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2017
Annual Activity Report
Directorate General for Trade
Ref. Ares(2018)1720253 - 28/03/2018
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Foreword
The Director-General or equivalent head of Commission department may insert here an introductory message.
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Table of Contents
THE DG IN BRIEF 4
EXECUTIVE SUMMARY 5
A) KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF DG TRADE’S GENERAL AND SPECIFIC OBJECTIVES ........................... 5 B) KEY PERFORMANCE INDICATORS (KPIS) ......................................................................................................................... 9 C) KEY CONCLUSIONS ON FINANCIAL MANAGEMENT AND INTERNAL CONTROL .......................................................................... 11 D) PROVISION OF INFORMATION TO COMMISSIONER MALMSTRÖM ...................................................................................... 11
1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG 12
Specific objective 1: Trade Negotiations ...................................................................................................... 13 Specific objective 2: Effective implementation ............................................................................................. 20 Specific objective 3: Tackling unfair trade .................................................................................................... 27 Specific objective 4: A sustainable approach to trade .................................................................................. 30
2. ORGANISATIONAL MANAGEMENT AND INTERNAL CONTROL 33
2.1 FINANCIAL MANAGEMENT AND INTERNAL CONTROL ................................................................................................ 33 2.1.1 CONTROL RESULTS ........................................................................................................................................... 33 2.1.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS ................................................................................................... 41 2.1.3 ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS .................................................................. 43 2.1.4 CONCLUSIONS AS REGARDS ASSURANCE ................................................................................................................ 45 2.1.5 DECLARATION OF ASSURANCE ............................................................................................................................ 46
DECLARATION OF ASSURANCE 47
2.2 OTHER ORGANISATIONAL MANAGEMENT DIMENSIONS ............................................................................................ 48 2.2.1 HUMAN RESOURCE MANAGEMENT ...................................................................................................................... 48 2.2.2 BETTER REGULATION ........................................................................................................................................ 50 2.2.3 INFORMATION MANAGEMENT ASPECTS ................................................................................................................ 50 2.2.4 EXTERNAL COMMUNICATION ACTIVITIES ............................................................................................................... 50
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THE DG 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, pluri- and multilateral trade agreements, ensures that the
rules agreed are actually applied, and works closely with the WTO and other multilateral institutions. This means tackling international trade and customs barriers, backed up
where needed with EU legislation. Trade negotiations cover a wide range of areas such as goods, services, intellectual property, investment, government procurement, access to
energy and raw materials, customs and trade facilitation, competition (including subsidies
and State Owned Enterprises), trade and sustainable development, investment and regulatory co-operation. 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 subsidisation. Success in Europe is inextricably bound up with the success
of the EU’s 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, in 2017 it managed
a budget of about €22 million (about €17.5 million in its operational budget and about
€4.5 million in its administrative budget). This budget has remained stable over recent years. At the same time trade-related objectives are also embedded in the different
financial programmes managed by other Commission departments, mainly under the heading of the Multiannual Financial Framework covering the EU as a global player
(Heading 4).
As the EU's prime negotiator and guardian of an effectively implemented EU trade policy,
DG Trade’s mission is largely dependent on close working relations with its partners, both inside and outside the Commission. In playing its role in trade policy, DG Trade works
very closely with the European Parliament and the Council of the European Union and
with other international organisations, such as the World Trade Organisation (WTO) and the Organisation for Economic Co-operation and Development (OECD), as well as with
the Civil Society. Its success draws strongly on its close working relationships with the European External Action Service (EEAS) and other Commission services.
In order to fulfil its mission DG Trade has two related, but distinct, operational activities: trade policy and trade defence; and is organised into eight directorates. The Director
General is supported in managing operations by two Deputy Directors Generals, 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); reporting directly to the Director General. In addition, DG Trade has staff posted in EU Delegations and in three Commission representations, for
which DG Trade is the Appointing Authority.
As demonstrated through the indicators, DG Trade is well-managed and works efficiently.
It is operating today under considerable resource pressure both at Headquarters and in EU Delegations throughout the world. 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 its work and effectively carry out the increased
implementation work, in addition to the increasing workload brought from the new
initiatives launched in 2017.
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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. Annual Activity Reports are the main instrument of
management accountability within the Commission and constitutes the basis on which
the College takes political responsibility for the decisions it takes as well as for the coordinating, executive and management functions it exercises, as laid down in the
Treaties1.
a) Key results and progress towards the achievement of
DG Trade’s general and specific objectives
On 13 September, in his annual State of the Union address, President Jean-Claude Juncker stated: "I want us to strengthen our European trade agenda. Yes, Europe is
open for business. But there must be reciprocity. We have to get what we give. Trade is
not something abstract. Trade is about jobs, creating new opportunities for Europe’s businesses big and small. Every additional €1 billion in exports supports 14,000 extra
jobs in Europe. Trade is about exporting our standards, be they social or environmental
standards, data protection or food safety requirements."
At the occasion of the State of the Union speech, Trade Commissioner Cecilia Malmström said: "The world needs leaders in trade. The EU continues to champion free
and fair trade, at the forefront of a group of like-minded countries. Today's package of proposals shows this leadership in action. It also demonstrates our determination to
develop EU trade policy in a way that's as open and inclusive as possible. And in the coming weeks I will be working closely with the European Parliament and EU
governments, through the Council of the EU, to move these proposals forward as quickly
as possible."
2017 was a fruitful year for DG Trade delivering on several areas of the EU’s
trade policy demonstrating the EU added value in this policy field. Concrete outputs were delivered not only on bilateral and multilateral relations, but also in the regulatory
sphere.
The Commission adopted as part of President Juncker’s State of the Union
speech a new Trade Package, which included several initiatives:
A Communication on “A Balanced and Progressive Trade Policy to Harness Globalisation”.
A recommendation to the Council to authorise the opening of negotiations
for free trade agreements with Australia and with New Zealand,
respectively. For the first time, the Commission decided to make public these negotiation directives (see other results towards a fully transparent trade policy
further below), along with the impact assessment report.
A recommendation to the Council to authorise the opening of negotiations for a Convention establishing a multilateral court for the settlement of
investment disputes. This court would replace the Investment Court System (ICS) currently foreseen in the EU’s bilateral agreements and the Investor-State
Dispute Settlement arrangements that exist in more than 3000 current bilateral
1 Article 17(1) of the Treaty on European Union.
trade_aar_2017_draft Page 6 of 53
investment treaties. These are the first ever discussions at multilateral level on the reform of the investor-state dispute settlement.
A proposal for a new framework for screening of Foreign Direct Investment into the EU. It consists of a dedicated Communication outlining the
strategic need for such a screening entitled “Welcoming Foreign Direct Investment while Protecting Essential Interests” as well as a Proposal for a Regulation of the
European Parliament and the Council establishing a framework for screening of foreign direct investments into the European Union. These steps are taken in
order to make sure that the EU remains one of the world’s most open investment regimes, and thereby a source of growth and jobs while protecting its essential
interests.
On 21 September 2017, the
Comprehensive Economic and Trade Agreement
(CETA) between EU and Canada entered into
provisional application. Canada is one of the EU's
oldest and closest strategic partners. Canada and the EU
have a long history of shared
values and therefore work closely together on many
global challenges such as the environment, climate change, energy security, regional stability etc. Canada is the 11th largest economy in the world and is the 12th largest
trading partner of the EU. With CETA, European companies are receiving the best treatment that Canada has ever offered to any trading partner, thus levelling the playing
field on the Canadian market for EU operators. By opening markets, CETA should support growth and jobs in the EU and bring further benefits for European consumers.
The most prominent negotiating achievement in
2017 was undoubtedly the finalisation of the
negotiations of an Economic Partnership Agreement
(EPA) with Japan. This agreement is one of the largest
and most comprehensive
economic agreements that either the EU or Japan have
concluded so far. This EPA involves approximately 30 percent of the world GDP, and will open up tremendous trade
and investment opportunities for both partners. It will also strengthen economic cooperation between Japan and the EU and reinforce their competitiveness as mature but
also innovative economies.
Another major milestone in 2017 was the ruling of the European Court of
Justice (ECJ) on the division of competences between the EU and its Member States in the Singapore FTA. This has triggered a reflection process between the
Commission, the EU’s Member States and the European Parliament on the future architecture of trade and investment agreements; a process which has implications for
the imminent signature and entry into force of free trade agreements with Singapore and Vietnam, negotiations which had already reached a political conclusion in 2014 and 2015
respectively.
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DG Trade’s negotiation force focused intensively on talks with Mexico and Mercosur in 2017. Significant
progress was made towards
reaching a balanced agreement with Mexico for modernising the
existing trade pillar of the 2000 EU-Mexico Global Agreement.
Simultaneously, the talks with four countries of the South
American sub-regional trading bloc Mercosur advanced on a
trade chapter in the future EU-Mercosur Association
Agreement.
As for the modernisation of the 2005 EU-Chile Association Agreement, the
Commission recommended on 24 May to the Council to authorise the opening of negotiations. The Council gave its green light in November 2017 and negotiations were
subsequently launched during the same month. A first substantive negotiation round took place in Santiago de Chile in January 2018.
On the multilateral track, the Trade Facilitation Agreement agreed at the World
Trade Organization’s 9th Ministerial Conference entered into force in February
2017 after two-thirds of the WTO membership completed their domestic ratification process. This agreement aims to simplify and clarify international import and export
procedures, customs formalities and transit requirements.
With regard to the EU’s anti-dumping and anti-subsidy legislation, two major amendments were agreed in the European Parliament and the Council in 2017.
The first one provides for a new method for calculating dumping on imports from countries where there are significant market distortions, in particular owing to state
interference. This amendment entered into force just over a year after being proposed by
the Commission. The second amendment aims at modernising the EU’s Trade Defence Instruments providing for new rules to shorten the current 9 month investigation for the
imposition of provisional measures and making the system more transparent.
Finally, the Council and the European Parliament adopted in May 2017 a new EU regulation to ensure responsible importation of the so-called 'conflict minerals'
tin, tantalum, tungsten and gold. This regulation will ensure that companies involved in mining, processing and trade in minerals do not intentionally or unintentionally contribute
to risks associated with conflict financing and human rights abuses, but focus on
generating income, growth and prosperity, and support the livelihood of local communities.
From the transparency and reporting angle, DG Trade also accomplished new results in
2017:
In the context of the effective implementation of the trade and investment policies, the Commission decided in September to create an expert group on EU
trade agreements. This is a group which will allow the Commission to engage with
representative organisations with expertise in economic, social, ethical and/or environmental issues in its implementation of the EU's trade policy.
At the same time, the Commission, starting with Australia and New Zeeland,
decided to publish its draft negotiation directives accompanying its recommendations to Council to open negotiations at the time of their proposal, and
continued to recommend that Council publish the final version.
Two major reports with regard to the EU's trade policy were released in 2017 in
addition to the more regular reporting. The report "Implementation of the Trade
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Policy Strategy Trade for All" showed that DG Trade is delivering on a progressive trade policy to harness globalisation. Another report "Implementation of Free Trade
Agreements" is the first of its kind shedding light on what happens after trade
agreements are negotiated and have entered into force. This publication is another step towards a fully transparent and inclusive trade policy, in line with the Commission's
commitments set out in the EU's 2015 'Trade for All' strategy.
In 2017 DG Trade
published 17 negotiation round reports published 65 legal text proposals
held 23 meetings with civil society and other interested parties, including
meetings during specific negotiation rounds. launched four public consultations on Impacts Assessments and Sustainability
Impact Assessments
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b) Key Performance Indicators (KPIs)
In this section, the three most relevant KPIs as identified in the DG Trade 2016-2020
Strategic Plan are presented.
KPI 1 : Preference utilisation rates of EU preferential trade arrangements2 for the EU and partners' side
This indicator will show the extent to which operators will be making use of the EU preferential arrangements. It will
give an indication how well these agreements are formulated and how the uptake is handled in the EU Member
States and the partner countries.
Source of data: Eurostat and national customs registrations
Baseline
2012
Interim
Milestone
2018
Target
2020
Latest known result
2015/2016
Preference utilisation EU importers
FTA 2012 2013 2014
Chile 93% 93% 94% Increase of rates The target is to increase the
percentage according to
recent trend. It is difficult to
predict an exact percentage
at a specific moment in
time. Ultimately, the desire
is of course to have full
coverage over time as this
will have the greatest
impact on the economy
95% - 95%
Mexico 68% 67% 61% 52% - 58%
Colomb
ia
…. 85% 96% 97% - 97%
Peru 95% 97% 98% - 97%
South
Africa
90% 91% 91% 85% - 78%
South
Korea
78% 82% 84% 85% - 87%
Turkey 92% 92% 93% 93% - 93%
Ukrain
e
…. - 89%
Preference utilisation EU exporters
FTA 2012 2013 2014 2015/2016
Chile 79% 78% 78% Increase of rates The target is to increase the
percentage according to
recent trend
76% - 74%
Colomb
ia
56% 63% - 71%
Costa
Rica
18% … - 38%
Egypt 55% 57% 41% - 59%
Monten
egro
76% 86% 86% 85% - 85%
South
Korea
65% 68% - 71%
Looking at the latest known results from 2016, it is noticeable that most results are rather stable showing good use of the agreements.
