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europeanreport

February 7, 2004 - twice-weekly - 2841

p.1 Retail trade: Sales volumes down in November 2003p.1 EIB: Loans up 7% in 2003

p.1 Civil aviation: Reactions to Ryanair decisionp.2 Aircraft components: RBS acquisitions waved through p.3 Merger control: Polish steel merger cleared

p.1 Free movement of goods: ECJ rulings on enriched foodsp.1 Justice and home affairs: Council move to crack car crimep.2 Broadcasting: 16:9 screens and digital TV p.3 Space: ESA Council meeting p.3 Standardisation: CEN President resignsp.3 Free movement of workers: Italy fine threat over lecturersp.4 Agriculture: Commission claws back Euro 143 millionp.5 Equal opportunities: Bid for more women

in the Olympics

I. european institutions

II. economic and monetary affairs

III. business brief

IV. internal market

p.2 Finance Council: February 9/10 sessionp.3 Consumer prices: Euro-zone inflation in January

p.3 Electricity: Schneider free to take over MGEp.3 Telecommunisations: Telenor cleared to buy Sonofonp. 3 Packaging: Anglo American free to buy Bauernfeind

p.6 Agriculture: Costs of Mediterranean product reformsp.7 CAP reform: Fischler warns Member Statesp.8 Drugs: Policy experts demand bigger EU voicep.9 Transport: EESC report on infrastructure p.9 Information Society: Safer Internet Day

p.10 Environment: Sweden takes the Commission to Court over paraquat

p.10 Transport/Telecommunications: Shortlisting of candidates for Galileo concession

p.11 Drugs: Hepatitis epidemic warning

p.1 Enlargement/Commission: Final list of candidatesp.1 EU Budget: Financial Irregularities Panel chair named

p.2 Enlargement/Personnel: Update on competitionsp.3 EU Budget: Financial Perspective Communication

V. external relationsp.1 Nuclear fusion research: ITER negotiations p.3 Justice and home affairs: EU Action Plan to support

International Criminal Court p.4 Enlargement/Trade: Remaining preparationsp.5 EU/US: Transfer of data on air passengersp.6 EU/Romania: New MEP warning on reformsp.6 EU/WTO: ILO says labour standards would boost

economies p.7 EU/ACP: Bid to improve aid delivery

p.7 EU/Eastern and Southern Africa: Launch of regional talks

p.8 EU/Solomon Islands: Fish pact signedp.8 EU/Colombia: President Uribe faces EU criticsp.9 EU/WTO: Commission still hopeful on Doha Round p.9 EU/Morocco: Visit by Mr Verheugen

p.10 EU/Asia: More EU expertise for bird ‘flup.11 EU/Serbia and Montenegro: Sugar preferences still

suspendedp.11 EU/WTO: Commission looks at ‘collective preferences’

Euro-memo: Council of Ministers, Committee of the Regions, Court of Justice, European Commission, European Parliament

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european report2841 - February 7, 2004

EU COUNCIL OF MINISTERS

euro-memo

Upcoming sessions under the Irish Presidency:

February

10 EcoFin (Brussels)19-20 Justice and Home Affairs (Brussels)23-24 General Affairs and External Relations (Brussels)24 Farm and Fisheries (Brussels)26 Education, Youth and Culture (Brussels)

March

2 Environment (Brussels)4-5 Employment, Social Policy, Health, Consumers (Brussels)8-9 Transport, Telecommunications and Energy (Brussels)9 EcoFin (Brussels)11 Competitiveness (Brussels)22-23 Farm and Fisheries (Brussels)

General Affairs and External Relations (Brussels)25-26 European Council (Brussels)30 Justice and Home Affairs (Brussels)(151/14.4)(AF)

1

COMMITTEE OF THE REGIONS PLENARY SESSION

The EU Committee of the Regions meets on February 11 and 12 in Brussels, for a plenary sessionwhich will be marked by the election of a new President, a first Vice-President, 14 other Vice-Presidents andother Bureau members. Michel Barnier, Commissioner for Regional Policy, will explain in this session thefuture of the policy of cohesion, a number of days from the adoption of the European Commission’s thirdreport on economic and social cohesion. Two Resolutions will be adopted on the Inter-GovernmentalConference and the work programme of the European Commission.

To celebrate the launching of the European Year of Education through Sport 2004, a debate on “Greatsporting events and their impact on host countries (urban development, integration, employment, training andeducation)” will conclude the work of the plenary session (February 12, from 11:30am). One notable speakerwill be Valentino Castellani, President of the Organising Committee of the Winter Olympic Games in Turin2006, and Guido de Bondt, Secretary-General of the Belgian Olympic Committee, member of the executi-ve bureau of the European Olympic Committees. A Forum on “Education through Sport in Europe’sRegions and Cities” will also be held in the European Parliament (February 12 from 14:30 to 17:30).

The list of Opinions on the plenary session order of the day includes:- Creation of a suitable regime for small border trade at the furthest frontiers of the Member

States - Rapporteur: Mr Neumann (Germany/PES)- European Action Plan on road safety – Reducing by one half the number of road

accident victims in the European Union, by 2010: a shared responsibility -Rapporteur: Mr Brady (Ireland/AE)

- Trans-European Transport Network: a lever for growth and instrument forEuropean cohesion and development of a Euro-Mediterranean networkof transport - Rapporteur: Mr Soulage (France/PES)

european report2841 - February 7, 2004 euro-memo

2

- Revision of Directive 1999/62/EC relative to the taxation of heavy weights for use in certain infrastructures -Rapporteur: Mr Neill (UK/EPP)

- Followed by a White Paper on “A new spirit for European Youth” – Proposal of common objectives in termsof youth participation and information following the Council Resolution of June 27, 2002 relative to the fra-mework for European Cooperation in the youth sphere - Rapporteur: Mr Kramer Mikkelsen (Denmark/PES)

-”Establishment of prevention and control strategies for underground water pollution - Rapporteur: MrFlensted–Jensen (Denmark/PES)

“The management of waste from the mining industry” - Rapporteur: Ms Sikora (Germany/PES)- Immigration, integration and employment - Rapporteur: Mr Boden (UK/PES)- Communication from the Commission on the activities of the European Observatory on racist and xenopho-

bic phenomena, accompanied by proposals to overhaul the Council Regulation (EC) 1035/97 and theRegulation Proposal of the Council relative to the European Observatory on racist and xenophobic phenome-na (Revision) - Rapporteur: Mr Moore (UK/ELDR)

DIARY OF THE EUROPEAN COURT OF JUSTICECourt of Justice

Tuesday, February 10

- Hearing C-346/02 Commission v Luxembourg - Freedom to provide services - Failure by a State to complywith its obligations - Directive 92/49/EEC on the coordination of laws, regulations and administrative provi-sions relating to direct insurance other than life insurance and amending Directives 73/239/EEC and88/357/EEC (Third Non-life Insurance Directive) - System of bonuses and penalties applying to all motorinsurance contracts concluded on Luxembourg territory.

- Hearing C-347/02 Commission v France. Freedom to provide services; Failure by a State to comply with itsobligations - Directive 92/49/EEC of June 18, 1992 on the co-ordination of laws, regulations, and administra-tive provisions relating to direct insurance other than life insurance and amending Directives 73/239/EEC and88/357/EEC (Third Non-life Insurance Directive) - System of bonuses and penalties applying to all motorinsurance contracts concluded on French territory.

Wednesday, February 11

- Hearing C-255/01 Markopoulos and Others - Company law- Application for a preliminary ruling - SymvoulioEpikrateias - Interpretation of the Eighth Directive 84/253/EEC of April 10, 1984 on the approval of personsresponsible for carrying out the statutory audits of accounting documents - Possibility of approving personswho have not sat an examination of professional competence. - Conditions for authorising nationals of otherMember States

- Hearing Joined Cases C-361/02, C-362/02 Tsapalos - Approximation of laws - Application for preliminaryruling - Dioikitiko Efeteio Peiraios - Temporal application of Directive 76/308/EEC on mutual assistance forthe recovery of claims resulting from operations forming part of the system of financing the EuropeanAgricultural Guidance and Guarantee Fund, and agricultural levies and custom duties - Application to debts

arising before the entry into force of the Directive.

Thursday, February 12

- Advocate-General’s Opinion C-220/02 Österreichischer Gewerkschaftsbund - Social policy -Application for a preliminary ruling to interpret Art. 119 of the EC Treaty and Art. 1 of

Directive 75/117/EEC on the approximation of the laws of the Member States relating tothe application of the principle of equal pay for men and women - Concept of pay -

Taking into account, for the calculation of the amount paid to the worker on cessationof the employment relationship, of the periods of military or civilian service com-

pleted. - Advocate-General’s Opinion C-373/02 Öztürk - External relations -

Application for a preliminary ruling to interpretation of CouncilRegulation (EEC) 1408/71 on the application of social security schemes


3

to employed persons, to self-employed persons and to members of their families moving within theCommunity as amended and updated by Council Regulation (EEC) 118/97 - Interpretation of the EEC-Turkey Association Agreement - Turkish national having worked in two Member States and finding himselfunemployed.

- Advocate-General’s Opinion C-397/02 Clinique La Ramée and Winterthur Europe Assurance - Staff regula-tions of officials - Application for a preliminary ruling - Court of Appeal, Brussels - Interpretation of theStaff regulations of officials of the European Communities, as laid down by Art. 2 and 3 of Regulation(EEC, Euratom, ECSC) 259/68 of February 29, 1968, laying down the staff regulations of officials of theEuropean Communities and the rules applicable to other agents of these Communities, and establishing spe-cial temporary measures applicable to Commission officials - Scope of the subrogation rule.

- Advocate-General’s Opinion C-443/02 Schreiber - Approximation of laws - Application for a preliminaryruling to interpret Directive 98/8/EC on the placing of biocidal products on the market - Concept of “bioci-dal product” and of “low-risk biocidal product” - Concept of “basic substance” - Blocks of red cedar woodmarketed as being “anti-moth”.

- Advocate-General’s Opinion C-242/03 Weidert and Paulus - Free movement of capital - Application for apreliminary ruling - Administrative Court of Luxembourg - National legislation which grants tax relief forpersonal-property investment in resident capital companies - Compatibility with the principle of free move-ment of capital.

- Hearing C-321/02 Harbs - Taxation - Application for a preliminary ruling to interpret Directive 77/388/EEC:Sixth Council Directive on the harmonisation of the laws of the Member States on turnover taxes - Commonvalue added tax system: uniform basis of assessment - Lease of part of a farm - Application of the flat-ratescheme for farmers in Art. 25 to the lease.

- Hearing C-19/02 Hlozek - Social policy - Oberster Gerichtshof - Interpretation of Art. 119 of the EC Treaty(replaced by Art. 141 EC), Council Directive 75/117/EEC on the approximation of the laws of the MemberStates on application of the principle of equal pay for women and men and Council Directive 76/207/EECon implementation of the principle of equal treatment for women and men as regards access to employment,training, promotion and working conditions - Meaning of “pay”.

- Judgment C-337/01 Hamann International - Customs Union- Preliminary ruling - Interpretation of CouncilRegulation 2913/92 establishing the Community Customs Code - removal from customs supervision ofgoods subject to import duties - goods leaving a customs warehouse for re-exportation but not placed imme-diately under the external transit procedure.

- Hearing C-411/02 Commission v Austria - Freedom to provide services - Failure of a State to fulfil obliga-tions - Directive 98/10/EC on the application of open network provision (ONP) to voice telephony and onthe universal service for telecommunications in a competitive environment - Failure to provide users offixed public telephone networks with a basic level of itemized billing without an additional charge.

- Judgment C-330/01 P Hortiplant v Commission - Agriculture - Appeal against the judgment in Case T-143/99 of the Court of First Instance dismissing an application for the annulment of the Commissiondecision to cancel financial assistance from the EAGGF Guidance Section - Application of Article 24 ofCouncil Regulation (EEC) 4253/88 laying down provisions for implementing Regulation (EEC) 2052/88 asregards coordination of the activities of the different Structural Funds between themselves and with the ope-rations of the European Investment Bank and the other existing financial instruments, as amended byCouncil Regulation (EEC) No 2082/93.

- Judgment C-406/02 Commission v Belgium - Environment and consumers - Failure of a State to fulfil obli-gations - Failure to communicate, within the prescribed period, the reports relating to Directives76/464/EEC, 78/659/EEC and 80/68/EEC, as amended by Council Directive 91/692/EEC of 23December 1991 standardising and rationalising reports on the implementation of certain Directivesrelating to the environment, in respect of the Bruxelles-Capitale Region.

- Judgment C-363/99 Koninklijke KPN Nederland - Approximation of laws - Preliminaryruling - Interpretation of First Council Directive to approximate the laws of the MemberStates relating to trade marks (89/104/EEC) - Absolute grounds of nullity - Distinctivecharacter of a make consisting of the compound word (Postkantoor), made up of twosubstantives not eligible for protection as such and which, under the applicablelegislation, is also protected in the language versions resulting from a transla-tion into the other recognised national or regional languages.

- Judgment C-265/00 Campina Melkunie - Approximation of laws -Preliminary ruling to interpret First Council Directive 89/104/EEC to


4

approximate the laws of the Member States relating to trade marks - New word consisting of two componentparts lacking any distinctive character for the goods in question (‘Biomild’) - New word indicating a certaincreativity - Existence of synonyms for each of the component parts of the new composite word making it pos-sible for competitors to describe their products without using the terms making up the new word claimed forthe trade mark.

- Judgment C-218/01 Henkel - Approximation of laws - Preliminary ruling to interpret First Council Directiveto approximate the laws of the Member States relating to trade marks - Three-dimensional trade mark -Grounds for refusal - Equivalence of the packaging to the shape or the external quality of the goods (liquid)itself - Requirements regarding proof of distinctive character.

- Judgment C-230/02 Grossmann Air Service - Company law - Preliminary ruling to interpret CouncilDirective 89/665/EEC on the coordination of the laws, regulations and administrative provisions relating tothe application of review procedures to the award of public supply and public works contracts, in conjunctionwith Article 2(1)(b) thereof - Persons to whom review procedures are available - Persons having or havinghad an interest in the award of a public contract - Person unable to perform the totality of a contract - Personwho has not had recourse to a remedy available at an earlier stage of the procedure.

- Judgment C-236/02 Slob - Agriculture - Preliminary ruling to interpret Commission Regulation (EEC) 536/93laying down detailed rules on the application of the additional levy on milk and milk products - Scope of theobligation of producers with reference quantities for direct sales to maintain stock accounts.

COURT OF FIRST INSTANCE

Tuesday, February 10- Judgment Joined cases T-215/01, T-220/01, T-221/01 Calberson GE v Commission - External relations -

Action for compensation for the loss allegedly suffered by the applicant following delays in unloading andloading at the store of the intervention agency in the course of implementation of the contract for the supplyof transport for lot No 4 of skimmed milk powder to Russia, opened by Commission Regulation (EC)1815/1999.

- Hearing T-166/98 Cantina Sociale di Dolianova and others v Commission - Agriculture - First, annulment ofCommission decision VI B-I-3 M 4/97PVP of 31 July 1998, rejecting the claim by the applicants for paymentof aid for distillation in the 1982/83 marketing year and, secondly, the Commission to be ordered to pay a cer-tain amount to the applicant by way of compensation for damage allegedly suffered as a result of thecontested decision.

- Judgment Joined cases T-64/01, T-65/01 Afrikanische Frucht-Compagnie v Council and Commission -Agriculture - Action for damages, seeking compensation for the loss allegedly suffered by the applicant in thecontext of the arrangements for importing bananas into the Community resulting from CommissionRegulations (EC) Nos 1637/98 and 2362/98 regarding the allocation of import quantities for 1999.

Wednesday, February 11

- Judgment T-259/01 Nutrinveste v Commission - Arbitration clause - Action based on a clause conferringjurisdiction - Commission ordered to reimburse to the applicant the amount of the deductions made when acontract for the supply of sunflower oil in Angola was awarded under Commission Regulation (EC) No2608/97 of 22 December 1997 on the supply of vegetable oil as food aid.

Thursday, February 12

- Judgment T-282/01 Aslantrans v Commission - Free movement of goods - Annulment of the Commission’sdecision REM 19/00 of 18 July 2001 informing the German authorities that there were no grounds for remit-

ting the import duties on a consignment of cigarettes stolen in the course of transport.- Hearing T-19/01 Chiquita Brands International and others v Commission - Agriculture -

Action for damages to compensate for loss allegedly incurred by the applicant followingthe Commission’s introduction of the tariff quota management system for imports of

bananas from Latin America and procedures for issuing import licences, as establi-shed by Commission Regulation (EC) 2362/98 laying down detailed rules for

the implementation of Council Regulation (EEC) 404/93 regarding importsof bananas into the Community, held to be incompatible with WTO rules.

(153/14.7)(AF)


5

Main events and activities during the week beginning February 9.

* Weekly meeting, Tuesday, February 10, in Strasbourg. On the agenda:- Communication on the financial perspective for the EU post-2006;- Progress report concerning the implementation of the White Paper on Commission reform;- Amendment of Regulations relating to inquiries carried out by the European Anti-Fraud Office;- Financial Framework for accession negotiations with Bulgaria and Romania;- Communication on EU/Russia relations.

