               EUROPEAN COMMISSION
            Brussels, 9.11.2017
            COM(2017) 656 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations to amend the International Sugar Agreement, 1992

               EXPLANATORY MEMORANDUM

               The present proposal concerns the decision establishing the position to be adopted on behalf of the Union in the International Sugar Council and Administrative Committee of the International Sugar Organization (hereafter "ISO"), as well as in any possible other ad hoc bodies that the ISO may set up to discuss possible amendments to the International Sugar Agreement 1992 in connection with the envisaged discussion on the revision of the International Sugar Agreement 1992 (hereafter "the ISA").

               1.CONTEXT OF THE PROPOSAL

               •Reform of the International Sugar Agreement 1992

                  The European Union is a party to the ISA
                     1
                  .

                  The ISA aims to ensure enhanced international cooperation in connection with world sugar matters and related issues, provide a forum for intergovernmental consultations on sugar and on ways to improve the world sugar economy, to facilitate trade by collecting and providing information on the world sugar market and other sweeteners and to encourage increased demand for sugar, particularly for non-traditional uses. The ISA entered into force on 1 January 1993 for a period of three years until 31 December 1995. Since then it has been regularly extended for further periods of two years. The ISA is going to be extended by decision of the International Sugar Council in November 2017 and will remain in force until 31 December 2019.
                     2

                  According to Article 8 of the ISA the International Sugar Council is the responsible body for the performance of all functions necessary to carry out the provisions of the ISA. Article 13 of the ISA stipulates that all decisions of the International Sugar Council shall be taken in principle by consensus unless stipulated otherwise in the ISA. And that in the absence of consensus, decisions shall be made by simple majority vote unless the ISA provides for a special vote.

                  According to Article 25 of the ISA Members to the ISO hold 2000 votes in total. Each Member to the ISO holds a specified number of votes which is annually adjusted following predefined criteria in the ISA.

                  The Agreement, and especially the distribution of votes among Members which also determines a Member's contribution, no longer reflects the realities of the global sugar market. Currently, the Union is the largest contributor to the ISO budget by far. Since 2015, the ISO has been discussing at working group level possibilities to review the mechanism of distributing votes. It is necessary that the EU has a position on reviewing the ISA in case the ISO engages actively in such discussions and negotiations.

                  Bringing reform to the ISO to further align it with the practices the Union fosters in other international commodity boards, as well as with developments in the global sugar market since 1992, is clearly in the interest of the Union. At the very least, this reform should lead to transparency concerning the Members' responsibilities in voting as well as their financial contributions. The allocation of votes in the ISO should be measurable according to indicators such as trade, consumption, production and ability to pay. The latter indicator is used in the United Nations to allow for the recognition of the development aspect of sugar. Taking into account this indicator, results in allotting a greater part of the financial responsibilities to those members that have a greater ability to contribute to the ISO budget.

                  The Commission can promote the above-mentioned practices with the other ISO members; since the ISO is a consensus-based organisation the EU cannot reform it by itself. Therefore, the general ISO Membership needs to give a clear signal that reform is both possible and desirable. During meetings of the ISO and in bilateral meetings with other ISO Members, the Commission should be in a position to take the initiative to open negotiations on the amendment of the ISA and to engage with other members in case they should take the lead on reform proposals.

               •Consistency with existing practice in International Commodity Boards

                  In international commodity boards such as the International Grains Council (IGC), and the International Olive Council (IOC), the Union has negotiated voting rights allocations and clear annual update mechanisms which reflect the Union's relative importance in the grains as well as the olive and olive oil markets. In the IGC the indicators are trade, consumption, and production. This is in contrast to the ISO practice, where the Agreement, since 1992, has not allowed for adjustments reflecting the changing positions of Members in the international sugar economy. Any efforts towards amending the ISA should seek to bring ISO practices in line with those existing in the other international commodity boards. Furthermore, the allocation of voting rights cannot be calculated in advance by members, but results instead from an intransparent calculation. While this has been accepted practice for 25 years, it can no longer be continued given the changes in the world sugar economy.

                  This comes at a moment where the Union is reforming its sugar policy and the abolition of sugar production quotas will give Union exporters greater access to world sugar markets, as well as remove constraints on sugar production in the Union.

               •Consistency with other Union policies

                  Sugar is a sensitive product under the Common Commercial Policy of the Union and the Common Agricultural Policy. In international trade negotiations for the Union, sugar plays a key role and both production and trade are carefully monitored by the Commission. Sugar is also an important commodity to many developing countries and the development aspect of sugar is of paramount importance in the Common Commercial Policy. The ISO provides for a neutral platform for discussing sugar related issues among a broad membership. At the same time, monitoring of developments in the world sugar market serves the interests of the market management possibilities under the Common Agricultural Policy.

               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

               2.1.Legal basis

                  Article 218(3) of the Treaty on the Functioning of the European Union (TFEU) provides for authorising the opening of negotiations and, depending on the subject of the agreement envisaged, nominating the Union negotiator or the head of the Union's negotiating team. Article 218(4) TFEU provides for the Council to address directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted.

               2.2.Application to the present case

                  The International Sugar Council is a body set up by an agreement, namely the ISA. Under Article 44 of the ISA, the International Sugar Council may, by special vote, recommend to ISO Members an amendment to the Agreement. In case there is no qualified majority to constitute a special vote, a proposal to amend the ISA cannot be made. The ISA provides for no other means to initiate an amendment. As a consequence, the only alternative for Members of the ISO who do not agree with maintaining the status quo is to not agree to an extension of the ISA for another period of two years, which is akin to leaving the ISO.

