: GENERAL OBJECTIVE 1 - ENSURING THE BEST TRADE CONDITIONS FOR EU BUSINESS, WORKERS AND

CONSUMERS 10 1.1.2 TRADE POLICY: GENERAL OBJECTIVE 2 – FOSTER SUSTAINABLE DEVELOPMENT FOR DEVELOPING COUNTRIES ............... 13 1.1.3 SPECIFIC OBJECTIVE 1 – THE MULTILATERAL AGENDA .......................................................................................... 15 1.1.4 SPECIFIC OBJECTIVE 2 – THE BILATERAL AGENDA ............................................................................................... 19 1.1.5 SPECIFIC OBJECTIVE 3 – SUSTAINABLE DEVELOPMENT ........................................................................................ 26 1.1.6 SPECIFIC OBJECTIVE 4 – MONITORING AND MARKET ACCESS ................................................................................ 29 1.1.7 SPECIFIC OBJECTIVE 5 – TRADE DEFENCE ......................................................................................................... 38 1.2 ECONOMY AND EFFICIENCY OF SPENDING AND NON-SPENDING ACTIVITIES. .............................................................. 42 1.2.1 EXAMPLE 1 : HR MANAGEMENT ....................................................................................................................... 42 1.2.2 EXAMPLE 2 : STREAMLINING FINANCIAL MANAGEMENT ......................................................................................... 42

2. MANAGEMENT OF RESOURCES 44

2.1 MANAGEMENT OF HUMAN AND FINANCIAL RESOURCES BY DG TRADE ..................................................................... 45 2.2 BUDGET IMPLEMENTATION TASKS ENTRUSTED TO OTHER DGS AND ENTITIES ........................................................... 50 2.3 ASSESSMENT OF AUDIT RESULTS AND FOLLOW UP OF AUDIT RECOMMENDATIONS ..................................................... 51

3. ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS 55

4. MANAGEMENT ASSURANCE 58

4.1 REVIEW OF THE ELEMENTS SUPPORTING ASSURANCE ........................................................................................... 58 4.2 RESERVATIONS AND OVERALL CONCLUSION ON ASSURANCE .................................................................................. 58

5. DECLARATION OF ASSURANCE 60


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Acronyms

ACP: Africa, Caribbean, Pacific

CJEU: Court of Justice of the European Union

CETA: Comprehensive Economic and Trade Agreement

DC: Developing Countries

DCFTA: Deep and Comprehensive Free Trade Area (trade part in Association Agreement)

DDA: Doha Development Agenda

ECJ: European Court of Justice (now CJEU)

EP: European Parliament

EAC: East African Community

EPA: European Partnership Agreement

ESA: Eastern and Southern Africa

FTA: Free Trade Agreement

GATS: General Agreement on Trade in Services

GPA: Government Procurement Agreement (WTO)

GSP+: Generalised Scheme of Preferences Plus (Special Incentive Arrangement for Sustainable Development and Good Governance)

iEPA: Interim European Partnership Agreement

ILO: International Labour Organisation

ISDS: Investor to State Dispute Settlement

IPR: Intellectual Property Rights

ITA: Information and Technology Agreement

NTB: Non-tariff barriers

OECD: Organisation for Economic Co-operation and Development

PCA: Partnership and Cooperation Agreement

SADC: Southern African Development Community

SIA: Sustainability Impact Assessment1

SPS: Sanitary and Phytosanitary

STRI: The Services Trade Restrictiveness Index

TBT: Technical Barriers to Trade

TDI: Trade Defence Instruments

TISA: Trade in Services Agreement

TTIP: Transatlantic Trade and Investment Partnership

WTO: World Trade Organisation

1 SIAs contribute to the formulation of sound, evidence-based trade policies by assessing the economic, social,

human rights and environmental implications of a trade negotiation. Carried out during the negotiation they help integrate sustainability into trade policy


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INTRODUCTION:

The Directorate General in brief

DG Trade is in charge of developing and implementing the common trade policy of the European Union in accordance with the objectives set out in Article 207 of the Treaty on the Functioning of the EU. DG Trade supports the EU's Trade Commissioner in shaping a trade environment that is good for European citizens and for European business and helping world trade and development, thereby boosting competitiveness, jobs and growth in the process.

DG Trade negotiates bilateral and multilateral trade agreements, and ensures that the rules agreed are actually applied, works closely with the WTO and other multilateral institutions. This means tackling international trade and customs barriers, backed up where needed with EU legislation. DG Trade covers all areas from manufactured goods to services, intellectual property and investment. DG Trade ensures that businesses can operate fairly in the EU and across the world and makes full use of its powers to tackle unfair competition, dumping and subsidization. Success in Europe is inextricably bound up with the success of our trading partners, both in the developed and developing world. For this reason, sustainable development and development policy in general are central to the overall approach.

While DG Trade does not manage any specific spending programme, it has a budget of almost €20 Mio2 (€14.8 Mio in its operational budget and almost €5 Mio in its administrative budget). This budget has remained stable over recent years. Without pre-empting the decisions by the budgetary authorities on the annual budgets, the budget is expected to grow modestly over the coming years. At the same time trade-related objectives are embedded in the different financial programmes managed by other Commission departments, mainly under Heading 4 of the Multiannual Financial Framework (EU as a global player).

Additionally, as the EU's prime negotiator DG Trade’s success draws strongly on its close working relationships with the European External Action Service (EEAS). More than 200 of its staff are working in the EU's Delegations around the world. In playing its role in trade policy, DG Trade also works very closely with the European Parliament and Council of the European Union, the Member States and other international organisations, such as the WTO and OECD. In this context, the increased need for transparency and accountability are particularly relevant in a sensitive area such as trade policy.

In order to fulfil its mission DG Trade has two related, but in nature distinct, operational activities: trade policy and trade defence; and is organised into eight

2 These appropriations are mainly operated under the Commission’s prerogatives or under its administrative autonomy (Article 54(2) d. and Article 54(2) e. of the Financial Regulation). All actions are implemented as direct management (mainly public procurement and contributions to international organisations). The detail of DG Trade's budget is found in policy area 20 of the budget.


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directorates. The Director General is supported in managing operations by two Deputy Directors General, who bear overall responsibility for Directorates B, C and D; and E, F, G and H respectively. Operational activities are supported by the Policy, Coordination, Information and Resources Directorate (A) and the Internal Audit and Evaluation Unit; both of these entities reporting directly to the Director General. With the entry into force of the Lisbon Treaty and the creation of the EEAS, operational directorates also have trade staff posted in the Delegations, for which DG Trade is Appointing Authority. DG Trade is a well-managed and efficiently working DG but today works under considerable pressure both at Headquarters and in our Delegations. In a climate of staff reductions across the Commission, it remains challenging to continue to support the current agenda, perform outreach and raise public awareness of our work and effectively carry out the increased implementation work.

The year in brief

Trade is an important means of achieving growth and creating jobs for the EU's economy. Trade links Europe to the new global growth centres and acts as a source of productivity gains. The contribution of external demand to GDP is currently the EU's most important source of growth, as domestic demand components, both public and private, remain weak. The EU benefits very significantly from globalisation and is well placed to gain even more from growth in trade.

In this context, 2014 has been a busy and productive year for DG Trade.

Negotiations were concluded for six important trade deals:

Economic Partnership Agreements were concluded with three African regions, namely West Africa, South African Development Cooperation and the East African Community. Once the legal texts have been finalised and the agreements have been steered through the Council and the European Parliament, this will mean new trade agreements in force with a further 27 countries.

In September, President of the Commission, and Stephen Harper, Prime Minister of Canada announced the end of the negotiations for a comprehensive economic and trade agreement between the EU and Canada. The legal review of the text has been initiated, and will continue in 2015 before it will be translated, and finalised.

Discussions aiming at including investment provisions in the Singapore Free Trade Agreement were concluded, and the legal scrubbing is currently on-going.

The protocol of accession to integrate Ecuador in the Colombia/Peru Free Trade Agreement was finalised in 2014.

In addition, we have made headway in discussions with some of our most important strategic partners, and in particular with the United States of America leading to a Transatlantic Trade and Investment Partnership. Due to expanded public interest in these negotiations and building on the momentum of the


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incoming Commission, we have been able to take transparency to another level by more active communication, by creating a TTIP Advisory Group and by making public negotiation texts for the first time. We also made good progress with our Japanese and Vietnamese trade partners, hoping to draw negotiations to a close with Viet Nam in 2015.

Trade agreements are being provisionally applied in two more countries, namely in Georgia and Moldova as part of the Association Agreements signed in June 2014. At the same occasion, the Association Agreement with Ukraine was signed, but in order to avoid further destabilisation of the country, the EU postponed the provisional application of the Deep and Comprehensive Free Trade Agreement until January 2016.

Furthermore, following up on the agreement obtained at the WTO Ministerial Conference at the end of 2013, DG Trade prepared all the necessary positions to allow the EU to formally adopt the Trade Facilitation Agreement together with all WTO members.

Finally, we were instrumental in launching talks for an agreement to liberalise global trade in environmental goods with 13 other WTO members as well as an investment agreement between the EU and Myanmar.


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EXECUTIVE SUMMARY

The Annual Activity Report is a management report of the Director-General of DG Trade to the College of Commissioners. It is the main instrument of management accountability within the Commission and constitutes the basis on which the Commission takes its responsibility for the management of resources by reference to the objectives set in the management plan and the efficiency and effectiveness of internal control systems, including an overall assessment of the costs and benefits of controls.

Key Performance Indicators

RESULT/IMPACT INDICATOR

TR

EN

D

TARGET AND MILESTONES LATEST KNOWN RESULTS

Value or percentage of EU trade covered by zero or preferential duties

80% by 2017

Beyond until 2020: further maintain or improve

Level of EU investment in third countries and third country investment into the EU

In the mid-term, given the uncertainty of the global economic outlook, maintain investment flows. In the long-term (2020), maintain positive growth


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Value or diversification of preferential imports from developing countries (incl. ACP countries) into the EU (GSP, FTAs, EPAs)

In the mid-term, given the uncertainty of the global economic outlook, maintain trade growth. In the long-term (2020), growing and increasingly diversified preferential imports from developing countries to the EU

The above graph shows an increase over time in particular since the EU started negotiating Economic Partnership Agreements (EPAs) in 2002. A slight decline is noticeable between 2012 and 2013, but the tendency is overall on track.

Preference utilisation rates of agreements provisionally applied or entered into force (Extent to which operators use the EU preferential agreements)

Improve the percentage according to recent trend Preference utilisation - EU imports

FTA 2010 2011 2012 2013

S-Africa 89% 89% 90% 91%

Mexico 65% 69% 69% 67%

Chile 89% 91% 93% 93%

Korea - 59% 77% 81%

Source: ISDB/Eurostat

Preference utilisation - EU exports

FTA

2011 2012 2013

Mexico

58% 52%(*) 48%(*)

Chile

81% 79% 78%

Korea

na 63% 66% Source: local statistical offices. (*) lower-bound estimate based on incomplete data

Percentage of payment files executed within legal deadlines

> 95% 2013: 94% 2014: 88.7% The decline is due to the shortfall in payment appropriations end of 2013 and 2014.


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Policy highlights of the year

In the context of the EU's multilateral relations on trade, the Doha Development Agenda was revived at the end of 2013. This has in 2014 resulted in the adoption of one of the broad pillars agreed upon, namely the Trade Facilitation Agreement. The EU has also engaged in a number of plurilateral talks, such as Trade in Services and Environmental Goods, with a certain number of WTO members. Unfortunately the review of the Information Technology Agreement failed to conclude in 2014, but we are working towards a solution in 2015.

In the meantime, our bilateral agenda of implementation and negotiation is moving ahead. Our agreements with Georgia and Moldova entered into force, while deals were struck with Canada, Singapore and Ecuador. Investment provisions were agreed with Singapore to become part of the overall Free Trade Agreement, and Ecuador will now be able to adhere to the recent multi party trade agreement the EU has with Colombia and Peru.

2014 also saw a major breakthrough in the African regions, where negotiations for a European Partnership Agreement were concluded with West Africa, the South Africa Development Cooperation and East African Community, totalling 27 countries.

In terms of progressing in on-going trade talks, much focus has been laid on achieving a balanced and transparent Trade and Investment Partnership with the United States of America. In this context, we held a public consultation on the investment aspects of the TTIP agreement. Headway was also made with other strategic partners such as Japan for a Free Trade Agreement and China for an investment agreement. Negotiations with the Vietnamese should be drawing to a close in 2015. Our bilateral agenda reaches out to all parts of the world.

Implementation and enforcement of our agreements is becoming an increasingly important part of DG Trade's work. With six new agreements in the pipeline, we are building on the practical experience of our deals with South Korea, Cariform, Central America and Peru/Colombia. According to the Annual Report on the Korea FTA, based on two years of implementation of the FTA, it is clear that in terms of development of bilateral trade, the FTA has worked well overall in particular for the EU. On the other hand, a study on implementation and effects of the Caribbean EPA, found that the active take-up of regulatory and market challenges and opportunities in both the Caribbean and the EU is still somewhat struggling.

2014 witnessed the publication of a revised strategy for the protection and enforcement of intellectual property rights in non EU member states and customs regulation on IPR enforcement at the EU border.

On the legislative side the GSP reforms started to implement in 2014 and a number of implementing acts have been adopted during the year. Two new pieces of trade legislation entered into force in 2014. One Regulation manages any possible financial responsibility deriving from investor-to-state dispute settlement, and the other lays down new internal rules allowing for more effective enforcement of international trade agreements. The Commission also tabled a legislative proposal on minerals originating


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from conflict and high risk areas, which is now being scrutinized by the European Parliament and the Council. As to the proposals for the so called "International Procurement Instrument" and legislative changes to the basic anti-dumping and anti-subsidy regulations, submitted respectively in 2012 and 2013, not much progress was obtained in the Council despite the Presidency's attempts to find a comprise solution.

Last but not least, we resolved a number of trade defence cases and while remaining vigilant to ensure that all our trading partners play by the rules we have several on-going WTO dispute settlement cases against Russia on recycling fees, pork meat, anti-dumping on light commercial vehicles and import duties.