* Trips and visits- Monday February 9: Mr Prodi, Mr Kinnock, Mr Monti and Mr Bolkestein receive the former Prime Minister

of Estonia and Commissioner-designate, Siim KallasMr Prodi and Mrs Schreyer receive the Lithuanian Minister of Finance and Commissioner-designate, DaliaGrybauskaite; Mr Barnier at the signing of the INTERREG programme between Greece and Turkey, in thepresence of the Greek Minister of the Economy and Finances, Nikolaos Christodoulakis, and of Turkey’sHead of Mission to the EU; Participation and speech by Mr Fischler on enlargement and globalisation at theWintertagung Agricultural Conference (+ 12h30: Press Conference, Vienna)

- Tuesday 10: Mr Prodi, Mr Patten and Mr Lamy receive the President of Colombia, Alvaro Uribe Velez (+meeting with Mr Fischler in Strasbourg); Mr Monti receives the Spanish Minister of Foreign Affairs, AnaPalacio; Mr Lamy meets Alfredo Atanasov, Acting President of the Parliamentary Commission attached toMercosur (Strasbourg)

- Wednesday 11: Mr Prodi and Mr Nielson receive the President of the Democratic Republic of Congo,Joseph Kabila; Mr Prodi receives Commissioner designate for Latvia, Sandra Kalniete; Mr Busquin visitsthe BASF laboratories (Strasbourg); Mrs Schreyer attends the open session of the Bundestag’s Committeeon Europe (Europaausschuss) on the financial perspective (Berlin)

- Thursday 12: Mr Prodi and Mr Verheugen receive the President of Bulgaria, Georgi Parvanov; Mr Prodireceives the Prime Ministers of St Vincent and the Grenadines, Ralph Gonsalves, of Saint Lucia, KennyAnthony, and of the Commonwealth of Dominique, Roosevelt Skerritt; Mr Monti, Mr Bolkestein, MrSolbes and Mrs Schreyer receive the Hungarian Minister of Finance, Tibor Draskovics; Mrs Schreyerreceives Bulgarian Ministers of Finance, Milen Veltchev, and the Minister for European Affaires, MeglenaKuneva; Mr Lamy receives the Ukrainian Minister of the Economy and of European Integration, MrMykola Derbach; Participation and speech by Mr Liikanen at the ‘eDemocracy’ seminar (BorschetteCentre); Participation of Mr Busquin at the launch of a new network of excellence on allergies; Speech byMr Barnier on the policy of cohesion at the plenary session of the Committee of the Regions

- Friday 13: Mr Nielson receives the President of the Transitional Government of Liberia, Gyude Bryant; MrNielson and Mr Lamy receive Chad’s Minister of Foreign Affairs, Nagoum Yamassoum; Mr Fischler, MrNielson and Mr Lamy receive the Prime Ministers of St Vincent and the Grenadines, Mr Ralph Gonsalves,of Sainte Lucia, Kenny Anthony, and of the Commonwealth of Dominique, Roosevelt Skerritt; Mr Lamyreceives the Egyptian Minister of Commerce, Youssef Boutros Ghali; Mr Busquin in Bremen (13-14).Meeting with Senator Willi Lemke, Minister for Science and Education; visit to the Space Research Instituteand to the Visionarum Museum on Science and Society.Speech by Mr Patten: “Europe and America - has the transatlantic relationship run out of road?” (OxfordUniversity); Participation and speech by Mrs Schreyer at the Conference on Financial Prospects organisedby the German Ministry of Finance (Berlin); Mr Barnier in Brittany. Visits to Structural Fund projects; parti-cipation in the conference and debate on “Brittany in a Europe of 25: how to integrate it in the contextof new European policies?” (Ploufragan)

- Saturday 14: Participation of Mr Lamy in the joint EU-ACP Parliamentary Assembly (14-15,Adis Ababa)

(European Report - 150/14.6)(PHD)

EUROPEAN COMMISSION


6

EUROPEAN PARLIAMENTMain events in the week beginning February 9

* Strasbourg plenary session from February 9 to 12

KEY(*) Consultation in single reading(**I) Co-operation procedure - first reading(**II) Co-operation procedure - second reading(***) Assent(***I) Co-decision procedure - first reading(***II) Co-decision procedure - second reading(***III) Co-decision procedure - third reading

Monday February 9

- * Report by Olle Schmidt (ELDR, S) on postal services: VAT (NB - request for referral back to com-mittee)

- Report by Giorgos Katiforis (PES, GR) on rating agencies - Report by Alejandro Cercas Alonso (PES, E) on organisation of working time- Report by Colette Flesch (ELDR, L) on ACP-EU Joint Parliamentary Assembly in 2003 - Report by Hans Modrow (EUL/NGL, D) on state-owned enterprises, public services and economy of

developing countries

Tuesday February 10

- Commission statement on bird flu in Asia- ***I Report by John Bowis (EPP-ED, UK) on European Centre for Disease Prevention and Control- Report by Georges Garot (PES, F) on agricultural incomes in the EU- Report by Friedrich-Wilhelm Graefe Zu Baringdorf (Greens/EFA, D) on agricultural research* Report by Dominique Souchet (IND, F) on recovery of the northern hake stock- Commission statement on problems relating to salmon- Commission statement on crisis in the steel industry (with resolution)- Oral question by the EPP-ED group to the Commission on population trends in the European Union - Interim points system applicable to lorries in transit through Austria: Agreement EC/Croatia,

Agreement EC/Slovenia, Administrative arrangement EC/Switzerland, Agreement EC/Former YugoslavRepublic of Macedonia

- ***I Report by Giuseppe Gargani (EPP-ED, I) on vehicles hired without drivers: use for thecarriage of goods by road

***I Report by Giuseppe Gargani (EPP-ED, I) on Convention on International CivilAviation

- *** Report by Luis Berenguer Fuster (PES, E) on EEA agreement and related agree-ments: participation of the accession countries in 2004

- * Report by Giuseppe Gargani (EPP-ED, I) on the Committee on monetary,financial and balance of payments statistics

* Report by Giuseppe Gargani (EPP-ED, I) on COM in pigmeat- ***II Report by Astrid Lulling (EPP-ED, L) on quarterly financial

accounts - general government- Report by François Zimeray (PES, F) for the defence of Mr

Pannella’s parliamentary immunity- * Report by Bartho Pronk (EPP-ED, NL) on social protection

committee


7

- * Report by Caroline Jackson (EPP-ED, UK) on pollution of the Mediterranean- * Report by Struan Stevenson (EPP-ED, UK) on north-east Atlantic fisheries- * Report by Heinz Kindermann (PES, D) on incidental catches of cetaceans- * Report by Elspeth Attwooll (ELDR, UK) on protection of deep-water coral reefs off Scotland- * Report by José María Gil-Robles Gil-Delgado (EPP-ED, E) on Court of Justice: transfer of direct

actions to the Court of First Instance- * Report by Willi Rothley (PES, D) on Court of Justice: review of decisions delivered by the Court of

First Instance- * Report by Joachim Wuermeling (EPP-ED,D) on mobile and aircraft equipment- * Report by Joseph Daul (EPP-ED, F) on flax and hemp sector: common organisation of the market

(COM)- Report by Margie Sudre (EPP-ED, F) on remote island communities and fisheries- Other votes, including - ***I Report by Giuseppe Gargani (EPP-ED, I) on approval of motor vehicles, trailers and systems- Report by Marialiese Flemming (EPP-ED, A) on integrated pollution prevention and control -

Council Directive 96/61/EC- Report by Carlos Lage (PES, P) on scientific and technical advice for Community fisheries- Motion for a Resolution on preparations for the 60th session of the UN Human Rights Commission - Formal sitting: address by Alvaro Uribe Velez, President of Colombia- Commission statement on the Financial Perspective: “Helping Europe prosper: policies and budgeta-

ry measures for an enlarged Union 2007-2013” (with the Council)

Wednesday February 11

- Annual debate on progress in implementing the Area of Freedom, Security and Justice (2003)- Oral questions by PES, Greens/EFA, ELDR and EUL/NGL to the Council and Commission on nuclear

disarmament- Council statement on the EU’s position on the hearing at the International Court of Justice on the wall being

built by the Israeli authorities in the Occupied Territories- Commission statement on corporate governance and supervision of financial services (Parmalat case)- Report by Giuseppe Gargani (EPP-ED, I) on approximating civil procedural law in the Union- ***I Report by Emmanouil Mastorakis (PES, GR) on European Maritime Safety Agency- ***I Report by Ulrich Stockmann (PES, D) on intermodal loading units- *** Recommendation by José María Gil-Robles Gil-Delgado (EPP-ED, E) on International Fund for

Compensation for Oil Pollution Damage- ***I Report by Stefano Zappala (EPP-ED, I) on recognition of professional qualifications

Thursday February 12

- Report by Andre Brie (EUL/NGL, D) on Afghanistan- Commission statement on EU measures on human rights and democratisation with Mediterranean partners- Oral question by EUL/NGL to the Commission on the Commission’s strategy on services of general interest- Oral question by EPP-ED to the Commission on implementation of Directive 73/239/EEC by the United

Kingdom between 1978 and 2001 (Lloyd’s)- ***I Report by Gianni Vattimo (PES, I) on MEDIA-training (2001-2005)- ***I Report by Valter Veltroni (PES, I) on MEDIA plus - development - distribution - pro-

motion- Debates on breaches of human rights, democracy and the rule of law, followed

by votes: Elections in Iran; Cambodia: political murders; Greek sailorsdetained in Karachi


8

* Committee Meetings in Strasbourg (reports referred to below are due to be put to the vote)- Foreign Affairs, Human Rights, Common Security and Defence Policy: Tuesday February 10. Discussion

with Alvaro Uribe Velez, President of Colombia- Budgets: Tuesday 10 February. Discussion with Commissioner Michaele Schreyer on a global political fra-

mework for the next Financial Perspective after 2006; Report by Neena Gill (PES, UK) on 2004 Budget -EP’s estimates (adoption to be confirmed); Report by Jan Mulder (ELDR, NL) on Amending Budget 1/2004(EU-25) (adoption to be confirmed)

- Budgetary Control: Monday February 9. Presentation of a special report of the European Court of Auditorson the evaluation of agricultural income, in the presence of Hedda von Wedel, Member of the EuropeanCourt of Auditors; Presentation by Jules Muis, Internal Auditor of the Commission, on the IAS annual reporton financial year 2003

- Citizens’ Freedoms and Rights, Justice and Home Affairs February 9. Report by Sérgio Sousa Pinto (PES,P) on the agreement between the EC and the Macao SAR: readmission of persons residing without authorisa-tion

- Development and Cooperation: February 9. Report by Karin Junker (PES, D) on population and develop-ment: 10 years after the international conference on population and development (Cairo 1994)

- Economic and Monetary Affairs February 9.- Environment, Public Health and Consumer Policy February 9.- Agriculture and Rural Development February 9

* The President’s diary

Tuesday February 10 - Strasbourg- Meeting with Alvaro Uribe Velez, President of Colombia, Protocol Room 3.30pm- Meeting with Prof. Andrzey Zoll, Polish National Ombudsman, President’s Office Wednesday February 11 - Strasbourg- Formal joint signature with Michael McDowell, Irish Minister for Justice, Equality and Law Reform, of a set

of legislative texts adopted under co-decision. This is the first time this procedure is being used. Until nowParliament and Council have formally adopted legislation via an exchange of letters. Joint signing ceremoniesof this kind are to become a regular feature of plenary sessions in Strasbourg.

(European Report - 152/14.8)(PhD)


ENLARGEMENT/COMMISSION:CZECH REPUBLIC AND CYPRUS COMPLETE LIST OF CANDIDATESThe Czech Republic and Cyprus have now decided their candi-dates to become European Commissioner, meaning all tenacceding countries have now done so. The Czech Governmenthas put forward former Environment Minister and SocialDemocrat MP Milos Kuzvart as its nomination. Proposed inmid-January by the Social Democrat Party of Prime MinisterVladimir Spidla, the candidacy has been approved despiteapparent doubts among Mr Spidla’s two coalition partnersabout Mr Kuzvart’s international profile and experience.Finance Minister Markos Kyprianou is the Cypriot nomination.(February 6, 2004 - European Report - 103/14.6-21.11-25)(JB)

european institutions

May and November. Mr Prodi plans to see all thecandidates concerned in the next couple of weekswith a view to hammering this out. Indeed, he alrea-dy held talks with Polish nominee Danuta Hubner onFebruary 4 in Brussels. Further meetings were due totake place on February 6 with the respectiveSlovakian and Slovenian candidates, Jan Figel andJanez Potocnik, with further sets of talks lined upwith the Estonian and Lithuanian candidates onFebruary 9 and the Latvian contender on February11.

Rumours are still circulating that Poland islobbying to work on the Trade portfolio with PascalLamy, while the Czech Republic’s formerEnvironment Minister would presumably be anobvious choice to team up with Margot Wallström onenvironment. Slovakia has indicated that it would beinterested in regional policy, research/science orexternal relations portfolios. Lithuania’s candidatehas said that she would like to be involved with eco-nomic/monetary policy or budgetary issues includingfinancial control. Slovenia’s Janez Potocnik hasreportedly expressed an interest in an economic dos-sier, without ruling out other portfolios. Estonia’sSiim Kallas is thought to favour the portfolios ofSolbes (Economic and Monetary Affairs), Liikanen(Enterprise and Information Society), or Monti(Competition). Sandra Kalniete of Latvia has indica-ted an interest in the “Wider Europe” portfolio whichis under the responsibility of EnlargementCommissioner Verheugen.

The complete list of Commissioner candidatesis as follows. With three women featuring, Mr Prodihas reached his target of having at least this numberamong the ten:

Cyprus - Markos Kyprianou (Finance Minister) Czech Republic - Milos Kuzvart (formerEnvironment Minister)Estonia - Siim Kallas (former Prime Minister)Hungary - Peter Balazs (Permanent Representativeto the EU)Latvia - Sandra Kalniete (Foreign Minister)Lithuania - Dalia Grybauskaite (Finance Minister)Malta - Joe Borg (Foreign Minister)Poland - Danuta Hubner (European Affairs Minister)Slovakia - Jan Figel (former chief negotiator)Slovenia - Janez Potocnik (European AffairsMinister and former chief negotiator).

Attention now turns to which Commissionersshould be attached to which portfolios in the last sixmonths of the current Commission’s term between

I.1

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JAN KARLSSON APPOINTED CHAIR OF COMMISSION’S FINANCIAL IRREGULARITIES PANEL

European Commission Vice-President NeilKinnock appointed Jan O. Karlsson, former Presidentof the European Court of Auditors, on February 4 asChairman of the new Financial Irregularities Panel(FIP), with effect as of February 1, 2004. The bodywas set up within the Commission on July 9, 2003 toprovide further expertise on the protection of financial

interests and the fight against fraud. The Panel willnot carry out investigations, its principal task being toprovide expert advice on suspected irregularities.Besides a Chairman, the Panel will have three mem-bers, all senior officials with training and/orexperience in financial matters (see European Report2791 for further details on the FIP).(February 4, 2004 - European Report - 101/14.2)(AF)

european report2841 - February 7, 2004 I european institutions

I.2

ENLARGEMENT/PERSONNEL:RESULTS OF PRE-SELECTION TESTS FOR NEW MEMBERS NOT ENTIRELY SATISFACTORYThe European Personnel Selection Office (EPSO) unveiled onFebruary 6 the results of pre-selection tests for a first wave ofcompetitions to recruit citizens from the ten acceding coun-tries to the EU institutions to work as administrators,secretaries and linguists. EPSO said the results showed a“generally impressive standard”, broadly comparable with theresults of past EU competitions. But in some categories thereare actual or - depending on how many candidates do not passthe later stages of the current round of tests - potential short-falls in the number of suitable candidates that EPSO wanted tohire. Problem areas include auditors, secretaries in a number ofcountries, “smaller” languages such as the Baltic languages,and Maltese (where not a single interpreter has been found).EPSO is also looking at why attendance of the tests was relati-vely disappointing.(February 6, 2004 - European Report - 104/14-21.11-25)(JB)

Attendance levels for the AssistantAdministrators and Secretaries competitions weregenerally unexpectedly low, at less than 50% on ave-rage, and below the 70-80% usually seen in previouscompetitions for EU Member States. EPSO launcheda survey in January to pinpoint the reasons for absen-teeism. It said that early indications suggested thatmany of those who had applied simply had othercommitments at the time of the tests. In fact,February 6 was the closing date for replying to thesurvey, and EPSO officials said the response hadbeen encouraging with more than 1,000 replies.

Languages. EPSO is also conducting ongoing enlarge-ment competitions for Heads of Linguistic Divisions,Lawyer-Linguists and Assistant Interpreters. Some550 candidates for the Lawyer-Linguists’ competi-tion took part in the latest tests for candidates fromthe accession countries on January 23 in Brussels -with an attendance level of around 86%. Successfulcandidates will be invited to oral tests, which willprobably take place in March.

As for Assistant Interpreters, orals for the lar-gest competition - Polish - are not expected to becompleted until October. EPSO officials said thatthere had been better results for “bigger” rather than“smaller” languages such as the Baltic languages.The number of translators for Estonian, Latvian,Lithuania and Maltese is already below target. Andthe tests for Maltese interpreters had already beenconcluded, but did not produce a single successfulcandidate. Officials said the Maltese tests would notbe repeated straight away, adding that temporary ortransitional arrangements could be put in place. (Inany event, Malta has two official administrative lan-guages - Maltese and English.)