                  The envisaged act in respect of which a position is adopted on behalf of the Union may lead to amending the institutional framework of the Agreement.

                  The procedural legal basis for the proposed decision, therefore, is Article 218(3) and 218(4) TFEU.

               2.4.Conclusion

                  The legal basis of the proposed decision should be Article 218(3) and (4) TFEU.

               •Subsidiarity (for non-exclusive competence)

                  The Union is a party to the ISA and is represented by the Commission in the ISO Council. Member States are not a separate party to the ISA. The EU's negotiation of any possible amendment to the ISA pertains to the exclusive competence of the Union.

               •Proportionality

                  Amending the ISA in order to achieve a voting structure that represents the relative importance of ISO Members in the global sugar economy is in the interest of the Union and is to be preferred to cancelling the Union's membership to the ISO. Currently, the EU's participation in the ISO is beneficial both to the Union and to other ISO Member states. However, since changes in the EU's relative importance have not been translated into less votes and as a consequence reduced financial contributions, this participation comes at too high a price. Other ISO Members, who have increased their presence on global sugar markets, have not seen their contribution rise to the same degree.

               3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               •Stakeholder consultations

                  The Union is a Member to the ISO and its Membership is generally supported since 1992 by the sugar sector in the EU as well as by most of the Member States. It is not deemed necessary to engage in stakeholder consultations regarding a process which merely aims to continue the Union's membership to the ISO albeit under a set of rules that are in line with those of other international commodity bodies of which the EU is a member. Ultimately, the reduced relative weight of the EU in the world sugar market should also lead to a modest reduction in contributions to the ISO. Under the existing rules, the EU will have to pay more than its fair share when other ISO Members do not pay or do not pay on time.

               •Impact assessment

                  A full-fledged impact assessment is not necessary, since the measure is not likely to have significant economic, environmental or social impacts. The successful amendment of the ISA would, mutatis mutandis, result in a lower financial contribution of the EU to the ISO. At the same time, a more transparent and equitable allocation of votes may even help attract new members to the ISO, which would result in further cost reductions.

                  Although a fair and equitable contribution of the EU to the ISO budget is certainly at the heart of the need to amend the Agreement, there are more than budgetary reasons calling for reform. The need for ISO Members to carry their weight in terms of their contributions to the ISO administrative budget is a key starting point for the modernisation of the ISO and should also result in a more active participation in the ISO by its Members.

               4.BUDGETARY IMPLICATIONS

                  The opening of negotiations is not deemed to have a budgetary impact.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations to amend the International Sugar Agreement, 1992

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               Whereas:

               (1)The Union is a Party to the International Sugar Agreement 1992
                  3
                (hereafter "ISA") and a member of the International Sugar Organisation (hereafter "ISO").

               (2)The Union has since 1995 approved the extension of the ISA for two year periods. The Commision has proposed to the Council to authorise the Commission to take a position in favour of the extension of the ISA for a further period of up to two years, ending on 31 December 2019.

               (3)According to Article 8 of the ISA the International Sugar Council is the responsible body for the performance of all functions necessary to carry out the provisions of the ISA. Article 13 of the ISA stipulates that all decisions of the International Sugar Council shall be taken in principle by consensus unless stipulated otherwise in the ISA. And that in the absence of consensus, decisions shall be made by simple majority vote unless the ISA provides for a special vote.

               (4)According to Article 25 of the ISA Members to the ISO hold 2000 votes in total. Each Member to the ISO holds a specified number of votes which is annually adjusted following predefined criteria in the ISA.

               (5)It is in the Union's interest to participate in an international agreement on sugar, considering the importance of that sector for a number of Member States and for the economy of the European sugar sector.

               (6)However, the institutional framework of the ISA and especially the distribution of votes among Members that also determines the Members' financial contribution to the ISO, no longer reflect the realities of the global sugar market.

               (7)Under the ISA rules on financial contributions to the ISO, since 1992 the Union's  share has remained the same although the world sugar market, and notably the Union's relative position in it, has substantially changed since then. As a result, the Union has been assuming a disproportionately large share of the budgetary costs and responsibility that goes along with the costs  in the ISO in recent years.

               (8)The ISA rules on financial contribution can be amended in accordance with the procedure provided in Article 44 of the ISA. On the basis of that Article the International Sugar Council may, by special vote, recommend to ISO members an amendment to the ISA. The Union being a member of the International Sugar Council in accordance with Article 7 of the ISA, should be able to initiate and participate in negotiations with a view to amend the institutional framework of the ISA.

               (9)It is therefore appropriate that the Commission be authorised to start negotiations within the International Sugar Council for the amendment of the ISA, that negotiating guidelines be established and that a special committee be appointed that will be consulted by the Commission when conducting the negotiations,

               HAS ADOPTED THIS DECISION:

               Article 1

               The Commission is hereby authorised to negotiate, on behalf of the Union, amendments to the International Sugar Agreement, 1992.

               Article 2

               The negotiating directives are set out in the Annex.

               Article 3

               The negotiations shall be conducted in consultation with [name of the special committee to be inserted by the Council].

               Article 4

               This Decision shall be valid until 31 December 2019.

               Article 5

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  Council Decision (92/580/EEC) of 13/11/1992; OJ L 379 of 23/12/1992, p.15.

                     (2)
                  Council Decision xxxx (here we will refer to the Commission proposal for the Council decision )

                     (3)
                  Council Decision of 13 November 1992 on the signing and conclusion of the International Sugar Agreement 1992 (OJ L 379, 23.12.1992, p. 15).