Key conclusions on resource management and internal

control effectiveness

In accordance with the governance statement of the European Commission, DG Trade conducts its operations in compliance with the applicable laws and regulations, working in an open and transparent manner and meeting the expected high level of professional and ethical standards. The Commission has adopted a set of internal control standards, based on international good practice, aimed to ensure the achievement of policy and operational objectives. As required by the Financial Regulation, the Director-General has put in place the organisational structure and the internal control systems suited to the achievement of the policy and control objectives, in accordance with the standards and having due regard to the risks associated with the environment in which it operates. DG Trade has assessed the effectiveness of its key internal control systems during the reporting year and has concluded that the internal control standards are effectively implemented. Furthermore, DG Trade has taken measures to further improve the efficiency of its internal control systems, notably of the internal control standards prioritized in 2013, as reported in Part 3. In addition, DG Trade has systematically examined the available control results and indicators, as well as the observations and recommendations issued by internal auditors and the European Court of Auditors. These elements have been assessed to determine their impact on the management's assurance as regards the achievement of control objectives. Please refer to Part 2 for further details. In conclusion, management has reasonable assurance that, overall, suitable controls are in place and working as intended; risks are being appropriately monitored and mitigated; and necessary improvements and reinforcements are being implemented. The Director General, in his capacity as Authorising Officer by Delegation has signed the Declaration of Assurance.

Information to the Commissioner(s)

The main elements of this report and assurance declaration have been brought to the attention of Commissioner Malmström, responsible for Trade.


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1. POLICY ACHIEVEMENTS

1.1 Achievement of general and specific objectives

In 2014 DG Trade has pursued two general objectives, namely 1) Contributing to European smart, inclusive and sustainable growth by ensuring the best trade conditions for EU business, workers and consumers, and 2) Fostering sustainable economic, social and environmental development in particular for developing countries (DC).


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1.1.1 Trade Policy: General objective 1 - Ensuring the best trade

conditions for EU business, workers and consumers

a) Performance tables

TRADE POLICY - GENERAL OBJECTIVE 1

CONTRIBUTE TO EUROPEAN SMART, INCLUSIVE AND SUSTAINABLE GROWTH BY ENSURING THE BEST

TRADE CONDITIONS FOR EU BUSINESS, WORKERS AND CONSUMERS

Non-spending

IMPACT INDICATOR 1: VALUE OR PERCENTAGE OF EU TRADE COVERED BY ZERO OR PREFERENTIAL DUTIES

(SOURCE: EUROSTAT)

Baseline (2009) Milestone Current situation Target until 2020

EU 27 imports covered by zero or preferential duties in 2009 constituted 76% of all imports

80% by 2017

Maintain or improve3

IMPACT INDICATOR 2: EU EXPORTS/ IMPORTS OF MANUFACTURED PRODUCTS TO THIRD COUNTRIES (EXTRA EU-28)

(SOURCE: EUROSTAT)


The EU-27 manufacture trade with countries outside the EU territory amounted to the following figures in 2009:

Imports: 739 billion euro

Exports: 896 billion euro

Given the uncertainty of the global economic outlook, maintain trade growth

Maintain positive growth2

3 In view of the increasing number of bilateral agreements being negotiated and concluded, and with the prospect of reaching an agreement in the multilateral framework, we can expect this figure to increase steadily. However, due to the influence of numerous external factors, it is difficult to set a more precise target.


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IMPACT INDICATOR 3: EU EXPORTS/ IMPORTS OF SERVICES TO THIRD COUNTRIES (EXTRA EU-28)

(SOURCE: EUROSTAT)


EU-27 trade in commercial services with countries outside the EU territory amounted to the following figures in 2009:

Imports: 422 billion euro

Exports: 505 billion euro


Maintain positive growth2

IMPACT INDICATOR 4: LEVEL OF EU INVESTMENT IN THIRD COUNTRIES AND THIRD COUNTRY INVESTMENT INTO THE EU

(SOURCE: EUROSTAT)


The level of EU investment in countries outside the EU territory in 2009:

3,751 billion European Commission

The level of non-EU member states' investment in EU in 2009:

2.783 billion euro

Given the uncertainty of the global economic outlook, maintain investment flows

Positive growth reducing negative impact of the global economic slowdown2

b) Narrative

It is the Commission's continuous aim to ensure the best competitive conditions and opportunities for European firms, in order to make a substantial contribution to the growth and the competitiveness of the European economy. In this context, external economic relations have a crucial role to play in the EU’s jobs and growth agenda. In parallel with other initiatives taken in the framework of the Europe 2020 strategy, the DG Trade continues to implement our trade strategy of reciprocal market opening.

The first impact indicator shows how the free trade agreements negotiated by DG Trade are instrumental in covering imports by zero or preferential duties. This in turn means benefitting growth and opening possibilities for creating jobs.

EU27 FDI with Extra-EU27

(billion euro)


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The graphs showing the current situation under impact indicators two and three clearly illustrate that trade in manufactured goods and services have increased over the years, and in particular since the global economic crisis kicked in. This is of course only partly attributable to the Commission's trade policy as our efforts are also influenced by other broader factors such as socio-economic changes, political priorities and lack of third party engagement, as we have seen in the framework of the Doha Development Agenda. The figures shown furthermore indicate trade which is not covered by a preferential agreement negotiated by the EU.

c) Conclusion

As evidenced above, the part on contributing to European smart, inclusive and sustainable growth by ensuring the best trade conditions for EU business, workers and consumers of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year.


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1.1.2 Trade Policy: General objective 2 – Foster sustainable

development for developing countries


TRADE POLICY - GENERAL OBJECTIVE 2

FOSTER SUSTAINABLE ECONOMIC, SOCIAL AND ENVIRONMENTAL DEVELOPMENT IN PARTICULAR FOR

DEVELOPING COUNTRIES (DC)4

Non-spending

IMPACT INDICATOR 1: VALUE OR DIVERSIFICATION OF PREFERENTIAL IMPORTS FROM ACP COUNTRIES INTO THE EU

(SOURCE: DG TRADE/EUROSTAT COMEXT)

Baseline (2009/2012) Milestone Current situation Target until 2020

EU-27 imports from African, Caribbean and Pacific countries totalled in 58 billion euro in 2009

EU-27 imports from ACP by region in 2012 in million euro:

West Africa: 42,304

SADC: 33,634

Central Africa: 11,637

Caribbean: 4,326

ESA: 3,842

EAC: 2,205

Pacific: 1,309


Growing and increasingly diversified preferential imports from developing countries to the EU2

4 This applies primarily to ACP countries (Africa, Caribbean, Pacific region) and not to advanced or emerging economies such as Brazil, Russia, India, China and South Korea.


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IMPACT INDICATOR 2: LEVEL OF INVESTMENT FLOWS BETWEEN THE EU AND ACP COUNTRIES

(SOURCE: EUROSTAT)

Baseline (2009) Milestone Target until 2020

EU-27 Foreign Direct Investment stocks with ACP countries amounted to the following figures in 2009:

Outward stocks: 51 billion euro

Inward stocks: 170 billion euro

Given the uncertainty of the global economic outlook, maintain investment flows

Maintain momentum of growth2

b) Narrative

The EU stays committed to contributing to a greener, more sustainable global economy which actively helps people around the world to move out of poverty.

Trade policy is also used to reinforce other important international priorities such as: supporting the fight to protect our environment and reversing global warming; promoting decent work for all and supporting improvements in working conditions for workers worldwide and ensuring high standards of health and safety for the products we buy and sell while supporting developing countries to meet these standards.

In this context the figures highlighted under impact indicator 1, show an increase over time in imports of merchandise from the ACP countries in particular since the EU started negotiating Economic Partnership Agreements (EPAs) in 2002. A slight decline is noticeable between 2012 and 2013, but the tendency is overall on track. Investment chapters can also be negotiated under the EPAs, which could in due course influence the EU's foreign direct investment stocks with the ACP countries.

These indicators represent the best approximation possible, and it cannot be excluded that the EU's efforts are influenced by other broader external factors such as socio-economic changes, political priorities and third party engagement. Long-term changes in aggregated economic metrics also depend on the overall economic climate and are therefore only partially due to the achievements of the EU's trade policy; a policy which creates opportunities, but depends on people and businesses to put them into real trade flows.

c) Conclusion

As evidenced above, the part on fostering sustainable development of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year.


1.1.3 Specific objective 1 – The multilateral agenda


CONTRIBUTE TO EUROPEAN SMART, INCLUSIVE AND SUSTAINABLE GROWTH BY ENSURING THE

BEST TRADE CONDITIONS AND OPPORTUNITIES FOR EU OPERATORS, WORKERS AND CONSUMERS

IN NEGOTIATING AGREEMENTS AT A MULTILATERAL LEVEL

NON-SPENDING

Result indicator 1 Baseline Current situation Target

Regarding trade liberalisation in goods, average level of bound MFN (Most Favoured Nation) tariffs for all products in developed countries and key emerging economies

Source: WTO World Tariff Profiles 2013

Examples of figures of 20135:

Argentina: 31.8 Brazil: 30.8 China: 9.1 India: 34.5 Russia: 7.2 Australia: 11 Japan: 2.6 US: 3.3 (EU: 3.9)

Examples of figures of 20146:

Argentina: 31.7 Brazil: 30.8 China: 9.1 India: 34.6 Russia: 7.2 Australia: 11.0 Japan: 2.5 US: 3.3

(EU: 3.9)

For NAMA: Substantial reduction of bound and applied tariffs to levels comparable to those of the EU in particular for industrialised countries as well as, to the extent possible, for the most advanced and important emerging economies, and a significant reduction in other developing countries which are not LDCs

On 27 November 2014, the WTO-General Council extended the deadline to prepare the post-Bali DDA work programme to July 2015. The EU is committed to preparing a work programme which puts the WTO on a realistic and credible path towards the conclusion of the DDA.


Regarding trade liberalisation in services, level of commitments undertaken by major economies

Source: World Bank (WB) STRI7. The Services Trade Restrictiveness Index (STRI) of the WB gives a broad indication of the level of openness of major economies for a number of services sectors

STRI 2013

Brazil: 22.5 China: 36.6 Russia: 25.7 India: 65.7 Thailand: 48 Indonesia: 50 Vietnam: 41.5

The maximum restriction is 100, which means that 0 is a completely open market

The level of openness of economies does not change every year. The day we manage to obtain commitments closer to the autonomous level of liberalisation of our partners, the indicator will change8

Bring commitments from non-LDC (Least Developed Countries) WTO members close to their autonomous level of trade liberalisation

Develop new rules and enhance existing GATS rules

5 For remaining figures, please refer to : http://www.wto.org/english/res_e/booksp_e/tariff_profiles13_e.pdf

6 For remaining figures, please refer to : http://www.wto.org/english/res_e/booksp_e/tariff_profiles14_e.pdf

7 http://iresearch.worldbank.org/ServiceTrade/ The World Bank STRI covers the following sectors: Financial (insurance and banking), Telecommunications, Transports (except inland waters), Professional (auditing, accounting, legal), Retail services. Moreover, mode 2 is not covered.

8 This WB index, released in 2012 has 2008 as the reference year and these figures have not been updated neither will be in

the near future. At the moment the WB is NOT working on this index.


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GATS negotiations started in 1995. Due to the impossibility to engage all partners, Trade in Services Agreement (TiSA) negotiations started in 2013 with a reduced number of partners. The plurilateral negotiations in the context of TiSA (see below) are meant to be integrated into be multilateral system in due course. The outcome of the current multilateral negotiations on services in the DDA framework (post-Bali process) remains uncertain.

MAIN OUTPUTS IN 2014 - SPECIFIC OBJECTIVE 1

Description Current situation target

Trade Facilitation Agreement

Achieved with some delay as some WTO Members blocked decisions that were originally planned for July 2014

Deadline for Work Programme extended to July 2015

Finalise agreement on Trade Facilitation by 2015

Final draft of Work Programme by end of 2014

Further to the outcome of the 2013 Bali 9th Ministerial Conference, which foresaw that the Agreement on Trade Facilitation should be finalised and a new Work Programme developed, DG Trade facilitated bringing forward the WTO Doha Development Agenda (DDA) negotiations where possible. This work included in particular Trade Facilitation negotiations and work on development-related issues. This resulted in the adoption of the Trade Facilitation Agreement (TFA) on 27 November 2014. The Commission is currently working on the EU ratification of the TFA. The WTO General Council extended the deadline to prepare the post-Bali DDA work programme to July 2015. The EU is committed to preparing a work programme which puts the WTO on a realistic and credible path towards the conclusion of the overall DDA. In 2015, DG Trade envisages to contribute to the Trust Fund which will be set up by WTO.

Preferential Rules of Origin guidelines

The EU is engaged to contribute to the work carried out by the WTO-Committee on Rules of Origin

Annual revision

During the 9th WTO Ministerial Conference, an LDC package on preferential Rules of Origin guidelines was adopted. In the course of 2014, DG Trade has been following committedly the WTO process of reviewing the compliance of developed countries.

Information Technology Agreement (ITA)

ITA was close to conclusion end of 2014, but progress will depend on political will to bridge the final gaps

Depending on political will, conclude agreement in 2014

The 1996 Information Technology Agreement (ITA) provides for WTO participants to completely eliminate duties on IT products covered by the Agreement. In recent years, DG Trade has participated engagingly in finalising the ITA expansion, which intends to cover products of significant export interest for the EU whilst providing for an adequate treatment for the most sensitive products for the EU. We have also continued the process on Non-tariff barriers (NTBs). In 2014 the ITA expansion came close to a deal, which could unfortunately not be struck due to lack of political will from all participants.

Trade in Services Agreement (TiSA) Five negotiation rounds held

Good progress achieved

Advance negotiations, in particular with regard to various chapters on rules (financial services, ICT, maritime services, domestic regulations) and market access commitments

Include as many partners as possible, in particular emerging economies

The TiSA is a trade agreement currently being negotiated by 24 members of the WTO. It is based on the WTO's General Agreement on Trade in Services (GATS), which involves all WTO members. The key provisions of the GATS – scope, definitions, market access, national treatment and exemptions – are also found in TiSA negotiations started in 2013 with the objective of subsequent multilateralisation.

In 2014 five rounds of negotiations were organised of which the EU hosted and chaired two. On regulatory disciplines, most of the proposals were turned into negotiating texts. These texts are being bracketed and some provisions are already stabilised. The EU submitted a proposal on government procurement (co-sponsored with Norway) and proposed a series of ambitious standards, including on mode 4. On market access, 21 offers were


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tabled and reviewed in plenary setting.

In parallel, bilateral market access negotiations have started. The EU publicly supported the incorporation of China and Uruguay in TiSA. Consensus among participants was reached on incorporation of Uruguay in December 2014, and thus Uruguay joined TiSA in early 2015.

A sustainability impact assessment is on-going with an objective to be concluded in 2015.

Environmental Goods Agreement Announcement in January 2014

Start of negotiations in July 2014

4 rounds completed

Initiation Q1 2014

In July 2014 the EU and 13 other members9 of the World Trade Organization (WTO) launched negotiations to liberalise global trade in environmental goods. This ’green goods initiative’ aims to remove barriers to trade and investment in ’green’ goods, services and technologies.