The pre-selection tests also revealed muchabout the acceding countries’ preferences concerningforeign languages. Given the choice betweenEnglish, French and German, EPSO officials saidaround 75% of candidates had opted to sit the pre-selection tests in English. The second favourite wasGerman, followed by French.

New EU administrators. Tests for AssistantAdministrators, Assistant Translators and Secretarieswere organised in 16 test centres in the accessioncountries and one centre in Brussels in November andDecember 2003. Some 17,000 applicants took part inthe tests. The multiple choice pre-selection papershave now been marked by machine-reader and nearly6,000 candidates have been provisionally declaredsuccessful. These will now be invited to submit a fullapplication, supported by documentary evidence oftheir qualifications. Provided they meet the eligibilityrequirements, the papers that they have already com-pleted for the second stage of the competition, thewritten test, will be marked. Candidates passing thatstage will be invited to oral tests in Brussels.

EPSO reported that, on the whole, candidatesperformed well in the pre-selection tests and theresults for the European Public Administration andLaw options in the tests for Assistant Administratorswere “very satisfactory”. However, in certain coun-tries, such as the Baltic states and Malta, levels ofapplications and attendance were lower. Similarly,some fields such as audit and, to a lesser extent, eco-nomics also attracted fewer participants. For auditors,the number that will proceed to the written test (129) isalready below the overall target (200) - a result whichEPSO officials described as “not really satisfactory”.Other areas where there are already shortfalls at thisstage include secretaries from Cyprus, Malta and theBaltics, Slovakia and Slovenia. EPSO says that suchshortfalls will be taken into account in the planning forfuture competitions. (A second wave will probablytake place from 2005.)

european report2841 - February 7, 2004 I european institutions

I.3

LAST-MINUTE DISCUSSIONS ON POST-2006 FINANCIAL PERSPECTIVE PLANfor 0.03% of EU GNI, should be integrated into theGeneral Budget, the commitment appropriation cei-ling for all the other principal EU policies should as amatter of caution not exceed 1.21% of GNI in 2013,i.e. Euro 151.8 billion. Other elements come intoplay, the impact of which on future payment needs issometimes difficult to gauge, notably the evolution ofrelative wealth in the Länder of the former GDR witha development delay, currently the second beneficia-ry of the Structural Funds.

However, spending levels are an importantfactor in addressing another chapter of the draftCommunication, which also deals with ownresources: the generalised corrector mechanism desi-gned to place a ceiling on net contributions in theform of a percentage of GNI. It is important to notrisk setting a percentage that would not leave suffi-cient resources for commitments. Another openquestion in this context is whether the current Britishbudget rebate should be melded into this new mecha-nism. The Commission should finally decide whetherit confirms the option of creating a new own resour-ce. Whatever the case, the details of these variouspoints will be specified in a report on the ownresources system expected in July 2004.(February 6, 2004 - European Report - 105/14.2)(YL)

The European Commission will decide onFebruary 10 on the level of commitment appropria-tions which it proposes to put down in the finalversion of its Communication on the financial perspec-tive for 2007-2013, which is the object of a virtualconsensus within the EU executive team (seeEuropean Report 2838 and 2839 for further details).President Romano Prodi and Budget CommissionerMichaele Schreyer will subsequently present the docu-ment now entitled “Help for European prosperity,policies and budgetary resources for an enlargedUnion 2007-2013”, to the European Parliament’s ple-nary session. Romano Prodi will himself pursue thisexercise before the Committee of Member States’Permanent Representatives to the EU (COREPER) onFebruary 11.

Several parameters should be considered so thatthe level of payment appropriations stemming fromcommitments never exceeds the own resources ceilingof 1.24% of gross national income (GNI). This capwas fixed by the Own Resources Decision adopted atthe Berlin European Council in March 1999 at thesame time as Agenda 2000, amendable unanimouslyby Member States with national ratification. Whilst theEuropean Development Fund (EDF), which accounts


economic and monetary affairs

RETAIL TRADE:VOLUME OF RETAIL TRADE DOWN 1.6% IN EURO-ZONE IN NOVEMBER 2003Between November 2002 and November 2003, the volume ofretail trade decreased by 1.6% in the Euro-zone and by 0.1% inthe EU15, according to estimates released on February 5 byEurostat, the EU’s Statistical Office. Compared to October2003, the sales index fell by 1.9% in the Euro-zone and by 1.0%in the EU15.(February 5, 2004 - European Report - 204/5)(AME)

which data are available, the only increases wereobserved in Finland (+4.4%), Sweden (+4.0%), theUnited Kingdom (+3.9%) and Spain (+2.9%). Salesremained stable in France, while the strongestdeclines were observed in Ireland and theNetherlands (both -5.5%), Austria (-4.5%) andGermany (-3.5%).

Regarding monthly variations, Eurostat notesthat compared to October 2003, the “food, drinks andtobacco” index declined by 1.1% in the Euro-zoneand by 0.9% in the EU15, and the “non-food” aggre-gate fell by 1.7% and 0.6% respectively. Among thenon-food sectors, “textiles, clothing and footwear”fell by 5.9% in the Euro-zone and by 2.8% in theEU15, while the index for “household goods”contracted by 1.5% and 0.6% respectively.Compared to October 2003, and among the MemberStates for which data are available, the volume ofretail sales only increased in the United Kingdom(+0.3%), while the strongest declines were observedin Denmark (-7.5%), Austria (-5.5%) and Germany (-3.2%).

Eurostat notes that the textiles sector recordedthe sharpest fall. A sector-by-sector analysis revealsthat retail sales of “food, drinks and tobacco” declinedby 1.1% in the Euro-zone and 0.2% in the EU15. Thesale of food in specialised stores fell by 4.0% in theEuro-zone and by 4.9% in the EU15, while figures fornon-specialised stores contracted by 1.0% in the Euro-zone but gained 0.3% in the EU-15. The non-foodsector fell by 2.1% in the Euro-zone and by 0.1% inthe EU15. Among the non-food sectors, “textiles, clo-thing and footwear” fell by 5.8% in the Euro-zone andby 1.5% in the EU15, while retail sales of “householdgoods” dropped by 1.3% in the Euro-zone but increa-sed by 0.1% in the EU15. Experts note that comparedto November 2002, and among the Member States for

II.1



EUROPEAN INVESTMENT BANK:EIB LENDS EURO 42.3 BILLION IN 2003The European Investment Bank (EIB) lent a total of Euro 42.3billion in 2003, according to data published on February 5 by itsPresident Philippe Maystadt. This is a rise of about 7% on theEuro 39.6 billion loaned the year before. Loans within theMember States rose to Euro 34.2 billion. Non-EU countriesbenefited from loans to the tune of Euro 8.1 billion. In the futureMember States, lending went up to Euro 4.6 billion, comparedwith 3.6 billion the previous year. To finance its lending activi-ties, the EIB has raised Euro 42 billion on the internationalcapital markets. The balance sheet of the Luxembourg-basedlong-term lending institution had risen to Euro 235 billion at theend of 2003. Outstanding lending amounted to Euro 207 billionand outstanding debt Euro 195 billion.(February 6, 2004 - European Report - 203/3)(JCG)

As in previous years, promoting balanced regio-nal development featured as the top financing priorityin 2003. 70% of the EIB’s total lending goes intoregional development projects, in both the currentMember States and the future Member States. The

Bank has consolidated its position as the foremostsource of financing in the ten future Member States.Since 1990, total loans to future European partnershas risen to some Euro 25 billion.

Candidate countries. Transport and telecommunicationsinfrastructure again took pride of place (accountingfor 37% of aggregate lending in those countries).Increasing attention was focused on protecting theenvironment including water resource management(16%) in order to meet EU environmental standards.

Loans for environmental and transportschemes were in many cases supplemented by grantsfrom the EU’s ISPA programme. As from accessionin May 2004, most countries previously benefitingfrom the Bank’s pre-accession support will be eli-gible for financing under its priority regionaldevelopment remit.

european report2841 - February 7, 2004 II economic and monetary affairs

II.2

Knowledge-based society. JHaving originally pledgedsupport for the EU’s Lisbon Strategy of strengtheningEurope’s economic competitiveness for the period2000-2003, the EIB in June 2003 extended its commit-ment as far as 2010 (Innovation 2010 Initiative).Loans totalling Euro 6.2 billion were extended in 2003under the Innovation 2010 Initiative (2002: 3.6 billion)

In support of the Action for Growth, the EIBplans to lend up to Euro 40 billion (including structu-red finance) to back R&D and innovation over theperiod to 2010. Lending of up to Euro 20 billion isenvisaged in the period to 2006 alone under ‘Actionfor Growth’, particularly for the Quick Start pro-gramme and for projects in the future MemberStates.

EIS gr.n°203EN

THE THE EIB’SEIB’S LENDING IN 2003: EUR 42.3 bnLENDING IN 2003: EUR 42.3 bn

MED

4.9%

Western Balkans

0.9%

Future Member

States

11.2%

ACP and SA

2.0%

ALA

0.9%

European Union

80.1%

FINANCE COUNCIL:STABILITY PACT AND TAXATION TOP FEBRUARY 9/10 AGENDAEU Finance Ministers will meet on February 10 to prepare theSpring European Council on March 25 and 26. Ministers willalso consider updated Stability and Convergence Programmesfor seven Member States. The Council will assess negotiationswith third counties on the introduction of measures on thetaxation of savings revenue equivalent to those proposed bythe EU. Ministers will also consider the draft Directive harmo-nising and rationalising reduced rates of VAT. France notablyinsists on a reduced rate for the catering sector.(February 6, 2004 - European Report - 202/7.3)(JCG)

The formal Finance Council session will bepreceded on the evening of February 9 by an informalmeeting of Euro-zone Finance Ministers. TheEurogroup will assess the economic situation and thelatest budgetary developments in the Member States.Finance Ministers will also consider the participationof the currencies of the future Member States in theExchange Rate Mechanism (ERM). The EuropeanCentral Bank published its position on December 18(see European Report 2832).

Spring European Council. The Council will examine thevarious preparatory reports to be submitted to theSpring European Council on economic reforms,namely the Commission’s January 21report entitled“Achieving Lisbon - reform for an enlarged Union”(see European Report 2837 for further details) andthe Communication assessing implementation by theMember States of the broad economic policy guide-lines (BEPGs - see European Report 2836 and 2837).The Irish Presidency will also present a draft summa-ry report to serve as a basis for Ministers’ discussionson February 10 and as preparation for their contribu-tion to the European Council.

Stability Pact. The Council will adopt its Opinions onthe Stability Programmes of France, Italy, Ireland, theNetherlands, Greece and Luxembourg (see EuropeanReport 2839 for further details).

european report2841 - February 7, 2004 II economic and monetary affairs

II.3

Taxation. The Irish Presidency will be informing theCouncil of the results of bilateral contacts with variousMember States in an effort to end the deadlock on theDirective harmonising VAT rates. Germany notablyrejects scope for applying a reduced rate of VAT tocatering services whereas France has identified this asa priority.

Taxation Commissioner Frits Bolkestein willreview the progress of negotiations with four thirdcountries (Monaco, Liechtenstein, San Marino andMonaco) to introduce mechanisms for the taxation ofsavings revenue equivalent to those approved by the

EU (see European Report 2826 for further details).Mr Bolkestein will also fill in the Council on theapplication of the European Directive in associatedcountries and territories of the EU Member States. Aunanimous decision on all these measures should betaken in June by the 25 Member States.

Other items. Over lunch, Ministers will discuss thereplacement of a member of the ECB Board, EugenioDomingo Solans. Ireland and Belgium should presentcandidates. Belgium is also keen to see the Councilconsider the creation of a study centre on the econo-my.

in briefEURO-ZONE INFLATION ESTIMATED AT 2% IN JANUARY. A 2% Euro-zone inflation rate is expected forJanuary, according to a flash estimate issued by the Statistical Office of the European Communities (Eurostat) on February4. The rate is unchanged from the December index and is in line with the European Central Bank’s (ECB) inflation target.Confirmed statistics for January will be issued on February 27.(February 4, 2004 - European Report - 201/7.1)(JCG)


business brief

The European Commission’s ruling on aid received by the airli-ne Ryanair has drawn a flurry of comments and declarations.The decision is important as it establishes a legal precedencefor aid to airlines from public regional airports. The communi-cation battle began immediately the verdict was announcedbetween those like the European Commission claiming theruling will “contribute to the development of low-cost airlines”and those like Ryanair (which has decided to appeal againstthe decision before the Court of Justice), speaking of “a disas-ter for consumers, for low-cost airlines throughout Europe andfor public regional airports”. Overall, the Commission’s deci-sion has generally been well received although the serenity ofsome stems from their obstinately regarding Ryanair as a spe-cific case that will not herald more general rules. The Assemblyof European Regions (AER) has meanwhile announced thatregional Transport Ministers will meet on February 12 inBrussels to assess the impact of the Commission decision andconsider initial proposals in this area. Ireland’s TransportMinister Seamus Brennan has confirmed that he proposes toadd the issue to the agenda for the Council of EU TransportMinisters on March 8 “to permit Ministers to express theirviews before the Commission decides on any general rules inthis area”.(February 5, 2004 - European Report - 301/24.2-4.2)(IS/AFP)

CIVIL AVIATION:BROAD BACKING FOR DECISION ON RYANAIR

Equal treatment. The Commission’s decision autho-rises some public aid intended to support thedevelopment of new routes by Ryanair fromCharleroi. This aid is accepted provided it meets cer-tain strict criteria regarding intensity (a degressivemaximum of 50% of net start-up costs) and duration(five years maximum). The Commission also empha-sises that aid “should act as an incentive, should beproportional with the objective, be consistent withthe principle of transparency, equal treatment andnon-discrimination between operators, be accompa-nied by a sanctions mechanism in the case of thecarrier failing to honour commitments, and not besimultaneous with social aid or public service com-pensation”. All airlines operating out of Charleroi infuture should benefit from comparable aid. TheEuropean Commission believes its decision willenable low-cost airlines to develop services throu-ghout the EU since it guarantees equal treatment forall airlines and prevents same from securing advan-tages liable to distort competition.

This analysis is broadly shared by traditionalairlines which, through the Association of EuropeanAirlines (AEA), have heralded “an important steptowards fair competition between EuropeanAirlines”, and by other low cost airlines competingwith Ryanair.

For EasyJet, Ryanair’s main competitor, theCommission’s decision “clarifies the relationship bet-ween airlines and publicly-owned airports” and is“supportive of the low-cost airline industry”. Theruling was described as making “a very clear com-mitment to the development of the low-cost airlinesector and the Commission’s intention to “use thisruling as the basis for uniform guidelines (...) willhelp clarify arrangements between airlines and publi-cly owned airports”. Virgin Express, anotherlow-cost airline operating from Brussels National air-port has also rejected Ryanair’s reaction to the rulingas a “disaster for low-cost flights” emphasising that“there are airlines that play the game and others thatenjoy illegal advantages”. In general, experts agreethat the Commission is not questioning the develop-

In coming to its decision, the Commission hadto examine whether the Walloon Region and Charleroiairport had acted in line with the private investor prin-ciple when granting public benefits to Ryanair. As faras the Commission is concerned, the answer is clearlyno: “no private investor would have granted suchbenefits” given the negative 10 year growth forecasts.Ryanair is contesting this, quoting the spectaculargrowth of Charleroi airport and the benefits accruedsince Ryanair began operating there. A war of words isstarting between the supporters and detractors of thedecision as to whether the decision will encourage thegrowth of low cost companies and the benefits linkedto their setting up in the region. As is to be expected,the Commission line is reassuring. Loyola de Palaciosaid that the decision “will facilitate low-cost companygrowth” and “provide good prospects to regional air-ports by ensuring they are treated equally”. She saidthat with regard to Ryanair’s operations in Charleroi,the February 3 ruling might make a difference of Euro6 to 8 per ticket. “I think that will allow a companylike Ryanair to keep sufficient margins”, theCommissioner said.

III.1



european report2841 - February 7, 2004 III business brief

ment model for low-cost airlines, even those such asRyanair that depend most heavily on subsidies fromairports. Case in point: the stock market value of theIrish company climbed after the verdict was announ-ced, reflecting the general view that the ruling wasbalanced.

In France, officials from several regional air-ports that had been approached by Ryanair and thatwould not take on the airline due to its financialdemands say they are satisfied with the ruling whichthey describe as balanced. They emphasized the discri-minatory demands of the Irish company. Those whohave contracts with Ryanair say they are comfortablewith the Commission’s decision despite the fact that itcould lead to a renegotiation of contracts as a result ofcomplaints from competitors who feel infringed upon.Though the Commission made it clear that it wouldexamine the situation with regard to other regional air-ports, the latter see the ruling applying only toCharleroi and having only a minimal effect on otherairports.

A few isolated statements echo Ryanair’s angryreaction, such as that of MEP Jonathan Evans (EPP-ED, United Kingdom) who, like the Irish company,sees “a disaster for passengers”. He says theCommission is “forcing the low-fares airlines to payhigher costs. This cannot be in the interest of consu-mers. It is a green light for the expensive national flagcarriers to hike up their fares further still.”

The Assembly of European Regions (AER),which had warned the Commission of potential reper-cussions of its decision on the future of regionalairports in Europe, is also less enthusiastic though it is“pleased to note that the Commission has suddenlytaken into consideration the importance of regionalairports for the economic development of the regions”.This welcome contrasts with the rest of its comments.

