The European Parliament and Council have both approved (on April 2 and May 8 respectively) a new legal framework under which the European Commission can amend the European trade regime for specific countries “to better enforce EU rights”. Essentially, the regime will allow the Commission to withdraw trade benefits from a partner under any agreement that includes dispute settlement, such as the WTO or EPAs.
The Commission has three specific circumstances in which it will use its powers. These are:
- “EU trade sanctions when a country does not comply with an arbitration ruling under multilateral or bilateral dispute settlement rules”;
- “Action to defend EU interests when third countries adopt bilateral/regional safeguard measures unduly restricting EU trade”;
- “Suspending trade benefits granted to a WTO Member that modifies its concessions to the EU under Article XXVIII GATT 1994 and fails to provide compensation to the EU”.
The new framework – which is an amended version of a proposal made by the Commission in December 2012 – has been made necessary by the Lisbon Treaty, which divides legislative and executive powers between the EU institutions. Under the Lisbon Treaty, “it is for the Council and the European Parliament to establish a clear and stable framework for the implementation of the common commercial policy”, which the Commission then implements. The purpose of the new legal arrangement is to provide the framework within which the Commission can “react swiftly and effectively”, avoiding a lengthy process involving all three European institutions in specific cases.
Many (though not all) dispute settlement provisions in the trade agreements to which the EU is a party include provision for what happens if a dispute is launched and one side “loses”, but then fails to take whatever remedial action has been recommended by the adjudicators. Dispute settlement provisions in EU trade agreements often allow the complaining party to take offsetting retaliatory measures that reduce proportionately the benefits of the agreement to the party found to be in the wrong. The new legal framework allows the Commission swiftly to apply whatever such “compensatory” measures it decides upon.
ACP countries could be affected if they belong to any trade agreement with dispute settlement to which the EU also belongs – such as the WTO. But it is perhaps most likely that they could be affected in the context of EPAs. EPAs include a range of obligations on both parties. Some of the obligations are quite clear (e.g. reducing specific tariffs) and some are opaque, in the sense that there may be disagreement over what actually needs to be done (for example, in the case of the requirement that charges on imports that have the same effect as a tariff must be phased out, there could be disagreement over whether a particular levy falls into this category). In some ACP EPA countries, many of these “additional charges” apply particularly to agricultural imports.
No doubt, many disagreements will be resolved by negotiation. But if any go to dispute settlement and the ACP side loses, it may feel the effects of this “streamlined” EU procedure.