The negotiations are ongoing. Three rounds took place in 2014 with a 4th round in January 2015. A sustainability impact assessment was launched end-2014 with an objective to be concluded end-2015.

Council decisions for the signature and conclusion of the compensation agreements under GATS following the EU27 enlargement.

Proposal for Council decision submitted

Agreement not yet reached

Adoption in Q1 2014

Based on the 2013 proposal to the Council to sign and conclude the compensation agreements under GATS following the EU27 enlargement, discussions are being undertaken with affected WTO members about re-signing the agreements on EU25 consolidation. Unfortunately no agreement has been reached so far, and therefore alternative solutions are being explored.

Review of the WTO Dispute Settlement Understanding

Limited progress Conclude at the WTO Ministerial Conference in 2015

Despite continued effort from the EU to work towards concluding negotiations on revisions to the WTO Dispute Settlement Understanding ("DSU review" negotiations), there is only limited progress. However, the process continues with a view to progressing before the next WTO ministerial in December 2015.

WTO accessions of Kazakhstan, Serbia, Bosnia Herzegovina, Afghanistan, Azerbaidjan, Algeria and ACP countries (Bahamas & Seychelles

Seychelles: achieved

Afghanistan: achieved. Formal completion pending

Kazakhstan: close to conclusion

Serbia : progressing

Accession of countries in Q3 and Q4 2014

The EU has contributed to pursuing WTO accession negotiations with a series of new countries.

For two countries the objective has been achieved, namely for the Seychelles, and for Afghanistan. As to the latter, formal completion is pending a final meeting of the Working Party. Kazakhstan accession negotiation has entered the end-game following agreements reached between Kazakhstan and the EU which have been endorsed by other WTO Members. Serbia accession is moving forward but GMO, which is politically very sensitive in Serbia, remains the most important outstanding issue multilaterally. Bilateral negotiations with other WTO Members are still ongoing.

Trade Policy Review meetings 13 reviews held for 17 countries in 2014

16 TPR meetings scheduled in 2014

In 2014, we continued active participation and representation of EU interests in TPR meetings at main trading partners’ Trade Policy Review (TPR) meetings. These covered Tonga, Malaysia, Myanmar, Qatar, Kingdom of

9 Australia, Canada, China, Costa Rica, Chinese Taipei, Hong Kong (China), Japan, Korea, New Zealand, Norway, Switzerland,

Singapore, United States


18

Bahrain and Oman, Ghana, Mongolia, Organization of Eastern Caribbean, States (OECS), China, Panama, Chinese Taipei, Mauritius and Djibouti, Hong Kong, China, United States of America, Due to the political situation in some countries, the scheduled Trade Policy Review had to be cancelled.

b) Narrative

The WTO and the multilateral process of trade liberalisation remain central to EU trade policy. The main objective of multilateral and plurilateral negotiations is to liberalise trade in goods and services. This has in 2014 particularly been pursued through the adoption of the Trade Facilitation Agreement, but also through active involvement in negotiations for the aforementioned plurilateral agreements. In reality the figures used for the indicators under this specific objective should change once these agreements have been concluded and implementation started. Therefore, due to the lack of engagement from all WTO parties, the EU has sought alternative routes and engaged in plurilateral discussions in order to overcome the obstacle. We therefore expect to achieve the targets set sooner than later. Naturally, DG Trade has limited control as other political, economic or social factors may indeed influence decisions made by our trading partners.

c) Conclusion

As evidenced above, the part on the multilateral agenda of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year.


19

1.1.4 Specific objective 2 – The bilateral agenda


CONTRIBUTE TO EUROPEAN SMART, INCLUSIVE AND SUSTAINABLE GROWTH BY ENSURING

THE BEST TRADE CONDITIONS AND OPPORTUNITIES FOR EU BUSINESSES, WORKERS AND

CONSUMERS IN NEGOTIATING AGREEMENTS AT A BILATERAL LEVEL

NON-SPENDING


Number of on-going trade and investment negotiations with countries/regions outside the EU (except for Economic Partnership Agreements (EPA) with ACP countries)

On-going trade negotiations" are here identified as negotiations from the point of launch of negotiations to provisional application of the agreement

Source: DG Trade

Situation at the end of 2013:

1910 on-going negotiations or agreements in the process of finalisation at different stages with countries/regions in the world

1911 on-going negotiations or agreements in the process of finalisation with countries/regions in the world

On 27 June 2014 the EU signed Association Agreements with Ukraine, Georgia and Moldova respectively. The Georgia and Moldova DCFTAs are provisionally applied since 1 September 2014

Negotiations have been concluded with Canada, Ecuador and Singapore

Work has progressed well in negotiations with the US, Japan and Vietnam in 2014

Myanmar investment negotiations launched

Continue and conclude negotiations for FTAs with some of our main trading partners with a special focus on US, Japan, Vietnam, Canada and Mercosur for the year 2014

10 Moldova DCFTA, Georgia DCFTA, Ukraine DCFTA, Singapore FTA, Canada CETA, Kazakhstan PCA, Vietnam FTA, Japan FTA,

United States TTIP, China investment agreement, Thailand FTA, Malaysia FTA, Morocco DCFTA, Mercosur, India FTA, Russia New Agreement, Azerbaijan PCA, Libya, GCC (Trade negotiations with Azerbaijan, Libya, the Gulf Cooperation Council, Russia and Thailand on hold. Technical conclusion reached after 6 rounds with Armenia. However, in view of Armenia's decision to join the Eurasian Economic Union the EU has not proposed signature. Bilateral scoping exercise for a new agreement was launched).

11 Compared with the baseline Georgia and Moldova are deleted as the agreements are now provisionally applied and two set of

negotiations were launched in 2014: Ecuador joining Colombia/Peru FTA and Myanmar investment agreement.


20

MAIN OUTPUTS IN 2014 – SPECIFIC OBJECTIVE 2

Description indicator Current situation target

Ukraine DCFTA Signed on 27 June 2014

Provisional application postponed until 1 January 2016

Signature and provisional application

Following the adoption in COREPER in September 2013 of the Commission's proposal for a decision on the signature and provisional application of the EU-Ukraine Association Agreement, the Deep and Comprehensive Free Trade Area12 (DCFTA) was signed on 27 June 2014 as part of the broader Association Agreement (AA). In April 2014, the EU unilaterally granted Ukraine preferential access to the EU market until 31 December 2015.in response to the security, political and economic challenges faced by Ukraine. To avoid further destabilisation of the country, and in particular to guarantee Ukraine's access to the CIS market under the Ukraine-Russia bilateral preferential regime, in September 2014 the EU postponed the provisional application of the DCFTA until January 2016.

Georgia DCFTA Signed on 27 June 2014

Provisionally applied since 1 September 2014

Signature Q3 2014

After seven rounds of negotiation with our Georgian trade partners, technical conclusion was achieved and the agreement initialled in November 2013. Following the legal scrubbing and translation, the Deep and Comprehensive Free Trade Area with Georgia was signed as part of the Association Agreement on 27 June 2014. The agreement is provisionally applied since 1 September 2014.

Moldova DCFTA Signed on 27 June 2014

Provisionally applied since 1 September 2014

Signature Q3 2014

After seven rounds of negotiation with our Moldovan trade partners, technical conclusion was achieved and the agreement initialled in November 2013. Following the legal scrubbing and translation, the Deep and Comprehensive Free Trade Area with Moldova was signed as part of the Association Agreement on 27 June 2014. The agreement is provisionally applied since 1 September 2014.

Canada CETA Negotiations concluded September 2014 Legal scrubbing on-going

Legal scrubbing Q3 2014

Signature 2015

Negotiation directives for a Comprehensive Trade and Economic Agreement were adopted in April 2009 and negotiations launched the following month. After intense discussions, negotiators finalised their work in early August 2014. President Van Rompuy and Prime Minister Harper announced the end of the CETA negotiations at the EU-Canada Summit on 26 September 2014. The legal review of the original (English) version of the agreement has been initiated and will continue in 2015. It will be translated into the other official languages of the EU and Canada before being submitted to the Council and the European Parliament for approval.

Singapore FTA Investment negotiations concluded in October 2014

Legal scrubbing of investment chapter ongoing

Signature Q3 2014

EP Consent Q4 2014

Initial investment February 2014

Negotiation directives (ASEAN, including Singapore) were adopted in April 2007, and a final political agreement reached in December 2012 on the main elements of the FTA. This part of the Agreement was initialled in September 2013. Subsequently, negotiations on investment protection were completed in October 201413, and

12 http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150981.pdf

13 http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152846.pdf

http://trade.ec.europa.eu/doclib/html/150981.htm


http://eeas.europa.eu/ukraine/assoagreement/assoagreement-2013_en.htm





http://trade.ec.europa.eu/doclib/docs/


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the legal scrubbing on the investment chapter is currently on-going. The Commission is awaiting the outcome of a case brought before the EU Court of Justice on the competence to sign and ratify the Agreement. The aim of the Commission is to bring clarity on which provisions of the Agreement with Singapore fall within the EU's exclusive or shared competence and which remain in the Member States' remit and require approval by national instances.

Transatlantic Trade and Investment Partnership

Sustainability Impact Assessment (SIA)

5 rounds concluded in 2014 (plus 1 in January 2015)

Steady progress in negotiations

SIA work well advanced

Conclude 5 negotiation rounds in 2014

SIA end of 2014

Negotiation directives for a Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States of America were adopted in June 2013 and negotiations launched the following month. During 2014 five rounds took place in 2014 with an additional one in January 2015 making a total of eight rounds since the beginning of the negotiations. Negotiators are making steady progress and have laid the technical groundwork on most topics. In certain areas negotiations have moved to text based discussions while others will reach that stage in 2015. The initial tariff and services offer were exchanged. The new Commission has adopted a transparency initiative which saw in January 2015 the publication of the EU negotiation legal texts in certain areas of the negotiations. As the initiative gained interest, a public consultation was held on the investment aspects (ISDS) of the deal, which attracted some 150 000 comments.

As to the sustainability impact assessment, the work is well advanced but in order to meet as much as possible the stakeholders’ requests for more information the consultant intends to take on board the additional analytical work that is currently being carried out. In light of this, it has been decided to delay the publication of the draft interim report until such additional analysis is completed.

Furthermore, DG Trade has helped to ensure that the Transatlantic Economic Council continued to deliver results in the area of upstream regulatory convergence by providing political input for future action. We have participated in regular meetings and contacts at expert level for all TEC workstreams and finalised a progress report.

Japan FTA

Sustainability Impact Assessment (SIA)

5 negotiating rounds held in 2014 (and one in February 2015) with market access offers exchanged

SIA on-going

Progress on NTBs

Exchange of market access offers

SIA end 2014

Negotiation directives for an EU-Japan Free Trade Agreement were adopted in November 2012, and negotiations launched the year after in March. After three initial rounds completed in 2013, DG Trade pursued paving its way to concluding an ambitious free trade agreement with another five rounds in 201414. Good progress was achieved in almost all the areas under negotiation: tariffs, technical barriers to trade, access to public tenders, trade in services, rules on investment competition, sanitary and phytosanitary measures, regulatory cooperation, transparency and protection of intellectual property, including geographical indications.

In accordance with those negotiating directives, the EU assessed the progress achieved during the first year of talks and whether Japan had implemented the commitments it made prior to the launch of the negotiations. Despite some concerns, the extensive discussions held in May between the Commission and Member States confirmed that the negotiations should continue.

The sustainability impact assessment is now well underway with the inception report finalised by the consultants on 20 February 2015 and the final study expected to be completed by end 2015.

ASEAN

Vietnam: 5 negotiation rounds in 2014 and

Substantial progress by end

http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152844.pdf 14

http://trade.ec.europa.eu/doclib/press/index.cfm?id=1024&title=EU-Japan-Trade-Talks-Continue http://trade.ec.europa.eu/doclib/press/index.cfm?id=1056&title=EU-and-Japan-exchange-offers-to-open-markets http://trade.ec.europa.eu/doclib/press/index.cfm?id=1124&title=EU-Japan-talks-on-track-after-the-one-year-on-review http://trade.ec.europa.eu/doclib/press/index.cfm?id=1168&title=EU-Japan-FTA-talks-advance-further

http://trade.ec.europa.eu/doclib/docs/

http://trade.ec.europa.eu/doclib/press/





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Vietnam FTA

Malaysia FTA

Thailand FTA

8 chapters completed. 2 rounds in 1st quarter 2015

Malaysia and Thailand stalled

2014

Exchange of market access offers

Negotiation directives for a Free Trade Agreement with the Association of South East Asian Nations (ASEAN) countries were adopted in April 2007. As it revealed too challenging to negotiate with the ASEAN as a region, bilateral negotiations were launched with the individual countries of the region.

Talks with Vietnam were launched in June 2012. With five rounds completed by the end of 2013, another five rounds and several inter-sessional meetings were concluded in 201415. Six chapters have been completed so far and a number of others are close to conclusion. Further progress was achieved on market access, and political leaders agreed that it would be possible to come to an agreement on a final text in 2015.

As to Malaysia negotiations, initially launched in March 2013 and with seven rounds completed, contacts took place in 2014 at Chief negotiator level to assess the possibility of resuming the negotiations, which had been stalled pending a policy review in Malaysia. The discussions are expected to continue in 2015.

Finally negotiations with Thailand, also launched in March 2013, are currently on hold due to military take-over in Thailand in May 2014. Only one round was held in April. Following the adoption in June of EU Council Conclusions on the political situation in Thailand, no further negotiating rounds have been held. Further progress will depend on the evolution of the overall political situation.

India FTA New Indian administration still defining its trade policy – negotiations not resumed.

Negotiations resumed

Conclusion by end 2014

Negotiation directives for an EU-India Free Trade Agreement (ASEAN) were adopted in April 2007. Negotiations were launched in June the same year. By the end of 2013, twelve rounds were completed and looking promising. However, the Indian elections held in spring 2014, resulted in a new Indian administration, which has not yet defined its trade policy. Resuming negotiations with India on outstanding issues are therefore still pending.

Morocco DCFTA Two negotiation rounds held in 2014

Negotiations currently paused

Substantial progress by end 2014

Offers on public procurement to be exchanged in 2014

Promising negotiations were launched for a Deep and Comprehensive Free Trade Area with Morocco in March 2013, and two rounds completed by the end of 2013. However, only two negotiating rounds were held in 2014 due to the request by Morocco to pause since July. No offers on public procurement were thus exchanged. Resumption of negotiations is expected in April 2015. Substantial progress has been made in all negotiating chapters but no chapters closed yet. The final report of the sustainability impact assessment16 was published November 2013.