The association deplores the fact that the decision isbased on the private investor criterion and “seems toignore the general interest aspect of regional airtransport”. Onno Hoes, Chairman of AER’s RegionalAviation group said that “the decision should havebeen based on an in depth analysis of the complexityof the issue and the diverse regional situations inEurope”. He questions the Commission’s intention toset common rules for a sector that is the very imageof regional diversity in Europe. “Imposing a maxi-mum duration of 3-5 years for regional aid could inmany cases endanger the regions’ long-term invest-ments and their sustainable economic development.”

The Commission’s decision has also been des-cribed as “a disaster for free competition in Europe”by the Belgian Federation of bus and coach operators(FBAA). The organisation’s President, Jean Wyns,believes it fundamentally distorts competition bet-ween the various transport modes.

Kerosene tax plea. The Green/EFA Group in theEuropean Parliament lost little time in echoing itslongstanding demand for a tax on aviation fuel.“Ecologists defend fair competition between alltransport modes”, said Belgian MEP PierreJonckheer, demanding a European tax on keroseneapplicable to all intra-Community flights. His Britishcolleague Caroline Lucas sounded a similar note inemphasising the need to direct transport demand:“Air travel is the fastest growing source of greenhou-se gas emissions and the current rates of growth arefuelled to a large extent by artificially cheap flights”,she declared, following the announcement of theCommission’s ruling. In addition to a tax on kerose-ne, Mrs Lucas also called for environmental chargingof airport use according to noise and gaseous emis-sion values (the European Commission is due tobring forward legislation on airport charges in thecourse of 2004).

III.2

in briefRBS-CRG ACQUISITIONS OF BRITISH AIRCRAFT COMPONENT MAKERS CLEARED. The EuropeanCommission said on February 5 it had granted clearance under the Merger Regulation to plans by the Royal Bank ofScotland Group subsidiary Royal Bank Investments Ltd. (RBI) and Capital Riesgo Global SCR S.A. (CRG), controlled byBanco Santander Central Hispano S.A. to take joint control of two UK-based aerospace manufacturing companiesDoncasters Group Plc and Britax International Plc. Both companies are currently solely controlled by RBI. Doncastersmakes aerospace engine components and Britax makes aircraft interior systems, among other things. The two transactionswere examined under the simplified merger review procedure after a routine one-month scrutiny. (February 5, 2004 - European Report - 302/4.3-13.9)(AME)


III.3

COMMISSION CLEARS PROPOSED POLISH STEEL BUYThe European Commission announced on

February 6 that it had cleared under the MergerRegulation the proposed acquisition of state-ownedPolish steel company Polskie Huty Staly SA (PHS) byinternational steel firm LNM, a deal resulting fromefforts to restructure and privatise the Polish iron andsteel industry. Under the terms of the agreement bet-ween LNM and the Polish State, LNM will acquire62.2% of PHS’s shares outright. LNM/PHS will beEurope’s fifth biggest producer of semi-finished steelproducts.

Having assessed the acquisition’s impact in themarket for semi-finished and finished steel products,where PHS is also active, the Commission found thatthe deal does not pose any competition concerns as themarket is characterised by a number of stronger playersincluding Arcelor, Corus and ThyssenKrupp. The

Commission’s jurisdiction entitled it to examine thedeal’s impact only in the EEA (European EconomicArea*) territory, rather than in Poland or in any of theacceding countries lining up to join the EU in May.

LNM is based in the Dutch Antilles andbelongs to Richmond Investments Holdings Ltd,headquartered in the British Virgin Islands.Richmond Investments is owned by businessmanLakshmi Mittal and his family. LNM is a producer ofiron ore and a maker of both finished and semi-fini-shed steel products. It operates integrated steel plantsin Algeria, Kazakhstan, Romania and the CzechRepublic.

* The EEA is EU-15 + Norway, Iceland andLiechtenstein.(February 6, 2004 - European Report - 306/4.3-13.4-21.11-25)(JB)

III business brief

SCHNEIDER GETS GO-AHEAD TO TAKE OVER MGE UPS SYSTEMSOn February 6, the European Commission

announced it would back the planned acquisition ofMGE UPS Systems S.A. by French electrical equip-ment maker Schneider. Just before Christmas,Schneider Electric Industries S.A. had notified theCommission of its plan to buy MGE UPS Systems, acompany which produces systems to ensure power sup-ply continuity. These devices allow networks to keeprunning when the primary power source fails due, forexample, to power blackouts.

The Commission’s investigation focused on ver-tical integration since the two companies’ activities arelargely complementary. Special attention was paid towhether customers could be prevented access to a num-ber of components Schneider which are required forthe manufacturing of Uninterruptible Power System(UPS) devices. However, the Commission concluded

there were no competition concerns as Schneideralready supplies most of MGE’s needs in this field.In any case, MGE’s purchases represent only a smallproportion of Schneider’s sales and there are otherimportant companies that produce these componentsincluding Legrand, Hager, ABB, Siemens andGeneral Electric.

The Commission also analysed to what extentSchneider could use its influence in the wholesaledistribution network to encourage distributors to buyMGE’s low voltage UPS devices, as opposed to com-petitors’ products. It found an absence of likely harmsince MGE’s shares in all relevant markets are below40% and the vast majority of low voltage UPSdevices are, moreover, sold through other importantdistribution channels where Schneider does not havethe ability to compel wholesalers to buy its products.(February 6, 2004 - European Report - 304/4.3-9.3)(AF)

in briefTELENOR GETS GREEN LIGHT FOR ACQUISITION OF SONOFON. The European Commission announced onFebruary 6 that it has endorsed the acquisition of the Danish mobile telephony operator Sonofon by the Norwegian opera-tor Telenor. Sonofon is currently controlled jointly by Telenor and the American operator Bellsouth. (February 6, 2004 - European Report - 305/13.5-4.3)(AF)

PACKAGING: COMMISSION CLEARS ACQUISITION OF AUSTRIA’S BAUERNFEIND BY ANGLO AME-RICAN. The European Commission has granted clearance under the 1989 Merger Regulation to the acquisition ofAustrian corrugated paper maker Roman Bauernfeind Holding AG by Mondi Packaging Holding AG, controlled by indus-trial conglomerate Anglo American Plc. The transaction was waved through under the simplified merger review procedureafter being notified just before Christmas. (February 5, 2004 - European Report - 303/4.3-13.9)(AE)


internal market

IV.1

FREE MOVEMENT OF GOODS:FRANCE AND ITALY CONDEMNED FOR CURBS ON ENERGY FOODSThe European Court of Justice has ticked off France and Italyfor placing curbs on the marketing of energy products andfoods enriched with vitamins and minerals. The Court said inthree separate rulings on February 5 that the prior authorisa-tion procedure France and Italy use flouts the principle of freemovement of goods within the EU. Moreover, it cannot be justi-fied on public health grounds because the authorities did notproperly check whether these products, which are legally soldin other Member States, posed a health risk. The EuropeanCommission, which took two of the cases, has not surprisinglywelcomed the rulings.(February 5, 2004 - European Report - 402/5-15.3)(BB)

One French case (C-24/00) concerned a ban onfoodstuffs that have been enriched with vitamins,minerals, amino acids and other substances. TheCommission brought France to Court in 2000 afterreceiving complaints from traders in other MemberStates who encountered problems marketing their pro-ducts. The Court found that the prior authorisationprocedure took too long and did not give traders ampleopportunity to appeal against a negative decision. Itrejected the French argument that there was no nutri-

tional need to enrich confectionary and drinks withvitamins, pointing out that France did not even fullyassess the effects of these products. By contrast, asregards energy drinks like “Red Bull” that containhigh quantities of caffeine, the Court accepted thatthere was solid scientific evidence backing up Frenchconcerns about their dangers to human health.

The Italian case (C-270/02) was taken by theCommission following complaints made by Britishmanufacturers of energy bars and re-hydrating drinkstailored for sportsmen and women. Again, the Courtfound that the Italy failed to prove that the priorauthorisation procedure was justified on public healthgrounds. The other case (C-95/01) was referred to theECJ by the Paris regional court in 2001 after twopeople were prosecuted for selling juices to whichvitamins and minerals has been added. The Courtrestated the principles of the other French judgment(C-24/00) and left it up to the referring court to deci-de on the facts.



The Netherlands has just tabled an initiative in the EU Councilof Ministers to do something about the 1.2 million cars that arestolen each year in the European Union and which cost theeconomy some Euro 15 billion. The draft Decision would requi-re police, customs and car registration authorities to workmore closely with car manufacturers and insurers in a public-private sector alliance. The move needs unanimous backingfrom the Member States to be adopted.(February 4, 2004 - European Report - 404/1)(BB)

JUSTICE AND HOME AFFAIRS:CAR STOLEN EVERY 26 SECONDS IN THE EU

The Dutch note that the cost of car ownership issteadily rising because the losses sustained by insuran-ce companies must ultimately be met by the car owner.It says that about 30 to 40% of vehicles are stolen byorganised crime groups and exported to other stateswithin and outside the EU. The Member States wouldbe obliged to enhance co-operation between nationalpolice, customs and vehicle registration authorities,and to make them regularly share information with carinsurers and manufacturers. Insurance companies areresponsible for repatriating vehicles released by police

abroad and also have influence over what happens todamaged vehicles, it says, while car makers can pro-vide useful technical data on the identity of cars andcar parts.

The Member States would each designate acontact point for tackling car crime and they wouldmeet at least once a year. All stolen cars would haveto be immediately flagged up on the SchengenInformation System (SIS) and on Interpol’s stolen cardata base. Police agencies would keep EU policeagency Europol briefed on the criminal groups invol-ved in car crime. Police and customs traininginstitutes would broach the issue in their curricula.

Stricter registration vetting. Stolen blank car registrationcertificates would also have to be entered in the SIS -not all police agencies realise that SIS can be sear-ched for this purpose. National authorities registeringa vehicle should check the registers of the country

european report2841 - February 7, 2004 IV internal market

IV.2

where it was originally registered, as well as the stolencar register. Arrangements shall be made to link upregistration systems. Registration certificates must berecovered by the police if cars are written off after aserious accident or if there are suspicions that the car’sidentity markings have been tampered with. Co-opera-tion agreements would also be concluded wherepossible with non-EU countries to make the latter veri-fy the legal origin of cars that come from an EU

Member State. Such agreements are already in placebetween Member States.

This draft Decision does not delve into thearea of vehicle security (car alarms etc.) as this is a“first pillar” Single Market issue and thus theEuropean Commission has the sole right to initiatelegislation. Indeed, the Decision is strictly operatio-nal in nature and would not require Member States toharmonise their laws.

BROADCASTING:WIDE-SCREEN FORMAT COULD HELP SPREAD DIGITAL TVWhat impact can wide-screen (16:9 format) and high-definitiontelevision have on the spread of digital television in Europe? Aworking paper recently issued by the European Commissionservices (DG Culture, Audiovisual) attempts to answer thisquestion and round off a debate launched 10 years ago by anAction Plan for 16:9 television (1993-1997). The working papersuggests that image quality is one factor that can acceleratethe spread of digital TV but that has not been sufficientlyexploited.(February 5, 2004 - European Report - 406/13.1)(AF)

The 16:9 Action Plan (endowed with Euro a228 million budget for 1993-1997) was devised to sti-mulate a market that was slow to take off in theabsence of a critical mass of programmes. By the endof 1998 it had financed 60,000 hours of broadcastingand the production of 23,000 hours of new pro-grammes. Wide-screen television sales doubled eachyear during the period in question. However, contraryto the expectations of professionals in the sector (elec-tronics equipment manufacturers and programmeproducers), the Action Plan was not extended. In factits primary targets were only partially met during theduration of the Action Plan itself given that the wide-screen television market had gathered a sustainablecritical mass in only three countries, namely France,Belgium and the Netherlands. In other countries, theeffects of the plan have been tangible but not sustai-nable (Austria, Germany, Portugal and possiblyFinland) and in others still it has passed virtuallyunnoticed (Denmark, Greece, Ireland, UnitedKingdom, Spain and Sweden).

The working paper that has just been publishedby the European Commission services provides amore recent overview of wide-screen penetration inEurope (data is for 2002) and distinguishes betweentwo groups of Member States: those with a penetra-tion rate of about 15-20% and those with a rate below10%. The first group includes the usual countries, theNetherlands, Belgium and Luxembourg (with, respec-tively, 20.9%, 19.6% and 19.2%), as well as theUnited Kingdom with 20.6% and France with 15%.The other countries have rates ranging from 2.9% to

7.7% (the lowest rate belongs to Greece). Despiteenjoying the largest consumer electronics market,Germany has a rate of only 7.3%.

The authors of the working paper say thatmarket players have tended to exploit all the advan-tages of digital television “in a sequential manner”.They have focused on multi-channel options andinteractive television rather than the quality of thedigital image. Broadcasters tried to maximise thenumber of available channels, assuming thataudiences would be more sensitive to the quantity ofservices/channels offered than to the quality of theimage. The latter is perceived to be a minor factor.The paper suggests otherwise, pointing out that thesuccess of DVD format and Home Cinema equip-ment shows that consumers do respond to imagequality. Broadcasters should take their cue from this.

The Home Cinema concept is “recalibrating”consumer expectations in terms of quality in thesame way that CD increased their expectations ofsound quality. The DVD take-up is already a factordrawing consumers towards wide-screen TV sets.The paper points out that wide-screen sets will helpdifferentiate digital video signals from analoguevideo signals and suggests that market players wouldbe wise not to underestimate this factor.

New screen formats are more cumbersome tointroduce than other service options linked to digitaltelevision (such as multi-channel options or interacti-ve TV) because they require a co-ordinated approach,between broadcasters and between the latter andequipment manufacturers. Indeed, a sufficient criticalmass of services and programmes that suit the largeformat need to be developed to provide an incentivefor the consumer to invest in the appropriate sets.This assumes that all broadcasters increase the num-ber of large format programmes. The paper suggeststhat such co-ordination could be facilitated by publicauthorities.


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IV internal market

SPACE POLICY:ESA AGREEMENT TO GUARANTEE EUROPE’S INDEPENDENCEThe meeting of the European Space Agency (ESA) Council inParis on February 4 resulted in an agreement on the funds nee-ded to guarantee Europe independent access to space overthe period 2005-2009. The agreement will put the Ariane 5 laun-cher back on track and actively prepare the development offuture launchers. Moreover, co-operation with Russia in thefield of launchers is now a reality through an agreement thatprovides the framework for the “Soyuz at the Guiana SpaceCentre” programme - with Soyuz launchers to be operated byArianespace as of 2006 - and joint activities in the field of futurelaunchers.(February 5, 2004 - European Report - 411/13.5-19)(AF/AFP)

“The decisions taken unanimously by the ESAmember countries consolidate, now and for the longerterm, Europe’s access to space, enhancing its ability tomeet the needs of its citizens. Europe can now counton a strong and stable launcher sector while it workstowards a new generation of launchers”, according to apress release published on February 5.

Following tough negotiations, the ESA memberstates finalised subscriptions for the three projectsdecided in May at an ESA Ministerial Conference. Abudget of Euro 960 million will be allocated to theEGAS programme (European Guaranteed Access toSpace), “99.2% of the sum requested, which will morethan permit the launch of the programme”, accordingto ESA spokesman Franco Bonacina. France will

cover more than half of the EGAS budget (55%),Germany 17.8%, Italy 9.6%, Belgium 5.5%, Spain3.2%, Switzerland 2.8%, the Netherlands 1.6%,Sweden 1.1% and the United Kingdom 0.3%. This isthe first time the United Kingdom has participated inArianespace.

The 15 ESA member countries have alsoreleased Euro 223 million to launch the Soyuz at theGuiana Space Centre programme, Arianespaceadding Euro 121 million. This overall sum of Euro344 million includes funds for the construction of aSoyuz launch pad at the Kourou Space Centre whichshould be ready for a first launch in 2006, as well asthe development of a new version of the Soyuz roc-ket. France will invest 58% of funds, Italy 8% (risingto 12% in June), Germany 6%, Belgium 6%, Spain3%, and Switzerland 2.5%.”This will cover 82.7% ofthe funds needed to launch the programme”, accor-ding to Franco Bonacina, who points out that theEuropean Commission is expected to add 6.7%.