2 A selection of countries is shown, where agreements have been in place for a certain time.
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KPI 2 : Percentage of EU trade covered by applied bi-lateral and regional agreements,3
This indicator will show the extent of the EU trade covered by EU's applied preferential trade and investment
agreements and the evolution of this coverage. The figures are based on trade in goods and services.
Source of data: DG Trade / Eurostat
Baseline
2013-15 goods /
2012-14 services
These figures now
exclude services with
Switzerland, as they had
mistakenly been included
in the Strategic Plan
Interim Milestone
2018
Target
2020
Latest known result
2015-17 goods/
2014-16 services
Impo
rts
Export
s
Total Imports Exports Total Import
s
Exports Total Impor
ts
Export
s
Total
21% 24% 23% 31% 35% 33% 54% 62% 58% 22% 26% 24%
Although the EU welcomed nine new countries as trade agreement partners in 2016 and another significant partner in 2017, it will take some time before the above indicators will
show results. This is due to the time lag of latest known results.
KPI 3 : Percentage of fully liberalised imports from the world (i.e. at zero duty4)
This indicator will show the extent of the EU's applied preferential treatment for merchandise imports (EU imports
extra EU) and its evolution. The bigger the share, the better economic conditions and opportunities for EU
consumers, and EU operators using imports as inputs in their businesses.
Source of data: Eurostat
Baseline
2015
Interim Milestone
2018
Target
2020
Latest known result
2016
70% Increase Increase 70%
The indicator remains at the same level as the year before.
3 This indicator does not cover multilateral WTO nor the plurilateral sectoral negotiations and agreements
4 Most Favoured Nation (MFN) duty free, Generalised Scheme of Preferences (GSP) duty free and other duty
free
trade_aar_2017_draft Page 11 of 53
c) Key conclusions on financial management and internal control
In accordance with the governance arrangements of the European Commission, the staff
of 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/principles, based on
international good practice, aimed to ensure the achievement of policy and operational objectives. The financial regulation requires that the organisational structure and the
internal control systems used for the implementation of the budget are set up in accordance with these standards/principles. DG Trade has assessed the internal control
systems during the reporting year and has concluded that the internal control
standards/principles are implemented and function as intended Please refer to AAR section 2.1.3 for further details.
In addition, DG Trade has systematically examined the available control results and indicators, including those aimed to supervise entities to which it has entrusted budget
implementation tasks, 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 Section 2.1 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.
d) Provision of information to Commissioner Malmström
In the context of the regular meetings during the year between the DG and the Commissioner on management matters, also 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. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG
As set out in its Strategic Plan 2016-2020, DG Trade pursues its DG specific objectives in context of three of the Commission's general objectives. These specific objectives,
together with their link to the general objectives5 are set out in the figure below. DG Trade’s policy actions are also aimed at achieving the objectives set out in the trade and
investment policy strategy Communication "Trade for All", adopted by the College of Commissioners on 14 October 20156.
5 The title of Priority 6 has been updated and made geographically neutral in view of the slowing down of
trade talks with the United States, the new geopolitical context, and the new dynamism in trade talks with
other important regions of the world. The Commission has reflected this reality by changing the previous
General Objective ("A Reasonable and Balanced Free Trade Agreement with the U.S") and introducing a new
impact indicator replacing the old one "Share US in total EU FDI stocks".
6 COM(2015)497 of 14 October 2015. The Trade for All Strategy was complemented by a new package
Communication (COM(2017) 492) in the context of President Juncker’s 2017 State of the Union speech
entitled “A balanced and Progressive Trade Policy to Harness Globalisation”. This package adds to and
completes the existing very intensive trade agenda of the Union in order to respond to the current
opportunities and challenges Europe faces, while furthering Europe’s essential interests.
1. A New Boost for Jobs,
Growth and Investment
6. A balanced and
progressive trade policy to harness globalisation
9. A Stronger Global Actor
Specific objective 1: Trade Negotiations
Specific objective 2: Effective Implementation
Specific objective 3: Tackling Unfair Trade Specific objective 4: A
Sustainable Approach to Trade
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Specific objective 1: Trade Negotiations
A wide coverage of the world's trade through regional, multi-, pluri- and bilateral agreements concluded by the EU ensuring the best economic
conditions and opportunities for consumers, workers, citizens and
enterprises, including SMEs, in the EU and non-EU countries, particularly
in Developing Countries
Activities and outputs under this specific objective contribute to various extents to the Commission's General objective 1, 6 and 9. DG Trade has been strongly pursuing its
comprehensive negotiation agenda aiming to increase the coverage of the trade between the EU and its trading partners with preferential tariffs and simplified regulatory
procedures for the benefit of EU citizens. Increasing opportunities for exports and imports have proven to boost the economy and create jobs in the EU. Trade agreements
are also an important element for the EU as a global actor in stabilising relations with
partners countries. In this context, trade negotiations are one of the core elements of towards a balanced and progressive trade policy to harness globalisation.
The multilateral and plurilateral agenda
In the run up to the 11th Ministerial Conference (MC11) of the World Trade
Organisation in December 2017, the EU, represented by DG Trade, had challenged its 163 WTO partners to plan for substantive outcomes with a
suitable package including text proposals in areas such as e-commerce, domestic support in agriculture, horizontal subsidies, fisheries subsidies, domestic regulation in
services, and on issues of interest to SMEs, such as transparency and good regulatory
practices of work. The successes of the last two Ministerial Conferences brought some optimism that despite significant differences of views among its Members, the WTO is still
capable of delivering important negotiated outcomes; however, MC 11 made clear that success is not a given and that the WTO's negotiating and deliberative function are facing
fundamental problems. In fact the Conference failed to reach any substantive outcome other than the decision to pursue negotiations on fisheries subsidies (Ministerial Decision
on Fisheries Subsidies) and other decisions extending the moratoria on customs duties on electronic transmissions and on non-violation and situation complaints (Work Programme
on Electronic Commerce and TRIPS non-violation and situation complaints, as well as a
decision on the Work Programme on Small Economies and a decision establishing a working party on accession for South Sudan. The lack of consensus on other issues led a
number of WTO Members, including the EU, to initiate work within subsets of WTO Members on e-commerce, domestic regulation in services, investment facilitation and
Micro, Small and Medium-sized Enterprises (MSMEs).
”All WTO Members have to face a simple fact: we failed to achieve all our objectives, and did not achieve any multilateral outcome. The sad reality is that we did not even agree to
stop subsidising illegal fishing. Now, I hope that several WTO members, whose actions here in Buenos Aires prevented an outcome, will use the time following this Ministerial
meeting for valuable self-reflection”, Malmström said.
Participants in the WTO’s Information Technology Agreement (ITA) met on 28 June to discuss implementation issues related to the Information Technology
Agreement (ITA) and to report on work in the area of non-tariff barriers (NTBs). This discussion took place at the occasion of the 20th anniversary of the ITA. As part of
the ITA Committee’s work programme on NTBs affecting trade in information technology products, the EU together with a small group of like-minded members have been
focusing their discussions on issues such as conformity assessment, transparency and e-labelling. On transparency, the group is discussing ways to enhance the quality of
notifications of products covered by the ITA as well as current practices and regulations
related to electronic labelling for ICT products. As the last of the major participants, Japan finally ratified and implemented the expanded ITA in 2017. Work continued to
trade_aar_2017_draft Page 14 of 53
encourage the four remaining WTO members that agreed to the expanded ITA to ratify it. In addition, DG Trade continued to encourage more original ITA participants to join the
expanded ITA, following the examples of Macao and Georgia.
DG Trade continued working towards the launching of the 5th review of the Pharma
arrangement so as to incorporate new active ingredients for duty-free treatment. However, the launch of the review has so far been blocked by the United States.
In terms of plurilateral sectoral negotiations, there were no substantive developments in 2017 due to lack of political will of some of the EU’s negotiating partners. As such the
negotiations which started in July 2014 together with 17 partners of the World Trade Organization (WTO), including the EU, for an Environmental Goods Agreement
(EGA)7 to remove barriers to trade in environmental or "green" goods that are crucial for
environmental protection and climate change mitigation did not advance. Nor were talks resumed for a Trade in Services Agreement (TiSA)8 particularly due to the current US
administration's agenda not being favourable for bridging differences that had already appeared in the negotiations towards the end of 2016.
The Commission recommended to the Council to authorise the opening of negotiations
for a Convention establishing a multilateral court for the settlement of investment disputes9 on 13 September 2017. As part of this process an impact assessment was
finalised in September 201710. The Council is expected to adopt the authorisation to
negotiate in early 2018. This court would replace the Investment Court System (ICS) currently foreseen in the EU’s bilateral agreements and the Investor-State Dispute
Settlement arrangements that exist in more than 3000 current bilateral investment treaties. In July 2017 the United Nations Commission on International Trade Law
(UNCITRAL) agreed to initiate multilateral discussions on the reform of investor state dispute settlement. These are the first ever discussions on this issue at multilateral level.
These discussions will first examine the problems before potentially moving to work on solutions. Work started in 2017 and will continue in 2018.
7 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1116
8 http://ec.europa.eu/trade/policy/in-focus/tisa/
9 COM(2017)493 final of 13 September 2017
10 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1505303601241&uri=SWD:2017:302:FIN
trade_aar_2017_draft Page 15 of 53
Finalising concluded bilateral and regional negotiations
The most prominent
achievement in terms
of trade negotiations in 2017 is
undoubtedly the finalisation of the
negotiations of an Economic
Partnership Agreement (EPA)
with Japan, announced on 8
December 201711.
The agreement is the result of an intensive
process of negotiation rounds and
intersessional meetings particularly
in 2017. The EU-Japan EPA is one of the largest and most comprehensive economic agreements that either the EU or Japan have concluded so far. This EPA involves
approximately 30 percent of the world GDP. It will open up tremendous trade and
investment opportunities and will contribute to strengthening the economies for both partners. It will also strengthen economic cooperation between Japan and the EU and
reinforce their competitiveness as mature but also innovative economies. This agreement also includes, for the first time, an SME chapter specifically designed for small businesses
to draw maximum benefits from the opportunities created by the FTA. A strong chapter on Trade and Sustainable Development is also part of the agreement, reaffirming both
sides' strong commitment to labour and environmental standards. Following this agreement, the EU and Japan carried out the legal verification of the text, also known as
"legal scrubbing", completing this task in February 2018. The English text of the
agreement is now being translated into the other 23 official languages of the EU, as well as into Japanese. The Commission will subsequently submit the agreement for the
approval of the European Parliament and Council, aiming for its entry into force before the end of the current mandate of the European Commission in 2019.
After confirming the conclusion of this process in a phone call with Prime Minister Abe, Commission President Jean-Claude Juncker said: "This is the EU at its best, delivering
both on form and on substance. The EU and Japan send a powerful message in defence of open, fair and rules-based trade. This agreement enshrines common values and
principles, and brings tangible benefits to both sides while safeguarding each other's sensitivities. In line with the commitment made in July, we finalised the discussions
before the end of the year. We will now do the necessary to submit the agreement to the European Parliament and EU's Member States so that our companies and citizens can
start exploring its full potential before the end of the mandate of my Commission."
Another major milestone in 2017 is the ruling12 of the European Court of Justice
(ECJ) on the division of competences between the EU and its Member States in the Singapore FTA13. Consequently the Commission has started a reflection process
with Member States and with the European Parliament on the future architecture of trade and investment agreements with non-EU countries, including on the need to negotiate
11 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1767
12 Opinion 2/15
13 http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156035.pdf
trade_aar_2017_draft Page 16 of 53
and propose for signature and conclusion two separate agreements: a free trade agreement covering areas where the EU has exclusive competence according to the
Treaty of the Functioning of the Union and an investment protection agreement covering
areas where the EU shares competences with the EU Member States. Taking account of this process, the Commission intends to submit proposals for signing and concluding the
agreements with Singapore and Vietnam once this reflection process and internal procedures, including translations are completed in 2018.
As for the Economic Partnership Agreements (EPA) with African countries, the signature processes of the EPAs with West Africa and the East African Community (EAC) could not
be completed in the partner regions as certain individual countries are not yet in a position to sign. In West Africa 13 out of 16 partner countries and in EAC two out of five
partner countries have signed these EPAs. Signatures of all the parties are needed before provisional application can start.
On-going negotiations
DG Trade’s negotiators focused much on talks with Mexico for modernising the existing trade pillar of the 2000 EU-Mexico Global Agreement14. These negotiations intensified in
2017 with five negotiation rounds held in Brussels and Mexico City which were supplemented by a number of intersessional meetings. As a result, significant progress
was made towards reaching a balanced agreement for both parties. DG Trade launched work with an independent contractor to carry out a Sustainability Impact Assessment
(SIA)15 to provide the EU negotiators with information on the possible impacts of the modernised agreement in this area. To ensure a transparent negotiation process, reports
of the round as well as the textual proposals by the EU were published on the trade
policy section of the Europa website16
Another big focus of the EU’s negotiating experts was the talks with four countries of the
South American sub-regional trading bloc Mercosur17 on a trade chapter in the Association Agreement between the two parties. Five rounds were held alternatively in
Brasilia and Brussels during 2017 that led to significant progress in areas such as trade in goods, rules of origin, SPS, TBT, services, government procurement, and trade and
sustainable development. An SIA was equally kicked off in 201718.