Mercosur Exchange of offers on hold Negotiation process resumed Substantial progress by end 2014

Negotiations with Mercosur are based on directives adopted in 1999, since put on hold and re-launched in May 2010. Nine rounds were completed by the end of 2013, but no progress in 2014 since exchange of offers was not possible due to lack of indications from Mercosur side on level of ambition of their draft offer. A meeting took place in March and Chief negotiators held a video conference in November 2014.

Integration of Ecuador into the Negotiations concluded 2-3 negotiation rounds in 2014

15 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1102&title=EU-and-Vietnam-make-good-progress-on-FTA-talks

16 http://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact-assessments/assessments/


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EU-Colombia/Peru FTA Protocol of accession initialled Technical and political conclusion by end of 2014

Negotiations aiming to integrate Ecuador into the EU-Colombia/Peru Free Trade Agreement were successfully concluded in July 2014. The protocol of accession17 was initialled in December 2014. This Agreement will provide improved access to the Ecuadorian market for many key EU exports, e.g. the automotive sector or alcoholic beverages. It will also create a stable and predictable environment that will help boost and diversify trade and investment on both sides.

Russia New Agreement None of the targets achieved due to political tensions

Official resuming of negotiation in 2014 if possible

Conclude the trade and investment part of the New Agreement

Council negotiation directives were adopted in 2008 to replace the existing Partnership and Cooperation Agreement. Since then twelve negotiation rounds have taken place. However, negotiations were suspended in 2010 waiting for revised Russian mandate, whereas technically some chapters like IPR, transparency, technical barriers to trade could be closed. Due to political tensions in the Russia/Ukraine crisis of early 2014, no progress has been achieved on this file.

Continuing strategic dialogue with the new Chinese leadership.

HED did not take place

Joint Committee took place in October 2014 and Trade and Investment Policy Dialogue in January 2015.

Improving trade relations

The EU has pursued improving trade relations with China based on various dialogues set up to engage in a constructive relationship. These include in particular meetings of the Joint Committee, the Trade and Investment Policy Dialogue and the High Level Economic and Trade Dialogue (HED) helping to manage possible trade frictions. The HED did not take place in 2014 as no EU-China Summit was organised due to co-chair change with new Commission.

China investment agreement 3 negotiations rounds in 2014

EU text presented

Advance in the negotiations

The Council adopted in October 2013 the negotiation directives aiming at concluding an investment agreement with China. Negotiations were launched in November 2013. Three rounds were held in 201418 and an EU text presented in December 2014.

Myanmar investment agreement

Negotiation directives adopted on 18 March.

Launched on 20 March

One negotiation round in February 2015

COM adoption February 2014

College adoption March 2014

Launch of negotiations by Q2 2014

Negotiation directives for an investment agreement with Myanmar were adopted by the Council on 18 March 2014 upon proposal by the Commission in February. Negotiations were launched on 20 March19, and a first negotiation round took place in February 2015.

Mexico Free Trade Agreement Submission of Joint Vision Report extended Joint Vision Report finalised

17 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1156&title=EU-and-Ecuador-publish-text-of-trade-agreement

18 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1013&title=EU-and-China-begin-investment-talks

http://trade.ec.europa.eu/doclib/press/index.cfm?id=1049&title=EU-and-China-hold-investment-talks-ahead-of-President-Xi-Jinping-visit-to-Brussels

19 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1045&title=EU-and-Myanmar/Burma-to-negotiate-an-investment-protection-agreement

http://trade.ec.europa.eu/doclib/press/index.cfm?id=1013&title=EU-and-China-begin-investment-talks




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update

to June 2015

IA Steering group set in June 2014

2014

Impact assessment launched by mid-2014

A first meeting of Working Group on Modernisation of the 2000 EU-Mexico FTA took place in 2013. An ex-ante study has been launched, which will feed into the impact assessment (IA). An IA steering group was set up in June to prepare the work.

Jordan DCFTA

Tunisia DCFTA

Jordan/Tunisia DCFTA: preparatory process are well advanced but not possible to launch negotiations in 2014

Launch of negotiations in 2014

The Council adopted negotiation guidelines in December 2011 allowing start of negotiations for a Deep and Comprehensive Free Trade Area with Jordan, Morocco, Egypt and Tunisia.

With regard to Jordan and Tunisia, the preparatory process is well advanced but unfortunately it was not possible to launch negotiations in 2014. In parallel trade sustainability impact assessments are being carried out. The final report on Tunisia20 was published November 2013, whereas the Commission position paper is currently being finalised. For Egypt and Jordan, the final reports were finalised in December 2014.

ASEAN investment Vietnam: negotiations on-going

For Malaysia and Thailand progress is linked to state of play of FTA negotiations

Make progress in 2014 and 2015

Following the entry into force of the Lisbon Treaty, negotiation directives allowing the EU to negotiate investment provisions with the ASEAN countries were adopted by Council in October 2013. These negotiations were launched with Thailand in December 2013 and with Vietnam and Malaysia in January 2014. However, as progress is linked to FTA negotiations they are currently stalled with Malaysia and Thailand, whereas they are on-going with Vietnam.

20 http://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact-assessments/assessments/


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b) Narrative

Free Trade Agreements go beyond the WTO rules in liberalising trade. In our negotiations for the new generation of EU FTAs we seek to include provisions on goods, services, intellectual property, government procurement, regulatory coherence and investment, customs duty reduction, access to services markets as well as attempt to reduce "non-tariff barriers" such as technical regulations.

The main objective throughout 2014 has been to continue to take forward the process that started in 2007, of concluding the various bilateral and regional negotiations that have been launched with some of the EU's main trading partners. We do this in order to bring other countries' markets to the EU's level of openness.

Particular attention has been focused on the relations with some of our biggest trading partners in 2014. Negotiations with the United States, Japan and Vietnam have progressed well as have our discussions with China for an investment agreement. 2014 also saw the start of provisional application of DCFTAs with Georgia and Moldova, agreeing on the terms for allowing Ecuador to adhere to the Colombia/Peru FTA with the EU and concluding negotiations with Canada and Singapore.

c) Risks

It is important to note that DG Trade often only has a limited control over the progress of bilateral talks, which constitutes a risk toward achieving the objectives. Negotiations are a two way process and need to take account of a wider political context. This has particularly been true in 2014 for our relations with Russia and Eastern Partnership countries. In 2014, we also saw the Moroccan side asking to pause negotiations to review their priorities.

Another risk which materialised in 2014 was the leak of sensitive negotiation documents. As a consequence DG Trade decided to include the critical risk relating to leaks of negotiating documents in the 2015 Management Plan. While placing a premium on transparency, DG Trade continues to remain vigilant to the risk of leaks, particularly, in the context of the sharing of such information under appropriate handling requirements with other EU institutions.

d) Conclusion

As evidenced above, the part on bilateral trade and investment negotiations of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year


26

1.1.5 Specific objective 3 – Sustainable development


FOSTER A SUSTAINABLE ECONOMIC, SOCIAL AND ENVIRONMENTAL DEVELOPMENT, FOCUSING ON

GREEN AND INCLUSIVE GROWTH, IN PARTICULAR FOR DEVELOPING COUNTRIES

NON-SPENDING

Result indicator 1 source: DG Trade

Baseline Current situation Target

Number of ACP countries applying and implementing European Partnership Agreements (EPA)

EPAs are negotiated since 2002 after the Cotonou Agreement entered into force in 2000

In 2013: Implementation of the comprehensive regional Caribbean EPA is on-going since 2008 covering 14 CARIFORUM states21. Haiti is meant to join it and signed in December 2009

The Pacific EPA is provisionally applied in Papua New Guinea since 2009 and in Fiji since July 2014.

In Central Africa, the Cameroon EPA is provisionally applied since August 2014

Interim EPA with four Eastern and Southern Africa22 (ESA) countries provisionally applied since May 2012

EPA negotiations on-going with 6 ACP regions: EAC, SADC, West Africa, Central Africa, ESA, Pacific

In 2014: 21 ACP countries apply an EPA

In 2014 regional EPAs were negotiated and successfully concluded with:

16 countries in West Africa23 (initialled in June),

6 countries in southern Africa24 (SADC) (initialled in July) and

5 countries in the East African Community (EAC)25 (initialled in October)

In 2014 there were no EPA negotiating meetings in Central Africa, the wider ESA and Pacific regions

In August Cameroon and Fiji notified the EU that they were applying the EPA they had negotiated in 2007

Ratification and application of EPAs with all interested ACP countries


Baseline Target

Number of developing countries benefitting from the Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) under the revised Generalised

2014: Already before the start of application of the revised GSP on 1 January 2014, a delegated act27 granting the GSP+ to the first 10 applicants28 was adopted

Three more applicants (Panama, El Salvador and Guatemala) were granted GSP+ in February 201429 and one more (the Philippines) in December 201430

Grant the revised GSP+ to at least 3 applicants (Panama, El Salvador, and Guatemala) in the first half of 2014 and process expeditiously any new applications (within 6 months of

21 Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, The Dominican Republic, Grenada, Guyana, Jamaica, Saint Christopher and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago

22 Madagascar, Mauritius, Seychelles and Zimbabwe

23 Benin, Burkina Faso, Cape Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo, Mauritania

24 Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland 25 Kenya, Uganda, Tanzania, Burundi and Rwanda

http://eur-lex.europa.eu/JOHtml.do?uri=OJ:L:2012:111:SOM:EN:HTML


27

Scheme of Preferences (GSP) to apply from 201426

application)

On 1 January 2014, the revised EU GSP focussing preferences on those developing countries most in need and strengthening the GSP+ arrangement for sustainable development and good governance started to apply. The application was smooth as from the very beginning and this major GSP reform started to deliver on its objectives.



Continue undertaking relevant measures, including preparing and adopting implementation legislation, to ensure smooth application of the provisions of the revised GSP and, in particular, of GSP+.

2 delegated acts updating the list of the standard GSP beneficiaries and 2 delegated acts including 4 more countries among GSP+ beneficiaries were adopted in 2014

Relevant measures, in particular acts adopted in a timely manner (within the required legislative timelines).

The application of the revised GSP was smooth as from its start on 1 January 2014. Several pieces of legislation were prepared and entered into force, in particular two delegated acts updating the list of the standard GSP beneficiaries31 and two delegated acts including four more countries among GSP+ beneficiaries32. Work towards updating of technical thresholds is also on-going.

Completion and implementation of the Economic Partnership Agreements

Joint meetings held with Cariforum and ESA in 2014

EPA negotiations completed with West Africa, SADC and EAC

Joint EPA meetings with Cariforum, Pacific (PNG) and ESA (iEPA).

EPA negotiations concluded with EAC, SADC and West Africa asap and before the end of the current Commission mandate.

A key output in 2014 was the completion and implementation of the Economic Partnership Agreements (EPAs). The EPAs provide scope for wide-ranging trade co-operation on areas such as services and standards. They are also designed to be drivers of change that will kick-start reform and help strengthen rule of law in the economic field, thereby attracting foreign direct investment. All EPAs contain provisions on state-to-state dispute settlement and avoidance. In 2014 regional EPA negotiations were successfully concluded with West Africa, the South African Development Cooperation EPA Group and the East African Community. Legal scrubbing started with SADC and was completed with West Africa. Cameroon and Fiji notified that they started applying their EPAs.

EPA implementation continued with CARIFORUM, the four Eastern and Southern African (ESA) States and Papua New Guinea. The CARIFORUM-EU Trade & Development Committee held its fourth meeting in November. The ESA iEPA Committee and sub-committees in January and November.

Legislative proposal on minerals originating from conflict and high risk areas

Commission proposal adopted

Implementing guidance being developed

Commission proposal adopted by Q1 2014

On the basis of a public consultation, and an impact assessment exercise carried out in 2013, the Commission proposed to the Council and European Parliament (EP) an EU legislative proposal on minerals originating from conflict and high risk areas33 on 5 March 2014. The Council and EP are expected to adopt this proposal in 2015.

27 Commission Delegated Regulation 1/2014

28 Armenia, Bolivia, Cape Verde, Costa Rica, Ecuador, Georgia, Mongolia, Pakistan, Paraguay and Peru 29 Commission Delegated Regulation 182/2014 30 Commission Delegated Regulation 1386/2014 26 Under the revised GSP, every beneficiary of the standard arrangement wishing to receive the enhanced GSP+ preferences has

to apply for these and meet the requirements in terms of economic vulnerability and compliance with core international human and labour rights, environment and good governance conventions.

31 Commission Delegated Regulations 1015/2014 and 1016/2014 32 Commission Delegated Regulations 182/2014 and 1386/2014 33 COM/2014/0111 final of 5 March 2014 - 2014/0059 (COD) - http://eur-lex.europa.eu/resource.html?uri=cellar:5de359c4-a5f8-

11e3-8438-01aa75ed71a1.0002.01/DOC_1&format=PDF


28

The Commission is currently developing implementing guidance.

b) Narrative

Trade and development is a broad policy area that covers the EU’s trade relations with developing countries. It encompasses a range of policy instruments whose main focus is almost exclusively on development, such as the GSP+, and others with only partial development focus such as the European Partnership Agreements. Supporting the gradual integration of developing countries into the world economy contributes to their growth and development. As evidenced above, 2014 saw the completion of negotiations with three African regions covering a total of 27 countries. Once the formal procedures have been completed for conclusion and signature and ratification is on-going, this will bring us a huge step forward to reaching our objective.

c) Conclusion

As evidenced above, the part on fostering sustainable growth for developing countries of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year.


29

1.1.6 Specific objective 4 – Monitoring and market access


CREATING THE RIGHT CONDITIONS FOR TRADE34 NON-SPENDING

Result indicator 1 Source: ISDB/Eurostat


Preference utilisation rates of agreements provisionally applied or entered into force

(Extent to which firms use the EU preferential agreements)

FTA 2008

S. Africa 86%

Mexico 74%

Chile 85%

Korea -

FTA

Chile 2010

81%

Korea 2012

63 %

Preference utilisation - EU imports

FTA 2010 2011 2012 2013

S-Africa 89% 89% 90% 91%

Mexico 65% 69% 69% 67%

Chile 89% 91% 93% 93%

Korea - 59% 77% 81%

Source: ISDB/Eurostat

Preference utilisation - EU exports

FTA

2011 2012 2013

Mexico

58% 52%(*) 48%(*) Chile

81% 79% 78%

Korea

na 63% 66% Source: local statistical offices. (*) lower-bound estimate based on incomplete data

Improve the percentage according to recent trend

Result indicator 2 Source: DG Trade


Degree of success in removing identified barriers to trade (incl. behind the border measures such as TBTs, NTBs, SPS)

(Impact on trade of the removal of obstacles to trade)

On a total of 220 key barriers (identified as priorities by the EU35), positive developments to a varying degree have occurred in 70 cases. 28 barriers were completely removed or were no longer relevant. In the remaining 42 instances partial improvements have been secured

Over the period 2013 and 2014, 17 barriers out of 76 newly introduced were resolved within the first two years of their inception (22%). In addition, 8 longstanding key barriers were resolved in 2014 alone

Market access success stories include a.o.:

The repeal of new legislation affecting EU freight companies in China via changes to the VAT regime; the opening of the Philippines banking sector to foreign ownership; a delay in Korea’s pharmaceuticals pricing reform; and the end of Brazil's CET exceptions on more than 100 products.