Finally, the ESA Council also reached agree-ment on the Future Launchers Preparation Program(FLPP) allocated a budget of Euro 24 million, entire-ly covering start-up costs, according to the ESAspokesman.

in briefSHOCK RESIGNATION OF PRESIDENT OF EUROPEAN COMMITTEE FOR STANDARDISATION.Austria’s Hans Joachim Bäurle has resigned his post as President of the European Committee for Standardisation (CEN)with immediate effect “for unexpected and personal reasons” after having given the decision “very thorough considera-tion”. The CEN’s Vice-President for External Policy Florence Nicolas will take over the President’s duties for the timebeing in order to ensure continuity for the organisation’s work. The 28 National Standards Bodies which are Members ofCEN are invited to proceed with nominations for a new President, who will be elected during an extraordinary GeneralAssembly that could take place at the occasion of the Administrative Board meeting in May 2004. The deadline for nomi-nations is March 31.(February 4, 2004 - European Report - 401/15.6)(HB)

ITALY FACES FINE FOR UNFAIR TREATMENT OF FOREIGN LECTURERS. The European Commission istrying to get a hefty fine imposed on Italy for not giving the same wage and employment benefits to non-Italian foreignlanguage lecturers that are given to Italians. The Commission wants the European Court of Justice to make Rome pay Euro309,750 a day for not enforcing a June 2001 ECJ judgement against it (Case 212/99). The Court condemned Italy becausenon-Italian, foreign language assistants in its universities who became mother-tongue linguistic experts were denied wagerises, seniority and social security benefits that Italian workers got. The Commission is not satisfied with a new law passedon January 14 by Rome to comply with the ruling. It complains that the law imposes the status of “part-time researchers”on such people instead of giving them a choice, bars them from teaching, and does not redress the pay and social securitydiscrimination.(February 4, 2004 - European Report - 403/15.2)(BB)


IV.4

COMMISSION CLAWS BACK EURO 143 MILLION OF MISSPENT FARM FUNDSMember States have misspent Euro 143.18 mil-

lion of EU farm money, the European Commissionrevealed in a Decision adopted on February 4, andthey will now have to repay the funds. France is thechief culprit in the first of the regular clearance ofaccounts procedures undertaken in 2004, with Euro 91million wrongly handed out to livestock farmers. Italytakes second place, with a bill for repayment of morethan Euro 20 million, due mainly to mistakes in theprivate storage of alcohol and cheese. Spain, Belgium,Denmark and Germany will also have repay signifi-cant sums for shortcomings in the fruit and vegetableand arable sectors.

The clawing back of EU farm money is a regu-lar procedure based on the results of hundreds of

audits carried out in the Member States. Althoughthere is no question of fraud, it does imply thatMember States have made mistakes in apportioningfarm subsidies, or that farmers have claimed moneyfor ineligible land or products. Since the MemberStates are responsible for administrating the day-to-day hand-out of farm subsidies, the Commissionkeeps an eye on the bigger picture through inspec-tions and on-the-spot checks.

Since 1991, over Euro 6.3 billion have beenclawed back in this way, with Italy accounting forover one third of that total, at Euro 2.2 billion, Spainadding Euro 1.5 billion and Greece at Euro 830 mil-lion.

EIS gr.n°408EN

Clearance of accounts of EAGFL

Decision 15: Principle corrections by sector

In Mio €

PUBLIC& PRIVATE STORAGE 19.464

WINE 0.12

ANIMAL PREMIA 90.916

ARABLE CROPS 20.78

MILK -0.14

FRUIT & VEGETABLES 12.32

OIL, FIBRE PLANTS & SEED -0.44

RURAL DEVELOPMENT 0.23

FINANCIAL AUDIT -0.07

TOTAL 143.18


IV.5

IV internal market

Clearance of accounts of EAGGF - Guarantee Decision 15: Principle corrections by Member state

Amount in

Mio. EURO

BELGIUM

Arable Crops, shortcomings in the ancillary controls 9.32

GERMANY

Arable Crops, shortcomings in on-the-spot controls 7.38

Wine & Tobacco, non compliance with the regulations on definitively abandoning vineyards 0.12

DENMARK

Livestock premiums, shortcomings in on-the-spot controls 0.006

SPAIN

Fruit & Vegetable, irregular grant of supplementary quotas and shortcomings in the quality controls of the end products

8.70

Fruit & Vegetable, non compliance with the delivery schedule and shortcomings in risk analysis and controls

2.97

Olive Oil, Part cancellation of Decision No 97/608/EC -0.44

Financial Audit, Amendment of the Decision No 2003/364/EC -0.01

FINLAND

Arable Crops, shortcomings in the key controls 4.08

FRANCE

Fruit & Vegetable, irregular grant of supplementary quotas (aid for the processing of tomatoes) 0,21

Livestock premiums, shortcomings in the key and ancillary controls 90.91

GREECE

Fruit & Vegetable, failings in the system for implementing controls 0.11

Milk & Milk Products, Partial cancellation of Decision 2001/137/EC -0.14

ITALY

Fruit and vegetables, irregular application of the penalties in respect of the financial compensation for citrus processing

0.33

Public Storage, Adjustment of Decision 2002/881/EC -0.006

Public Storage, non compliance with Article 13 (1) of Reg. (EC) No 3105/88 and Reg. (EC) No 2148/96 : Alcohol

6.55

Private Storage, non compliance with Article 8 of Reg. (EC) No 1255/1999 : Cheese 12.92

Rural Develop. , failings in the management and control systems 0.23

UNITED KINGDOM

Financial Audit, Case of an irregularity – Decision 2003481/EC -0.06

TOTAL 143.18

(February 4, 2004 - European Report - 408/2.1)(SF)

in briefEQUAL OPPORTUNITIES: BID FOR MORE WOMEN TO TAKE PART IN OLYMPIC GAMES. EuropeanEmployment and Social Affairs Commissioner Anna Diamantopoulou has backed bids to ensure that women are notexcluded from national teams taking part in the Olympic Games this Summer. Meeting Belgian Senator Anne-Marie Lizin- who is on the Atlanta-Sydney-Athens+ Committee - on February 3, Mrs Diamantopoulou said she supported efforts toend all forms of discrimination at the Olympics, including on grounds of sex. At the 1992 Barcelona Olympics, there were35 nations with no female participants in their Olympic team. That number is now eight: Saudi Arabia, Kuwait, Qatar,Bahrain, Oman, UAE, Virgin Islands and Botswana.(February 4, 2004 - European Report - 410/15-21-15)(LC)


IV.6

AGRICULTURE:COUNCIL ARGUES OVER COSTS OF MEDITERRANEAN PRODUCT REFORMMember States are locked in a fight over the financing ofreforms to the cotton, tobacco, olive oil and hops supportregimes. A working party in the Council was split down themiddle in January by the question of reduced support, whichSpain, Italy and Portugal called a betrayal of the budgetary neu-trality principle agreed at the September Farm Council lastyear. But the net contributing Member States, including theNetherlands, the United Kingdom, Germany, Sweden andDenmark, want to see greater savings made in the reform.Germany suggested that an annual saving of Euro 500 millionwould be both justifiable and achievable.(February 4, 2004 - European Report - 409/2.1-2.5-2.6)(SF)

(COM(2003)698), the reform would see some Euro308 million being transferred from subsidy paymentsto rural development measures, and an overall costsaving of Euro 113 million by 2008. The rural deve-lopment money comes mostly from reduced supportto the larger tobacco farmers and from the cottonregime. Cotton support is forecast to drop by Euro 51million per year, olive oil support by Euro 43 million,tobacco support by Euro 18 million and hops supportby Euro 1 million. The figures assume that there willbe a 100% utilisation of the production areas andpayments available.According to estimates in a financial annex to

the Commission’s September proposal EIS gr.n°409EN

I. Estimated expenditure under the proposal

2006 2007 2008 2009 2010 2011 et seq.

A. Decoupled aid 1. Cotton 417,3 417,3 417,3 417,3 417,3 417,3 2. Olive oil 1429,7 1429,7 1429,7 1429,7 1429,7 1429,7 3. Hops 11,2 11,2 11,2 11,2 11,2 11,2 4. Tobacco 674,1 718,5 749,6 749,6 749,6 749,6

B. Coupled aid 1. Cotton 278,5 278,5 278,5 278,5 278,5 278,5

cotton – inter-branch 4,3 4,3 4,3 4,3 4,3 4,3

2. Olive oil 901,3 901,3 901,3 901,3 901,3 901,3 3. Tobacco 177,7 88,9 0 0 0 0

incl. former Tobacco Fund 7,1 4,4

C. Market measures 1. Olive oil: private storage 10,0 10,0 10,0 10,0 10,0 10,0 2. Tobacco – quota buy-back p.m. p.m. p.m. – – – 3. Tobacco – conversion fund (former scheme) 5,0 p.m. p.m. – – –

TOTAL B1 – 1 3909,1 3859,7 3801,9 3801,9 3801,9 3801,9

D. Transfer to rural development (1B) 1. Cotton 102,9 102,9 102,9 102,9 102,9 102,9 2. Tobacco 102,8 147,2 205,0 205,0 205,0 205,0

Total B1 - 4 200,7 250,1 307,9 307,9 307,9 307,9

Total under new proposal 2006 2007 2008 2009 2010 2011 et seq.

TOTAL A+B+C+D 1. Cotton 803 803 803 803 803 803 2. Olive oil 2341 2341 2341 2341 2341 2341 3. Hops 11 11 11 11 11 11 4. Tobacco 955 955 955 955 955 955

TOTAL 4110 4110 4110 4110 4110 4110

II. Estimated expenditure under the current regimes (in accordance with the expen-diture forecasts contained in Annex I of document COM(2002) 394 final)

2006 2007 2008 2009 2010 2011 et seq.

1. Cotton 854 854 854 854 854 854 2. Olive oil 2384 2384 2384 2384 2384 2384 3. Hops 12 12 12 12 12 12 4. Tobacco 973 973 973 973 973 973

TOTAL 4223 4223 4223 4223 4223 4223

III. Impact of the measure (I–II) (1) 2006 2007 2008 2009 2010 2011 et seq.

1. Cotton -51 -51 -51 -51 -51 -51 2. Olive oil -43 -43 -43 -43 -43 -43 3. Hops -1 -1 -1 -1 -1 -1 4. Tobacco -18 -18 -18 -18 -18 -18

TOTAL -113 -113 -113 -113 -113 -113 – including B1 - 1 -314 -363 -421 -421 -421 -421 – including B1 - 4 201 250 308 308 308 308

(1) The difference between the new proposal and the estimates of expenditures under the current regimes (in accordance with the expenditure forecasts contained in Annex I of document COM(2002) 394 final).


IV.7

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A second line of attack was also opened, whenGermany, Sweden, Denmark and the Netherlands sug-gested that restructuring aid proposed by theCommission in the tobacco sector should logically bephased out. This aid to help farmers diversify out oftobacco production would be worth Euro 5 million in2006. The three main producers of the so-calledMediterranean products protested that their farmerswould then be penalised twice: once via the transfer ofproduction subsidies into rural development fundingand a second time by the phasing out of restructuringaid. The Danes also said that they wanted to see the

proposed decoupling rate of 60% of historicalreceipts to be increased for cotton farmers, but thiswas rejected by the Commission.

A Presidency compromise on the whole pac-kage of the reforms is expected in March, followingthe adoption of the European Parliament’s Opinion.

For more details on the proposed reforms, seeour website EISnet: www.eis.be > Advanced search> Reference= EURE;2821;461

Agriculture Ministers in each of the 15 EU Member States havebeen sent a letter reminding them of the objectives of farmreform by EU Farm Commissioner Franz Fischler. The lettersent on January 29 warns Ministers that any departure fromthe model of direct payment agreed in the June 2003 reform ofthe Common Agricultural Policy (CAP) must be both “objecti-ve” and “justifiable”. He wrote: “A departure from the historicalmodel could have important redistributive effects in terms ofpayments to individual farmers, resulting in some farmersobtaining significantly lower amounts compared to the past,whilst others would receive significantly increased payments.”So far, only Denmark, Austria and Ireland have notified theCommission of their intended models for direct payments.(February 5, 2004 - European Report - 412/2.1)(SF/AW)

CAP REFORM:FISCHLER WARNS MEMBER STATES TO STICK TO RULES

Last June’s deal on CAP reform was finallyadopted by the Council as a legal text on September29, 2003 (Regulation 1782/2003/EC), and it allowedMember States some flexibility in their implementa-tion of the reform. The nub of the new-look CAP is tobe the Single Farm Payment (SFP), which allows far-mers to receive all their farm support in one payment,based on their receipts in the reference years 2000-2002. Detailed technical implementing measures forall the CAP reform regulations (including the“Horizontal Regulation” on farm support) are beingthrashed out between the Member States in theManagement Committee for Direct Payments. Thesewill be agreed in the coming months.

Regionalisation. But built into the deal was a clause thatallowed Member States to move away from the histo-rical payments model, and establish different modelsfor different regions: the so-called “regionalisation”approach.

Regulation 1782/2003/EC allows flexibilityaccording to the following principles, contained inArticle 59(1): “In duly justified cases and according toobjective criteria, the Member State may divide thetotal amount of the regional ceiling established underArticle 58 or part of it between all the farmers whose

holdings are located in the region concerned, inclu-ding those who do not meet the eligibility criterionreferred to in Article 33.” This aims to allow a flat-rate calculation to be introduced on a regional basisas an element of the SFP, either in part or in full.

Member States have until August 1 this yearto notify the Commission of their plans, and MrFischler wants to keep them on the straight and nar-row. “The reason Mr Fischler sent out the letter nowdiscussions have kicked off in the Member States isin case one or two have got the wrong idea”, said aspokesman for the Commission. “It is to make clearthe framework to avoid Member States taking a deci-sion that cannot later be justified.” A key part of thisjustification will be an impact assessment, particular-ly looking at the effect of proposals on agriculturalproduction and on regional employment.

Although the Commission has no legal basisfor approving or rejecting national plans for imple-menting direct payments, the spokesman pointed outthat it was in the interests of the Member States to getit right first time round. In an extreme case, theCommission can always enforce compliance with therules for the SFP after they come into play in 2005by opening infringement proceedings.

National plans. Sweden has not formally taken a deci-sion but an official said the Government has agreedto follow the “hybrid model”. Between 7-5% of pay-ments may be coupled in the male bovine premiumssector, worth Euro 40 million. This is well below the25% threshold agreed in the CAP talks last June. Thecoupled payments are intended to maintain livestockproduction in the country’s southern forest region.

For Denmark, the hybrid model will alsoapply. Eighty percent of the total farm money is to beredistributed as a flat rate payment with 20% alonghistorical lines in the livestock sector. A Danish offi-


IV.8

cial stressed that the regional model was always apriority for Denmark as it was much simpler to use.Ten percent of payments will be made on a regionalbasis with the remainder keeping to the historical sys-tem.

Ireland was the first country to decide on theissue in November 2003 when Agriculture MinisterJoe Walsh declared himself in favour of full decou-pling. The Irish stance followed country-wideseminars to explain the agreement which succeededin persuading doubters in the farming lobby thatdecoupling made sense for Ireland.

The European Union needs to start presenting itself as an inde-pendent, unified voice on drugs issues and stop slavishlyfollowing the United States’ agenda. That was the stridentmessage coming from drugs experts at a conference inBrussels on February 5 hosted by the European Policy Centreand the Senlis Council. EU Justice and Home AffairsCommissioner António Vitorino warned them, however, thatdrugs were primarily a national competence, although he wasconfident the EU drugs strategy for 2005-2009 would be moreambitious than the present one.(February 6, 2004 - European Report - 405/1)(BB)

DRUGS:POLICY EXPERTS DEMAND BIGGER EU VOICE

Commissioner Vitorino said the impendingenlargement of the EU would lead to a rise in drug-trafficking from central and eastern European routes,but also gave an opportunity of working closer toge-ther with countries from that region. Synthetic drugsare increasingly popular, with some 50-70 productioncentres in Europe, he said, and another big problem ispeople mixing legal drugs like alcohol with illegalones like amphetamines. He vowed to push the EUCouncil of Ministers to quickly adopt his draftDecision on sharing data, assessing risks and control-ling new drugs (see European Report 2810 for details).This would extend the scope of the 1997 Joint Actionon new synthetic drugs to also cover illicit drugs ofnatural origin. Another thing that needs to happen, hesaid, is for national actors to be made more aware ofwhat is decided at EU level.

The Italian Radical MEP Marco Cappato inter-vened to slam the EU for focusing on repressivemeasures such as boosting the powers of Europol andEurojust. He also slated the recently agreedFramework Decision on drug-trafficking for its prohi-bitionist, intolerant approach, calling it “harmonisationfor the worst”. The Council in November 2003 agreedon a common definition of drug-trafficking and har-monised sanctions.

Influence at the UN. “The UN agenda has been hijackedby the Americans even though the EU is putting moremoney into UN drugs programmes”, the conference’smoderator Susan Stern complained. Her view was sha-red by Interpol’s Honorary Secretary-GeneralRaymond Kendall, who said EU Member States come

to UN meetings without a co-ordinated position andend up aligning themselves with the US instead ofpushing their own priorities. This is despite the factthat the EU contributes more than twice the Euro 13million that the US gives each year to UN pro-grammes. He said the current structures of the EUmake it impossible for it to have a uniform approach.

The Czech Deputy Prime Minister Petr Maressaid that the EU Drugs Strategy for 2005-2009should focus firstly on reducing the health risks lin-ked to drug use and secondly on prosecutingdrug-traffickers. He was keen for the EU to play abigger role on drugs. He told the conference hiscountry has had to formulate its drugs policies on thebasis of expert opinions because of a lack of data.The Czechs criminalised all possessions of illegaldrugs in 1998, including for personal consumption,but Mr Mares has recently abandoned this policy fora more “realistic ... public health approach”.

Criminology Professor from Ghent University,Brice De Ruyver, called for the EU to develop “anevidence-based policy, not an emotional and moral-based one”. At the same time, he felt that MemberStates and even regions should be given enough lee-way to experiment with different policies to seewhich one works best. He noted that the 1990s hasseen a shift to a more pragmatic, harm-reductionapproach in most Member States. Many of themhave seen their criminal justice systems clogged upwith drug users and have responded by imposingfewer prison sentences and making more referrals todrug treatment programmes.