In our immediate neighbourhood, only a technical negotiation round was held in the early
2017 with Tunisian19 counterparts in the context of advancing towards a Deep and
Comprehensive FTA (DCFTA). Tunisia asked for time to undertake a number of studies including an ex-post impact assessment of the existing Association Agreement. Following
the change of government a new Tunisian chief negotiator has now been appointed and the plan is hold the next round before the summer 2018. The Moroccan side in charge
of negotiations for a DCFTA with the EU has not yet lifted its suspension of negotiations pending the outcome of in-depth studies and domestic consultations. It has also further
limited contacts with the EU following the European Court of Justice ruling on the affiliation of Western Sahara. Negotiations are still ongoing with Morocco to extend the
Agricultural Agreement to cover the Western Sahara following the ECJ Judgement.
Bilateral talks with China20 for an agreement on investment protection (IPA) continued in 14 http://ec.europa.eu/trade/policy/countries-and-regions/countries/mexico/
15 http://www.siaeumexico.com/
16 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1694
17 http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/
18 http://www.eumercosursia.com/
19 http://ec.europa.eu/trade/policy/countries-and-regions/countries/tunisia/
20 http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/
trade_aar_2017_draft Page 17 of 53
2017 with four rounds of negotiations held in Beijing and Brussels. The negotiating parties have continued text-based discussions for topics over which exchanges are
already advanced, such as expropriation and transparency. On the issues relating to
national treatment, the EU and China clarified their respective understanding of the scope and function of the non-discrimination obligations. Exchanges on sustainable
development, financial services and the umbrella clause are still at an initial stage.
In April 2017 chief negotiators met in Yangon to discuss issues outstanding from the 4th
round of negotiations held in December 2016 on the Investment Protection Agreement (IPA) between the EU and Myanmar21. The parties discussed the newest elements of the
EU's reformed approach to investment protection and investment dispute resolution, including a robust code of conduct for the judges of the Investment Court System. This
built on the agreement found on the transparency and sustainable development chapters. Despite the good technical progress, no further negotiation round was held as the
Commission does not consider the current political circumstances conducive to conclude
the negotiations.
Based on the 2007 negotiating directives for FTAs with the Association of South East
Asian Nations – ASEAN – and its Member States, in 2016, negotiations were launched with the Philippines22 and Indonesia23. Two rounds have taken place so far with the
Philippines of which the last one in February 2017, whereas EU negotiators have met three times with their Indonesian counterparts including twice in 2017. Work was
launched to carry out an SIA in December. Simultaneously, work is in preparation for region to region talks with the objective to negotiate an EU-ASEAN trade agreement.
As to the planned SIA for the EU’s trade negotiations with India24, this was not triggered
as negotiations have not yet resumed. Key outstanding issues include improved market access for certain goods and services, government procurement, geographical
indications, sound investment protection rules, and sustainable development.
In the past year, DG Trade worked together with the European External Action Service
(EEAS) to finalise a new framework agreement with Armenia25, enhancing our bilateral relations, including trade. A successful outcome was reached at the fifth Eastern
Partnership summit in Brussels on 24 November 2017, where Armenia and the EU signed a new Comprehensive and Enhanced Partnership Agreement (CEPA). The CEPA improves
conditions for bilateral trade compared to the former bilateral Partnership and
Cooperation Agreement and to the WTO framework. The disciplines contained in the new agreement will generate more entrepreneurship and competition and provide traders,
investors and services suppliers' with greater trading and cooperation opportunities.
Negotiations for Association Agreements with Andorra, San Marino and Monaco have
taken place on a regular basis over the year in Brussels. It aims at integrating the three small-sized states, which are already part of Customs Unions, in the Single Market. These
negotiations are led by EEAS, working in close coordination with the Commission services. DG Trade participated notably in the negotiations on the chapter dealing with
trade in goods.
Negotiations with the United States on the Transatlantic Trade and Investment Partnership (TTIP) were paused until further notice at the end of 2016. A number of
factors have affected TTIP's prospects. There were already significant differences of view
21 http://ec.europa.eu/trade/policy/countries-and-regions/countries/myanmar/
22 http://ec.europa.eu/trade/policy/countries-and-regions/countries/philippines/
23 http://ec.europa.eu/trade/policy/countries-and-regions/countries/indonesia/
24 http://ec.europa.eu/trade/policy/countries-and-regions/countries/india/
25 http://ec.europa.eu/trade/policy/countries-and-regions/countries/armenia/
trade_aar_2017_draft Page 18 of 53
at the end of the Obama Administration, both on market access and new rules. It was not clear how these could be overcome. The new US Administration's agenda of economic
nationalism, reflected in a series of policy initiatives, has further reduced the overlap
between our policies. The stance of the new Administration with regard to climate change, and in particular the intention to withdraw from the Paris agreement, is another
complicating factor, since it widens the gap with regard to the EU's goal of setting high environmental standards in trade agreements in order to support sustainability. It would
therefore need to be clarified if there is a sufficient level of shared ambition and common ground before deciding whether and how to proceed with the negotiations.
The proposal of new bilateral negotiations
As part of the Trade package accompanying President Juncker’s State of the Union speech 2017, the Commission recommended to the Council to authorise the opening of
negotiations for free trade agreements with Australia26 and with New Zealand27.
At the same time the Commission decided to make public at the time of their proposal the negotiation directives, along with the impact assessment report. As it has done for
other recent negotiating directives, the Commission also recommended to the Council to publish the final negotiation directives once adopted.
In the Trade for All communication the Comission commited to explore launching negotiations on investment with Hong Kong and Taiwan, building on the investment
provisions under negotiation with China. In the context of our bilateral relations and regular dialogues on trade and investment with Hong Kong and Taiwan, investment
Working Groups have been created which will help assess the prospects for a high
ambition agreement.
As for the modernisation of the 2005 EU-Chile Association Agreement, the Commission
proposed28 to the Council on 24 May to authorise the opening of negotiations. The Council authorised its Decision on 13 November 2017 and negotiations were
consequently launched on 16 November 2017. A first substantive negotiation round took place in Santiago de Chile in January 2018.
On 21 December 2016 the Commission recommended to the Council to authorise the launch of negotiations with Turkey29 to enhance EU-Turkey bilateral trade relations and
to modernise the Customs Union between the two partners. The draft negotiation
directives have been intensively discussed in Council during 2017. These discussions have not led to any Council decision yet.
In February 2017 the European External Action Service and the Commission launched negotiations with Azerbaijan30 for a Comprehensive Agreement based on negotiation
directives adopted by the Council on 14 November 2016. DG Trade contributed to the negotiation process with regards to the trade provisions during the two first substantive
rounds held respectively in June and September 2017.
On 19 December 2017, the European External Action Service and the Commission
26 COM (2017) 472 final
27 COM(2017) 469 final
28 JOIN (2017)19/02 – The negotiating directives adopted by the Council were made public on 22 January
2018. http://www.consilium.europa.eu//media/32405/st13553-ad01dc01en17.pdf
29 http://ec.europa.eu/trade/policy/countries-and-regions/countries/turkey/
30 http://ec.europa.eu/trade/policy/countries-and-regions/countries/azerbaijan/
trade_aar_2017_draft Page 19 of 53
launched negotiations with Kyrgyzstan31 for a Comprehensive Agreement based on negotiation directives adopted by the Council on 9 October 2017. This first introductory
round served to outline and discuss political priorities and general provisions. DG Trade
will lead the negotiation process with regards to trade provisions, the first round of which is planned for the beginning of March 2018.
31 http://ec.europa.eu/trade/policy/countries-and-regions/regions/central-asia/
trade_aar_2017_draft Page 20 of 53
Specific objective 2: Effective implementation
Effective implementation of the EU's trade and investment policies secured, amongst other, through proper monitoring, enforcement and
support
Once agreements are in place, implementation can start and it is thus important
that implementation is closely monitored and rights being enforced. Naturally this next step in the EU's trade policy reinforces the Commission's priorities on boosting the
EU economy, creating jobs, harnessing globalisation through a balanced and progressive trade policy and being a strong global actor.
Two major reports were released in 2017 with regard to the EU's trade policy.
The first report "Implementation of the Trade Policy Strategy Trade for All32"
showed that DG Trade is delivering on a progressive trade policy to harness
globalisation. It concludes that the first two years implementing the Trade for All strategy have seen considerable concrete progress towards an effective, transparent and
responsible trade policy that responds to economic challenges and seizes opportunities. The EU is shaping rules of global trade by pursuing progressive and innovative
agreements, as illustrated by the Canada and Japan agreements.
The second "Implementation of Free Trade Agreements"33 is the first annual
report of its kind and it sheds light on what happens after trade agreements are negotiated and have entered into force. This publication is another step towards a
fully transparent and inclusive trade policy, in line with the Commission's commitments
set out in the EU's 2015 'Trade for All' strategy. The report shows that it is often the EU agricultural and motor vehicles' sectors that benefit the most. For example, exports of
cars to South Korea have increased by 244% since 2011, and in the case of the agreement with Colombia and Peru there was a 92% and 73% increase, respectively, in
the exports of EU agricultural goods. The report also looks at the impact of the provisions included in the 'Trade and Sustainable Development' (TSD) chapters, covering
environment protection and labour rights, present in the most recent agreements. While it is too early to draw general conclusions on the implementation of sustainable
development goals included in EU trade agreements, there are already numerous
examples of positive collaboration on issues going beyond trade liberalisation that have been made possible thanks to these agreements.
The report also identifies areas for improvement to increase the benefits of existing agreements. Despite the overall positive impact of trade agreements for EU exports, EU
companies do not take full advantage of the opportunities offered. For example, the extent to which EU businesses are using tariff reductions is lower on the EU side than on
our partners' side. For exports to countries where there are recent trade deals in place, EU companies make use of available duty rebates for around 70% of their exports,
whereas our partners use that duty rebate in around 90% of cases. The report highlights
an increasing need to raise awareness amongst EU companies – particularly small and medium-sized ones – about the opportunities that these deals offer, to expand their
exports and grow their businesses.
This first "Implementation of Free Trade Agreements" report complemented other
individual reports produced on an annual basis for the most recent trade agreements.
Annual reports have thus been produced for the EU's trade agreements with South
32 COM (2017) 491 final
33 COM(2017)654 final
trade_aar_2017_draft Page 21 of 53
Korea34, Central America35 and Colombia/Peru36.
The annual report for Korea shows that the FTA has worked well with high increase
rates in all trade domains. Compared to the last year before the provisional application of
the FTA (2010 to 2016), EU goods exports have increased by almost 60 % leading to an EU trade surplus of €3.1 bn. EU exports of services to Korea increased by almost 50%
and 32% for EU imports from 2010 to 2015, with a €4.8 billion EU trade surplus in 2015. Over the same period, EU inward FDI stocks from Korea increased by almost 60% (to
€21 billion) and EU outward FDI stocks by 33% (to €50 billion).
The third annual report of the implementation on the Trade Agreement with
Colombia and Peru as well as the third annual report on the implementation of the EU-Central America Association Agreement noted that the agreements had a stabilising
effect, although bilateral trade between the EU and these countries in some areas decreased due to the economic slowdown in Latin America and the fall in commodity
prices, which affected exports to the EU. In turn, the agreements contributed to
diversification of exports from these countries to the EU, notably through the increased exports of various agricultural products.
The regular report about trade and investment barriers37 was published in June 2017. In its new more focused and result-oriented format, the report confirmed a rise in
protectionism (EU exporters reported 36 new barriers in 2016, reaching a total stock of 372 obstacles in 51 countries across the world). It also demonstrated that the Market
Access Strategy is delivering in tackling barriers. Just during the course of 2016, a total of 20 existing obstacles – including several long-standing ones – were resolved in 12
different countries around the world in several sectors. A broader, high level
communication campaign enhanced the awareness of stakeholders regarding our Market Access Partnership.
In addition to formal reporting, in relation to individual bilateral agreements, DG Trade monitors the implementation of its agreements through the institutional set-up those
agreements establish or foresee.
Most recently, the EU-Canada Comprehensive Economic and Trade Agreement (CETA)
entered into force on a provisional basis on 21 September 2017. An institutional structure is in the process of being set up to monitor its implementation. In addition, as committed
during CETA ratification Parties have launched a review of the chapter on trade and
sustainable development, trade and labour and trade and environment. Further work is also ongoing on the CETA Investment Court System in line with commitments
undertaken during CETA ratification. Furthermore communication tools, highlighting the opportunities that CETA creates have been developed. These tools have been
disseminated widely amongst EU Member States, EU trade associations and other stakeholder
s to make EU business
aware of
the opportunitie
s that CETA creates.