All relevant cases addressed appropriately with third countries and a high number (20%) partially/fully solved within maximum 2 years of their inception

In 2014, the EU agri-food was in particular hit hard because of unjustified import bans imposed by Russia. The banned products value 5.1 billion EUR, i.e. 43 % of EU agri-food exports to Russia. A determined effort is underway to open alternative markets which are still closed for SPS-reasons. Initial actions by the Commission have successfully opened Canada for Belgian pears, and apples of Poland, the US for beef from Ireland and

34 This objective covers proper monitoring of implementation as well as enforcement of agreements provisionally applied or

entered into force. It also covers market access related issues and management of EU legislation related to external trade.

35 http://madb.europa.eu/madb/barriers_crossTables.htm. These figures cover the years 2011-2012.


30

Turkey for live cattle from the EU.

The EU's market access drive continues to produce concrete market openings like for meat and meat products to Saudi Arabia, Japan, Singapore, Taiwan, Uruguay, Honduras and China for several EU Member States, for dairy and milk products to China, chocolate to China or cheese to Japan. Recent outbreaks of avian influenza in a number of Member States prompted a number of excessive market closures by key EU markets like South Africa, Hong Kong, Russia, Saudi Arabia and Ukraine that will require extra attention in 2015.

Result indicator 3 DG Trade/WTO


Compliance of WTO members' commitments

End 2013: 160 WTO members

Dispute settlement: Measures consistent with WTO obligations.

The following WTO cases are on-going with Russia36: Recycling fee (establishment of panel), Pork meat (composition of panel), anti-dumping on light commercial vehicles (composition of panel), import duties (consultations)

Successful outcomes:

The EU ensured successful dispute settlement in three offensive cases and one defensive case

Full compliance on an ongoing basis.

Successful outcome in cases up for decision and other positive developments in main ongoing disputes, including where feasible the settlement of disputes

DG Trade has continued to follow the compliance through monitoring of implementation of members to their WTO commitments including outcome of dispute settlement cases (ie. successfully defended or successfully brought taking into account initial analysis of strength of the case).

Offensive cases: In 2014, the EU was successful in settling a dispute with China on China's export restrictions on rare earth. This was a case that is of high economic and systemic importance for the EU and its efforts to ensure fair access to highly needed raw materials for its industry. China has already lifted its export quotas and will have to lift all restrictions by 2 May 2015. DG Trade was also instrumental in settling a case against Indonesia on procedural matters, which dealt with safeguarding the EU's third party rights in another proceeding and about avoiding a negative precedent with regard to the EU's position regarding interpretation of some procedural rules. It was solved at the consultations stage without further proceeding to a panel. Finally, the EU had another significant victory in an offensive case against Argentina in 2014 on import restrictions on a broad range of products. The restrictive, non-transparent measures include Argentina's import licensing regime and notably the procedures to obtain an import licence, including certificates of importations required. The panel report was circulated on 22 August 2014 and the Appellate Body report37 came out in January 2015.

Defensive cases: A case on Atlantic herring, brought by Denmark on behalf of the Faroe Islands could be solved in the EU's interest at consultations stage without Denmark further proceeding to the panel stage.

36 http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds462_e.htm

http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds475_e.htm


http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds485_e.htm 37







31



Compliance through monitoring of implementation of EU's trade partners to their trade agreement commitments, incl. outcome of dispute settlement cases (ie. successfully defended or successfully brought taking into account initial analysis of strength of the case.

End 2013: Countries and regions with which EU has a trade agreement in force38

Dispute settlement: Measures consistent with trade agreement obligations

Monitoring of implementation

Korea: Annual Report on the implementation for the EU-Korea FTA39 transmitted to the EP and Council in spring 2014 and all FTA implementation bodies have met in 2014 to raise and solve compliance issues.

Colombia/Peru: First Implementation reports of the Agreements with Colombia/Peru and Central America will be presented to Parliament and Council in the first half of 2015.

Dispute settlement

There has been no dispute settlement cases brought under the EU’s FTAs in 2014.

Full compliance on an ongoing basis

Successful outcome in cases up for decision and other positive developments in main ongoing disputes, including where feasible the settlement of disputes.

According to the Annual Report on the Korea FTA, based on two years of implementation of the FTA, it is clear that in terms of development of bilateral trade, the FTA has worked very well overall in particular for the EU. Exports of goods increased by 24% or € 7 billion in the second year of implementation compared to the year before the FTA was provisionally applied. In comparison, EU exports to the rest of the world increased by 17% during the same period. While imports from Korea decreased by 6%, mainly due to reasons which are not directly linked to the FTA, imports of fully or partially liberalised goods developed positively for both the EU and Korea, increasing more than exports overall.


Baseline Current situation

38 Customs Unions: Andorra, Turkey, San Marino. Free Trade Agreements: Faroe Islands, Norway, Iceland, Switzerland, The former

Yugoslav Republic of Macedonia (Stabilisation and Association Agreement (SAA), Albania (SAA), Montenegro (SAA), Bosnia and

Herzegovina (Interim Agreement on trade) Serbia (Interim Agreement on trade), Algeria (Association Agreement (AA), Egypt

(AA), Israel (AA), Jordan (AA), Lebanon (AA), Morocco (AA), Palestinian Authority (Interim AA), Syria (Co-operation Agreement),

Tunisia (AA), Iraq (Partnership and Cooperation Agreement), Chile (Association Agreement and Additional Protocol, Mexico

(Economic Partnership, Political Coordination and Cooperation Agreement, South Africa (Trade, Development and Co-operation

Agreement), CARIFORUM States (Economic Partnership Agreement (Provisionally applied)), Cameroon, Cameroon (Economic

Partnership Agreement (Provisionally applied)), Eastern and Southern African countries Madagascar, Mauritius, Seychelles,

Zimbabwe (Economic Partnership Agreement (Provisionally applied)), Fiji, Papua New Guinea (Economic Partnership Agreement

(Provisionally applied)), Korea (New Generation Free Trade Agreement, Central America (AA), Peru - Colombia FTA.

39 http://trade.ec.europa.eu/doclib/docs/2014/march/tradoc_152239.PDF

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http://eur-lex.europa.eu/JOIndex.do?year=2004&serie=L&textfield2=084&Submit=Search&ihmlang=en


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http://eur-lex.europa.eu/JOIndex.do?year=2002&serie=L&textfield2=262&Submit=Search&_submit=Search&ihmlang=en


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http://trade.ec.europa.eu/doclib/docs/2006/march/tradoc_127986.pdf






http://eur-lex.europa.eu/JOHtml.do?uri=OJ:L:2011:127:SOM:EN:HTML

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Outcome of ISDS cases, working in co-operation with Member States where relevant40 (ie. successfully defended) taking into light initial analysis of strength of the case.

Measures consistent with relevant international obligations.

There have been no ISDS cases involving the EU in 2014.

Successful outcome in cases up for decision and other positive developments in main ongoing disputes, incl. where feasible the settlement of disputes.

Result indicator 6 source : IPRI Report41


Level of risk that the EU IPR (Intellectual Property Rights) holders run when exporting and carrying out Foreign Direct Investment transactions

IPR protection scores for the EU and trading partners:42

2011

EU27 6.9 ASEAN 5.7 US 7.5 Japan 7.6 Korea 6.3 India 5.6 Mercosur 5 Russia - Ukraine 4

Improvement in scores of our main trading partner relative to recent years' trend.

Result indicator 7 source : European Commission


Level of legally guaranteed market access for EU companies to key priority procurement markets

Access of EU firms to GPA partner's Public Procurement market:

US: 12% (2010), 32% (2011)

Japan:23% (2010), 28% (2011)

Canada: 3% (2010), 16% (2011)

Korea: 50% (2010), 65% (2011)

Revised GPA entered into force in April 2014. As a consequence, the GPA parties have opened procurement activities worth an estimated US$ 1.7 trillion annually to international competition (including the EU).

The figures for 2010 and 2011 represent the period before and after the revised GPA, which was the last time the level of legally guaranteed market access for EU companies changed in relation to key markets. Figures will be revised once the FTAs with Canada (and Singapore) enter into force.

Increased level of legally guaranteed market access for EU companies to key priority procurement markets relative to recent years' trend.

Result indicator 8 Source: Eurostat


40 In accordance with article 3 of Regulation (EU) no 1219/2012 of the European Parliament and of the Council of 12 December

2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries

41 http://www.internationalpropertyrightsindex.org/ranking

42 The scores highlight the risks that EU IPR holders run when they export IPR-intensive goods, carry out FDI transactions in IPR-intensive sectors or licence their IPR rights to agents in these countries. The score can range from 0 (no protection i.e. high risk) to 10 (perfect protection i.e. no risk)


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EU share in trade in FDI stocks of our major trading partners

Figures from 2013 are too shaky as they originate in different sources with different definitions.

Positive evolution according to recent years' trend.



Regular reporting about identified barriers, suggested actions, and results achieved via market access reports, protectionism monitoring reports

Several reports on trade and investment have been published in 2014

TIBR Q1 2014

Several reports on trade and investment have been published in 2014, a.o. the trade and investment 2014 report43, the 11th report on potentially trade-restrictive measures44, and the trade and investment barriers report45.

Enforcement of commitments (and ensuring EU respect of commitments) through dispute settlement in the WTO, or through bilateral dispute settlement mechanisms.

Five offensive cases were filed by the EU

Three defensive cases were filed against the EU

No dispute settlement cases were brought under the EU’s FTAs

Timely and effective management of cases

Offensive: the EU filed 5 new cases in 201446 – as much as in 2012 and 2013 together. Three cases were filed with Russia on excess duties, light commercial vehicles and swine fever. One case with the US on subsidies to Boeing and one with Indonesia on procedural matters.

Defensive: Three files were filed against the EU (which is similar to recent years' figures). Pakistan filed a case on Countervailing Measures on Polyethylene Terephthalate47, Indonesia one on biodiesel48, whereas the Russians filed a case on energy and cost adjustment in anti-dumping49.

43 http://trade.ec.europa.eu/doclib/docs/2014/january/tradoc_152062.pdf

44 http://trade.ec.europa.eu/doclib/docs/2014/november/tradoc_152872.pdf

45 http://trade.ec.europa.eu/doclib/docs/2014/march/tradoc_152272.pdf









EU28 share in FDI stocks 2013 of

China, Japan, Russia and USA







34

There has been no dispute settlement cases brought under the EU’s FTAs in 2014.

Management of cases brought in investor-state dispute settlement mechanisms (Energy Charter Treaty, under FTAs, under Grandfathering Regulation etc).

There have been no ISDS cases involving the EU in 2014.

EU Member States have notified cases under the Grandfathering regulation and these have been successfully managed

Timely and effective management of cases

Instrument dealing with financial responsibility for investor state dispute settlement

Regulation No 912/2014 of the EP and the Council of 23 July 2014 published in August and entered into force in September50

Completion of legislative process by early 2014.

This Regulation manages any possible financial responsibility deriving from investor-to-state dispute settlement by allocating between the EU and the Member States the financial responsibility on the basis of who adopted the treatment responsible for a breach of the agreement. It also deals with who would defend a particular case.

Instrument dealing with the ability of the EU to enforce international trade rules

Regulation No 654/2014 of the EP and Council of 15 May 2014 published in June and entered into force in July51

Completion of legislative process by early 2014.

This Regulation lays down new internal rules allowing for more effective enforcement of international trade agreements. Where a non-EU member state has not complied with its international obligations, the Commission can adopt commercial policy measures restricting access to the EU market of goods or services supplied by that non-EU member state until such time as compliance with the relevant international trade rules is achieved.

Compliance of Russia to its WTO commitments since its accession in 2012

The following WTO cases are on-going with Russia: Recycling fee (establishment of panel), Pork meat (composition of panel), anti-dumping on light commercial vehicles (composition of panel), import duties (consultations)

Work towards Russia's full compliance with the WTO commitments

DG Trade has actively been following the compliance of Russia to it WTO commitments through 2014 and have launched three dispute settlement cases on recycling fees, pork ban and import duties.

A number of SPS measures have been implemented by Russia against the EU. Despite of technical consultations all the measures are still in place.

Monitoring of EU-Korea FTA All FTA implementation bodies have met in 2014, including the Trade Committee in October, and the Annual Report on the implementation of the FTA was transmitted to EP and the Council in spring.

Full functioning of the institutional framework

Fully functioning of the internal task force

The EU-Korea FTA has been provisionally applied since July 2011. DG Trade pursues its monitoring of the implementation of the Korea FTA through the management of the six specialised committees, seven working groups, the annual FTA Trade Committee as well as through the internal Commission task force, which regularly deal with specific market access cases and other issues related to the implementation of the FTA.

Monitoring of EU-Colombia/Peru FTA and EU-Central America DCFTA

Work well advanced for both Colombia/Peru and Central America

The first annual report of the implementation of the FTA is being finalised

First meetings of Association Council and Trade Committee to take place in first half of 2014

50 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:257:FULL&from=EN

51 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:189:FULL&from=EN

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The EU-Colombia/Peru FTA and EU-Central America DCFTA have been provisionally applied since 2013. DG Trade has contributed to setting up the necessary structures foreseen in the Colombia/Peru and Central America Agreement. Dates are being set and work is underway in setting the agenda of the different bodies. The first steps in the organisation of an event in Central America have been taken. For Colombia/Peru, dates have been set and the agenda is being discussed.

Monitoring and evaluation of the implementation of EPAs

Monitoring meetings held for CARIFORUM, ESA and SADC

Study on implementation of Caribbean EPA finalised

Working towards compliance and pro-development impact

The CARIFORUM-EU Trade & Development Committee held its fourth meeting in Brussels in November, whereas the EPA's Consultative Committee made up of civil-society representatives met for the first time. They discussed an independent study on implementation and effects of the Caribbean EPA52, which found that the “EPA signal” – i.e. the active take-up of regulatory and market challenges and opportunities in both the Caribbean and the EU – is still struggling to be heard.