In some Member States, 40-60% of drugaddicts get treatment whereas in some EU candidatestates less than 5% get the necessary care, DrVladimir Pozynak from the World HealthOrganisation (WHO) said. “Serious consideration”should be given to using drug substitution treatmentsas a means of fighting HIV, he added. Small-scaleheroin programmes (where heroin is distributed toaddicts in a controlled environment) have been car-ried out in Germany and Switzerland but the resultsso far are limited, he said.


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TRANSPORT: EESC RECOMMENDS FUEL LEVYThe European Economic and Social Committee

is calling for the creation of a European Fund fortransport infrastructure. It proposes financing this witha ‘solidarity levy’ of 1 cent per litre on all fuels consu-med on EU roads by all applicable vehicles, public orprivate transport of freight or passengers. The EESCwants the European Commission to make a “concreteand exhaustive” study on this proposal, as per thereport adopted in the EESC plenary session on January28 and 29 (Report by Karin Alleweldt, PhilippeLevaux, Lutz Ribbe on Preparing transport infrastruc-ture for the future: planning and neighbouringcountries - sustainable mobility - financing.) Thereinthe advantages are explained: as an ongoing financingresource over 20 years; to meet the annual requirementof Euro three to four billion, the sum needed to financethe TEN-T according to the Van Miert group ofexperts; its simplicity, as all Member States have asystem of fuel tax collection in place. The EESC,which proposed the creation of such a Fund threetimes in 2003 (in a report on the harmonisation of

petrol and diesel excise duties, its Opinion on roadtunnel safety, and an Opinion on the revision oftrans-European transport networks), does, however,admit “one can, in principle, put forward a number ofimportant objections against this levy”.

The report focuses on the development of asustainable transport system, which advocates “deve-loping road transport from an environmentalperspective”, and supports the idea of decouplingeconomic growth from the growth in transport. Italso calls for a reinforcement of environmentalimpact studies and recommends the active encoura-gement of changing means of transport. The EESCadvances a number of German studies which suggestthat investment in railways creates more jobs thanconstruction of roads. As these studies were “notvery recent”, however, the EESC suggests theCommission carry out more specific investigations“so as to give a basic objective to discussions”.(February 6, 2004 - European Report - 407/24.1)(IS)

FEBRUARY 6 MARKS SAFER INTERNET DAYSafer Internet Day kicked off successfully

across Europe on February 6. This event focuses onchildren’s rights to a safer Internet as part of theEuropean Commission’s Safer Internet Programme. Itshowcases existing safer Internet projects, videos andawards developed with the backing of the programme.These schemes involve actors from the private, publicand voluntary sectors. Safer Internet project membershave contributed to several remarkable achievements.In October 2003, a world-wide child-porn ring wasbroken up following a tip-off from the Internet hotlineassociation INHOPE. In November 2003 the newInternet Content Rating Association content filteringplatform (ICRAplus) was launched. Events will be sta-ged simultaneously in 12 European countries(Denmark, Germany, Greece, Iceland, Ireland, Italy,Luxembourg, Netherlands, Norway, Spain, Sweden,United Kingdom), as well as in Australia. Theseevents involve public authorities, the Internet industryand hundreds of other organisations. Events includeaward shows in Germany and the Netherlands for chil-dren’s poster campaigns, the launch of the saferinternet education programme and video in Ireland andthe presentation by children of a charter of Internetrights to Members of Parliament in Spain.

The programme, which has been running since 1999, alsoseeks to ensure a safe environment for other on-line appli-cations, such as for content delivered via broadband andmobile communications, online games, peer-to-peer filetransfer, and all forms of real-time communications such aschat rooms and instant messages. It is specifically desi-gned to help protect children and young people from beingexploited. This programme, which has provided Euro 38million between 1999 and 2004, has four main areas ofaction:- supporting the establishment of a European network ofhotlines to report illegal content;- encouraging self-regulation;- developing content rating and filtering, benchmarking filte-ring software and services;- raising awareness of safer use of the Internet.

Future work includes establishing a network of saferInternet awareness centres and the expansion of the exis-ting network of hotlines to report illegal content. TheEuropean Commission is likely to take a decision over thenext few weeks on a follow-up programme, Safer InternetPlus, to cover the period 2005 to 2008.

(February 6, 2004 - European Report - 414/13.5)(AF)


IV.10

ENVIRONMENT:COMPLAINT LODGED AGAINST COMMISSION DECISION AUTHORISING USE OF PARAQUATThe Swedish Government announced on February 5 that itwould be taking action against the European Commissionbefore the European Court of Justice for its approval inDecember 2003 of herbicides containing paraquat, a dange-rous chemical substance. The Commission has not yet reactedto the Swedish move. It notes only that the decision was adop-ted on the basis of scientific opinions and in accordance withprocedures, adding that any Member State has the right tochallenge a Decision, up to and including taking action beforethe Court of Justice.(February 6, 2004 - European Report - 416/10.7)(AME)

Paraquat, banned in Sweden since 1983, iscontained in herbicides used to treat olive, wine andhazelnut plantations. The Court of Justice is beingasked to annul the Commission’s authorisation for theuse of paraquat in the EU, under certain conditions,announced the Swedish Environment Ministry in apress release. “We know that paraquat is highly toxicand extremely hazardous to health. The use of para-quat is associated with the risk of harm and death forthousands of people, especially in poor countries

where people are unable or do not know how to pro-tect themselves when using pesticides”, saidEnvironment Minister Lena Sommestad. She addedthat she has been trying to put a halt to the use of thisdangerous substance since learning of theCommission decision. “In my view, paraquat is anunacceptable pesticide that has no place in sustai-nable agriculture”, she declared.

The question of the use of paraquat had alrea-dy prompted in December a strongly worded reactionby the Pesticide Action Network-Europe (PAN-Europe). In an open letter to the Commission,PAN-Europe protested against the decision, pointingout the dangers of excessive use of the productwithout adequate precautionary measures, especiallyin developing countries. The product is assumed tobe safe because it is “authorised” in the EU, but thewarnings and restrictions on its use are not publicisedin the developing world (see European Report 2826).

The names of the three consortia of companies shortlisted inthe race to win the concession for Galileo, the European satelli-te navigation system, were unveiled on February 6. They are: -the consortium consisting of the European satellite operatorInmarsat, EADS Space Services (EADS Group) and Thales (pro-fessional electronics); - the consortium comprising theEuropean satellite operator Eutelstat, the British IT servicesgroup LogicaCMG, the Spanish satellite operator Hispasat, andAena (Aeropuertos Españoles y Navegación - Spanish Airportsand Aerial Navigation); - and the consortium comprising theFrench telecoms equipment manufacturer Alcatel, Italy’sFinmeccanica and the French firm Vinci.(February 6, 2004 - European Report - 415/24.1-13.5)(IS)

TRANSPORT/TELECOMMUNICATIONS:THREE CANDIDATES SHORTLISTED FOR GALILEO CONCESSION

The Galileo Joint Undertaking will now startnegotiations with the pre-selected candidates with aview to awarding the concession before the end of2004. A fourth consortium led by the German firmOHB Technology was not shortlisted. Rainer Grohe,the Executive Director of the Joint Undertaking, saidthe three shortlisted candidates had agreed to financetwo-thirds of the cost of the programme deploymentphase, estimated at Euro 2.2 billion. This phase is setto take place in 2006 and 2007 and will see the launchof 30 satellites and the establishment of ground sta-tions. The concession holder will also have to managethe operational phase from 2008. In all, this firstconcession period is expected to cover 10 to 20 years,“or an amortisation cycle”, Mr Grohe told the press.

The selection phase will be completed in2004. Rainer Grohe explained that it would involvechoosing a single consortium, even though the JointUndertaking “has left open the possibility of invol-ving additional players”. “We cannot promise that thethree consortia will remain as they are until the end,but we do not want them to join forces, which wouldbe against competition”, added the ExecutiveDirector. He did not rule out the future possibility ofthe consortium admitting companies from countrieswith which co-operation agreements have beensigned (such as China).

An information day for industry will be heldon March 9 to give the three shortlisted consortia thechance to present themselves and to invite companiesin the sector interested in satellite navigation to takepart in the programme.

Still no deal on Galileo. JIn spite of the latest round ofnegotiations held on January 29 and 30 inWashington, the EU and the United States have fai-led to settle their dispute over the frequencies forGalileo. An agreement was apparently very near,however, and the two sides issued several optimisticstatements in the countdown to the meeting. Thechallenge that has to be met centres on the risks ofinterference between the Galileo frequencies and US


IV.11

IV internal market

military (or “code M”) GPS signals. An initial break-through was made last November, when theEuropeans proposed changing the modulation ofGalileo’s PRS (Public Regulated Service) signals,which are encrypted and basically reserved for theneeds of public institutions. For the last two years, theUnited States has been against the use of the same fre-quencies by Galileo’s PRS and the military GPSsignal, which does not allow selective scrambling ofone of the two signals without impairing the other.

A similar type of solution has to be found forGalileo’s public signals. The EU and the United Stateshave both proposed a specific modulation for thesesignals, but while “steps have been taken on bothsides”, agreement is still out of reach. The next roundof negotiations will be held on February 24 and 25 inBrussels. “I believe we will reach an agreement at that

time”, said Heinz Hilbrecht, Director in charge ofthese issues at the European Commission. The EUtakes the view that the latest American proposals willnot offer as outstanding a system in terms of preci-sion as what could be offered by a system based onthe modulation it is proposing. “But the difference isnot as decisive as we thought in the beginning”,observed Mr Hilbrecht, which suggests that the nego-tiations are now taking place on the basis of theAmerican proposals, with the EU “trying to improvethem”. “Whatever our signal, you can be sure that itwill be good and commercially viable”, he explained,pointing out that the EU had already rejected severalUS proposals. He said the use of a common opensignal with the United States was welcome andwould be “a good thing” because it “would open atremendous market”.

in briefHEPATITIS C “A HIDDEN EPIDEMIC”, SAYS EUROPEAN DRUGS CENTRE. The European Monitoring Centrefor Drugs and Drug Addiction (EMCDDA) has issued a dire warning about Hepatitis C, calling it a hidden epidemic and amajor challenge to public health. Probably over one million and possibly up to several million people in the EU are infectedwith the virus, with drug injectors accounting for 60-90% of new infections, the agency says in a report published onFebruary 4. Hepatitis C is a highly infectious and potentially fatal disease that attacks the liver, although carriers often showno symptoms for several years. The agency says that public awareness of the disease must be raised so that more peoplecome forward for testing and treatment. Efforts should be made to stop people injecting drugs and reduce the risk of trans-mission for those that do by ensuring that needles are not shared. On the positive side, the Lisbon-based agency says theintroduction of screening of blood and blood products for Hepatitis C has dramatically reduced transmission rates.(February 6, 2004 - European Report - 413/1-22)(BB)


external relations

V.1

NUCLEAR FUSION RESEARCH:PARTNERS NEGOTIATE COMPENSATION FOR LOSING ITER SITEThe EU and Japan have now answered their partners’ queriesregarding their ability to host the future international thermo-nuclear experimental reactor (ITER). A technical meeting withall partners held in Naka (Japan) at the end of January gave thetwo candidate sites vying to host ITER an opportunity to putforward technical and scientific arguments as well as presentoffers to compensate the losing candidate site.(February 4, 2004 - European Report - 501/9.5-9.7-21.5)(HB)

The meeting in Washington just beforeChristmas was a failure not only in terms of choosinga site for ITER, the colossal international research pro-ject worth more than Euro 10 billion that should leadto the production of energy from the fusion of hydro-gen atoms. The French Cadarache site is supported byChina and Russia and the Japanese Rokkasho-murasite by the United States and South Korea. TheMinisters for Research from the six partner countries(the EU counts for one country in the ITER consor-tium) took two decisions in Washington to break thegridlock. The first was that all partners should drafttechnical questions and objections to the candidatesites and the advocates of each site should respond.Japan and the EU actually responded ‘in person’ topartners’ questions in bilateral meetings throughoutJanuary. The second decision was that a “broaderapproach to fusion” - i.e. research needs related toITER - should be discussed as soon as possible. Theunderlying objective, of course, is to compensate thesite that is not chosen in order to avoid the polarisationof negotiations. This was the main topic of discussionsin Naka.

War of nerves. When the United States went public withits support for the Japanese project, tongues startedwagging (see European Report N°2836). The Frenchdaily Le Monde published an opinion piece on January23 by the Japanese Ambassador to France entitled “Nobickering over ITER”. In the article, Mr HiroshiHirabayashi wondered whether a specific factorywould be built in France to produce the huge poloidalmagnetic field coils (which surround the core aroundthe reactor), “the project’s most important and volumi-nous ingredient”, impossible to transport on Frenchroads. It so happens that the ITER terms of referencerequire the host country to manufacture these elements

and this has been the case since the period before theUS returned to the ITER project. The EU looked intothis, of course, and decided to temporarily earmarksome of the future ITER buildings for the manufactu-re of the poloidal magnetic field coils. As the projectproceeds, the buildings will be used for other pur-poses. In short, this factor appears not to be aproblem for the Europeans since it has already beentaken into account both technically and financially.All other elements will be manufactured in partnercountries, according to their level of financial contri-bution. It should be recalled that if Cadarache ischosen, the EU will be responsible for 48% of theITER budget, Japan 123% and 10% each for theother partners.

The criterion concerning the distance from theITER site to the nearest harbour appears to giveJapan a clear advantage with a port 1 km away fromthe Rokkasho-mura site. The Berre port is 96 kmaway from Cadarache. However, the danger associa-ted with long-distance road transport would be less(if all precautions are taken) than with trans-shipment(transferring cargo from a vessel to a road vehicle).The latter is considered more risky by the insurancecompanies, at least according to their rates. In thismatter the two sites are on an equal footing.

The Ambassador’s piece stresses the superio-rity of the Japanese experimental thermonuclearfusion reactor (tokamak) JT-60 in Naka, the results ofwhich are said to be “more applicable” to the ITERprogramme than those of the smaller French reactorTore Supra in Cadarache. The Europeans emphasisethe fact that the fusion research project is Europeanand that Europe has the experimental thermonuclearfusion reactor JET, at the Culham site in Oxford inthe UK, which has produced the most advancedresults in this area. It is the only reactor of its kind inthe world since the TFT1 in Princeton (USA) wasdismantled. Furthermore, the JT-60 is not compatiblewith tritium (ITER’s “fuel”) while JET is. A barebones comparison of the sites themselves revealsmuch more fusion in Cadarache than in Rokkasho-mura, which will be starting from scratch.



european report2841 - February 7, 2004 V external relations

V.2

These explanations and many others were givento the ITER project partners. Their questions touchedon a raft of technical issues that are considered to beimportant such as experience with fission/fusion, trans-port, seismicity and security. The Europeans pointedout that most of the infrastructure was yet to be built atRokkasho-mura, while everything or almost every-thing already stands in Cadarache.

Reciprocal offers. The deciding factor will probablyemerge from the other topic of discussion, namelycompensations. A parallel project linked to ITER isalready on the drawing board: the International fusionmaterials irradiation facility or IFMIF. The projectaims, through experiments, to develop new materialsintended for the mass production of thermonuclearfusion reactors. The project involves developing andtesting materials that will be bombarded by high-speedneutrons. In other words, when the thermonuclearfusion promoters eventually apply for a productionlicence, it will not be granted on the basis of theoryand calculations but solely on the basis of scientificresults that demonstrate the resistance to radiation ofthe materials in question. A particle accelerator thatwill bombard sample metal alloys for years on end willtherefore have to be built, under the stewardship of afew dozen engineers. The project, which has a budgetof about Euro 600 million, is still in the initial develop-ment phase and should be ready for launch in 2010.The Europeans are in favour of giving the IFMIF toJapan should the later lose ITER.

There was also talk of a data analysis and long-distance monitoring centre that could go to the ‘loser’.However, the fact that it would not include the ITERcontrol room, which must be located close to the reac-tor, does make the offer slightly less attractive. A gianttelescope can operate from a distance but thermonu-clear fusion reactors require more. It would be quitepossible, on the other hand, for the ‘loser’ to host adata collection centre that would disseminate results tothe other partners following certification by the ITERoperators. This would certainly boost transparency andtrust among the international project partners. The onlylikely location for the centre if the Japanese win it is

Naka, the site in Japan that specialises in thermonu-clear fusion, two hours away from Tokyo.

The Europeans could also offer to compensateJapan in connection with the training of teams to runITER and the creation of a global approach to opera-ting thermonuclear reactors. The proposed jointprogramme would involve training people on JETand then on JT-60. The idea would be to developoperating scenarios for ITER because the physicistswill obviously not be able to train on ITER. Thisway, the engineers would be ready in time for theexperimental reactor.

Negotiations. The Europeans spared no effort inattempting to win over the countries that supportJapan as ITER host. Both ITER candidates are tryingto outbid each other for Korean support. South Koreais building its own experimental reactor, the K-STAR, a tokamak supraconductor which, in size, liessomewhere between the JET and the Tore-supra. Thecountry needs financial support and this could comefrom either Japan or Europe. Europe has just openedits doors to Korean participation in the 6th R&DFramework Programme.

The United-States have somewhat toned downtheir stated support for Japan which had caused a bitof an uproar in the muffled world of the thermonu-clear fusion community around the globe. Thescientific adviser to the American President, JohnMarburger, said on January 29 in Paris that theAmerican position “could change”. This could meanthat the United States’ unconditional support for theJapanese candidacy is wavering now that the scienti-fic and technical arguments of the competitors aregetting more specific. Or it could be a political moveto avoid polarisation or even a breakdown of negotia-tions.