34 COM(2017)614 final
35 COM(2017)160 final
36 COM(2017)585 final
37 http://trade.ec.europa.eu/doclib/docs/2017/june/tradoc_155642.pdf
trade_aar_2017_draft Page 22 of 53
As to the EU-South Korea FTA38, 13 out of sixteen implementation bodies (seven
specialised committees, seven working groups and two dialogues) met in 2017, as well
as the annual FTA Trade Committee at ministerial level. The committees acknowledged the positive trends in the development of bilateral trade relations and discussed
outstanding issues in a number of areas, e.g. FTA amendments, labour rights, beef, geographical indications and customs procedures.
Meanwhile, the ongoing analysis of the EU-Korea FTA which has led so far to the publication of the interim evaluation report39 has found that the FTA has been effective in
liberalizing and facilitating trade in goods, and seems to have contributed to promoting trade in services and investment. It has also found that although the FTA has increased
some administrative costs for businesses, as well as costs for the EU linked to the FTA’s institutional structure, the agreement has led to high tariff savings and facilitated a
number of technical procedures for business and has been overall welfare enhancing for
both the EU and Korea. With regard to the multiparty Trade Agreement between the EU and Colombia/Peru/Ecuador and the Central America agreement40, the
annual Trade Committee with Colombia and Peru took place in November 2017. With regard to Central America41, the Parties agreed to hold the next meeting of the
Association Committee in June 2018. In addition, work was done by EU Delegations and Headquarters on implementation of specific issues as well as
dissemination/communication activities in the EU and the partner countries. Furthermore accompanying development cooperation actions were planned under the relevant
instruments in order to support implementation of the agreements, including a strong
focus on trade and sustainable development.
With regard to the EU-Chile Association Agreement, the 15th Trade Coordinators
Meeting (TCM) took place in Brussels in November 2017, and various trade-related committees met before the TCM.
In the Eastern Neighbourhood, under the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA)42 as part of the Association Agreement (AA), an annual Association
Committee in Trade configuration/Association Council and 4 thematic Sub-Committees were held and the Rules of Procedure of the Sub-Committees adopted. In the context of
the implementation of the regulatory approximation commitments in the Trade and
Trade-Related part of the AA, the Sanitary and Phytosanitary (SPS) strategy and a public procurement roadmap are in the process of being added to the Agreement. Also, new
temporary Autonomous Trade Measures have been adopted and entered into force on 1 October 201743 with the aim of supplementing the trade concessions available under the
DCFTA.
Likewise for DCFTAs with Georgia and Moldova44, an annual meeting of the
38
The EU-Korea FTA has been provisionally applied since July 2011, and amended in 2014 to include Croatia
as a party to the FTA with effect from 1 July 2013. It entered into force in December 2015.
39 https://static1.squarespace.com/static/5798bbd2be6594e06f727388/t/5950bcf0e4fcb533d1d45dd7/149846
3505732/EU-Korea+FTA+Interim+Technical+Report+Part+1+-+2017-06-19.pdf
40 The EU-Colombia/Peru Trade Agreement is provisionally applied since 2013. Ecuador acceded to the
Agreement on 1 January 2017.
41 The EU-Central America FTA is provisionally applied since 2013.
42 The trade part of the EU-Ukraine Association Agreements is provisionally applied since 1 January 2016.
43 Regulation (EU) 2017/1566 of the European Parliament and of the Council of 13 September 2017.
44 Both the Georgia and Moldova Association Agreements entered into force on 1 July 2016. Provisional
application already started in September 2014.
trade_aar_2017_draft Page 23 of 53
Association Committee in Trade configuration and four specialised Sub-Committees took place in 2017 (two of the four in the case of Georgia). Updates of the regulatory
approximation annexes on SPS, public procurement and technical barriers to trade (TBT)
of the Association Agreement were finalised in 2016.
With all Euromed partners the implementation of the existing Free Trade Agreement
under the Euromed Association Agreements is ongoing: Trade sub-committees were held with Algeria, Egypt, Jordan and Palestine in 2017 and will be organised with Israel,
Lebanon, Tunisia and Palestine before the summer of 2018. With the Gulf Cooperation Council a new annual Trade and Investment dialogue was launched in 2017 to formalise
discussions of a number of trade and investment barriers in the absence of a bilateral FTA, for which negotiations remain suspended since 2008. With Iran discussions at
expert level on trade and investment, initiated in November 2016, will continue in 2018.
The implementation of Economic Partnership Agreements (EPAs) with African,
Caribbean and Pacific countries (ACPs) has also continued in 2017, with seven agreements in the implementation stage. For the Cariforum45 EU EPA, the Joint Council,
preceded by the Trade and Development Committee, took place in Brussels in November 2017, and the Parliamentary Committee as well as the Consultative Committee took
place in Trinidad and Tobago in October and November 2017, respectively The EPA Committee with the Pacific (Papua New Guinea and Fiji) took place in Brussels in October
2017. As for the EPAs with African partners, the following EPA Committees were held: with the Eastern and Southern Africa in Madagascar in October 2017, with SADC in
February 2017 and November 2017, with Cote d'Ivoire in April 2017 and with Cameroon
in Brussels in December 2017.
We continued to implement the EU strategy on China adopted in June 201646. We, in
particular, focused on bilateral strategic discussions on trade and investment issues covering China’s lack of market-oriented economic reforms; overcapacity concerns
(particularly on steel, but also in the sectors covered by China's Made in China 2025 policies); increasing Chinese investments in the EU as well as decreasing EU investments
in China; market access issues in China; China's industrial policies; better protection of intellectual property rights and avoidance of forced technology transfer in China. The
implementation of the strategy also entailed plurilateral and multilateral discussions at
the level of G7, G20, OECD and WTO, notably on issues such as overcapacity or export credits. Finally, alliance building with like-minded partners and ensuring coherence and
consistency with other EU policies have been key elements to implement our strategy.
DG Trade made good progress in 2017 in facilitating trade through mutual
recognition agreements (MRAs). It negotiated with the United States a comprehensive revision of the annex on Good Manufacturing Practices of the 1998 US-EU
MRA to recognise inspections of manufacturing sites for human medicines. The revised annex, which became operational in November 2017 and is progressively implemented,
saves costs and resources for the administrative authorities and for manufacturers, by
avoiding duplicative inspections. In addition, two Joint Committee Decisions were adopted to update the MRA between the EU and the Swiss Confederation, ensuring its
effective functioning in line with latest EU legislation.
DG Trade continued to engage with key trading partners to cooperate towards
an adequate and efficient protection and enforcement of intellectual property (IP) rights. It was done mainly through regular bilateral Dialogues and/or Working
Groups that enabled the Commission to raise systemic IP issues, to share best practices
45 Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Lucia,
Saint Vincent and the Grenadines, Saint Kitts and Nevis, Surinam, Trinidad, Tobago, and the Dominican
Republic.
46 http://eeas.europa.eu/archives/docs/china/docs/joint_communication_to_the_european_parliament_and_th
e_council_-_elements_for_a_new_eu_strategy_on_china.pdf
trade_aar_2017_draft Page 24 of 53
and, to offer developing countries help e.g. in improving domestic legislation and enforcement practices. In 2017 we held IPR Dialogues and Working Groups with China,
Hong Kong, Korea, Taiwan, Thailand, Turkey, Ukraine and USA. In addition, IP-
Subcommittee meetings took place with Colombia, Peru and Ecuador. New technical cooperation programmes (IP Key) were launched with China, South-East Asia and Latin-
America.
DG Trade actively participated in the development of EU policies in the area of IP. It
made a significant contribution to the IP enforcement package which was published in November 201747. DG Trade's services also prepared a report on the protection and
enforcement of IPR in third countries ("Third Country Report"), to be finalised and published in the first quarter of 2018. It has also initiated the establishment of a
counterfeiting and piracy watch list to identify marketplaces (physical and online) which reportedly infringe IPR; the watch list is to be published in 2018.
DG Trade continued its work to remove and prevent trade barriers through the
Market Access Partnership with Member States and stakeholders. During the course of 2017, a total of 44 existing obstacles – including several long-standing ones –
were resolved in 27 different countries around the world in several sectors, creating additional export opportunities for EU companies worth billions of Euros per year – the
magnitude of a medium-sized free trade agreement. In the wake of the rise in protectionism detected in the Report on Trade and Investment Barriers (see above), DG
Trade is committed to reinforce the Partnership, with enhanced prioritisation of actions to remove barriers, strengthened coordination with stakeholders, and wider communication
and outreach, to enhance awareness by stakeholders regarding our Market Access
Partnership.
DG Trade's activities in this area also include intensive work to remove and prevent
market access barriers in the Sanitary and Phytosanitary (SPS) areas supported by the SPS Market Access Working Group. Clear priorities have been identified and agreed on a
mid- to long term strategy to tackle SPS barriers and continued financial support to international standard setting organisations granted. Key successes in 2017 include
removing SPS barriers for exports of pig meat, poultry and apples and pears to Mexico in the context of the FTA negotiations, facilitating exports of products of animal origin to
Brazil, ensuring market access for beef from a greater number of EU Member States in
non-EU countries such as Taiwan and Japan and an increased recognition of EU regionalisation policy in case of avian influenza outbreaks by some of our trade partners.
Furthermore, DG Trade continued its efforts to enforce the EU’s multilateral and bilateral rights and obligations through the WTO's dispute settlement and the
bilateral dispute settlement mechanisms throughout the year. Since the beginning of this year, we have seen results, at different stages, in several disputes. On the
offensive side: the EU has a complete success in the pork dispute against Russia (confirming also the principle of regionalisation of SPS measures) but a loss in the Boeing
II dispute. The EU won cases against Russia on Light Commercial Vehicles (LCV) (under
appeal) and Brazil on Taxes (under appeal). On the defensive side: the EU defended itself effectively in the Fatty Alcohols (Indonesia) and in the poultry dispute (China). The EU
has ensured effective implementation of disputes brought in 2016 (Columbia on spirits and China on Raw Materials III). Russia implemented the panel report in the tariffs case.
The EU is carefully keeping under review compliance in other cases and protects its position where necessary.
The EU has also taken a leading role in defending the WTO's dispute settlement system, in particular, in the light of the blockage of the appointment process for Appellate Body
members.
47 http://europa.eu/rapid/press-release_IP-17-4942_en.htm
trade_aar_2017_draft Page 25 of 53
The Trade Facilitation Agreement agreed at the World Trade Organization’s 9th Ministerial Conference entered into force in February 2017 after two-thirds of the WTO
membership completed their domestic ratification process. This agreement aims to
simplify and clarify international import and export procedures, customs formalities and transit requirements. It will make trade-related administration easier and less costly,
thus helping to provide an important and much needed boost to global economic growth. EU customs authorities will play a leading role in the implementation of the agreement,
acting both as an example to follow and as an engine for further progress in trade facilitation within the EU and at international level. The agreement will also help improve
transparency, increase possibilities for small and medium-sized companies to participate in global value chains, and reduce the scope for corruption. In this context, a factsheet
has been published to highlight the “European Commission’s support for Trade Facilitation”48. The EU notified its transparency and aid measures for the implementation
by developing countries and Least Developed Countries (LDCs) of their "category C49"
commitments. The EU contributed actively to the meetings of the Trade Facilitation Committee in the WTO.
Commissioner for Trade Cecilia Malmström said at the occasion of the entry into force of the Trade Facilitation Agreement: "Better border procedures and faster, smoother trade flows will revitalise global trade to the benefit of citizens and businesses in all parts of the
world. Small companies, that have a hard time navigating daily bureaucracy and
complicated rules, will be major winners."
In the multilateral framework, the WTO's review of the EU's trade policy in July 2017 was a success. This was achieved thanks to good coordination among the many
Commission DGs involved in this exercise, which required us to respond to 1300 questions from the WTO membership.
In order to make sure that the EU remains one of the world’s most open investment
regimes, and thereby a source of growth and jobs while protecting its essential interests, the Commission proposed on 13 September 2017 a new framework for screening of
Foreign Direct Investment into the EU. It consists of a dedicated Communication outlining the strategic need for such a screening entitled “Welcoming Foreign Direct
Investment while Protecting Essential Interests”50 as well as a Proposal for a Regulation of the European Parliament and the Council establishing a framework for screening of
foreign direct investments (FDI) into the European Union51. In addition, a Staff Working Document was published, also providing information on FDI inflows, their implications
and the potential risks they may pose for security and public order in the EU.
In the Communication, the Commission announced two complementary measures, one being the launch of an in-depth study. The study will address, in particular, Foreign
Direct Investment in strategic sectors or assets which may raise security or public order concerns. It will include data collection, analysis of trends, and assessment of the impact
of such investments, including through case studies. Its results should feed into the decision-making process for the proposed Regulation. The second complementary
measure announced is the setting up of a coordination group dedicated to inward foreign direct investment, including all issues within the scope of the proposed Regulation. The
group was set up on 29 November 2017 and it will be chaired by the Commission and
composed of representatives of Member States. DG Trade aims at holding the first meetings of this group in the first half of 2018.
48 http://trade.ec.europa.eu/doclib/docs/2017/february/tradoc_155332.pdf
49 Members of category C will need additional time and capacity building support to implement the measure
50 COM(2017) 494 final
51 COM(2017) 487 final
trade_aar_2017_draft Page 26 of 53
Finally, in order to support more effective implementation of the trade and investment policies, the Commission decided52 in September 2017 to create an
expert group on EU trade agreements. This is a group which will allow the
Commission to engage with representative organisations with expertise in economic, social, ethical and/or environmental issues in its implementation of the EU's trade policy.