The ESA iEPA Committee and sub-committees met in January and November in Brussels and Harare respectively to discuss implementation issues relating to trade in goods, customs and trade facilitation, and development cooperation.

Preparations were made for the fourth meeting of the Pacific-EU iEPA Committee and the first meeting of the Cameroon-EU EPA Committee in 2015.

Under the EU-South Africa Trade and Development Cooperation Agreement, the Trade Cooperation Committee and Joint Cooperation Council met in November 2014.

Formal five-yearly review of the Caribbean EPA

Study on implementation of Caribbean EPA finalised

Endorsement pending

Final study report by end of Q2 2014

Endorsement by end 2014

In 2014 a crucial study was finalised and fed into the CARIFORUM-EU Consultative Committee and the Trade & Development Committee in November. On this basis, the review of the Caribbean EPA can be finalised and endorsed by the Joint Trade and Development Committee and the Joint Cariforum/EU Council in beginning 2015.

Raw materials action plan OECD report published

The EU won two WTO cases against China on export restrictive measures

Publication of report in Q4 2014

Successful outcome for the EU at WTO panel

DG Trade has continued implementing the action plan related to raw materials in 2014. This in particular resulted in a report published by the OECD entitled "Raw Materials Trade, Facts, Fallacies and Better Practices"53. Enforcement of rights through dispute settlement was also ensured through the settlement of two WTO cases against Chinese export restrictive measures confirming the EU's claims of the incompatibility with GATT rules of China's export restrictions on rare earths, tungsten and molybdenum54.

IPR strategy Strategy published Publication in Q1 2014

Implementation of a revised strategy for the protection and enforcement of intellectual property rights in non-EU


53 http://www.oecd.org/trade/benefitlib/export-restrictions-raw-materials-2014.pdf






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member states and customs regulation on IPR enforcement at the EU border. The new strategy, which was published on 1 July 201455 sets out an international approach for examining recent changes and it presents ways to improve the Commission's current means of action to promote enhanced IPR standards in non-EU member states and to stem the trade in IPR infringing goods.

International Procurement Instrument

Not achieved in 2014

The Commission has announced in its Work Programme for 2015 the review of the IPI proposal.

Consent of the EP and Council in 2014

In 2012, the Commission tabled a proposal56 for a European Council and European Parliament Regulation on the access of non-EU member states' goods and services to the Union’s internal market in public procurement and procedures supporting negotiations on access of Union goods and services to the public procurement markets of non-EU member states (also referred to as the IPI – International Procurement Instrument). As the proposal encountered quite some opposition from certain EU Member States in the Council, the Commission has announced a review of this proposal in its Work Programme 2015.

Sustainability Compact High-level meeting held in October 2014

Further steps outlined

Successful high-level follow-up meeting in 2014.

Maintain stakeholders' engagement

Following the "Sustainability Compact57" aiming at improving labour rights and occupational safety and health in the ready-made garment sector in response to the Rana Plaza tragedy, which was launched by the EU, the Governments of Bangladesh and the United States and the International Labour Organisation (ILO) in July 2013, DG Trade organised in October 2014 a high-level Compact follow-up meeting together with the ILO and agreed with the other Compact Partners an outcome document58 taking note of progress made and outlining outstanding issues. In the framework of its Compact monitoring project with the ILO, DG Trade also published in July 2014 a progress report59 with an annex listing projects by all donors supporting the Compact60

Export control policy review Communication adopted

Data collection for impact assessment on-going

Adoption by Q2 2014

Progress in the impact assessment

As part of an ongoing review of the EU export controls system, the Commission has adopted, on 24 April 2014, a Communication61 setting out concrete policy options for the modernisation of EU export controls and their adaptation to rapidly changing technological, economic and political circumstances. DG Trade is also currently carrying out an impact assessment in support of the review.

An amendment (1382/201462) to Regulation 428/200963 was adopted for "delegated acts" empowering the Commission to amend the EU Control List.

7 Meetings of the Dual-use Coordination Group were held

55 http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152643.pdf

56 http://trade.ec.europa.eu/doclib/docs/2012/march/tradoc_149243.pdf





61 http://trade.ec.europa.eu/doclib/docs/2014/april/tradoc_152446.pdf

62 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R1382&qid=1426156189800&from=EN

63 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:134:0001:0269:en:PDF

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http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152656.pdf


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Export credits More than 20 OECD meetings took place

3 meetings of International Working Group were held

Up to 15 meetings in 2014

3-4 meetings in 2014

During 2014 DG Trade has been actively monitoring and ensuring the implementation of the OECD Arrangement on export credits through participation in the more than 20 OECD meetings. We have also been contributing to the process of extending export credit disciplines to non-OECD countries through support to and participation in the International Working Group process.

b) Narrative

This objective contributes to job creation and growth in the EU by reaping the benefits of WTO membership, bilateral and multilateral trade agreements, through the effective implementation of the signed agreements including tackling any remaining barriers with the necessary means such as the bilateral dispute settlement mechanisms.

The above figures on preference utilisation rates of our main trade agreements, show our new generation of comprehensive agreements to be successful as evidenced by the rise in percentage for South Korea. The 2000 Mexico trade agreement on the other hand illustrates a decline in the utilisation rate. DG Trade has already taken this situation a step further in looking into a potential modernisation of this agreement.

The 22% degree of success in removing identified market access barriers over the last two years supports the added value of the EU's intervention on trade policy.

DG Trade is also persevering the monitoring of compliance of Russia to its WTO commitment through a number of dispute settlement cases. As to the monitoring of the EU FTAs, the annual report on South Korea has established that things are on track. The institutional framework for monitoring the implementation of recently provisionally applied agreements with Colombia/Peru and Central America are being set up. And this will continue for Georgia and Moldova in 2015.

c) Conclusion

As evidenced above, the part on creating the right conditions for EU trade of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year


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1.1.7 Specific objective 5 – Trade defence


STANDING UP FOR EU INTEREST IN THE AREA OF TRADE DEFENCE NON-SPENDING



Number of measures in force and on-going investigations

By end of 2013:

125 measures in force

41 on-going investigations

121 measures in force relating to 61 products

47 on-going investigations

Maintaining and improving a system to combat distortions and unfair trade practices in international trade. Ensuring that EU economic operators, including SMEs, can rely on the best service in the conduct and follow-up of our trade investigations

TDI case handling activity is complaint driven. As a consequence the number of measures in force and on-going investigations may vary even significantly from one year to the next depending on the number of complaints lodged. Currently DG Trade is involved in 47 on-going investigations.



Percentage of investigations concluded within deadlines

100% 100% Maintaining and improving a system to combat distortions and unfair trade practices in international trade. Ensuring that EU economic operators, including SMEs, can rely on the best service in the conduct and follow-up of our trade investigations

TDI investigations are subject to tight statutory deadlines, such as 9 months to impose provisional anti-dumping and anti-subsidy duties, plus 6 months to impose definitive anti-dumping duties or 4 months to impose definitive anti-subsidy duties, 12 months for expiry reviews, 9 months for anti-circumvention investigations and new exporter reviews, etc. In 2014 all statutory deadlines were respected.



Number of trade defence measures in force monitored through undertakings and ad hoc surveillance activities

By end of 2013:

227 undertaking companies64; surveillance activities follow ad hoc allegations

Successful monitoring; to continue in 2015 for as long as the measures are in place and/or we receive ad hoc allegations.

Undertakings: monitoring full compliance with the undertaking to ensure effective implementation of the measure.

Ad hoc surveillance to detect irregularities as early as possible



Number of cases before the ECJ and raised in WTO

By end of 2013:

ECJ cases: 55

CJEU (former ECJ): 68

It is imperative to defend cases effectively since if lost this could have huge policy and

64 This comprises 214 undertaking companies in solar panels


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TDI investigations are quasi-judicial proceedings, subject to the screening of the ECJ and WTO Dispute Settlement Body

WTO cases: 4

WTO: 5

financial implications



Number of third country measures in place against EU, leading to financial costs for the EU companies having duties imposed on their exports

By end of 2013:

142

158

Active participation in anti-dumping and countervailing investigations by third countries with the aim to minimise the costs for EU exporters

The development in figures is independent of the Commission's influence. The increase is mainly due to enhanced activity by emerging economies. DG Trade has participated actively in all of these investigations to ensure the best possible outcome for the EU exporters.



Number of TDI chapters closed in FTA negotiations

Currently we have closed the TDI chapter in 6 on-going FTAs, and 4 others are under negotiation

TDI chapters concluded: Singapore, Malaysia, India, Canada, Ukraine, Moldova, Georgia.

On-going: Japan, USA, Morocco, Thailand, Vietnam, Mercosur

Successful negotiation of the TDI chapter in as many as possible FTAs according to the pace of each individual FTA negotiation process



Description Current situation Target

Carry out TDI investigations All cases up for decision in 2014 were concluded within the statutory deadlines

All cases concluded within the statutory deadlines on an on-going basis.

Implementation of new TDI procedures following adoption of Omnibus I

Omnibus I Regulation fully in place

New procedures for decision making implemented since February 2014

No appeals to COM proposals and thus no meetings of the Appeal Committee.

Entry into force by February 2014

Creation of new appeal Committee by end of 2014

Ensure smooth transition to the new system in 2014

The new Comitology rules entered into force in February 2014, and the new decision making process on TDI have therefore been implemented accordingly. However, since there were no appeals to the Commission proposals no meetings of the Appeal Committee were necessary.

TDI modernisation First EP reading of legislative proposal in April

Impasse in Council

Finalise legislative procedure

The TDI modernisation consists of a Communication, the legislative changes to the basic anti-dumping and anti-subsidy (AD/AS) regulations and guidelines. In 2013, the Commission submitted its proposal to amend the AD/AS basic regulations to the European Parliament and to the Council65. The Parliament adopted its first reading resolution on 16 April 2014. However, the Council has not reached a position yet. The Commission supported the Italian Presidency's attempts to find a compromise solution on the legislative proposal but impasse in Council continues to persist. The other elements of the TDI modernisation package (guidelines and non-legislative changes) will be decided upon once the progress on the legislative file becomes clearer.

Work on the requests for Market Economy Status from candidates

Work on requests from five countries in 2014

Three reports are being finalised and one in preparation

Preparation of regular state of play and reports on-going each year

The Commission has been working on requests for Market Economy Status from five countries during 2014. For Mongolia, the report has been finalised and shared with Mongolia in April 2014. For Vietnam an updated report is being finalised, whereas the same is effective for Kazakhstan's first report. As to Armenia, consultations are ongoing, and a new report will be prepared based on information to be provided by Armenia. Discussions are ongoing with China.

Negotiation of TDI chapters On-going: 6 countries

Concluded: Singapore, Malaysia, India, Canada, Ukraine, Moldova, Georgia.

Deliver the necessary support to the negotiation teams for timely conclusions.

In 2014 DG Trade has pursued negotiations of the TDI chapters with Japan, USA, Morocco, Thailand, Vietnam, Mercosur. TDI chapters are already concluded with Singapore, Malaysia, India, Canada, Ukraine, Moldova, Georgia. Negotiating of TDI chapters on-going is still in an intensive phase. Implementing regulations for other FTA are equally in preparation.

Total Quality Management (TQM) on TDI practises

4 on-going projects End 2014

DG Trade has continued the TQM and simplification exercise to enhance transparency and make full use of efficiency gains in TDI practises. TQM focuses on 4 areas central to the quality of the TDI work, i.e. transparency, consistency of the analysis, internal efficiency and relations with stakeholders. Currently, there are 4 important on-going projects, i.e. optimisation of internal processes, further improvements of electronic filing (SHERLOCK),

65 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013PC0192&from=EN


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completion of design of standard questionnaires, further improvement of a standard calculation tool (OASYS), verification manual. New IT tools, consisting of web consultation, submissions and disclosures are currently being developed.

b) Narrative

The Commission proceeds taking action to protect the EU's and EU producers' interest in order to combat unfair methods such as dumping or subsidisation practised by certain governments and companies. This is evidenced by the number of investigations and trade defence measures in place as referred to above. Including trade defence provisions in the trade agreements is also an investment in standing up for EU interest in trade defence.

c) Conclusion

As evidenced above, the part standing up for the EU in trade defence of the policy managed by DG Trade is on course to meet its multiannual objectives for this objective and has achieved the annual performance indicators or outputs and milestones in the reporting year


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1.2 Economy and efficiency of spending and non-

spending activities.

According to the Financial Regulation (art 30), the principle of economy requires that the resources used by the institution in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and the best price. The principle of efficiency concerns the best relationship between resources employed and results achieved.

The respect of these principles is continuously pursued through the implementation of internal procedures and predefined practices. These procedures ensure that activities are executed in an efficient manner (e.g. the different workflows contribute to the efficient cooperation between staff, units, etc…) and according to the principle of economy (e.g. the procurement rules ensure procurement in optimal conditions).

DG Trade is continuously fine-tuning its internal arrangements in order to improve the efficiency and economy of its operations. The following two initiatives show how these principles are implemented in DG Trade:

1.2.1 Example 1 : HR management

DG Trade is continuing its efforts to absorb both the effects of budgetary austerity and the increased workload as far as possible within existing teams and, where possible, bearing down on the level of overheads. To manage these pressures, DG Trade continues its efforts to shift resources towards priorities and ensure that we are run efficiently, both at Headquarters and in Delegations. For example, when the negotiations with one country is concluded resources are immediately applied for the continued heavy work of legal scrubbing, the steering of the agreements through Council and the European Parliament and finally to ensure the monitoring and the implementation of the agreement. In addition, some of the resources freed up have been redeployed to new negotiations that have been opened during the year. For example, the resources released by the conclusion of the agreement with Canada will help absorb additional negotiating work on EU-US TTIP negotiations, while those released from the Singapore agreement are already being applied to other ASEAN partners.

1.2.2 Example 2 : streamlining financial management

As of 2014, all open tender procedures in DG Trade were managed by using the e-tendering platform (corporate platform developed by the Publication Office), as a first step towards full electronic tendering vis-à-vis potential service providers. In addition to the current functionalities (publishing of notices in the electronic version of the Official Journal), this system allows to publish the documents linked to the Call for Tenders and to process Questions and Answers.

In addition to the sending of electronic invoices (e-invoicing) through the corporate IT platform, DG Trade has started to investigate the possibility to manage its Information Technology contracts fully electronically by using the corporate e-ordering platform. The deployment is foreseen in 2015. In 2015, DG Trade will also pursue its analysis to


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introduce paperless workflows for non-complex transactions.