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 9.11.2017
            COM(2017) 656 final
            ANNEX
            to the
            Council Decision
            authorising the opening of negotiations to amend the International Sugar Agreement, 1992

               ANNEX

               Directives for the negotiation of amendments to the International Sugar Agreement, 1992

               The Commission may enter into negotiations with the other parties to the International Sugar Agreement, 1992 (hereafter "ISA") within the International Sugar Council with a view to modernise the ISA taking into account developments in the world sugar market and to address current discrepancies between the influence and financial contributions of Members of the International Sugar Organization and their relative place in the world sugar market.


               EUROPEAN COMMISSION
            Brussels,22.11.2017
            COM(2017) 803 final
            Recommendation for a
            COUNCIL DECISION
            establishing that no effective action has been taken by Romania in response to the Council Recommendation of 16 June 2017

               Recommendation for a

               COUNCIL DECISION

               establishing that no effective action has been taken by Romania in response to the Council Recommendation of 16 June 2017

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union,

               Having regard to Council Regulation (EC) No 1466/97
                  1
               , and in particular Article 10(2), 4th subparagraph, thereof,

               Having regard to the recommendation from the European Commission,

               Whereas:

               (1)On 16 June 2017 the Council decided in accordance with Article 121(4) of the Treaty on the Functioning of the European Union ("TFEU") that a significant observed deviation from the adjustment path toward the medium-term budgetary objective existed in Romania

               (2)In view of the established significant deviation, the Council on 16 June 2017 issued a recommendation for Romania to take the necessary measures to ensure that the nominal growth rate of net primary government expenditure
                  2
                does not exceed 3.3% in 2017, corresponding to an annual structural adjustment of 0.5% of GDP. It recommended Romania to use any windfall gains for deficit reduction, while budgetary consolidation measures should ensure a lasting improvement in the general government structural balance in a growth-friendly manner. The Council established a deadline of 15 October 2017 for Romania to report on action taken in response to the recommendation.

               (3)On 26 and 27 September 2017 the Commission undertook an enhanced surveillance mission in Romania for the purpose of on-site monitoring under the Article -11(2) of Council Regulation (EC) No 1466/97. After having transmitted its provisional findings to the Romanian authorities for comments, the Commission reported its findings to the Council on 24 October 2017. These findings were subsequently made public. The Commission report finds that the Romanian authorities do not intend to act upon the Council Recommendation of 16 June 2017. The authorities stated that their target for 2017 remains a headline deficit of 3% of GDP. Given the positive and increasing output gap this would amount to a deterioration of the structural deficit in 2017, contrary to the Council Recommendation. This reflects a clearly expansionary fiscal policy.

               (4)On 13 October 2017 the Romanian authorities submitted a report on action taken in response to the Council Recommendation of 16 June 2017. In the report, the authorities reiterated that their target for 2017 remains a headline deficit of 3% of GDP. The only measure listed in the report with a significant budgetary impact in 2017 is an increase of excise duties for energy products back to their 2016 level (i.e. a reversal of a previously adopted excise duties cut which entered into force in January 2017). Thus, the fiscal impact of the reported measures falls significantly short of the requirement stated in the Council Recommendation.

               (5)Based on the Commission autumn 2017 forecast, the structural balance is set to deteriorate by 1.1 % of GDP, reaching a deficit of 3.3% in 2017. This is the opposite of the recommended structural improvement of 0.5% of GDP relative to 2016. The corresponding growth of net primary government expenditure amounted to 4.9%, well above the expenditure benchmark of 3.3%. This deterioration compared to 2016 was driven by cuts to indirect taxes, in particular to VAT and excise duties, which entered into force at the beginning of the year and increases to public wages and social benefits introduced through the year. Since the Council Recommendation of 16 June 2017, the increase of excise duties for energy products back to their 2016 level as well as a cut in public investment in the September’s budget rectification had a positive impact on the public deficit, although their effect was largely offset by increases to public wages also contained in the budget rectification.

               (6)This leads to the conclusion that the response of Romania to the Council Recommendation of 16 June 2017 has been insufficient. The fiscal effort falls short of the annual structural adjustment of 0.5% of GDP for 2017 which corresponds to a nominal growth rate of net primary government expenditure that does not exceed 3.3% in 2017,

               HAS ADOPTED THIS DECISION:

               Article 1

               Romania has not taken effective action in response to the Council Recommendation of 16 June 2017.

               Article 2

               This Decision is addressed to Romania.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        Net government expenditure is comprised of total government expenditure excluding interest expenditure, expenditure on Union programmes fully matched by Union funds revenue and non-discretionary changes in unemployment benefit expenditure. Nationally financed gross fixed capital formation is smoothed over a four-year period. Discretionary revenue measures or revenue increases mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted out.


               EUROPEAN COMMISSION
            Brussels, 18.1.2019
            COM(2019) 15 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations of an agreement with the United States of America on conformity assessment

               EXPLANATORY MEMORANDUM

               1.CONTEXT OF THE RECOMMENDATION

               •Reasons for and objectives of the recommendation

               On 25 July 2018, the President of the European Commission and the President of the United States of America reached agreement to launch a new phase in the trade relationship between the United States and the European Union with a view to facilitate trade and avoiding an escalation of trade tensions. The Joint Statement envisaged the establishment of an Executive Working Group to consider, inter alia, measures to reduce administrative obstacles and costs, while preserving the high level of protection of each side.

               This recommendation for the opening of negotiations with the United States forms part of a larger set of actions aiming at improving cooperation between the European Union and the United States on regulatory issues and on the use of standards in support of regulations. The recommendation provides for draft negotiating directives to facilitate trade and thus increase trade flows in industrial goods between the European Union and the United States through a reduction of the costs of conformity assessment, in a reciprocal and balanced manner.