The nomination of 28 experts53 has been based on an open call for applications and a clear set of criteria. The first two meetings of the group are scheduled to take place in
February and April 2018. More information about the group is available on the Commission's register of expert groups54.
Securing effective implementation of the EU's trade and investment of the 41 trade agreements currently in place (including those under provisional application) through
proper monitoring, enforcement and support is important. This has been helped, on the one hand, by the regular meetings of an internal FTA Coordination and Coherence Group
inside DG Trade, and, on the other hand, by the creation at the end of 2016 of the senior
role of Coherence Officer for Implementation to ensure more effective and coherent implementation. The FTA group discusses on a regular basis strategic issues related to
the implementation of the EU’s trade agenda, such as coordination of negotiation rounds and the enhancing templates for negotiations.
52
http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3556&news=
1&new_groups=1&month=09&year=2017
53 http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156487.pdf
54 http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3556&news=1
trade_aar_2017_draft Page 27 of 53
Specific objective 3: Tackling unfair trade
Maintain and improve a transparent, efficient and effective system to
combat distortions and unfair trade practices in international trade
The EU uses trade defence instruments to re-establish a competitive
environment for the EU industry when harmed by unfair imports. DG Trade has throughout 2017 committed to maintaining and improving a transparent, efficient and
effective system to combat distortions and unfair trade practices. As such this specific objective contributes to the Commission's general objective of expanding the EU
economy and maintaining jobs in the EU. In 2017, there were more than 350.000 jobs in
the EU in areas covered by EU's trade defence measures. DG Trade completed all investigations within the mandatory deadlines or even earlier.
In addition, measures taken under the umbrella of the EU’s trade defence mechanism balances the commercial policy that the EU is leading in order to harness globalisation.
In November 2016, the Commission had presented a proposal55 for a new method for calculating dumping on imports from countries where there are significant
market distortions, in particular where the State has a pervasive influence on the economy. Following adoption by the European Council and the European Parliament and
its publication in December56, the revised legislation entered into force just over a year
after being proposed by the Commission. It introduces a new way of calculating whether dumping has occurred in imports into the EU from countries where the economy is
distorted owing to state interference. The purpose of this new legislation is to make sure that Europe has trade defence instruments that are able to deal with current realities –
notably state-induced distortions which too often lead to overcapacities – in the international trading environment, while fully respecting the EU's international obligations
in the legal framework of the WTO. In parallel with the publication of changes to the EU's anti-dumping legislation, the Commission released the first country report envisaged by
the new legislation57. This Regulation introduces changes to the EU's anti-dumping and
anti-subsidy legislation.
President Jean-Claude Juncker said: "The EU is and will remain one of the most open markets in the world. We are and will remain in the first line defending open, fair and
rules-based trade. This, however, should not be mistaken as naivety. Our unshakable and facts-based conviction that trade brings prosperity will not prevent us from
defending our workers and companies with all legitimate tools when others do not play
by the rules. With this new legislation and a new set of modernised tools […], Europe will be able to keep pace and deal more effectively with the ever changing realities of the
international trading environment."
A second amendment to the EU’s anti-dumping and anti-subsidy legislation, based on a 2013 Commission proposal to modernise the EU’s Trade Defence Instruments58 was
agreed upon in 2017. The new rules will shorten the current 9 month
investigation for the imposition of provisional measures and make the system more transparent. The companies will benefit from an early warning system that will
help them adapt to the new situation in case provisional duties are imposed. Smaller
55 COM (2016)721
56 Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending
Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the
European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not
members of the European Union OJ L 338, p. 1-7
57 http://trade.ec.europa.eu/doclib/html/156474.htm
58 COM(2013)192
trade_aar_2017_draft Page 28 of 53
companies will also get more targeted assistance from a specific help desk to make it easier for them to trigger and participate in trade defence proceedings. Also, in some
cases, the EU will adapt its 'lesser duty rule' and may impose higher duties. This will
apply to cases of unfairly subsidised inputs in case of significant raw material distortions in the exporting country. Finally, trade defence measures will apply to the continental
shelf of the EU if the products concerned are consumed in significant quantities there.
As announced in the ‘Trade for All’ Communication, DG Trade has significantly improved
transparency of Trade Defence in 2017. The Commission has so far implemented two of the initiatives announced in the Communication: the TRON platform59 – an IT tool
ensuring increased access to the file for interested parties - is now fully operational, including a notification module through which DG Trade formally communicates and
notifies the parties in each procedural step. Moreover, transparency towards the general public has also been enhanced with the Commission systematically publishing online
executive summaries of all complaints or requests for review60. Going beyond its
commitments, DG Trade took an additional step towards deepening transparency by disclosing, since 1 August 2017, to each interested party subject to a verification visit a
full mission report of the visit to that party, while a concise version of such report is also included in the non-confidential file, accessible to other interested parties.
In the current situation of overcapacity in the steel sector, a Global Forum on steel excess capacity was launched in Berlin in December 2016 to implement the
commitment undertaken by G20 Leaders. The EU has been instrumental in making the ministerial meeting of the Global Forum in November 2017 a success. At this meeting
Global Forum Members agreed on an ambitious package of concrete policy solutions
According to the agreed package, Global Forum members must ensure market-based outcomes in the steel industry, refrain from market-distorting subsidies and other
government support measures that contribute to overcapacity, provide a level playing field between state-owned and private companies, and enact effective adjustment
polices. This agreement spells out the market-distorting practices at the root of overcapacity and is underpinned by a robust monitoring mechanism on capacity and
policy developments to track implementation in 2018 and 2019.
Commissioner for Trade Cecilia Malmström said on the occasion of the Global Forum:
"The problem of excess capacity of steel has real effects on people's lives – especially those who become unemployed. Today, we have agreed on an important and effective
package to tackle the pressing issue of global steel overcapacity. These wide-ranging policy solutions will help create a level playing field and support EU growth and jobs. This
is a global challenge, and it has to be dealt with accordingly. In the run-up to the World Trade Organisation's 11th Ministerial Conference in Buenos Aires, this success underlines
the importance of effective multilateral cooperation to solve global problems. Of course,
our work is not yet done. Now we need to walk the talk. Our industry, our workforce, our consumers and citizens depend on these commitments being carried out effectively. As
co-chair of this Forum during next year, the EU will follow the implementation of these
measures closely."
In parallel, and in addition to this multilateral exercise, DG Trade will continue to push
China to deliver on its bilateral commitments and establish a bilateral platform on steel
with similar objectives to those of the Global Forum.
DG Trade also works to avoid the emergence of overcapacity in other sectors, such as
semiconductors. The October 2017 meeting of the GAMS (Governments/Authorities Meeting on Semiconductors) yielded useful results, with an agreement to enhance
transparency on subsidies and avoid that encryption regulations become market access barriers.
59 http://trade.ec.europa.eu/tdi/
60 http://trade.ec.europa.eu/tdi/notices.cfm
trade_aar_2017_draft Page 29 of 53
The Commission implemented its trade defence regime to address the various forms of
injurious unfair trade practices to which the Union industry can be exposed.
For instance, in hot-rolled flat steel from China, the Commission concluded that, while
the Union industry was not yet suffering material injury as a result of unfairly priced imports from China, such injury was clearly imminent and therefore decided to impose
measures to avoid the occurrence of material injury. In the case at hand, both anti-dumping and anti-subsidy measures needed to be imposed as it was found that imports
from China were not only priced below their normal value but were also benefitting from significant unfair subsidisation.
The importance of protecting Small and Medium Sized Enterprises (SMEs) from unfair competition also featured prominently in 2017. For instance, the Commission decided to
maintain anti-dumping measures on imports of Ceramic Tiles from China following an
expiry review. The Commission also initiated two new proceedings concerning imports of Tyres and E-bikes from China. In those three sectors, the Union industry consists of a
large numbers of SMEs.
At the same time, the Commission took account of important interests of the
downstream industry in Europe and decided to renew the measures on Solar Panels for
only 18 months.
trade_aar_2017_draft Page 30 of 53
Specific objective 4: A sustainable approach to trade
Improved sustainable economic, social and environmental conditions for consumers, workers, citizens and businesses in the EU and in non-EU
countries and a special focus on human rights, responsible management
of supply chains and good governance
The "Trade for All" Communication committed the Commission to reinforce its action within trade policy to promote sustainable development, human rights
and good governance, in the spirit of the UN's 2030 Agenda for Sustainable
Development, including by ensuring effective implementation of related FTA provisions and the Generalised Scheme of Preferences61. In this sense the outputs under this
specific objective, as listed below, contribute to a large extent to the Commission’s priority 9 enhancing the EU's position as a stronger global actor.
The Commission has continued to negotiate ambitious Trade and Sustainable Development (TSD) provisions to ensure that trade and economic prosperity is
accompanied by a high level of environmental protection, social equity and cohesion. This includes obligations for our trade partners to implement effectively the fundamental
International Labour Organisation (ILO) Conventions and the Multilateral Environment
Agreements (MEAs), including climate change, to which they are a Party.
For trade agreements already in force, the Commission has intensified its interaction with
trading partners to implement effectively TSD provisions, on issues such as decent work, occupational health and safety, working conditions and labour inspection, as well as the
conservation and sustainable management of the environment or promotion of sustainable production and Corporate Social Responsibility.
Recognising the need to support the effective implementation of the Paris Agreement on climate change, references to the support and implementation of that landmark
agreement have been strengthened. This has started with the recently concluded
negotiations with Japan.
On 11 July 2017, the Commission launched a debate on the enforcement and
implementation of EU FTA's TSD chapters. The basis for this debate is a non-paper prepared by the Commission services and transmitted to the Member States and the
European Parliament and made public62.
The Generalised Scheme of Preferences (GSP) continued to offer generous trade access
to the EU market coupled with a strong engagement with national authorities with GSP beneficiaries on human rights and sustainable development. A report assessing the
performance of the scheme during 2016-2017, including the legislative and practical
developments in GSP+ countries linked to the implementation of relevant 27 international conventions was published early January 201863.
An external study was launched to assess the application of the current GSP Regulation. The study will be adopted through a Commission report in the first half of 2018. The
61 The EU's Generalised Scheme of Preferences (GSP) is designed to help developing countries integrate in the
international trade system by making it easier for them to export their products to the EU. This is done in
the form of partly or fully reduced tariffs for their goods when entering the EU market. Through the
additional export revenue which is generated, GSP fosters growth in their income and supports their
development. The scheme has three components, two of which GSP+ and Everything But Arms offer
additional benefits. EBA ensures that Least Developed Countries can import all products other than arms
free of duties to the EU. GSP+ offers additional tariff reductions for developing countries which sign up to
putting into practice key UN human rights and International Labour Organisation conventions.
62 http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf
63 COM(2018) 36 final
trade_aar_2017_draft Page 31 of 53
study has found that for the 80 countries that were eligible for GSP preferences throughout the period 2011-2016, they have in fact increased their exports collectively
under the respective arrangements. This has been especially the case for the 49 EBA
countries and the 8 GSP+ countries. Moreover, both EBA and GSP+ beneficiaries under investigation have significantly increased their utilisation rate since 2014, indeed by more
than 10 percentage points. However, the findings on export diversification were mixed: measured by number of tariff lines for which non-zero exports have been recorded,
export diversification has been more important for standard GSP beneficiaries, but decreased considerably at all sector levels for GSP+ beneficiaries. EBA beneficiaries
experienced significant growth in tariff lines on export diversification.
Sri Lanka was granted access to GSP+64, whereas Côte d'Ivoire, Ghana, and Swaziland
lost GSP preferential access (effective as of 1 January 2019) as these countries now have other preferential market access arrangements with the EU. Paraguay was removed from
GSP and GSP+ lists (also effective as of 1 January 2019) as it was classified as upper-
middle income country for three consecutive years. Lastly, Equatorial Guinea was removed from the EBA list (effective 1 January 2021) as it is no longer considered a
least-developed country by the UN.
On 13 November 2017, the Commission adopted a Communication on achieving
prosperity through trade and investment in view of updating its joint EU Strategy on Aid for Trade65. The updated Strategy emphasises the need for greater alignment of EU's Aid
for Trade with our regional or bilateral trade agreements (including EPAs) and unilateral GSP preference schemes and gives focus on issues such as women's economic
empowerment, responsible business conduct and fair and ethical trade.
Work intensified to promote trade aspects of Corporate Social Responsibility/Responsible Business Conduct (CSR/RBC). In the context of the trade pillar of the EU-Central America
Association Agreement, a workshop dedicated to creating awareness and sharing best practices on Responsible Global Value Chains was be held in May in San Jose, Costa Rica.
Furthermore, DG Trade has renewed its support to the OECD work on due-diligence in the garment sector and has developed together with the FPI a 9 million euros project on
responsible supply chains designed to promote responsible business conduct approaches in key Asian trading partners (China, Japan, Myanmar, Vietnam, Thailand and the
Philippines) to be implemented by the ILO and the OECD.