44

2. MANAGEMENT OF RESOURCES

Assurance is an objective examination of evidence for the purpose of providing an assessment of the effectiveness of risk management, control and governance processes. This examination is carried out by management, who monitors the functioning of the internal control systems on a continuous basis, and by internal and external auditors. Its results are explicitly documented and reported to the Director-General.

The reports produced are:

A signed declaration by all Authorising Officers by Sub-Delegation confirming that all transactions authorised by them during 2014 were legal and regular and implemented in accordance with the principles of sound financial management;

The report issued by the Internal Control Coordinator on the state of play of internal control systems in DG Trade (see part 3);

The reports from Authorising Officers in other DGs managing budget appropriations;

The opinion on state of control issued by DG Trade’s Internal Audit Capability (IAC);

The observations and the recommendations reported by the internal and external auditors (IAC, Internal Audit Service and European Court of Auditors).

DG Trade’s budget was implemented in 2014 as follows:

TOTAL EXPENDITURE COMMITMENTS

€ 17,481,792

PAYMENTS

€ 15,943,500

Administrative expenditure (excl. external staff) € 4,286,165 € 4,119,210

Contributions to International Organisations € 4,050,000 € 3,247,130

Procurement activities € 7,983,550 € 7,964,260

Other expenditure € 183,670 € 171,120

Entrusted to other services € 978,407 € 441,780

Although DG Trade manages a relatively small budget, it does acquire services for economic and impact assessment studies, organising conferences and negotiation rounds, IT support, legal and other services. These services are generally provided by specialised consultants or service providers through public procurement.

In addition, DG Trade also executes part of its operational budget by awarding direct grants to international organisations with a view to implementing multilateral programmes and initiatives in the field of trade related assistance to strengthen the capacity of developing countries to participate effectively in the multilateral trading system and regional trading arrangements and to improve their trade performance.

100% of the budget is implemented through direct management.


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DG Trade continues to operate a decentralised financial circuit with counter-weight. All transactions are therefore subject to an independent ex-ante financial verification.

In addition, a combination of preventive, detective and corrective controls are embedded into the programming and planning, verification, execution and monitoring, management and reporting and communication processes so as to ensure effective mitigation of the financial and management risks.

These include, inter alia:

An annual programming exercise and two mid-term reviews on implementation and human resource management;

An up-to-date Finance Manual (revised each year), complemented by hands-on guidance, local training and references to central guidance;

Financial circuits designed to ensure compliance with the Financial Regulation and its Rules of Application;

Regular accounting controls;

Formal reporting requirements and hand-over procedures for AOSDs;

Detailed quarterly management reporting on key human and financial resource related indicators;

Weekly bulletins on payment delays;

The existence of an Administrative Coordination Assistant's network;

DG Trade’s specific ethics framework, including an anti-fraud strategy.

This section reports the control results and other relevant elements that support management's assurance on the achievement of the internal control objectives66. It is structured in three separate sections: (1) the DG’s assessment of its own activities for the management of its resources; (2) the assessment of the activities carried out by other entities to which the DG has entrusted budget implementation tasks; and (3) the assessment of the results of internal and external audits, including the implementation of audit recommendations.

2.1 Management of human and financial resources by DG

Trade

This section reports and assesses the elements identified by management that support the assurance on the achievement of the internal control objectives. Annex 5 outlines the main risks together with the control processes aimed to mitigate them and the indicators used to measure the performance of the control systems. Given the size of the budget, the nature of the underlying expenses and the single control strategy, this section covers both the public procurement activities and the contributions to

66 Effectiveness, efficiency and economy of operations; reliability of reporting; safeguarding of assets and information; prevention, detection, correction and follow-up of fraud and irregularities; and adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of the programme as well as the nature of the payments (FR Art 32).


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international organisations managed by DG Trade.

Human resources

The staff allocation and mobility process in DG Trade is in line with the priorities and objectives of the DG. In a situation of high workload and pressure to reduce human resources, the HR processes, and in particular mobility, are closely monitored through several instruments such as performance indicators and strategic planning tools.

The close monitoring and continuous redeployment within the DG ensured the DG to meet its objectives while at the same time balancing turnover of staff. Particular analytical focus is put on vacancy rates, sensitive posts, turnover of staff, proportion of external staff/statutory staff, equal opportunities (number of females in management positions), absence management and work-life balance indicators (use of teleworking/flexitime etc.). Mitigating actions are taken where necessary.

Absences are carefully balanced through the replacement staff budget (global envelope) to ensure business continuity. This has been shown in the execution rate where DG Trade, of all the services, was the second best at 99.92%.

Control effectiveness as regards legality and regularity

DG Trade has set up internal control processes aimed to ensure the adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the nature of the payments concerned. The control objective is to ensure that the residual error rate does not exceed 2% per annum.

In DG Trade this threshold applies to any transaction that has been registered as a non-compliance event. Indeed, DG Trade’s activities are predominantly of a political nature (trade negotiations, including monitoring and implementation), and procedural (case-handling), involving a very modest level of financial management.

In such an environment, the services rely on ex-ante controls (100%) and actions by the Internal Audit Capability designed to assess the adequacy and effectiveness of the internal control system.

The legality and regularity is demonstrated by the following key indicators:

OBJECTIVE INDICATOR TARGET 2014 2013 2012 2011

Compliance with ICS 8

Nr of financial exceptions

Keep stable/ reduce

4 3 6 4

Nr of non-compliance events

Keep stable/ reduce

2 3

Nr of decisions overriding controls

None None 1 None None

Complaints in procurement procedures

Number of legal cases following complaints in procurement procedures

None None None None None


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Quality of financial files

Number of transactions verified without any observations

>80%

86% 87% 84%

88%

Payment times

% of payment files executed within 30 days

>95%

(30 days)

88.7%

(18,6 days)

94%

(15,7 days)

98.8%

(13,2 days)

97.2%

(15,5 days)

High budget execution with respect to annual and final budgets

% of budget execution: commitments

> 90% 94% 100% 97.57% 95.79%

% of budget execution: Payments

> 90% 100% 100% 99.9% 99.98%

Potential abnormal RAL (Reste à Liquider)

% of commitments less than 3 years old

>95% 96.4% 96.3% 98 % 100 %

Assessment

Compliance with ICS 8: the rate of financial exceptions/non-compliance events remained stable over

the last three years. An examination of the nature of the exceptions did not reveal any fundamental weaknesses in the control system. In addition, they were considered not to impact the legality and regularity of the underlying transactions. In 2014, no overriding of control was registered. As a consequence the Residual Error Rate (RER) is considered below the materiality threshold of 2% for 2014.

Legal cases: In 2014, there were no legal cases, nor complaints, about a procurement procedure.

Quality of financial files: In 2014, 86% of all financial files were verified without any observation by the financial verifying agent.

Payment times: The number of payments made after 30 days increased in 2014. This is mainly due

to the lack of payment appropriations both in 2013 and 2014 which required carrying forward payments into 2014 and 2015.

Payment execution: DG Trade continued to monitor closely the needs in payment appropriations. Despite the reinforcement received end of December in the Global Transfer, DG Trade was short of payment appropriations for the second year in a row. As a result, a shortfall of € 2M remained unpaid in 2014 and was carried forward in 2015. No particular problems are expected in 2015.

As the indicators remained stable over the last four years and no serious weaknesses were detected in the context of an audit, DG Trade considers that there is no indication that transactions managed by DG Trade would not be legal and regular.


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Control efficiency and cost-effectiveness

The principle of efficiency concerns the best relationship between resources employed and results achieved. The principle of economy requires that the resources used by the institution in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price. This section outlines the indicators used to monitor the efficiency of the control systems, including an overall assessment of the costs and benefits of controls.

DG Trade has produced an estimation of the costs of the main control processes. DG Trade estimates the overall cost of control, including the costs of control for the budget implementation tasks referred to under 2.2, at €1,553,000.

DG Trade has defined efficiency measures for the controls associated with the main core processes. As demonstrated in annex 5, a substantial part of the appropriations would be at risk if these controls would not be in place.

As regards non-quantifiable benefits of controls:

DG Trade applies a 100% ex ante verification of all transactions. This verification

includes mainly procurement procedures and direct awards of grants. To a large

extent, both are governed by a regulatory framework which cannot be curtailed. DG

Trade considers the necessity of these controls to be undeniable. No ex post control

function is established;

With the entry into force of the new provisions of the Financial Regulation,

negotiations were undertaken by DG DEVCO and DG BUDG in order to sign new

framework agreements with the international organisations to which DG Trade

contributes and new model agreements had to be used. Throughout 2014, DG

Trade has observed the latest models provided by DG DEVCO and approved by the

International Organisations. In four cases, the signing of the specific agreements

had to be carried into 2015.

No procurement procedures were cancelled in 2014;

As regards contributions to international organisations potential projects were

discussed with the relevant units and DGs prior to the launch of the financing

decision.

DG Trade retained the following key indicators relating to quantifiable benefits of control:


Credit notes Amount of credit notes received

€553,822 €183,117 N/A N/A

Recovery Order

Number of recovery orders issued

Keep stable/ reduce

1 2 1 7


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Assessment

Credit notes and Recovery Orders: One recovery order, relating to a contribution agreement with

less spending than foreseen, was issued. Credit notes totalling €553,822 were received. The real total increased only slightly compared to 2013, but two credit notes for a higher amount were issued inflating artificially the indicator).

In addition, the following elements of control have to be taken into consideration:

Early March, financial verifying agents started recording the quantifiable benefits of the controls, which are estimated at €700,000 over the nine months of reference.

In 2014, one verification mission was performed to assess whether the financial reporting provided by one international organisation gave reasonable assurance that the underlying expenditure complies with the eligibility rules, and in particular whether the expenditure was backed by effective supporting evidence and verifiable. As a result, no financial corrections were necessary.

Taking into account the non-quantifiable benefits, the stability of the efficiency indicators and the outcome of the additional controls, DG Trade considers that the controls performed today are efficient and necessary.

Fraud prevention and detection

DG Trade has adopted in 2013 its anti-fraud strategy as foreseen in the Commission’s overall anti-fraud strategy67. All the resulting measures and actions have been implemented since or are on-going in line with the indicated timetable. No transitional measures are necessary. Despite its small budget, DG Trade has put in place various control levels to minimise the risk of fraud in financial transactions as outlined above and in annex 5. Furthermore, clear procedures and guidelines on how to detect and report potential fraudulent cases, including whistleblowing, have been put in place and shared with staff. In 2014, no cases have been transmitted to European Anti-Fraud Office (OLAF) or Investigation and Disciplinary Office (IDOC). In the area of trade defence investigations, the cooperation with OLAF continues to work well.


Handling of OLAF cases

Number of cases referred to OLAF

None None None None None

Assessment

67 COM(2011) 376 24.06.2011


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OLAF cases and legal cases: In 2014, no cases were referred to OLAF.

2.2 Budget implementation tasks entrusted to other DGs

and entities

This section reports and assesses the elements that support the assurance on the achievement of the internal control objectives as regards the results of the DG’s supervisory controls on the budget implementation tasks carried out by other Commission DGs and entrusted entities distinct from the Commission.

A number of crossed sub-delegations were concluded with DG Devco during the period 2008-2014 on budget lines 20.020100 and 20.020300. Their aim is a) to finance projects with a view to promoting fair trade in partner developing countries, to be carried out by non-state actors and to be selected through a multi-country call for proposals (implemented by the EU Delegation in India), b) to contribute to the African Union – Interafrican Bureau of Animal Resources (AU-IBAR) to consolidate and enhance participation of African countries in SPS Standard setting (implemented by the EU Delegation in Kenya). No particular weaknesses were signalled by DG Devco.

End 2014, crossed subdelegations were concluded with DG Sante (former Sanco) and DG Clima for an amount of €370.000, which only gave rise to global commitments. No particular weaknesses were signalled.

A co-delegation between DG Trade and the Publications Office was signed in June 2013, whereby the authorisation of payments was co-delegated. In 2014, payments were authorised for an amount of € 6,216.5.

End of 2014, DG Trade contributed €100.000 to the development of a corporate case management system. In the context of the IT rationalisation, this platform is developed by the Case Management Business Domain, led by DG Comp.

Finally, in 2012 and 2014, the mandate of Chafea (Consumers, Health, Agriculture and Food Executive Agency for which DG Sanco is parent DG) has been amended to implement projects aiming at training officials responsible for Codex Alimentarius issues, animal health and plant health issues with the objective to improve their participation in the multilateral meetings of the respective international standards setting bodies and their preparation of national positions, and by extension regional positions.

Overview of funds managed by other DGs:

DG COMMITMENTS PAYMENTS

DG Devco € 500,000 € 335,564

DG Sante € 350,000

DG Clima € 20,000

OP € 8,407 € 6,216


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DG COMMITMENTS PAYMENTS

DG Comp € 100,000 € 100,000

Total € 1,478,407 € 441,780

2.3 Assessment of audit results and follow up of audit

recommendations

In 2014, DG Trade has been subject to five audits in total: three from DG Trade’s Internal Audit Capability (IAC), one from the Internal Audit Service (IAS) and one performance audit from the European Court of Auditors (ECA). DG Trade’s IAC completed two follow-up audits on data protection and ethics and one new audit on planning and risk management. IAS finalised a follow-up audit on management of local IT. ECA concluded a performance audit on the management of Preferential Trade Agreements.

None of the audits completed made any recommendations classified as “critical”

Results from work carried out by DG Trade Internal Audit

Capability (IAC)

The IAC's overall assessment in two follow up audits (on data protection and ethics) is that all recommendations have been adequately and effectively implemented, except for one important recommendation from the audit on data protection that was assessed as in progress. It relates to the further strengthening of the exchange of information between DG Trade’s IT unit and the Data Protection Coordinator (DPC). Corrective actions have already been undertaken and the DPC should now be informed about new IT developments and, if applicable, new vision documents.

Based on the results of the follow-up audit on ethics, the auditors considered that all recommendations have been adequately and effectively implemented. Since the initial audit on ethics was completed in 2012, DG Trade took several actions to improve the processes and procedures related to ethics, such as aligning of the internal guidance (in particular the Code of Ethics) to the newly created corporate one, and raising of awareness. A new revision of the Code of Ethics took place in November 2014 to update the instructions and adjust inadvertencies. The revised and updated version was approved by the Director General, circulated to all DG Trade staff and posted on the DG’s intranet in February 2015. As a result, all recommendations were considered implemented.

In a recently finalised audit (report issued in February 2015), the auditors concluded that DG Trade's processes and procedures related to planning and risk management comply with legal and corporate requirements, and are effectively and efficiently implemented in general. Nevertheless, the auditors made a couple of recommendations, in particular as regards the process of the risks identification within DG Trade, its coverage and completeness.