               The EU and US are the largest and most integrated economies in the world, with a long, shared history of trade and a similar rate of economic development. The US is the main export destination of EU exports in industrial goods and is the second largest exporter of industrial goods to the EU (after China). EU-US trade in goods amounted to EUR 633 billion in 2017, composed mostly of industrial products (EUR 598 billion, mostly composed of EUR 166 billion trade in machinery and equipment). Around 4.7 million EU jobs are associated with production for exports to the US. Industrial goods account for most of our trade in goods with the US (94 % of EU exports and 95 % of imports). EU-US trade in goods has been growing consistently over the last 10 years. In light of these important trade flows, economic operators on both sides of the Atlantic stand to benefit greatly from the elimination of duplication of testing, inspection and certification requirements, thereby reducing the costs for companies to access our respective markets.

               The European Union and the United States have their respective practices of conformity assessment to ensure that manufacturers can only place a product on the market when it meets all the applicable requirements to ensure that unsafe or otherwise non-compliant products do not find their way to their respective markets. These may include testing, inspection and certification. Differences in approaches to conformity assessment can result in additional costs and lengthy and complex administrative processes without necessarily improving the safety of products. In case of mandatory third party conformity assessment (approximately 70% of cases in the United States), enabling exporters to seek certification in the country of export of products to prove compliance with the applicable rules in the country of importation can facilitate trade. This possibility only exists for certain sectors under the existing mutual recognition agreement concluded between the EU and the US in 1998, which does not function properly for all of the sectors covered. Costs of conformity assessment can thus be significant for EU exports in particular in key sectors such as machinery and equipment.

               The reduction in the costs of conformity assessment can bring significant economic benefits, in particular for small and medium-sized enterprises (SMEs) who are disproportionally affected by them. Given their size, it is often much harder for SMEs to cope with trade barriers than it is for larger firms. They often lack the capacity and/or resources to deal with differences in product requirements and applicable conformity assessment procedures, and struggle to find the relevant information. Therefore, a reduction in the number of barriers in relation to conformity assessment could be of particular benefit for exporting SMEs in the manufacturing industries. They are likely to gain in greater proportion from a decrease in costs of trading. This decrease in trade costs can sometimes make the difference between exporting or not.

                  Facilitating acceptance of conformity assessment results requires an international agreement in order to allow, upon fulfilment of the relevant requirements, the conformity assessment bodies that are not established within the territory of the EU to certify product compliance with the relevant EU legislation. This recommendation therefore proposes entering into negotiations with the US with the objective of reducing conformity assessment costs for economic operators on both sides of the Atlantic by agreeing on acceptance of results of conformity assessment carried out by conformity assessment bodies located in the territory of the exporting Party in the territory of the importing Party in accordance with the technical requirements of the latter.

               •Consistency with existing policy provisions in the policy area

                  The scope of this recommendation is limited to the implementation of the part of the Joint Statement of 25 July 2018 to improve trade in goods through the facilitation of the acceptance of conformity assessment results while ensuring that the high level of protection is fully preserved. The objective is to facilitate trade and de-escalate trade tensions between the EU and the US and is fully consistent with the Treaty on European Union (TEU), which enshrines that the EU should encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade.
                     1

               •Consistency with other Union policies

                  The recommendation is consistent with other Union policies.

               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

               Legal basis

                  Article 207(3) and (4) first subparagraph in conjunction with Article 218(3) and (4) of the Treaty on the Functioning of the European (TFEU).

               Subsidiarity (for non-exclusive competence)

                  According to Article 5(3) of the TEU, the subsidiarity principle does not apply in areas of exclusive EU competence. The common commercial policy is listed among the areas of exclusive competence of the Union in Article 3 of the TFEU. This policy includes the negotiation of trade agreements pursuant to, inter alia, Article 207 TFEU.

               Proportionality

                  The Commission recommendation is in line with the principle of proportionality, and necessary in light of our objective to de-escalate trade tensions with the US.

               Choice of the instrument

                  Decision of the Council of the European Union.

               2.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               Ex-post evaluations/fitness checks of existing legislation

                  Not applicable

               •Stakeholder consultations

                  Several stakeholder consultations in the form of hearings and civil society dialogue meetings have taken place since 2012 to consider possible gains from closer EU-US regulatory cooperation. This is in addition to public debates in or organised by the European Parliament and EU Member States.

                  In the context of this recommendation, a new round of stakeholder consultations will soon be launched on possible regulatory cooperation initiatives with the US, consisting of the publication of a roadmap setting out a stakeholder consultation strategy (with a possibility of stakeholder “feedback” within a four-week period).

                  The results of the consultations will be summarised in a short synopsis report. The Commission will also provide a reaction to the main stakeholder recommendations. The consultation will not be limited to the issue of conformity assessment, but will also aim at identifying other initiatives with the US, which could result in significant benefits, while maintaining - if not enhancing - existing levels of protection.

               •Collection and use of expertise

               Considerable expertise about the possible gains from closer EU-US cooperation on conformity assessments was already gathered in previous consultation activities since 2012 (please see links and documents on the following website:

                  http://trade.ec.europa.eu/doclib/cfm/doclib_section.cfm?sec=146

               ). However, this expertise will be updated in the context of the new stakeholder consultations mentioned above.

               •Impact assessment

               Due to the political imperative to move ahead quickly in order to lower trade tensions between the EU and the US, as expressed by the President of the Commission after his meeting with the US President, and endorsed by the European Council in its informal meeting of 16 May 2018 in Sofia, the formal impact assessment process has been waived in favour of a more proportionate approach to ensure evidence gathering and stakeholder consultation. This proportionate approach is also justified because it is expected that the new agreement will not have significant economic, social or environmental impacts beyond those benefits arising from simplification of conformity assessment for specific product sectors.