The application process for the first edition of the "EU Cities for Fair and Ethical Trade" Award was opened on 7 December 2017. The award aims at acknowledging and raising
awareness on the policies carried out at local level in the EU in the area of fair and ethical trade. The ceremony for the first edition will take place on 27 June 2018.
The European Commission and the International Trade Centre (ITC) hosted the International Forum on Women and Trade in Brussels on 20 June 2017. This Forum
took stock of current trade policy's contribution to the economic empowerment of women, raised awareness of gender issues in trade, and considered how trade can
promote the advancement of gender equality through a combination of multi-stakeholder
engagement and a progressive approach to sustainable development. In this context a first quantitative assessment, to be renewed in 2018, on how EU exports support jobs for
women across Europe was carried out66. A follow-up study will be launched by the ITC with the financial support of the EU in 2018. Furthermore, for the first time, the
Commission has proposed provisions on gender issues in the negotiations with Chile. DG Trade has also supported the adoption of the Joint Declaration on Trade and Women's
Economic Empowerment in the margins of the 11th WTO ministerial conference. The
64 OJ L 125, 18.5.2017
65 COM(2017)667 final
66 http://trade.ec.europa.eu/doclib/docs/2017/june/tradoc_155632.pdf
trade_aar_2017_draft Page 32 of 53
declaration gathered support of 118 WTO members and observers. It is a non-binding instrument aiming to provide a platform for WTO Members to promote an inclusive trade
agenda ensuring trade benefits for all.
In the same spirit of promoting good governance, in cooperation with EU Member States and the European Parliament the Commission has developed an innovative approach on
anti-corruption and trade agreements, and has proposed ambitious provisions on this in the negotiation with Mexico. A similar approach has also been proposed in the
negotiations with Chile.
In the current deteriorating security environment, it is also important that trade policy
contributes to the preservation of international peace and security whilst ensuring the protection of human rights. Therefore, the Commission tabled in 2016 a legislative
proposal67 for a modernisation of EU export controls for dual use items68. The purpose of the proposal is to strike a balance between ensuring a high level of security,
and maintaining the competitiveness of European companies involved in legitimate trade
in dual-use items. In 2017, the Council and the European Parliament advanced discussions of the proposal, with the Parliament's INTA Committee adopting its report in
November 2017. DG Trade also actively engaged with stakeholders and participated in a series of outreach events, culminating with the organisation of an Export Control Forum
on 19 December 2017.
At the same time, DG Trade supported the effective implementation of controls through
regular meetings of the Dual-Use Coordination Group, while technical expert groups bringing together experts from the Commission and Member States as well as, where
appropriate, industry and civil society, assessed the feasibility of promoting electronic
licensing systems across the EU, prepared EU Guidelines on industry compliance and monitored trade in cyber-surveillance technology. A delegated act was adopted in 2017
to update the EU list of dual-use items in light of technological developments. DG Trade also promoted the transparency of export control activities, especially with the release of
a dedicated annual report in November 2017, and ensured EU participation in some meetings of the multilateral export control regimes, as well as dialogue with third
countries.
In conflict-affected and high-risk areas, companies involved in mining, processing and
trade in minerals have the potential to generate income, growth and prosperity, and
support the livelihood of local communities. At the same time, companies may also risk contributing to or being associated with significant adverse impacts, including conflict
financing and associated human rights abuses. The so-called 'conflict minerals' tin, tantalum, tungsten and gold (3TG) are associated with particular risks in this regard, and
can find their way into e.g. our mobile phones, cars and jewellery. Therefore, the EU adopted in May 2017 a new EU regulation to ensure responsible importation of
3TG and that companies do not intentionally or unintentionally contribute to the aforementioned risks; thereby consolidating the EU's global leadership in this important
policy area. The requirements for EU importers will apply as of 1 January 2021 so that
companies have time to adapt. In the meantime, the Commission is bringing forward a series of initiatives to facilitate the effective implementation of the regulation and
continues its outreach dialogues on conflict minerals with a number of trading partners.
67 COM(2016)616
68 Regulation (EC) No 428/2009
trade_aar_2017_draft Page 33 of 53
In 2017, the Commission also made progress on its work on non-binding guidelines on the criteria for conflict-affected and high-risk areas and ex-post checks as well as on a
delegated act on the criteria and methodology for the recognition of supply chain due
diligence schemes; in view of finalising these initiatives in the course of 2018.
With respect to the ‘Anti-Torture’ Regulation, Commissioner Malmström co-chaired in
the margins of the UN General Assembly the successful launch - - of a Global Alliance to end trade in goods that could be used for torture or capital punishment on 18 September
2017. The Global Alliance is a joint initiative between the EU, Argentina and Mongolia. At the meeting a joint political declaration was adopted by the 58 participating countries69.–
DG Trade supported actively its Commissioner and the Service for Foreign Policy Instruments (FPI) in their efforts to promote the EU model and encourage third countries
to develop and adopt similar legislation.
69 http://www.torturefreetrade.org/
trade_aar_2017_draft Page 34 of 53
2. ORGANISATIONAL MANAGEMENT AND INTERNAL CONTROL
This section answers to the question how the achievements described in the previous
section were delivered by DG Trade. This section is divided in two subsections.
The first subsection reports the control results and all other relevant information that
support management's assurance on the achievement of the financial management and internal control objectives. It includes any additional information necessary to establish
that the available evidence is reliable, complete and comprehensive; appropriately covering all activities, programmes and management modes relevant for the DG.
The second subsection deals with the other components of organisational management: human resources, better regulation principles, information management and external
communication.
2.1 Financial management and internal control
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 continued 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 2017 were legal and regular and implemented
in accordance with the principles of sound financial management;
The report issued for the attention of the Internal Control Coordinator on the state of
play of internal control systems in DG Trade;
The reports from Authorising Officers in other DGs managing DG Trade's budget appropriations;
The limited conclusion on the state of control in DG Trade issued by the Internal Audit Service (IAS);
The observations and the recommendations reported by the internal (IAS) and external (European Court of Auditors) auditors.
This section reports the control results and other relevant elements that support management's assurance. It is structured into (a) Control results, (b) Audit observations
and recommendations, (c) Effectiveness of the internal control system, and resulting in
(d) Conclusions as regards assurance.
2.1.1 Control results
This section reports and assesses the elements identified by management that support the assurance on the achievement of the internal control objectives70. The DG's
assurance building and materiality criteria are outlined in the AAR Annex 4. Annex 5 outlines the main risks together with the control processes aimed to mitigate them and
70 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 programmes as well as the nature of the payments (FR Article 32).
trade_aar_2017_draft Page 35 of 53
the indicators used to measure the performance of the control systems.
DG Trade is a policy DG with a relatively small budget, where the majority of the budget
is implemented through direct management, while part of the contributions to
international organisations are implemented though delegated agreements, i.e. indirect management. DG Trade’s budget was implemented in 2017 as follows:
Total expenditure Commitments
in M €
Payments
in M € Administrative expenditure (excl. external staff) 4.28 0.4
Contributions to International Organisations 5.08 5.11
Procurement activities 11.64 9.59
Cross sub-delegations to other DGs 0.01 0.12
Total (as presented in Annex 3) 21.01 15.22
Co-delegation to other DGs 0.85 4.55
Total expenditure 21.86 19.77
The expenditure managed by DG Trade falls into the following categories:
Administrative expenditures
More than 90% of the administrative budget (missions expenses, meetings of
committees and expert groups, training, conferences and other miscellaneous expenditure) managed by DG Trade is actually paid by PMO. Missions represent more
than 80% of all administrative expenditure in DG Trade.
Contributions to international organizations
Overall, the value of the payments linked to contributions to international organizations represented about 34% of the total budget expenditure in 2017. DG Trade awarded
direct grants and delegated agreements to international organisations with a view to implement multilateral programmes and initiatives, notably 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 and investment performance.
Procurement activities (contracts)
Overall, the value of payments linked to signed contracts represented about 63% of the total budget expenditure in 2017. DG Trade mainly acquired 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.
Cross sub-delegations
DG Trade has cross sub-delegated appropriations to the DGs listed below. Being Commission services themselves; their Authorising Officer by Delegation (AOD) is
required to implement the appropriations subject to the same rules, responsibilities and
accountability arrangements. The cross sub-delegation agreement requires the AOD of the DG, to whom the appropriations have been delegated, to report on the use of these
appropriations.
trade_aar_2017_draft Page 36 of 53
DG Consumed commitment
appropriations in M €
Consumed payment appropriations in M €
DG COMM 0.01 0.01
DG SANTE - 0.10
DG DEVCO - 0.01
For the 2017 reporting year, the cross-delegated AODs have themselves reported
reasonable assurance on the delegated budget managed by them on behalf of DG Trade.
They have signalled no serious control issues. For the amounts that have not been spent by the cross-delegated AODs, no report has been received.
Considering the very small amount entrusted to these other DGs, and bearing in mind
the reports without reservation from the Authorising Officers in those DGs, DG Trade will not perform any additional controls as regards legality, regularity and error rates.
Coverage of the Internal Control Objectives and their related main indicators
Control effectiveness as regards legality and regularity
DG Trade has set up internal control processes aimed at ensuring the appropriate
management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the
nature of the payments concerned.
DG Trade continues to operate a combination of a fully centralised financial circuit and a
decentralised financial circuit with counter-weight. All transactions are therefore subject to an independent ex-ante financial verification (100% of transactions). No ex-post
function is set up. 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.
In addition, for all the contributions to international organisations, the disbursement of
funds takes place after the conclusion of a Pillar Assessed Grant or Delegation Agreement
(PAGODA agreement) with the beneficiary. Each agreement requires that international organisations have successfully passed the pillar assessments. A verification check is
normally done only in cases when there are indications of possible incorrect spending of EU funds. As there have been no indications that the funds were not correctly spent in
2017, no expenditure checks were initiated during last year.
The objective of the control system is to ensure that the DG has reasonable assurance that the amount of financial operations authorised during the reporting year and which
would not be in conformity with the applicable contractual or regulatory provisions, does not exceed 2% of the total expenditure for the reporting year.
During 2017 a total of 647 payments amounting to M€ 15.22 were made, 95.05 % of
them on time, with an average payment deadline of 20.5 days.
In DG Trade, the 2% threshold applies to any transaction that has been registered as an
exception or a non-compliance event and which has a quantifiable impact on the legality and regularity of the underlying transaction.
In 2017, 4 non-compliance events were recorded as control weaknesses. None of these non-compliance events had an impact on the legality and regularity of the transactions.
All concerned events related to formal compliance issues which do not have a negative impact on the budget.
The correction of detected erroneous invoicing which involved an amount unduly
trade_aar_2017_draft Page 37 of 53
invoiced, resulted in 23 credit notes for a total amount of EUR 39,731 and 26 cases of claiming an ineligible amount totalling EUR 1,132. Please refer to table 8 in annex 3 for
details. All errors and irregularities have been discovered before the actual payment, with
the exception of one case linked to unclear reporting from an International Organisation which required the issuing by DG Trade of the only recovery order in 2017 for an amount
of EUR 47,292, representing 0.9% dedected error rate. In addition, no other elements were brought to the attention of the AOD which could give rise to a financial correction or
an ex-post recovery.
The legality and regularity is demonstrated by the following key indicators:
OBJECTIVE INDICATOR TARGET 2017 2016 2015 2014 2013
Compliance with ICS8
No of financial exceptions
Keep stable/ reduce
None 1 2 4 3
No of non-compliance events
Keep stable/ reduce
4 7 10 2 3
No of decisions overriding controls
None None None None None 1
Complaints in procure-ment procedures
No of legal cases following complaints in procurement procedures
None None None None None None
ASSESSMENT Compliance with ICS 8: the rate of financial exceptions/non-compliance
events decreased in 2017 compared to 2016. An examination of the nature of the non-compliance 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. Legal cases: In 2017, there were no legal cases, nor complaints, about a
procurement procedure.
DG Trade considers that there is no indication that transactions managed by DG
Trade would not be legal and regular. All corrections take place before the
actual payment is made (ex-ante), there are no errors left at the moment of
payment. Nonetheless, to calculate the error rate, DG Trade has taken a most
conservative approach and estimates the error rate being at 0.5%.
In the context of the protection of the EU budget, at the Commission's corporate level, the DGs' estimated overall amounts at risk and their estimated future corrections are
consolidated.
For DG Trade, the estimated overall amount at risk at payment71 for the 2017 payments
made is 0.06 M€. This is the AOD's best, conservative estimation of the amount of
71 In order to calculate the weighted average error rate (AER) for the total relevant expenditure in the
reporting year, the detected, estimated or other equivalent error rates have been used.
trade_aar_2017_draft Page 38 of 53
relevant expenditure during the year (12.20 M€) not in conformity with the applicable contractual and regulatory provisions at the time the payment is made.
The internal control strategy foresees the implementation of an ex-ante control of 100%
of the expenditure authorised. Given that there is no ex-post control function setup, no future corrective capacity after the payments have been made is being considered.