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In its’ overall opinion on the state of control, the IAC concluded that the internal control system in place provided reasonable assurance regarding the achievement of the business objectives set up for the processes audited.

Results from work carried out by Internal Audit Service (IAS)

In 2014, the IAS carried out a follow-up audit on management of local IT in DG Trade with a view to assess the progress made in implementing the accepted recommendations addressed to DG Trade that resulted from the initial audit concluded in 2012. Although the IAS acknowledged the progress made in the design of the IT Governance set up and of the IT risk management process, it considered two recommendations classified as very important as only partially effective and efficient for the reasons described below.

To better address the risk of the IT strategy not being in line with the organisation's strategy and of the IT-enabled investments not supporting the organisational goals and objectives, the IT Governance should be further enhanced by reinforcing the role of the IT Steering Committee (ITSC). In 2013, DG Trade approved an ITSC charter describing the objective, tasks, composition, meetings frequency and agenda. However, in terms of implementation, the IAS observed that some key tasks are not effectively performed, in particular the monitoring of the status of IT projects (and in general of the IT services provided to DG Trade) by means of appropriate reporting and key performance indicators (KPI), and the reporting and monitoring of IT-related risks. In this respect DG Trade has been reflecting on which KPIs monitoring progress would be more appropriate to report upon, in a way that is relevant to management. The DG’s IT Unit is consulting the system owners to identify the most relevant indicators. Once defined, these KPIs could be used to report to the project steering committees and the DG’s ITSC.

In addition, DG Trade was requested to improve the risk management process to ensure adequate identification and management of IT-related risks. IAS still had reservations to whether significant IT risks are timely detected and effectively mitigated and that the results of such an assessment are escalated to the ITSC for review and discussion. DG Trade undertook appropriate steps to better address this risk and for every meeting of the ITSC (2-3 times per year), a supporting document is prepared compiling the risks in the risk lists of the different projects, the IT related risks in the Directorate’s and DG’s risk registers.

Results from work carried out by the European Court of Auditors

(ECA)

No specific comments with regard to DG Trade’s financial processes were received from the ECA in its Annual Report 2013. To date, no transactions from DG Trade have been selected by the ECA in the context of 2014 DAS (Declaration of Assurance).

In May 2014, the European Court of Auditors (ECA) issued a Special Report on the effective management of the Preferential Trade Arrangements (SR 2/2014). As regards


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the elements relating to trade policy, the report made a number of observations touching on how the Commission had assessed the impact of the trade agreements in the past and therefore issued a number of recommendations. DG Trade acknowledged there is room for improvement in some areas but considers it has always acted in accordance with existing standards and guidelines at the time, and accepts the Court’s recommendations whereby it will continue to move forward and do more and better systematic assessments of trade agreements (through impact assessments, sustainability impact assessments and ex-post evaluations). Not only will there be work ahead to effectively address these recommendations, DG Trade will also have to follow up on Parliament's or Council's recommendations made in the context of the Discharge. Although the ECA's recommendations are being addressed in the meantime (revision of the SIA Handbook, intensified cooperation with Eurostat on the quality assessment of statistical data, conclusion of an administrative arrangement with JRC aiming at improving the European input-output database for Global Trade Analysis (EU-GTAP)), there is still work ahead to complete the actions DG Trade committed to undertake with a view to improve the effectiveness of the assessment of the preferential trade arrangements.

Implementation of audit recommendations

In 2014, DG Trade continued to systematically monitor the implementation of recommendations stemming from the audit reports. A comprehensive report on the state of play of audit recommendations is established periodically. A summary is included in DG Trade's Resources Report and communicated to all staff of DG Trade. Whenever deemed necessary, the specific issues resulting from on-going/closed audits are presented at relevant fora. Action plans are systematically established following each audit with active involvement of all auditees concerned.

As of end of 2014, a total of three recommendations, classified as very important and considered as “overdue” more than 6 months, remain partially implemented. They relate to two action plans drawn up in response to the final audit reports performed by the IAC on document management and the follow – up audit by the IAS on local IT management.

With relation to the weaknesses identified in the audit on document management, almost all shortcomings were addressed throughout 2014, except for one very important recommendation, requesting the Directorates to define important “milestone/reference” documents for their activities, to be registered in Ares, which is considered to be partially implemented. Although some Directors felt the recommendation is well implemented at their level, two considered they did not receive sufficient central guidance in this respect.

Two other outstanding very important recommendations result from the IAS audit on management of local IT where the auditors assessed that their implementation is still in progress and additional measures should be taken to effectively address the existing risks in the IT governance and IT risk management (see details above).

Recommendations not addressed


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In addition, one very important recommendation that remains to be addressed, of which the implementation has not started yet and which is nearly overdue was issued in the IAC audit report on enforcement of EU rights in the context of the multinational and bilateral trade commitments. According to the auditors and in order to improve the efficiency of the team work process and optimal use of resources across the DG, a transparent workflow to be applied for enforcement activities should be defined and a decision on whether to centralise or decentralise monitoring of implementation be taken. At the moment, only a partial action plan is presented to IAC and followed up, pending a management decision on this matter. Such a decision would only be possible in the light of several years’ experience of the various trade agreements that have come into force over the last three years.

Except for the aforementioned instances, all relevant action plans are being implemented as planned and are on schedule.

As a result of the assessment of the risks underlying the auditors’ observations together with the management measures taken in response, the management of DG Trade believes that the recommendations issued do not raise any assurance implications, in particular as regards safeguarding of information, and are being implemented as part of the on-going and continuous efforts in terms of further improvements.


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3. ASSESSMENT OF THE EFFECTIVENESS OF THE

INTERNAL CONTROL SYSTEMS

DG Trade has put in place the organisational structure and the internal control systems suited to the achievement of the policy and control objectives, in accordance with the standards and having due regard to the risks associated with the environment in which it operates. Unit A.1 is responsible for advising, monitoring, compliance assessment and reporting on the internal control systems in DG Trade. In this unit, one official (supervised by the Head of Sector) from the Budget, Strategic Planning and Management sector assists DG Trade's Internal Control Coordinator (Director A) in his tasks. In 2014, the compliance was also assessed ex post by the DG's Internal Audit Capability (IAC), for the internal control standards selected as part of the IAC's annual work programme approved by the Director General. In 2014, the College decided that the DG's internal audit functions would be transferred to the Commission’s Internal Audit Service (IAS) which has taken over of the responsibility to contribute to the building of the AODs' overall annual assurance as from January 2015.

It is important to note that the present assessment exclusively relates to the implementation of internal control standards for which DG Trade is responsible and does not include reporting on internal control arrangements in the EU Delegations, for which DG Trade is not responsible.

The 2014 assessment of the internal control systems was launched in October and completed in February 2015 with the Internal Control Coordinator's report to the AOD. The following elements have been taken into account in order to build reasonable assurance on the functioning of the entire internal control systems in DG Trade:

Detailed reports by the respective chefs de file on the implementation of the 2014 prioritised internal control standards (ICSs);

Results of a staff survey with coverage of all ICSs;

Qualitative assessments by the units/sectors/teams in charge of the implementation of particular ICSs;

A desk review by unit A.1 of information collected throughout the year, such as information from senior management coordination meetings, the quarterly management meetings on administrative matters, the 2015 Management Plan and relations with central services;

The DG Risk Assessment exercise;

The reports by the AOSDs (AOSD Declaration);

The IAC opinion on the state of control;

Relevant audit results (IAC, IAS, ECA);

Other control information (OLAF, IDOC);

The register of exceptions and non-compliance events.

In 2014, DG Trade planned a number of measures to improve the effective implementation of certain ICSs and in particular those prioritised in the reporting year,


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i.e. ICS 12 on Information and Communication and ICS 14 on Evaluation of Activities.

DG Trade remains confronted with challenges with regard to the external communication (ICS 12). DG Trade faces an unprecedented level of interest and scrutiny around its main bilateral negotiations (especially, but not limited to, TTIP), and consequently has stepped up communication initiatives in 2014. It continued to implement the recommendations stemming from the evaluation of the communication strategy. In 2015, DG Trade will continue to invest and enhance capabilities in the field of information and communication. The Communication on transparency from Commissioner Cecilia Malmström in November 2014 paved the way for new actions such as the publication of negotiating texts in the course of the negotiations. In 2015, DG Trade decided to continue to put emphasis on this ICS in 2015, given the level of priorities and public interest generated by trade across our Member States.

As regards the effective implementation of the ICS14 (Evaluation of activities), some of the ECA's recommendations issued in the Special Report 2/2014 are meanwhile being addressed (revision SIA Handbook, intensified cooperation with Eurostat and JRC on the quality assessment of statistical data). In spite of the actions already undertaken there is still work ahead. For example, we are working towards the setting up of a multiannual plan for ex-post evaluations of trade agreements by the end of 2015, and a framework contract for evaluations has been set up and launched. Hence, it has been decided to continue focusing on the ICS 14 in 2015 as well.

It can be concluded on the basis of the 2014 internal control assessment exercise, that DG Trade is compliant with all internal control standards and that the internal control systems provide a reasonable assurance regarding the achievement of the business objectives. For certain elements covered under the ICSs, such as ICS6 Risk Management, ICS8 Processes and Procedures, ICS11 Document Management, however, further improvement is still needed.

During the reporting period, some audits focused on the compliance of the ICSs (ex. ICS 5 and ICS 6), where need for an improvement was identified in 2013 and measures taken in 2014. Therefore, a significant effort was undertaken for the 2014 Management Plan to improve the quality of the individual indicators and targets of the general and specific objectives, and in the preparation of the 2015 Management Plan, another major effort was undertaken to further enhance the readability of the report. DG Trade continued to comply fully with the requirement of the ICS 6. The measures, to further improve the efficiency of its internal control systems in the management of IT related risks and the staff involvement in the risk assessment exercises were taken.

As regards ICS 8 and in order to effectively address weaknesses detected in the IAC's audit (See chapter 2.3), the transparent workflow in the area of the enforcement activities should still be defined.

With regard to the effective implementation of ICS 11, DG Trade has made a considerable effort to address the weaknesses in the document management policy and procedures highlighted in the IAC's audit results. An awareness and information campaign was run during 2014 (several notes, open day, intranet updates, bilateral contacts of Document Management Team with operational colleagues to perform simplification of filing plans in ARES) to address most shortcomings. However, Trade handles a great deal of sensitive and/or classified information. It considers that there


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is an important risk to the achievement of its objectives in the event of leaks of sensitive negotiating documents (often appearing to originate in the EU Member States or in the European Parliament once information is shared with them) or business sensitive information in TDI cases. As a consequence DG Trade decided to include the critical risk identified in the 2015 Management Plan relating to leaks of negotiating documents. While placing a premium on transparency, DG Trade continues to remain vigilant to the risk of leaks, particularly, in the context of the sharing of such information under appropriate handling requirements with other EU institutions. It has, for example, established a close cooperation with the Council and Parliament to ensure appropriate handling of sensitive information in the trade area (such as, the creation of of a special reading room for MEPs consultation, appropriate use of EU restricted marking and classification). It has also worked closely with relevant Commission services to review measures in place. The actions undertaken to reduce the risk are reviewed systematically during mid-term reviews and instances that could hinder the effectiveness of the internal control system in safeguarding of information are signalled.


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4. MANAGEMENT ASSURANCE

This section reviews the assessment of the elements reported in Parts 2 and 3 and draws conclusions supporting the declaration of assurance and particularly, whether it should be qualified with reservations.

4.1 Review of the elements supporting assurance

Key indicators of DG Trade's performance in financial management showed either a positive or a stable trend in 2014. Whereas, DG Trade has a relatively small budget to manage, the key controls implemented in DG Trade and which were not altered in 2014, operate adequately as confirmed by the different audits conducted. The outcome of all the audits, the regular and comprehensive follow-up of the related audit recommendations and the results of the internal control assessment constitute important components of assurance in this respect.

Taking into account the conclusions of the review of the elements supporting assurance, DG Trade considers that the information presented above gives a full and fair presentation of the systems in place to ensure that resources assigned to the DG have been used for their intended purposes and in accordance with the principles of sound financial management and those of legality and regularity.

It is therefore possible to conclude that the internal control systems implemented by DG Trade provide sufficient assurance to adequately manage the risks relating to the legality and regularity of the underlying transactions. Furthermore, it is also possible to conclude that the internal control systems provide sufficient assurance with regards to the achievement of the other internal control objectives.

4.2 Reservations and overall conclusion on assurance

In view of the control results and all other relevant information available, the AOD's best estimation of the risks relating to the legality and regularity for the expenditure authorised during the reporting year (€15.943 million) is between 0% and 2%, which implies an amount at risk of maximum € 0.318 million.

The internal control strategy foresees the implementation of an ex-ante control of 100% of the expenditure authorised. No ex-post control function is set up. Since 2009, the implementation of these ex-ante controls has resulted on average in recoveries and financial corrections representing 1.8% of average payments over the same period. In 2014, in addition to the verification performed, none of the non-compliance events registered over the last years required a financial correction or recovery. In addition, no other elements were brought to the attention of the AOD which could give rise to a financial correction or recovery. As a result, no financial corrections or recoveries had to be applied ex-post. The percentage of 1.8% applied to this year’s payments (resulting in € 0.286 million) provides the best available indication of the corrective capacity of the control systems implemented by DG Trade.

Given the above, DG Trade can therefore conclude that it has not identified any specific


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issues or systematic weaknesses or shortfalls in its management and internal control systems that would give rise to material reservations or that would have an impact on the assurance contained in the annual declaration.


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5. DECLARATION OF ASSURANCE

I, the undersigned, Jean-Luc DEMARTY

Director-General of Directorate-General Trade

In my capacity as authorising officer by delegation declare that the information

contained in this report gives a true and fair view68.

State that I have reasonable assurance that the resources assigned to the activities

described in this report have been used for their intended purpose and in accordance

with the principles of sound financial management, and that the control procedures put

in place give the necessary guarantees concerning the legality and regularity of the

underlying transactions.

This reasonable assurance is based on my own judgement and on the information at

my disposal, such as the results of the self-assessment, ex-post controls, the work of

the internal audit capability, the observations of the Internal Audit Service and the

lessons learnt from the reports of the Court of Auditors for years prior to the year of

this declaration.

Confirm that I am not aware of anything not reported here which could harm the

interests of the institution.

Brussels, 30 March 2015

[signed]

Jean-Luc DEMARTY

68 True and fair in this context means a reliable, complete and correct view on the state of affairs in the DG

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