               •Fundamental rights

                  The recommendation is consistent with the EU Treaties and the Charter of Fundamental Rights of the European Union.

               3.BUDGETARY IMPLICATIONS

                  The agreement on the conformity assessment between the United States and the European Union will have no negative impact on the budget of the EU. Indirect positive impacts can be expected from increased trade flows.

               4.OTHER ELEMENTS

               •Procedural aspects

               The Commission will negotiate on behalf of the EU. In accordance with Article 218(4) TFEU, it is suggested that the Council of the European Union designates the Trade Policy Committee as the committee in consultation with which the negotiations must be conducted.

               The European Parliament will be informed at all stages of the procedure, in line with Article 218(10) TFEU.

               The Commission will make this Recommendation and its Annex public immediately after its adoption.

               The Commission recommends that the negotiating directives be made public immediately after their adoption by Council.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations of an agreement with the United States of America on conformity assessment

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207(3) and (4), first subparagraph in conjunction with Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               HAS ADOPTED THIS DECISION:

               Article 1

               The Commission is hereby authorised to open negotiations, on behalf of the European Union, with the United States of America for an agreement on conformity assessment.

               Article 2

               The negotiations shall be conducted on the basis of the negotiating directives of the Council set out in the Annex.

               Article 3

               The Commission shall conduct negotiations in consultation with [name of the special committee to be inserted by the Council].

               Article 4

               This Decision and its Annex will be made public immediately after their adoption.

               Article 5

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        Article 21 paragraphe 2 (e) TEU.

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 18.1.2019
            COM(2019) 15 final
            ANNEX
            to the
            Recommendation for a Council Decision
            authorising the opening of negotiations of an agreement with the United States of America on conformity assessment

               ANNEX

               DIRECTIVES FOR THE NEGOTIATION OF AN AGREEMENT WITH THE UNITED STATES OF AMERICA ON CONFORMITY ASSESMENT

               Nature and Scope of the Agreement

               1.The Agreement should exclusively contain provisions on conformity assessment between the Parties.

               2.The Agreement should be fully consistent with World Trade Organisation (WTO) rules and obligations.

               3.The Agreement should provide for reciprocal commitments on conformity assessment.

               Objectives

               4.The objective of the negotiation is to facilitate trade between the EU and the US through the development of streamlined processes to ease the recognition of conformity assessment results that confirm compliance of products with a party’s technical regulations, whilst ensuring that a high level of protection is fully preserved.

               Content

               Streamlined horizontal conformity assessment agreement

               5.The Parties will explore the feasibility of introducing less burdensome conformity assessment requirements based on the assessment of the risk linked to the product.

               6.The Parties should develop requirements that would allow an importing Party to accept conformity assessment results confirming compliance with its technical regulations, issued by the conformity assessment bodies located in the territory of the other Party.

               7.The agreement should also include provisions to ensure improved and effective procedures and approaches in sectors where obstacles are currently found, notably in the machinery, electrical and electronic sectors.

               8.The agreement should mainly cover sectors for which the importing Party requires third party conformity assessment, and it would be conditional upon the Parties agreeing to exercise effective public authority supervision of the conformity assessment bodies located in their territory.

               9.The agreement should, as appropriate, address its relationship with the EU-US agreements on mutual recognition which are currently in force.

               Final Provisions

               10.The Agreement should set up an institutional structure to ensure the implementation of the Agreement.

               11.The Agreement should provide provisions on the termination and/or (partial) suspension of the Agreement.

               12.The Agreement should be equally authentic in all official EU languages and shall include a language clause to that effect.


               EUROPEAN COMMISSION
            Brussels, 18.1.2019
            COM(2019) 16 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations of an agreement with the United States of America on the elimination of tariffs for industrial goods

               EXPLANATORY MEMORANDUM

               1.CONTEXT OF THE RECOMENDATION

               •Reasons for and objectives of the recommendation

               On 25 July 2018, the President of the European Commission and the President of the United States of America reached agreement to launch a new phase in the trade relationship between the United States and the European Union, with a view to facilitate trade and avoid an escalation of trade tensions.

               A Joint Statement was adopted on 25 July 2018, providing for the elimination of tariffs for industrial goods; increased cooperation on regulatory issues and standards; facilitation of trade in soybeans; and increased trade in liquefied natural gas (LNG) to allow the European Union to better diversify its energy supply. They also agreed to join forces to better protect European and US companies from unfair global trade practices and to work closely with like-minded partners to reform the World Trade Organisation (WTO).

               An Executive Working Group was set up to carry this joint agenda forward, and asked inter alia to identify short-term measures to facilitate commercial exchanges. It was agreed that during the process of implementing the Joint Statement the European Union and the United States would fully respect the spirit of this agreement, unless either party terminates the negotiations. Both sides also agreed that they want to resolve the steel and aluminium tariff issues.

               The European Commission is committed to implement the Joint Statement of 25 July 2018 in good faith. The Commission shall suspend the negotiations with the United States, in case the United States does not respect the commitment made on 25 July 2018 to abstain from adopting new measures against the EU under Section 232 of the Trade Expansion Act. The Commission may also suspend negotiations in case the US adopts trade restrictions against EU exports on the basis of Section 301 of the 1974 Trade Act or under any other similar United States law.