As a result the estimated overall amount at risk at payment is considered to be the same as the estimated overall amount at risk at closure of 0.06 M€.
trade_aar_2017_draft Page 39 of 53
Table 1 - Estimated overall amount at risk at closure
DG Trade
"payments
made" (FY;
m€)
minus newa
prefinancing
[plus
retentions
madeb] (in
FY; m€)
plus clearedc
prefinancing [minus
retentions (partially)
releasedb and
deductions of
expenditure made by
MS]
(in FY; m€)
= "relevant
expenditure"d
(for the FY;
m€)
Average
Error Rate
(weighted
AER; %)
estimated
overall
amount at
risk at
payment
(FY; €)
Average Recoveries
and Corrections
(adjusted ARC; %)
estimated
future
corrections
[and
deductions]
(for FY; €)
estimated overall
amount at risk at
closuree (€)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Programme,
Budget
Line(s), or
other relevant
level
as per AAR
annex 3,
table 2
as per ABAC
DWH BO
report on
prefinancing f
as per ABAC DWH BO
report on
prefinancing f
= (2) – (3) +
(4)
Detected
error rates,
or
equivalentg
estimates
= (5) x (6) based on 7Y-avg
historic ARC (as per
ABAC DWH BO report
on corrective
capacity)f: (2,1%),
but adjustedh to be
the best but
conservative
estimate for the
current MFF
= (5) x (8) = (7) – (9)
Procurement 9.6 0.0 0.0 9.6 0.5% 0.05 0.0% 0.00 0.05
Contributions
to
International
organisations
5.1 4.4 1.4 2.1 0.5% 0.01 0.0% 0.00 0.01
Administrative
expenditures 0.4 0.0 0.0 0.4 0.5% 0.00 0.0% 0.00 0.00
Other 0.1 0.0 0.0 0.1 0.5% 0.00 0.0% 0.00 0.00
Overall, total
15.2 4.4 1.4 12.20 0.5%
0.06
mEUR;
0.5% of
(5)
0.00% 0.00 mEUR;
0% of (5)
0.06 mEUR; 0.5% of
(5)
trade_aar_2017_draft Page 40 of 53
a New PF actually paid by out the DG itself during the FY (i.e. excluding any PF received as transfer from another DG)
b In Cohesion, the (10%) retention made, which is later released or (partially) withheld by the Commission
c PF actually having been cleared during the FY (i.e. their 'delta' in FY 'actuals', not their 'cut-off' based estimated 'consumption')
d For the purpose of equivalence with the ECA's scope of the EC funds with potential exposure to L&R errors (see the ECA's AR methodological Annex 1.1 point
10), also our concept of "relevant expenditure" includes the payments made, subtracts the new pre-financing paid out [& adds the retentions made], and adds
the previous pre-financing actually cleared [& subtracts the retentions released and those (partially) withheld; and any deductions of expenditure made by MS in
the annual accounts] during the FY. This is a separate and 'hybrid' concept, intentionally combining elements from the budgetary accounting and from the general
ledger accounting.
e For some programmes with no set closure point (e.g. EAGF) and for some multiannual programmes for which corrections are still possible afterwards (e.g.
EAFRD and ESIF), all corrections that remain possible are considered for this estimate
f [if possible] differentiated for the relevant portfolio segments at a level which is lower than the DG total
g In Shared Management, e.g.: "validated/adjusted error rates", "residual error rates at MS-level, as reported by the MS Audit Authorities and
applied/adjusted/projected by the DG", etc.
For types of expenditure with indications that the equivalent error rate might be close to 'zero' (e.g. administrative expenditure, operating subsidies to agencies),
we recommend to use 0.5% nevertheless as a conservative estimate.
h Even though based on the 7 years historic average of recoveries and financial corrections (ARC), which is the best available indication of the corrective capacity
of the ex-post control systems implemented by the DG over the past years, the AOD has adjusted this historic average, in order to come to the best but
conservative estimate of the expected corrective capacity average to be applied to the reporting year's relevant expenditure. Considering that DG TRADE is a DG
with entirely ex-ante control system, the ex-post future corrections are considered to be 0.0%.
trade_aar_2017_draft Page 41 of 53
Cost-effectiveness and efficiency
Based on an assessment of the most relevant key indicators and control results, DG
Trade has assessed the cost-effectiveness and the efficiency of its control system and has reached a positive conclusion.
DG Trade quantifies the costs for carrying out the controls described in annex 5 on the basis of the human resources required for these controls and estimates their benefits, in
so far as possible, in terms of the amount of errors and irregularities prevented, detected and corrected by these controls (as shown in Annex 3, table 8). However, most benefits
are non-quantifiable since they cover non-financial gains such as compliance with
regulatory provisions, deterrent effects, system improvements and protection from reputational damage.
DG Trade has produced an estimation of the costs of the main control processes. DG Trade estimates the overall cost of control at € 1.4 mil72.
Apart from the Commission’s own cost of control (in the strict sense) mentioned above, there are fees paid to international organisations for their overall
administration/management in the broad sense (which are however known to cover broader costs than only control in the strict sense): 7% of the final amount of the direct
eligible costs actually incurred.
DG Trade applies a 100% ex ante verification to 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. No ex-post control function is established.
DG Trade, being considered as small-spending DG and not being possible to split the cost of controls into the Direct and Indirect Management modes, retained a single overall cost
of control indicator:
The cost of control as well as the level of appropriations authorised remained stable
compared to 2016. DG Trade considers the necessity of these controls to be undeniable,
as they are essential to ensure compliance with regulatory requirements. As demonstrated in annex 5 a substantial part of the appropriations would be at risk if these
controls would not be in place. For these reasons, the overall cost of control has to be seen in relation to the relative small payments value (15.2 M€).
72 This corresponds to 9.7 FTE, representing the estimated combined effort of actors in the financial and
operational units involved in the execution and verification of financial transactions in DG Trade.
trade_aar_2017_draft Page 42 of 53
Taking into account the obligations resulting from the regulatory framework, the total costs of controls and both the quantifiable and non-quantifiable benefits, DG Trade
considers that the controls performed today are efficient and necessary. DG Trade continues to reflect on its control model and examines whether it is possible to make it
even more cost-effective and efficient.
Fraud prevention and detection
DG Trade has developed and implemented its own anti-fraud strategy in 2013,
elaborated on the basis of the methodology provided by OLAF. It has been updated in
2015.
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 2017 no cases were reported by DG Trade to OLAF. Moreover, and to DG Trade’s
knowledge, there are no cases linked to financial procedures or staff matters currently being investigated by OLAF. Cooperation with OLAF continues to work well in the area of
fraud linked to trade defence investigations.
2.1.2 Audit observations and recommendations
This section reports and assesses the observations, opinions and conclusions reported by
auditors in their reports as well as the limited conclusion of the Internal Auditor on the state of control, which could have a material impact on the achievement of the internal
control objectives, and therefore on assurance, together with any management measures taken in response to the audit recommendations.
Audits completed in 2017
In October 2017 the IAS completed an audit on "Internal processes supporting trade policy negotiations", where the internal auditors concluded that the internal processes in
DG Trade to support trade policy negotiations across the Commission are effective and efficient. Nevertheless, the IAS detected some areas for improvement and issued five
recommendations (none of them considered critical or very important). The action plan has been established to address all recommendations that should be fully implemented
by the end of 2018.
Implementation of audit recommendations
In 2017, DG Trade continued to monitor systematically the implementation of
recommendations stemming from audit reports. A comprehensive state of play of audit
recommendations is regularly updated and its summary is brought to the attention of DG Trade’s management and staff through spring and/or autumn review. Whenever deemed
necessary, specific issues resulting from on-going/closed audits are presented in other settings in DG Trade. Action plans are systematically established following each audit
with active involvement of all auditees concerned.
In July 2017 the IAS finalised a follow-up of the open recommendations under the audit,
completed at the end of 2015, "Are the European Trade Defence Instruments (TDIs) managed effectively and efficiently to defend the European Union against trade
distortions?" concluding that all recommendations addressed to DG Trade were
adequately and effectively implemented. Also in 2017 the only recommendation that remained open under the audit on management of local IT was considered fully
implemented by the IAS in July 2017.
trade_aar_2017_draft Page 43 of 53
As regards the IAS audit on Ethics in DG Trade, completed at the end of 2016, the internal auditors recognised that DG Trade set up and implemented an effective ethics
framework based on strong support from the management and on appropriate procedures adapted to the DG's specific environment. It did not reveal any cases where
ethics rules were breached and did not identify critical or very important weaknesses. The IAS detected some areas for improvement and issued two recommendations: (1) the
improvement of internal processes concerning contacts with interest groups and requests for access to documents. This recommendation was fully implemented in 2017; (2) the
implementation of additional, awareness raising, monitoring and reporting on ethics,
where the full implementation is expected by the end of 2018.
In relation to the weaknesses detected during the Financial and procurement
management audit, the IAS had decided to downgrade one very important recommendation, after DG Trade's management demonstrated the completion of a
number of actions proposed to address this recommendation. While the drafting of a reflection paper on the control model to be applied in DG Trade for the financial and
procurement management was put on hold, several measures have been implemented to increase efficiency and effectiveness in this field. These aim at further simplifying
financial management in DG Trade while at the same time maintaining the high quality of
control systems in place. This recommendation should be fully implemented in the course of 2018.
Finally, almost all the weaknesses identified in the 2014 ECA Special Report73, that were within DG Trade's competence, were addressed within the set deadlines and DG Trade
will continue to report to the EP and the Council in the context of the follow up to the Discharge if requested. There is only one out of six recommendations remaining to be
fully implemented in relation to the Generalised System of Preferences' monitoring (which should be reinforced to meet its policy objectives). The recommendation should
be considered to be fully addressed upon presentation of the mid-term review of the GSP
to the legislative authorities as required by the legal base (estimated for the end of June 2018).
None of the above mentioned recommendations were rated as critical or required the issuance of a reservation. Moreover, DG Trade's control system is not considered to be
affected by these recommendations.
In its contribution to the 2017 AAR exercise, the IAS concluded that the audited DG
Trade's internal control systems are effective. This conclusion is based on all work undertaken by the IAS in the period 2015-2017 and taking into account the actions plans
adopted to implement recommendations made by the IAS in 2015-2017.
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 concerns
towards the assurance. These recommendations are being implemented as part
of on-going and continuous efforts by DG Trade to seek for further improvement
and efficiency in its processes.
73 Special Report 2/2014 "Are preferential trade arrangements appropriately managed?"
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2.1.3 Assessment of the effectiveness of the internal control systems
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. In
addition, as regards financial management, compliance with these standards is a compulsory requirement.
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 these
standards and having due regard to the risks associated with the environment in which it
operates. Within the DG, Unit A.1 is responsible for advising, monitoring compliance, assessing and reporting on the internal control systems74 in DG Trade. One official in Unit
A.1 assists DG Trade's Internal Control Coordinator (Director A) in his tasks.
The present assessment relates exclusively to the implementation of internal control
systems for which DG Trade is responsible and, therefore, does not include reporting on internal control arrangements in EU Delegations.
Management assesses on a continuous basis the effectiveness of the internal control systems, in order to determine whether they work as intended and ensuring that any
control weaknesses in the system are detected, analysed and considered for
improvement. In addition, management performs specific assessments to ascertain whether the internal control systems and their components are present and functioning.
The purpose of these management assessments is to provide reasonable assurance that the internal control standards/principles adopted by the Commission are implemented
and functioning in the DG, that the assessment findings are evaluated and that any deficiencies are communicated and corrected in a timely manner, with serious matters
reported as appropriate.
The 2017 assessment of the internal control systems was launched in December 2017
and completed in February 2018 with the report sent to the Internal Control Coordinator.
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:
Results of the staff survey;
Qualitative assessments by the units/sectors/teams in charge of the
implementation of particular Internal Control Standards;
A desk review by Unit A.1 of information collected throughout the year, in
particular records from management meetings, the quarterly management meetings on administrative matters and meetings covering specific internal
control issues;
The results of DG Trade's risk assessment exercise;
The reports by the Authorising Officers by Subdelegation (AOSD Declaration);
The IAS opinion on the state of control;
Relevant audit results (IAS, ECA);
Other control information (OLAF, IDOC);
74 DG Trade has implemented the new Internal Control Framework (C(2017)2373 final, 19.4.2017) in
2018. The 2018 AAR will be based on this new framework.
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The register of exceptions and non-compliance events.
Based on the above elements it can be concluded that the internal control standards are
effectively implemented and functioning. For certain elements covered under specific Internal Control Standards, minor additional measures should be taken to further
improve the effectiveness of DG Trade's internal control systems under standards N°1 Mission, N°2 Ethical and Organisational Values, N°8 Processes and Procedures and N°11
Document Management.
Regarding the mission, some Directorates and Units do not have their mission
statements available in the intranet.
With regard to the controls existing in the ethics area, DG Trade's ethical framework is up to date, aligned with the corporate framework and adapted to the DG's specific
environment. Nevertheless, there is still an open recommendation following an audit from the IAS finished in November 2016 on the need to increase monitoring and reporting.
Based on that, an Ethics survey was launched among DG Trade staff and results were received in December 2017. The results are now been analysed to determine what
actions should be taken as a follow up.