The Europeans will meet with Americannegotiators on February 10. A technical level mee-ting of all partners will be held in Vienna onFebruary 21 to take stock. The likelihood of anagreement will determine whether a ministerial-levelmeeting will follow.


V.3

V external relations

JUSTICE AND HOME AFFAIRS:COUNCIL TO RENEW SUPPORT FOR INTERNATIONAL CRIMINAL COURTThe European Union is stepping up its campaign to promotethe newly-established International Criminal Court, whoseremit is to prosecute war crimes, crimes against humanity andgenocide. An Action Plan has recently been approved by thePolitical and Security Committee of the EU Council ofMinisters. The EU will continue to push non-EU countries tosign and ratify the ICC’s Rome Statute (the 15 Member Stateshave already done so). It will also help the ICC to function effec-tively, possibly by deploying judges and prosecutors to thirdcountries that lack the necessary expertise in this field.(February 4, 2004 - European Report - 503/1)(BB)

The Action Plan, to be rubber-stamped atFebruary 23/24 General Affairs Council, replaces theCommon Position on the ICC that Council adopted onJune 16, 2003. It calls for an EU focal point to be setup within the Council to co-ordinate the pro-ICC cam-paign, plus a national focal point in each MemberState. It says that Council’s ICC sub-working groupshould meet twice a semester and that the MemberStates should place ICC experts in their embassies inThe Hague, the tribunal’s headquarters. The EuropeanCommission should also be consulted periodically andthe European Parliament’s views “should be dulytaken into account”.

The drive to get other countries to ratify theStatute “will continue to be relevant”, the Plan says. Itshould be raised as a human rights issue when the EUis negotiating agreements with third countries. Pro-ICC statements should be made in the United Nations.Funding should continue for awareness-raising cam-paigns led by non-governmental organisations (NGOs)and expert assistance in drafting the relevant legisla-tion. Country-specific strategies should be developedand regularly reviewed. “The EU should consider”, itsays, sending teams of “judges, prosecutors, legalexperts, analysts, investigators and forensic personnel”to countries in need of assistance.

The EU Member States should encourage ICCjudges and prosecutors to be selected transparentlyand ensure that the candidates are highly qualified,the Action Plan says. Account should be taken oftheir “competences, geographic origin, legal systemsand gender”. The Member States “will transferpromptly and in full their assessed contributions tothe ICC” and “encourage other states parties to dolikewise”.

The EU should try to “ensure that the mediaand general public understand the precise parametersof the ICC and the time framework for the effectiveoperation of the Court”. Finally, the Member Statesare urged to sign the Agreement on Privileges andImmunities of the ICC by June 30, 2004 and ratify itwithout delay. So far, all Member States exceptSweden have signed it but only Austria has ratified it.

According to the latest information from the ICC,139 states have signed its Rome Statute and 92have ratified it. The most notable country not tobecome a party is the United States, whose opt-out has caused tensions in its relations with theEU. The US did actually sign the Statute onDecember 31, 2000 in the dying days of PresidentBill Clinton’s Administration, but the inaugura-tion of George Bush in 2001 led to an instantpolicy u-turn. The Czech Republic is the onlycountry of the ten EU accession countries not tohave ratified the Statute - a Bill to do so is aboutto be sent before Parliament. Candidate countriesBulgaria and Romania have ratified it while theother remaining EU candidate country Turkey hasnot even signed it.

The ICC got the green light on April 11, 2002 after therequired 60 countries ratified its Rome Statute. It officiallycame into existence on July 1, 2002. The Court has jurisdic-tion when national authorities are unwilling or unable toprosecute in cases of genocide, crimes against humanity,war crimes and other serious human rights abuses. TheCourt’s Statute is not retroactive, which means it cannotprobe crimes committed before July 1, 2002. The impetusfor the tribunal came from the war in Bosnia from 1992-95and the genocide in Rwanda in 1994.

☞


V.4

ENLARGEMENT/TRADE:WORK ONGOING TO ENSURE SMOOTH EXPANSION IN MAYAlthough 95% of the EU-15’s trade with the ten acceding coun-tries lining up to join the EU in May 2004 has already beenliberalised, there is still a certain amount of tidying up to dobefore May 1 to ensure that the EU’s expansion causes no dis-ruption to trade with third countries. One notable consequenceof EU enlargement is that World Trade Organisation (WTO)members have the right to request compensation for anyincreased tariffs that new EU members apply to particular tariffheadings as a result of taking on the EU’s CommonCommercial Policy.(February 4, 2004 - European Report - 507/21-21.11-21.14-25)(JB)

Compensation. WTO rules (see Articles XXIV.5 andXXIV.6 of the GATT) provide that third countries’trade with the enlarged EU cannot become more res-trictive than before enlargement took place. The rulesalso require the EU to notify changes to tariff sche-dules in this respect at least three months in advancei.e. by February 1, 2004, in the case of EU enlarge-ment. Indeed, the European Commission provided thenecessary statistics to the WTO in Geneva in lateJanuary, giving details of the tariff headings for whichnew Member States, as a result of joining the EU, areexpected to apply higher tariffs than the levels towhich they have bound themselves under the WTO.

It is thought that China, Japan and the UnitedStates have all flagged an interest in conducting com-pensation talks with the EU, although it seems that nodetailed requests have yet been made. Third countrieshave up to 90 days to make a claim for negotiatingcompensation. It is apparently too early to say whatform of compensation could be involved, althoughoptions would seemingly include lowering tariffs orincreasing quotas. If no agreement is reached beforeenlargement, a third country can withdraw substantial-ly equivalent concessions after 30 days and no laterthan six months after the EU has modified its conces-sions. In other words, in relation to EU enlargement,trading partners would gain the right to withdrawconcessions on June 1, 2004.

In fact, the EU expects that third countries’ spe-cific concerns in this context will be limited. And itbelieves that enlargement will bring significant bene-fits overall for third countries as a result of access to alarger internal market covered by a single set of traderules. Officials explain that EU tariffs will decline ove-rall from an average 9% to 4%. They claim, for

example, that customs duties on imports intoHungary will be halved, and that Russia is expectedto gain over Euro 300 million from the overall reduc-tion in customs duties. As for non-WTO countriessuch as Russia which have no legal basis for reques-ting compensation from the EU under the WTO, theCommission is maintaining that it is prepared to dis-cuss “legitimate” enlargement-related concerns (seealso European Report 2840 for more analysis).

EU Free Trade Agreements. As EU trade pacts will applyto the new Member States as of May 1, certain tech-nical adaptations are required to secure the level oftraditional trade flows and to make sure that tradepartners grant the new Member States the same treat-ment as they do the current EU members. This isunderstood to involve in particular some EU FreeTrade Agreements, such as with Mexico.

New members’ deals. As for the new Member States,they have to renounce their own bilateral Free TradeAgreements with third countries as they take on theEU’s trade arrangements. This work is ongoing butbelieved to be largely complete. New Member Statesalso have to amend international agreements withthird countries in order to remove any provisions thatcould conflict with EU policies. This applies in parti-cular to investment-protection accords with certaincountries. Talks in this area have been successfullycompleted with the US, but must continue concer-ning agreements that some new members have withCanada and Japan. EU officials trust that the task willbe completed by May 1.

Adapting quotas. The EU is also to increase its quotason steel and textiles, as well as those on certainindustrial products from China (footwear, ceramics,tableware), to reflect traditional trade between thirdcountries and the new EU members. For example,the Commission will discuss an increase in steelimport quotas for Kazakhstan, Russia and Ukraine.For textiles, the increased quotas will apply onlyuntil the end of 2004, when all quotas on importsfrom WTO members cease to exist. The quotas oncertain industrial products from China are also tem-porary, applying until the end of the year.


V.5


EU/UNITED STATES:TRANSFER OF DATA ON AIR PASSENGERS REMAINS PROBLEMATICALNational authorities responsible for the protection of privacybelieve the agreement reached in December between theUnited States and the EU on the transfer of data on air passen-gers on transatlantic flights “fails to establish whether anadequate level of data protection is achieved”. In an opinionissued on January 29, they notably warn against the use of datain the context of the future American CAPPS II programme(Computer Assisted Passenger Pre-Screening). WhereasCommissioner Frits Bolkestein (Internal Market, Customs) hasassured the European Parliament that the agreement reachedin December rules out use of data in the context of the CAPPSsystem - an exclusion presented at the time as “an importantcoup”, the NGO Statewatch affirms that the agreement pro-vides explicitly that data might be used to test CAPPS II.(February 5, 2004 - European Report - 505/24.2-21.3)(IS)

The European Commission announced onDecember 16, 2003 that it believed it had secured suf-ficient guarantees from the United States to present aDecision recognising the adequate nature of protectionof personal data on airline passengers travelling to thecountry (see European Report 2830 for furtherdetails). This Decision should be presented in thecourse of the month.

The opinion issued on January 29 by the EU’sArticle 29 Data Protection Working Party (in referenceto the article in Directive 1995/46 establishing it)nevertheless argues that the guarantees offered by theUnited States regarding the use and retention of dataremain inadequate. It notably highlights the absence ofbinding commitments from the United States, theexcessively “vague” terms of the agreement (the fightagainst terrorism and “other serious crimes, includingtransnational organised crime”), and the excessivequantity of data liable to be transferred (34 elementswhich the Working Party is keen to see cut to 19). Italso calls for technical solutions to exclude the transferof general remarks which might contain sensitive data,even though the United States has indicated that suchelements would be deleted through the use of a seriesof trigger words. The Group believes such an approachdoes not guarantee the removal of all sensitive datathat might be included in these general remarks.

The duration of data retention - 3.5 years - isalso deemed excessive, particularly as the agreementprovides for additional retention over eight years in thecase of data being merely consulted. The group alsoexpresses particular concern that the “push” transfermechanism (whereby data is transferred by airlines)has still not been developed, even though the UnitedStates has expressed no objection to such a systemover recent months.

The Working Party also considers that “initia-tives must be taken” to avoid flight cancellations dueto confusion over the identity of individuals whoshare their name with terrorist suspects (severalflights from the EU were cancelled at the last minuteduring the festive period following the crossing ofdata with lists of terrorist suspects).

CAPPS II system. The Article 29 Working Party urgesthe Commission to exclude use of data in the contextof the CAPPS II system from the scope of its firstadequacy decision. This system is due to be operatio-nal in the United States in the course of this year. Itwill permit the cross referencing of a series of data(police, financial, etc.) to assess the risks posed byeach passenger and therefore implies relatively broadcirculation of data. The European Parliament is oppo-sed to the notion of the EU feeding data into theAmerican CAPPS system and appearing beforeParliament’s Committee on Civil Liberties andCitizens’ Rights on December 16, Frits Bolkesteinpresented as a victory the fact that the EU had secu-red consent that the agreement should not extend tothe CAPPS system. The Article 29 Working Party isadamant that all future decisions on the CAPPS sys-tem to be presented to it and should not automaticallyflow from an extension of the applicable scope of theCommission’s first adequacy decision.

Referring to America’s published commit-ments (1), the NGOs Statewatch, European DigitalRights and Privacy International nevertheless claimEuropean data will be used to test the CAPPS sys-tem, a, claim confirmed in an exchange of e-mailswith the American authorities (2). “EitherCommissioner Bolkestein lied to the ParliamentaryCommittee or the American Administration has rein-terpreted the results of the negotiations”, according toAndreas Dietl, European Affairs Director atEuropean Digital Rights. He warns that full use ofEuropean data in the CAPPS system is just a matterof time, claiming the European Commission hasnever denied the fact: at the end of last year it indica-ted that the CAPPS problem would need to beresolved through a second round of negotiations.

The report by the Article 29 Data ProtectionWorking Party is available on our EISnet site at:www.eis.be > Advanced search > Reference=EURE,2841,505

(1)(www.statewatch.org/news/2004/feb/01eu-us-pnr-agreement.htm)

(2) (www.statewatch.org/news/2004/jan/04eu-us-pnr-cappsII.htm)


V.6

EU/ROMANIA:MEPS AGAIN RAISE IDEA OF SUSPENDING ACCESSION TALKSThe EU should suspend accession negotiations with Romaniaunless Bucharest gets its reform process back on track, accor-ding to the MEP who is drafting a report on Romania for theEuropean Parliament, Baroness Emma Nicholson (ELDR, UK).She has tabled an amendment to her own draft report to thiseffect, co-signed with Arie Oostlander, the Dutch EPP Memberwho had originally raised the idea of suspending Romanianaccession talks during a discussion in the Foreign AffairsCommittee on January 21.(February 5, 2004 - European Report - 508/21.11-25)(JB)

Baroness Nicholson said on February 4:“Romania must properly implement reforms alreadypassed and in particular must tighten up the rule oflaw. Without further measures, there is a strong likeli-hood that the European Parliament will recommendputting negotiations towards EU membership on ice”.She singled out in particular the need for theGovernment to “establish a genuinely independent andimpartial judicial system which is up to the task ofadjudicating on current and future Romanian legisla-tion. The Romanian Government should also do moreto tackle corruption and to safeguard the rights of chil-dren”. The MEP said that Romania had madesignificant progress, but there was “still a long way togo”, and reform efforts had to be redoubled.“Negotiations should be continued as soon asRomania satisfies the EU that her internal institutionalset-up and capacities live up to the high level neededfor accession to the EU”, she argued.

A series of proposed amendments to the draftreport on Romania (see European Report 2835) wastabled by February 3, including by BaronessNicholson herself. The Foreign Affairs Committee isnow expected to discuss the report and the amend-

ments on February 18 and hold a vote the day after.Romania is aiming to conclude accession talks withthe EU in 2004, with a view to joining in 2007 alongwith Bulgaria. It has so far provisionally closed 22 of30 negotiation chapters.

Romanian response. Talking to a small group of journa-lists in Brussels on February 5, Romania’s chiefaccession negotiator, Vasile Puscas, said theRomanian Government’s response to developmentsin the European Parliament was that it would have toinform and clarify everything with BaronessNicholson and other MEPs who were suggestingamendments to her report. The Government wouldsend them information on children, rule of law, justi-ce and law enforcement institutions. TheGovernment’s answer would be to implement theacquis communautaire and continue preparations forEU membership. Speaking personally, Mr Puscassaid that he was “not comfortable” with somebodysuggesting that negotiations should be suspended.This was a “very radical attitude” - and one withwhich Mr Puscas said he was sure the “general view”would not agree. Mr Puscas agreed that theParliament’s expressions of doubt were “extremelydamaging” for his country, adding that he did notthink Romania deserved such a debate.

Road rage? Meanwhile, the European Commissionconfirmed on February 5 that it is monitoring deve-lopments concerning the reported award byRomania, without a tender, of a Euro 2 billion motor-way contract to US firm Bechtel. A spokesman saidthe Commission was “looking at the facts”, althoughthe matter did not constitute an “investigation”.

EU/WTO: ILO SAYS LABOUR STANDARDS WOULD BOOST DEVELOPING ECONOMIESEducating children, rather than forcing them to

work, could have huge economic benefits for develo-ping nations, according to the International LabourOrganisation (ILO). Paying for a child’s educationcould bring a sevenfold return on the investment, inaddition to social and other benefits that make this apreferred option to child labour, the ILO said onFebruary 3. Companies and nations alike stand tobenefit from increased productivity, while higher sala-ries would benefit both the workers and their families,as well as governments who would get higher tax reve-nues. In addition, removing the worst forms of childlabour, such as prostitution and slavery, would reduceillnesses and injuries. The ILO said the benefits of eli-minating child labour will be an estimated US$ 5.1

trillion (Euro 3.9 trillion) in the developing and tran-sitional economies, where most child labourers arefound. It said child labour - which involves one inevery six children in the world - can be stopped andreplaced by universal education by the year 2020 atan estimated total cost of US$760 billion (Euro 575billion).

However, European Commission officialshave said the study, while welcome, will not precipi-tate a change in the EU’s approach to the World TradeOrganisation’s Doha Round. “We welcome suchinsights”, said one Commission official. “But thequestion of labour standards was not included in theDoha Round single undertaking. It may be taken up


V.7


eventually by WTO members, and we certainly hopethat it is, but at the moment, it is not part of the DohaRound.” When the Round was launched in Doha inNovember 2001, the thorny issue of labour standards

was not included in the agenda, despite repeatedappeals from European Trade Commissioner PascalLamy.(February 4, 2004 - European Report - 514/21.7)(LC)

The European Commission announced on February 4 a seriesof measures designed to make the European Union’s pact withthe African, Caribbean and Pacific (ACP) countries more effec-tive through flexibility and decentralisation. The measures aremade ahead of negotiations on a planned revision of the EU-ACP Partnership Agreement signed in Cotonou in June 2000,which are due to start in May.(February 4, 2004 - European Report - 512/21.1-21.13)(LC)

EU/ACP:NEW AID DELIVERY MEASURES UNVEILED

The proposals include:- increasing flexibility in the allocation of resources to

better adapt to new needs and to allow better respon-siveness to international initiatives and conflicts;

- redefining and decentralising management of deve-lopment aid funds in ACP countries in order tosimplify implementation and strengthen local owner-ship;

- promoting wider regional integration between ACPand non-ACP countries by facilitating co-operationwith their regional organisations and by extendingthe scope of untied aid to non-ACP developingcountries. The latter should also further boost theeffectiveness of aid.