               The goal of the negotiations on the elimination of tariffs will be to eliminate all duties for industrial goods, on a reciprocal basis, with the objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of such tariffs in a short time frame. Industrial goods encompass all goods other than those included in Annex I of the WTO Agreement on Agriculture. Account may be taken of the particular sensitivities of certain products. In this connection, the EU is ready to take into account potential US sensitivities for certain automotive products.

               The EU and the US are the largest and most integrated economies in the world, with a long, shared history of trade and a similar level of economic development. The US is the main export destination of EU exports in industrial goods and is the second largest exporter of industrial goods to the EU (after China). EU-US trade in goods amounted to EUR 633 billion in 2017, composed mostly of industrial goods (EUR 598 billion, of which EUR 166 billion trade in machinery and equipment). Around 4.7 million EU jobs are associated with production for exports to the US. Industrial goods account for most of our trade in goods with the US (94 % of EU exports and 95 % of imports). EU-US trade in goods has been growing consistently over the last 10 years.

               In general, both the EU and the US have low tariffs on industrial goods. The simple average applied MFN tariff rates on non-agricultural products are 4.2% and 3.1% respectively. While applied tariffs levels are relatively low, the sheer size of our trade relationship means that the elimination of all tariffs of industrial goods will have an important impact on businesses and consumers on both sides of the Atlantic.

               An internal analysis with the computable general equilibrium model MIRAGE shows that the elimination of tariffs on industrial goods would benefit both partners about equally in terms of an increase in bilateral trade. EU exports of goods to the US would increase by 10%, US exports to the EU would increase by 13%.

               The removal of tariffs on industrial goods should in particular result in important economic benefits for small and medium-sized enterprises (SMEs) who are disproportionality affected by the costs of placing a product on the market. Reductions in costs, including through the elimination of tariffs can help make exports from SMEs more competitive, thus making the difference between exporting or not.

               •Consistency with existing policy provisions in the policy area

                  The scope of this recommendation only relates to the part of the Joint Statement of 25 July 2018 covering the elimination of tariffs for industrial goods. The Joint Statement was adopted under exceptional circumstances, in order to avoid an escalation of trade tensions between the EU and the United States.

                  The objective to de-escalate trade tensions with the US is fully consistent with the Treaty on European Union (TEU), which enshrines that the EU should encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade.
                     1

                  The recommendation for the opening of negotiations with the US on the elimination of tariffs should by no means be construed as an indication that the Commission would be willing to derogate from existing trade and investment policies as provided for under the Commission Communication on ‘Trade for All: Towards a more responsible trade and investment policy’.
                     2

               •Consistency with other Union policies

                  The recommendation is consistent with other Union policies.

               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

               •Legal basis

                  Article 207(3) and (4) first sub-paragraph in conjunction with Article 218(3) and (4) of the Treaty on the Functioning of the European Union (TFEU).

               Subsidiarity (for non-exclusive competence)

                  According to Article 5(3) of the TEU, the subsidiarity principle does not apply in areas of exclusive EU competence. The common commercial policy is listed among the areas of exclusive competence of the Union in Article 3 of the TFEU. This policy includes the negotiation of trade agreements pursuant to, inter alia, Article 207 TFEU.

               •Proportionality

                  The Commission recommendation is in line with the principle of proportionality, and necessary in light of our objective to de-escalate trade tensions with the US.

               •Choice of the instrument

                  Decision of the Council of the European Union.

               3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               •Ex-post evaluations/fitness checks of existing legislation

                  Not applicable

               •Ex-post evaluations/fitness checks of existing legislation

               Not applicable

               •Stakeholder consultations

               A considerable amount of stakeholder consultations have taken place about the possible gains from the elimination of tariffs since 2012. Several hearings and Civil Society Dialogue meetings have been organised. This is in addition to public debates in or organised by the European Parliament and in EU Member States.

               •Collection and use of expertise

               Considerable expertise about the possible gains from the elimination of tariffs between the EU and US was already gathered in previous consultation activities since 2012 (please see links and documents on the following website:

                  http://trade.ec.europa.eu/doclib/cfm/doclib_section.cfm?sec=146

                .

               •Impact assessment

               Due to the political imperative to move ahead quickly in order to lower trade tensions between the EU and the US, as expressed by the President of the Commission after his meeting with the US President, and endorsed by the European Council in its informal meeting of 16 May 2018 in Sofia, the formal impact assessment process has been waived.

               •Fundamental rights

                  The recommendation is consistent with the EU Treaties and the Charter of Fundamental Rights of the European Union.

               4.BUDGETARY IMPLICATIONS

                  The agreement on the elimination of tariffs will have a negative impact on the budget of the EU in the form of foregone customs duties due to tariff elimination for industrial goods, representing some EUR 2.2 billion (data for 2017). Indirect positive impacts are expected in terms of increases in resources linked to value added and other taxes and increases of gross national income.

               5.OTHER ELEMENTS

               •Procedural aspects

               The Commission will negotiate on behalf of the EU. In accordance with Article 218(4) TFEU, it is suggested that the Council of the European Union designates the Trade Policy Committee as the committee in consultation with which the negotiations must be conducted.

               The European Parliament will be informed at all stages of the procedure, in line with Article 218(10) TFEU.

               The Commission will make this Recommendation and its Annex public immediately after its adoption.

               The Commission recommends that the negotiating directives be made public immediately after their adoption by the Council.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations of an agreement with the United States of America on the elimination of tariffs for industrial goods

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207 (3) and (4) first sub-paragraph in conjunction with Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               HAS ADOPTED THIS DECISION:

               Article 1

               The Commission is hereby authorised to open negotiations, on behalf of the European Union, with the United States of America for an agreement on the elimination of tariffs for industrial goods.