Regarding processes and procedures, in the 2017 risk assessment exercise, management
confirmed again that one of the most important risks at DG level relates to the leaks of
sensitive negotiating documents. DG Trade has put in place all the necessary mitigating measures to address this risk within the Commission. In practice the main challenges in
this area have taken place after the documents have been transmitted to other institutions. Moreover, in the audit on internal process of supporting trade negotiations
the IAS recommended to DG Trade to perform an analysis of the security provisions put in place to protect sensitive information and to take the necessary measures to allow the
negotiators to work within adequate technical conditions.
Finally, one of the management tools which are used to conclude on the effectiveness of
controls and/or to assess where changes need to be applied, are the reports on
exceptions and non-compliance events. In 2017 there were no exceptions and the number of non-compliance events decreased in comparison with 2016 and can be
considered as reasonable. Moreover, the non-compliance events did not reveal any fundamental weaknesses in the control system and they were considered as not having
an impact on the legality and regularity of the underlying transactions.
The new Commission's Internal Control Framework is fully applicable as from 1 January
2018. In this context, the Director of Resources, Information and Policy Coordination was appointed as Director responsible for Risk Management and Internal Control (RMIC) in
DG Trade as from 1 January 2018.
Based on all above elements it can be concluded that all internal control standards are effectively implemented and functioning and that they provide a
reasonable assurance regarding the achievement of the business objectives with
some improvements needed in areas identified above.
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2.1.4 Conclusions as regards assurance
This section reviews the assessment of the elements reported above (in Sections 2.1.1,
2.1.2 and 2.1.3) and draws conclusions supporting the declaration of assurance and whether it should be qualified with reservations.
Review of the elements supporting assurance
While DG Trade has a relatively small budget to manage, the key controls implemented in DG Trade and which were not altered in 2017, operate appropriately 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 appropriately 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.
Overall Conclusion
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.
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2.1.5 Declaration of Assurance
trade_aar_2017_draft Page 48 of 53
DECLARATION OF ASSURANCE
I, the undersigned,
Director-General of DG Trade
In my capacity as authorising officer by delegation declare that the information contained in this
report gives a true and fair view.
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 limited conclusion of the Internal
Auditor on the state of control, 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 or those of the Commission.
Brussels, 31 March 2018
Jean-Luc Demarty
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2.2 Other organisational management dimensions
In order to illustrate how the Commission is continuously trying to improve its
functioning with a view of investing its resources not only to the most relevant objectives but also in the most economical and efficient manner, DG Trade has chosen the following
two examples of specific efforts that it has made to improve the economy and efficiency of financial and non-financial activities. For a full overview of the performance indicators
on organisational management please refer to annex 2.
Example 1 - HR management
Given the continued visibility and high political pressure on trade policy DG Trade
remains determined to work effectively and efficiently to absorb both the effects of
budgetary constraints and continuous high workload as far as possible within existing
teams by developing more horizontal cooperation, ad hoc cross unit/directorate project
teams and constantly reviewing the need for redeployment options, both at Headquarters
and in Delegations.
The HR BC, together with the Head of Unit TRADE A1 and the Resource Director, meets on a regular basis the Director General to discuss the human resource situation in DG
Trade. Measures to adapt the staffing levels where necessary are decided and in most cases solved through internal redeployments or redistribution of tasks between
directorates and units. Continuous close dialogue and collaboration with middle and senior managers ensures that the HR BC and the Resources Director receive the relevant
information needed for engaging with the Director General on such decisions.
Example 2 – streamlining financial management
DG Trade will closely follow-up the development of the eProcurement project and pursue
the deployment of the ensuing applications as the main driver of efficiency gains in
financial management.
Following the implementation of E-ordering in 2015, DG Trade implemented two other e-modules in 2017: e-fulfilment and e-submission. E-fulfilment allows electronic handling of
time sheets and may allow e-invoices to be automatically "certified correct" provided
they fulfil certain conditions. E-submission (electronic submission of offers) allows tenderers submit their offers electronically in a secure way and consequently brings
efficiency gains during the opening and evaluation of the tenders.
DG Trade continues to analyse the cost-effectiveness and efficiency of its processes and
appropriate measures are proposed, mainly relating to simplification of validation chains and level of responsibilities, when they are considered beneficial.
2.2.1 Human resource management
The HR Modernisation project, as laid down in the Communication on Synergies and
Efficiencies, was rolled out in the Commission as of 16 February 2017. HR services for
DGs are now delivered by the Account Management Centres (AMCs). Within each DG, the HR Business Correspondent coordinates strategic HR matters and prepares the
related decisions of the DG's management. DG Trade contributed in a pragmatic and positive manner to ensure that the project was rolled out as smoothly and efficiently as
possible for all involved, staff, managers and the partners within the HR Community.
DG Trade’s specific objective relating to Human Resources is to motivate and
retain highly qualified staff in order to maintain an effective and efficient operation of DG Trade. Therefore DG Trade continued in 2017 to treat this angle as a
priority.
trade_aar_2017_draft Page 50 of 53
The latest staff survey took place in 2016 and a new survey is planned to be launched by central services during 2018. Therefore for the purpose of reporting on the indicators in
2017 the reference target remains those of 2016. DG Trade's staff engagement (i.e. the overall indicator for staff satisfaction) in 2016 remained above the Commission average
at 67% and improved by 2 percentage points since the 2014 staff satisfaction survey. Despite this very positive feedback, results on well-being continue to be below the
Commission average (26%) and have even decreased since the 2014 staff satisfaction survey. The staff survey also showed the need to improve and increase internal
communication actions.
Being mindful of the very high workload in DG Trade, further actions seeking to improve work-life balance/well-being, focusing on managing stress and
workload (including through elements of flexibility like teleworking and flexitime) were seen as priority in 2017. For this purpose a specific action plan to
address the 2016 staff survey results was put in place in 2017 with a special focus on career development, work-life balance, well-being and internal communication and from
which actions will continue to be implemented in the different areas in 2018. For example a Health Day, which was much appreciated by staff, was organised in autumn 2017
addressing some of these concerns. We also started the preparations for a specific AST
teambuilding event and a full Health week to take place in 2018. As regards learning and development, special focus will be put on actions on management development and well-
being, in addition to those on trade policy. For example, a pre-management development programme was designed in 2017 and will be launched in the first half of 2018. Specific
management courses relating to the prevention of burn-outs, unconscious bias and emotional intelligence were also designed and prepared in 2017 and will continue or be
launched in 2018.
Moreover, DG Trade continuously seeks to analyse and address how to most
efficiently and effectively use its human resources. This enables it us to prepare for
forward planning of staff in order to optimise the human resources needed for implementing its policy objectives, while at the same time ensuring staff engagement
through learning and development, well-being, fit@work and diversity actions. Furthermore, to address staff motivation, an internal mobility exercise (launched
for the first time in 2016) was organised again in 2017 for both AD and AST staff. With the continued high workload for DG Trade staff, well-being and staff
motivation will continue to be a priority also for the coming year.
In addition to regular discussions with senior management, and the preparation of ad hoc
strategic notes and a resource report, we organise each year a spring and autumn
review, where, together with Senior Management, we look at the human resource and mobility situation in the DG. These reviews also help DG Trade's senior management to
decide how to meet the increasing workload demands with existing staff levels; to decide any needs for further reinforcement, or whether to consider internal redeployments of
staff. Through this process, and in close discussion with the Director General, continuous redistribution of human resources within the DG is possible so that
we can meet our priorities while at the same time balance insufficient staff levels and turnover of staff. Where necessary, we take mitigating actions. In 2017 we
launched the idea of creating short-term "project teams" for urgent high priority dossiers
and which is to be implemented in 2018 on a pilot basis.
Finally, as in previous years, DG Trade continued taking very seriously its
commitment to promote gender equality. Compared to the baseline figure 2015 (18.5%) we have in 2017 increased substantially the percentage of female middle
managers and reached our target of 30%. In addition, DG Trade reached in September 2017 the additional target of first appointment of two female middle managers. DG Trade
also participated in the compulsory middle management mobility exercise, launched by DG HR in May 2017. This exercise resulted in two new middle managers, one female and
one male, joining DG Trade on 1 September and 1 October 2017 respectively.
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2.2.2 Better regulation
In line with the Better Regulation Agenda, DG Trade submitted three impact assessments
to the Regulatory Scrutiny Board in 2017. All three documents received a positive opinion on their first submission. These submissions concerned the impact assessment regarding
the comprehensive Australia and New Zealand FTAs, the modernisation of Chile Association Agreement and the multilateral investment court.
2.2.3 Information management aspects
According to DG Trade’s objective to register and file documents in ARES and making
them retrievable and thus to be shared in the DG and reusable by other DGs, the number
of registered documents that were not filed went down in 2017 (0.95%) improving the already positive results from 2016 (0.99%). The improvement in the overall results for
all DGs is explained by the mandatory filing introduced in the ARES last version.
In addition, following the full implementation of the 100% electronic e-signatory in Ares
launched in January 2017, DG Trade had 93.6% of registered documents with fully approved e-signatory in 2017. This procedure has facilitated a better use of electronic
workflows, with the reduction of errors caused by the parallel circulation of paper files and a reduction of paper storage.
There was a reduction of 12.5% in the number of emails registered with Areslook in
2017. Part of the reduction is explained by the general reduction in the registered document in Ares (6.4%) in 2017. Furthermore, the target of this output has been
revised in the Management Plan 2018 considering that the number of emails registered with Areslook have reached a proper level (33.50% in 2017) and should be maintained in
the future.
The Negotiations Support Tool (NEST) supports the planning of negotiations through
calendar management functions and it is gradually becoming a repository of the relevant policy information relating to trade negotiations.
Another information management tool which is used by DG Trade is our TradeTogether
platform that supports collaborative and group work in various services of the DG.
The Event Management Tool (EMT), developed by DG FISMA, has successfully passed the
pilot phase and it is now used across the DG as a transparency tool to record meetings with external stakeholders.
2.2.4 External communication activities
In 2017, there was a continued high level of interest around bilateral negotiations
(CETA, Japan notably), the State of the Union Trade package in September 2017
including the legislative proposal on investment screening, as well as developments related to trade defence (adoption of new methodology and
modernisation of trade defence rules). The DG's communications, information, outreach and transparency work has therefore focused to a large extent on these priority issues
and how they fit into the wider priorities of this Commission, notably, delivering jobs, growth and investment. Nevertheless, DG Trade has also shown through its
communications efforts that EU trade policy is more than just these two important negotiations, and has covered other bilateral trade negotiations, as well as the
multilateral dimension and the values agenda. The 2017 Progress Report on the Trade for
All communication outlines progress achieved since the beginning of the Juncker Commission on all these issues.
DG Trade continued pursuing this approach not only from Commission headquarters in Brussels, but also from Commission representations in the Member States, in particular
trade_aar_2017_draft Page 52 of 53
in the three Member States where specific posts for trade communications and outreach officers were created (Berlin, Paris and Vienna). This includes working with a contractor
to develop ‘contextualised’ content and stories on trade as well as outreach actions in Member States. Similar efforts have been undertaken by many of our trade sections
across the EU's Delegation network, particularly in those countries where new agreements are in force, have been provisionally applied or are under negotiation.
Within the Commission, DG
Trade worked with
other DGs (in particular DG
Communication's spokespersons'
service) to implement the communication
strategy and monitor the impact of our
communication policy
in Member States' media, social media
and politics. DG Trade also cooperates
with the European Parliament, the
Council and third party actors (think
tanks and civil society
organisations). The DG supported press
and media relations through lines to take,
technical media briefings and
interviews as well as seminars dedicated to trade for groups of journalists.
In terms of social media, DG Trade uses primarily its Twitter account (31,500 followers at
a 15% annual follower growth rate, the highest among EC accounts without any paid social media promotion - with a very strong engagement rate of 10%, by far the highest
among all Commission accounts, and 2 out of top 5 best performing tweets among all DGs) as well as the Commission central social media accounts and coordinates closely
with the Commissioner’s communications adviser with regards to the Commissioner’s Twitter account with over 61,000 followers. We also cooperate with the with
Representations in Member States and the Delegations around the world that also use their social media channels. DG Trade and the Commissioner Twitter account as well as
additional social media channels from the Commission and the Representations in MS
have become increasingly important in our strategy to give visibility to our actions and increase our outreach.
In relation to transparency, DG Trade continued to step up its transparency policy by deciding to publish Commission's proposals to the Council for negotiating directives and
the opening of negotiations as well as the explanation of the political agreement sent to Member States and the EP, in addition to negotiating texts and round reports. 82
documents were published in 2017 (17 negotiation round reports plus 65 negotiation text proposals).
Communication activities also focused on stakeholder involvement and on an interactive
process with the civil society. In 2017, DG Trade organised 23 civil society dialogue
trade_aar_2017_draft Page 53 of 53
meetings on different trade policy issues and launched 4 public consultations.
The new expert group (mentioned above) on trade agreements composed of 28
representatives of businesses, trade unions and NGOs, was created by a Commission decision in September 2017. Following the completion of the selection process of member
organisations by the end of 2017, it started its work in February 2018.
DG Trade organised its flagship event on trade policy, the EU Trade Policy Day, in
December 2017. The event was very successful, with nearly 450 people that attended and with thousands of people watching the web streaming session. On that day our
hashtag #EUTrade was for a while the number one hashtag in Belgium.