The Commission is planning to focus the revi-sion of the Cotonou Agreement on improvingefficient delivery of aid to ACP countries. It is alsoplanning amendments to ensure coherence with poli-tical commitments made by the EU since 2000,including the fight against terrorism, non-prolifera-tion of weapons of mass destruction and support tothe International Criminal Court.

The 20-year EU-ACP Partnership Agreement - or CotonouAgreement - replaced the Lomé Convention, which hadprovided the structure for trade and co-operation betweenthe ACPs and the EU since 1975. It focuses on povertyreduction as its principal aim, to be achieved through politi-cal dialogue, development aid (including a Euro 13.5 billionEuropean Development Fund covering the Agreement’sfirst five years) and closer economic and trade co-opera-tion. The basic principles and the time-frame for EconomicPartnership Agreement (EPA) negotiations were set out inthe Cotonou Agreement, which says that negotiations forEPAs will take place between September 2002 and January2008.

European Trade Commissioner Pascal Lamy is due to launchtrade talks on February 7 with 16 Eastern and Southern Africancountries as part of a regional partnership pact. Mr Lamy willopen the talks on the Economic and Partnership Agreement(EPA), which is part of the overall package of EU negotiationswith the African, Caribbean and Pacific (ACP) nations. The 16Eastern and Southern African countries involved in the talksare: Burundi, Comores, Djibouti, Democratic Republic ofCongo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi,Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia andZimbabwe.(February 5, 2004 - European Report - 516/21.1-21.15)(LC)

EU/EASTERN AND SOUTHERN AFRICA:LAMY TO LAUNCH REGIONAL TALKS

Mr Lamy said the talks would set developmentas their objective and trade as one of the tools. “By ini-tiating negotiations on a regional basis, our partnershave already taken a big step towards deepening andaccelerating their own economic integration”, he saidin a statement. “If at the end of these negotiations,Eastern and Southern Africa stands as a strongerregion, able to define its common interest and improvejointly the environment for business and investors, wewill all have won.”

The Mauritius meeting is set to confirm thestructure and the roadmap for the negotiations, andthe two sides will exchange views on regional priori-ties and how to integrate the development dimensionin the EPA process. The Commission said that theEU has already committed more than Euro 700 mil-lion from the European Development Fund (EDF) tosupport trade-related activities and regional integra-tion in the Eastern and Southern African countries.

Commission officials were keen to stress thatthe aim of the EPAs was less about market penetra-tion and more about ensuring that the ACPs integratemore fully into the world and regional economy.Officials say just 10% of ACP trade is regional: theEU was aiming to offer assistance to build tradecapacity as an instrument for promoting develop-ment.

The 16 countries, with a total population is280 million, all form part of the Common Market forEastern and Southern Africa (COMESA), which pro-


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motes regional economic integration through trade andinvestment and aims at creating a Customs Unionfrom end of 2004. The remaining countries ofSouthern Africa (Angola, Botswana, Lesotho,Mozambique, Namibia, Swaziland and Tanzania) willnegotiate their EPA as a separate grouping. In 2002,trade between the two regions amounted to Euro 10.3billion, and ESA region had a trade surplus with theEU of Euro 1.6 billion. The EU is the ESA region’smain trading partner and absorbs 40% of exports fromthe ESA region. ESA’s main exports to the EU are pre-cious stones (21%), textiles (11%), aluminium (8%),sugar (7%), tobacco (7%) and plants/flowers (6%).The level of foreign direct investment (FDI) hasincreased gradually in the ESA region from an averageof US$337 million over the period 1985-1989, to anaverage of $2.6 billion between 1995 and 1999, rea-ching $4.5 billion in 1999.

The negotiations on Economic and Partnership Agreements(EPAs), involving the EU and 77 ACP countries and the EU,were launched in September 2002 in Brussels. The firstphase, which ended last October, led to a preliminaryunderstanding on horizontal issues in key areas such asmarket access, trade-related areas, and services. Sincethen, negotiations on the regional level have been launchedwith West Africa and Central Africa in October 2003. EPAsare composed of several elements. The primary buildingblock is a free trade area, which gradually abolishes sub-stantially all tariffs between the EU and the ACPs, as well asall non-tariff measures, such as quotas and measureshaving equivalent effect. But it will also address divergentmarketing rules or product regulations (e.g. standards,hygiene, public, animal and plant health rules, rules forenvironmental or consumer protection) and costly com-pliance requirements, competition issues like abuses of adominant positions, intellectual property rights, and invest-ment rules.

EU/SOLOMON ISLANDS :FISHERIES AGREEMENT SIGNEDThe European Union and the Solomon Islands

have signed a three-year Fisheries Agreement, worthEuro 400,000 annually, providing EU vessels with tunafishing opportunities around the Pacific islands. Some30% of the EU financial contribution will be allocatedto the implementation of a mutually-agreed action pro-gramme aiming to boost responsible fishing in thecountry’s waters. The state of fisheries resources in theSolomon Islands’ fishing zone will be jointly monito-red on the basis of scientific advice. “This Agreementwill also help to ensure the sustainable exploitation ofliving marine resources in the Pacific region”, said

European Agriculture and Fisheries CommissionerFranz Fischler. For the first year, four purse seinevessels and ten long-liners, from Spain and France,will be authorised to fish, and this may be raisedfrom the second year if scientific assessment war-rants such an increase. The reference tonnage hasbeen set at 6,000 tonnes of tuna catches per year.Some Euro 14.5 million has been allocated to theSolomon Islands under the 9th EuropeanDevelopment Fund.(February 4, 2004 - European Report - 510/17-21.5)(LC)

Alvaro Uribe faces a rough reception when he makes his firstvisit to Europe as Colombian President on February 7-12.President Uribe has already been criticised for using heavy-handed tactics in his bid to crack down on terrorist insurgents,and he will be questioned about his policies when headdresses the European Parliament in Strasbourg on February10. Mr Uribe will also meet European Commission PresidentRomano Prodi, External Relations Commissioner Chris Pattenand Trade Commissioner Pascal Lamy. (February 6, 2004 - European Report - 515/21.4)(LC)

EU/COLOMBIA: PRESIDENT URIBE FACES EU CRITICS

The focus of European concern is an anti-terro-rism Bill adopted by Congress in December that givesthe armed forces sweeping judicial powers to detainsuspects without warrants, tap phones and searchhomes as part of a campaign to crush a four-decadeleftist insurgency. Last month, EU Foreign Ministerscalled on President Uribe to respect human rights inhis broad plans to reform the country and deal withterrorist insurgents (see European Report 2838).

Colombian Foreign Minister Carolina Barcosought on February 4 to allay fears that the legisla-tion could lead the military to commit abuses, saying“we are absolutely committed to democraticnorms...the necessary controls exist”. She saidPresident Uribe was looking forward to winning overhis European counterparts by explaining why thelaws are vital to defeat two resilient leftist rebelgroups. “Many of these worries are due to a lack ofinformation”, she said.

President Uribe is scheduled to visit theEuropean Commission in Brussels on February 9before addressing the Parliament in Strasbourg thefollowing day. He then heads to Rome before travel-ling on to Berlin on February 12. He will beaccompanied by leading business figures looking toboost trade and investment. He is also expected todiscuss increased co-operation with the EU’s policeagency, Europol, in the battle against drug-traffickingand money-laundering.


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But the Colombian President has irkedEuropeans by denouncing human rights workers asterrorist sympathizers and cowards. And many feel hiscurrent plan to allow right-wing warlords to escape jailterms if they lay down their weapons lacks transparen-cy and would let some of the nation’s worst killers anddrug traffickers too easily off the hook.

However, the EU has already eased relationswith Colombia by pledging support for the humanita-rian accord that is progressing to facilitateprisoner-for-hostage swaps with the country’s leftistrebels. And the United States wholeheartedly backsMr Uribe’s crackdown on leftist guerrillas and drugtrafficking. Last month, US Secretary of State ColinPowell said Colombia is meeting congressional stan-dards for protecting human rights, ensuring that thecountry receives US$34 million (Euro 28 million) in

military aid. The move was denounced by AmnestyInternational as “deeply disappointing”.

But Colombian authorities have releasedfigures recording a reduction of 26% in the numberof kidnappings in 2003 and a 20% drop in assassina-tions as a sign that the Government’s securitypolicies are proving effective.

Meanwhile, the International Confederation ofFree Trade Unions (ICFTU) said on February 3 thatit had “strong reservations” about President Uribe’svisit to the European Parliament. Although the grouprecognised an overall drop in the assassinations oftrade unionists, it said there had been an increase inother forms of repression such as arbitrary deten-tions, death threats, forced displacements and otherviolations.

The European Commission is still hopeful that the World TradeOrganisation’s Doha Round of trade liberalisation talks can berevived soon. Officials have told European Union nationalrepresentatives that there is unanimous support among WTOmembers for the basic principles of a re-launch of the negotia-tions, albeit not for questions of substance. (February 6, 2004 - European Report - 513/21.7)(LC)

EU/WTO:COMMISSION STILL HOPEFUL ON DOHA ROUND

The next step will be the selection of new chairsfor the WTO bodies at the meeting of its GeneralCouncil on February 10/11, as a “package deal”, andthe Commission wants to avoid any delay on this front.It wants Japan’s representative elected Chair of theGeneral Council, but at the same time wants to avoid atime-consuming debate on this and other proceduralissues. Politically, the Commission says that a classicalGeneva Negotiating Group process is needed, comple-mented by intense contacts between the main playerslike the EU, the United States and the Group of 20 lea-ding developing nations.

While the Commission has welcomed therecent letter by US Trade Representative RobertZoellick calling for all sides to re-engage in the Dohanegotiations, it noted that, on agriculture, Mr Zoellickhad moved away from the common EU-US positionof August 2003. And the Commission has also identi-fied the forthcoming UNCTAD XI Conference 2004in São Paulo, Brazil, on June 13-18 as an opportunityto generate support for the Doha Round.

On geographical indications (GIs), theCommission has acknowledged that the negotiationsare completely blocked in all main areas, like settingup a multilateral register with legally-binding effectsfor all WTO members, and extending the traditionalintellectual property protection currently available towines and spirits to other products. While theCommission has no intention of raising the GIs as afirst subject in Geneva, but intended first to undertakeinformal consultations with other actors.

EU/MOROCCO:NEW NEIGHBOURLINESS POLICY TO BACK REFORMS IN MOROCCO

Günter Verheugen, the European Commissionerresponsible for the Enlargement portfolio, explainedthe elements of the new neighbourliness policy propo-sed by the enlarged European Union to itsMediterranean partners on his visit to Morocco onFebruary 4 and 5. The Commissioner explained thatthis policy offers powerful support to reforms laun-ched by Morocco to modernise its economy, society,political institutions and its administration. From May1, the European Union will extend “the area of peace,

stability, democracy and prosperity patiently establi-shed over the past fifty years” to ten new MemberStates. At the same time, he is aware that this ambi-tion is doomed to failure if its immediate neighbours,to the East and the South, do not also benefit frompeace, stability and well-being.

“Enlargement must not create new divisions”,Mr Verheugen told Moroccan representatives. This isthe very raison d’être of this new neighbourliness


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policy which, in the long term, aims to offer the EU’sneighbours that share with it a certain number of com-mon values, the full benefits of its Internal Market.The process is based on two key principles: “jointownership”, which implies that implementation of thepolicy is defined jointly with each of the countriesconcerned; and “differentiation”, which takes fullaccount of the specific situation and characteristics ofindividual countries.

The Commission indicated on February 6 thatthroughout his talks, the Commissioner noted the fullagreement of Moroccan representatives with theobjectives, methodology and timetable for implemen-tation of European neighbourliness policy. The next

step will be the development by the end of March ofan action plan, in association with the MoroccanGovernment, defining objectives, stages and time-tables in a certain number of precise areas: access tothe Internal Market, energy, justice and home affairs,political dialogue, research, education and dialoguebetween civil societies. This plan will then be sub-mitted to the Heads of State and Government of thetwenty-five-member EU at their June session. MrVerheugen also emphasised that this new policyshould be accompanied by the modernisation andenhancement of corresponding financial instrumentsand indicated that the Commission will present a pro-posal to the Member States.(February 6, 2004 - European Report - 517/21.8)(AF)

Two EU experts on public health have recently arrived inVietnam to help authorities deal with the growing AvianInfluenza crisis, the European Commission said on February 4.They join an animal health expert sent out to the country lastweek after a call by various United Nations agencies for urgentinternational assistance. But as international experts gatheredin Rome on February 3-5 for emergency discussions on figh-ting the Asian epidemic, it has become clear that the EU is notyet considering much-needed financial assistance to the affec-ted countries. There are fears that poor farmers will not culltheir birds without adequate compensation, which theirgovernments are hard-pressed to provide.(February 6, 2004 - European Report - 506/2.11-21.5-21.13)(SF)

EU/ASIA:EU SENDS MORE BIRD ‘FLU EXPERTS TO VIETNAM, BUT NO FINANCIAL ASSISTANCE

EU Health and Consumer AffairsCommissioner David Byrne said: “The EU is glad tobe able to support the WHO [World HealthOrganisation] and the other international agencies intheir effort to combat avian flu in Asia. It is our duty toassist those countries in need.” The two public healthexperts come from the European Programme forIntervention Epidemiology Training and work atresearch institutes in Germany and the Netherlands.They will help to protect the Vietnamese populationfrom contamination with the bird ‘flu virus, after 13deaths have been attributed to it in Vietnam andThailand. They will also be monitoring for signs ofhuman-to-human transmission of the disease.

However, the WHO and the World AnimalHealth Office (OIE) are calling for more than justexpertise from the international community. At anemergency meeting of veterinary officials in Romethat held from February 3 to 5, they pressed the needfor tangible financial support to cover the costs offighting the avian ‘flu epidemic. “Compensation isoften a limiting factor. As long as small farmers andcommercial producers, especially in poorer countries,

do not receive an adequate financial incentive forkilling their chickens, they will probably not applysuggested emergency measures”, Hans Wagner of theFAO said recently. The Rome meeting also called fora targeted vaccination campaign for poultry at risk ofbeing infected by Avian Influenza in heavily affectedcountries to control the further spread of the epide-mic.

Money will be needed to cover the intensifiedculling programme and poultry vaccinations aimed atcontaining the virus, which were recommended bythe meeting in Rome. Participants also called for bet-ter surveillance and controls in the affected countries,and more transparent reporting by national authori-ties. They are planning a further emergency meetingin Asia.

The European Commission has not yet expli-citly considered the issue of financial support, aspokeswoman said. She explained that such an initia-tive was beyond the purview of Mr Byrne’s services,and would have to be agreed by the Commission as awhole. She suggested that funding could come fromthe development budget, but said that it woulddepend on the outcome of the Rome meeting (*). Themechanism to release funds from the EU’s veterinarybudget simply does not exist.

Thailand. Meanwhile, reports from Thailand say thatCommissioner Byrne’s head of cabinet, MartinPower, exchanged angry words at a meeting onJanuary 29 with the Thai Ambassador to the EU,Surapong Posayanond. He is reported as saying thatthe Commissioner had lost confidence in the ThaiSovernment because authorities had tried to concealthe extent of the avian ‘flu problem. Meanwhile,


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Thai Trade Minister Watana Muangsook is reportedlyconsidering reprisals to penalise Japan and the EU ifthey continue to ban chicken imports. The Ministerbelieves that the EU ban does not respect internationalveterinary agreements on imports of healthy meat.

In a pointed reference to Thailand and otherstates in the region, experts at the FAO meeting decla-red that re-establishing the credibility of a country’sveterinary authorities is a must for re-starting poultry

exports. But they admitted the possibility of a regio-nalisation approach to get trade moving in unaffectedareas. The Commission ruled this out last weekbecause of the Thai authorities’ attempt to cover upthe outbreak.

For more details, see our website EISnet:www.eis.be > Advanced search > Reference=EURE;2841;506

in briefEU/SERBIA AND MONTENEGRO: SUSPENSION OF SUGAR IMPORT PREFERENCES ROLLED OVER.As predicted in European Report 2839, the European Commission decided on February 5, by written procedure, to rollover for an additional six months the existing suspension of preferential arrangements for imports into the EU of Serbianand Montenegrin sugar (customs codes 1701 and 1702). The new Regulation is to apply from February 8. TheCommission found that, despite considerable efforts by the authorities in Serbia and Montenegro to redress the situation,deficiencies persist in their system of certification and control of preferential origin. Imports of sugar from Serbia andMontenegro jumped from some 29,900 tonnes in 2001 to around 172,500 tonnes in 2002, with EU exports a respective128,100 and 64,800.(February 6, 2004 - European Report - 509/2.8-21.12)(JB)

EU/WTO: COMMISSION LOOKS AT COLLECTIVE PREFERENCES. The European Commission is consideringimport bans from countries that fail to meet the European Union’s basic values. A Commission spokeswoman said discus-sions were taking place on the issue of ‘collective preferences’, the key values any community sets for trading partners.Although the debate is at an early stage within the Commission, an internal paper has challenged the World TradeOrganisation’s rules on banning imports only if they are unsafe. The paper says the collective preferences could have broa-der political and social coverage, reflecting the views of EU society.(February 6, 2004 - European Report - 518/21.7-21.14)(LC)

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