               Article 2

               The negotiations shall be conducted on the basis of the negotiating directives of the Council set out in the Annex.

               Article 3

               The Commission shall conduct negotiations in consultation with [name of the special committee to be inserted by the Council].

               Article 4

               This Decision and its Annex will be made public immediately after their adoption.

               Article 5

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        Article 21 paragraphe 2 (e) TEU.

                     (2)

                  http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 18.1.2019
            COM(2019) 16 final
            ANNEX
            to the
            Recommendation for a Council Decision
            authorising the opening of negotiations of an agreement with the United States of America on the elimination of tariffs for industrial goods

               ANNEX

               DIRECTIVES FOR THE NEGOTIATION OF AN AGREEMENT WITH THE UNITED STATES OF AMERICA ON THE ELIMINATION OF TARIFFS FOR INDUSTRIAL GOODS

               Nature and Scope of the Agreement

               1.The Agreement should contain provisions on the elimination of tariffs for industrial goods
                  1
               , between the Parties, thus providing for the reciprocal elimination of tariffs.

               2.The Agreement should be fully consistent with World Trade Organisation (WTO) rules and obligations.

               Objectives

               3.The objective of the Agreement is to increase trade between the European Union and the United States with a view to generating new economic opportunities that create jobs and growth as a result of increased market access due to the reciprocal tariff elimination for industrial goods.

               Content of the Agreement

               Duties and other requirements regarding imports and exports

               4.The goal of the Agreement should be to eliminate all duties for industrial goods on a reciprocal basis, with the objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of such tariffs in a short time frame. Account should be taken of the particular sensitivities for certain goods in line with the Joint Statement of 25 July 2018. All customs duties, taxes, fees, or charges on exports and quantitative restrictions or authorisation requirements on exports to the other Party which are not justified by exceptions under the Agreement should be abolished upon the application of the Agreement. The Agreement should be without prejudice to either Party’s right to take appropriate safeguard, anti-dumping or countervailing measures in accordance with the WTO Agreement.

               Rules of origin

               5.Negotiations should aim at reconciling the European Union’s and the United States’ approaches to rules of origin including the origin procedures in a manner that facilitates trade between the Parties and that takes into account the latest developments in the preferential rules of origin of the European Union and the interests of the European Union economic operators.

               Institutional framework

               6.The Agreement should set up an institutional structure to monitor the implementation of the Agreement.

               Dispute settlement

               7.The Agreement should include an appropriate dispute settlement mechanism to ensure that the Parties observe mutually agreed rules.

               Final provisions

               8.The Agreement should include a provision allowing the European Union to suspend unilaterally the application of substantially equivalent concessions or obligations, if the United States adopts against the European Union any measures, under Section 232 of the Trade Expansion Act, Section 301 of the 1974 Trade Act or under any other similar United States law.

               9.The Agreement should be equally authentic in all official European Union languages and shall include a language clause to that effect.

               Conduct of the negotiations

               10.The Commission shall suspend the negotiations with the United States, if the United States does not respect the commitment made on 25 July 2018 to abstain during the course of the negotiations from adopting new measures, against the European Union under Section 232 of the Trade Expansion Act of 1962. The Commission may also suspend negotiations if the United States adopts trade restrictions against European Union exports on the basis of Section 301 of the 1974 Trade Act or under any other similar United States law.

               11.Prior to the conclusion of negotiations, the Commission will confirm that the United States has removed any measures on exports of steel and aluminium originating in the European Union pursuant to Section 232 of the US Trade Expansion Act of 1962.

                     (1)

                        Industrial goods encompass all goods other than those included in Annex I of the WTO Agreement on Agriculture.


               EUROPEAN COMMISSION
            Brussels, 19.4.2017
            COM(2017) 191 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations on the adaptation of protocols to the Agreement between the European Union and the Kingdom of Morocco

               EXPLANATORY MEMORANDUM

               1.CONTEXT OF THE PROPOSAL

               •Reasons for and objectives of the proposal

                  Over almost half a century, the EU and Morocco have developed a rich and multidimensional partnership, by virtue of which an "advanced status" was granted to Morocco in 2008 to reflect the strength of bilateral ties as well as the shared ambitions and commitments of the two parties to advance their common agenda.

                  At the same time, the EU has consistently reiterated its commitment to the resolution of the conflict in Western Sahara. It fully supports the efforts being made by the United Nations Secretary-General (UNSG) and his Personal Envoy to help the parties find a just, lasting and mutually acceptable political solution which would provide for the self-determination of the people of Western Sahara in the context of arrangements consistent with the principles and purposes of the Charter of the United Nations as provided for in the United Nations Security Council resolutions, including resolution 2152 (2014) and resolution 2218 (2015).

               In view of the granting of tariff preferences, the present proposal envisages amendments to Protocol 4
                  1
                and Protocol 1
                  2
                to the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part (hereinafter referred to as the 'EU-Morocco Association Agreement' or the 'Association Agreement'), following the judgment of the European Court of Justice of 21 December 2016 in case C-104/16 P, which ruled that the EU-Morocco Association and Agriculture Agreements are not applicable to Western Sahara.

               Before the Court ruling, the trade preferences foreseen in the Association Agreement and its protocols had been applied de facto to products originating in Western Sahara, a non-self-governing territory. However, such practice may not continue following the judgment of the Court of Justice, unless Protocol 4 on origin is amended in a manner that allows products from Western Sahara to be assimilated to those produced in Morocco. Following the Court ruling, uncertainties in the markets have affected bilateral commercial relations.

               The present recommendation aims at authorising negotiations with a view to providing a legal basis to the continued granting of preferences to products originating from Western Sahara, in line with past practice. As these trade preferences on the EU market for agricultural and fisheries products are laid down in Protocol 1 to the Association Agreement, the scope of application of that Protocol ought to be clarified as well. This will avoid trade disruptions while keeping the level of market access to the EU stable, since no new preferences would be granted. The amendments of the relevant protocols of the Association Agreement may at a later stage be complemented, as the case may be, by a subsequent amendment of the Association Agreement itself. Finally, it should be borne in mind that two cases (C-266/16 and T-180/14) concerning Morocco are still pending before the European Court of Justice with regard to the EU-Morocco Fisheries Partnership Agreement, which are likely to provide further guidance on the conditions for extending an agreement to a non-self-governing territory. Moreover, it is understood that any arrangement will only be provisional for as long as the resolution of the conflict in the context of the United Nations and in accordance with relevant UN Security Council resolutions remains pending.

               •Consistency with existing policy provisions in the policy area

                  The present recommendation is fully consistent with current trade policy, as customs authorities have de facto applied preferences to Western Sahara products certified as having Moroccan origin. No new trade preferences would be granted to Morocco, as the objective is simply to extend the geographical area covered by preferences, and not to alter their amount.

                  The proposal is consistent with the overarching objectives of the European Neighbourhood Policy inasmuch as it contributes to improving trade and economic relations in the Southern Neighbourhood in a spirit of close cooperation. It is also consistent with the overall EU policy vis-à-vis Morocco, which aims at fostering a privileged partnership with Morocco while not prejudging the outcome of the UN-led process regarding Western Sahara.

                  The fact that the trade preferences may have a wider scope is not unprecedented, as the EU-Morocco Association Agreement contains two Joint Declarations to the effect that products originating in the Republic of San Marino and in Andorra ‘shall be accepted by Morocco as originating in the Community within the meaning of the Agreement’.

               •Consistency with other Union policies

                  The EU position has always been that it is possible to extend its bilateral agreements with Morocco to Western Sahara under certain conditions, as illustrated, e.g. by the Fisheries Partnership Agreement, which explicitly covers the waters off the coast of Western Sahara. Modifying the relevant protocols of the Association Agreement would also allow basing the granting of EU tariff preferences on assessments of benefits for the local populations and of the respect of human rights.

               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

               •Legal basis

                  The recommendation is based on Article 218(3) and (4) of the Treaty on the Functioning of the European Union.

               •Subsidiarity (for non-exclusive competence)

                  The common commercial policy is an exclusive competence of the Union (Art 3(1) TFEU) and in accordance with Article 5(3) TEU the subsidiarity principle is not relevant in areas of exclusive competence.

               •Proportionality

                  The recommendation is a proportionate response to the issue at stake. The agreement would not modify the degree of market access to the Union. Rules of origin are defined in the protocol to the Association Agreement; amendments thereof are necessary to achieve the objective and offer a relatively expeditious response to current trade uncertainties affecting Morocco, without prejudice to the UN-led process on Western Sahara and without prejudging the final outcome of the conflict.

                  Therefore, the recommendation for a Council decision authorising the Commission to negotiate an agreement between the European Union and Morocco on adaptations to protocols to the Association Agreement relating to the origin of goods does not go beyond what is necessary or appropriate to achieve the policy objectives.

               •Choice of the instrument

                  The relevant protocols may only be amended by agreement between the parties. This also covers the cooperation needed between authorities in order to implement the trade preferences.

                  The agreement will take the form of an exchange of letters between the EU and the Kingdom of Morocco.

               3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               •Stakeholder consultations

                  Exploratory talks have been held with Moroccan authorities and with Member States through the relevant structures of the Council.

                  The Commission should endeavour to ensure that, at the time of its proposal for signature and conclusion, the people concerned by the agreement have been adequately involved.

               •Impact assessment

                  No Impact assessment has been carried out given that the recommendation actually consists in providing a legal basis for preferential treatment that had hitherto been de facto consistently applied to Western Sahara products for the past years. Therefore, since the degree of market access will not change, the proposal is unlikely to have any significant commercial impact in terms of trade flows, as compared to the ones existing for the last years.

                  However, the Commission will ensure, in the most appropriate way, that the Union can take into account information relevant to the sustainable development of Western Sahara, in particular as regards the benefits of the agreement for the local population and the exploitation of natural resources, at the time of signature and also afterwards.

               •Fundamental rights

                  Article 2 of the Association Agreement includes a human rights and fundamental freedom clause. This is defined as an essential element of the Agreement, which, if breached, can lead to the suspension of the Agreement. It shall be ensured that the protocols are applied in line with the provisions of the Association Agreement relevant to the respect of fundamental freedoms and human rights.

               4.BUDGETARY IMPLICATIONS

                  In terms of EU customs revenues, no budgetary implications can be expected as compared to the current situation given that products originating in Western Sahara had de facto benefitted from the exemption of customs duties at their entry in the EU.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations on the adaptation of protocols to the Agreement between the European Union and the Kingdom of Morocco

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               Whereas:

               (1)The Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part, hereafter referred to as the "Association Agreement", entered into force on 1 March 2000.

               (2)In its judgment in Case C-104/16 P, the Court of Justice clarified that the Association Agreement only covers the territory of the Kingdom of Morocco but does not cover Western Sahara, a non-self-governing territory. However, since its entry into force, products coming from Western Sahara and certified as having Moroccan origin have been imported into the Union under the tariff preferences provided for in the relevant provisions of the Association Agreement.

               (3)It is important that the flows of trade which have developed over the years are not disrupted, while ensuring that there are appropriate guarantees for the protection of human rights and the sustainable development of the territories concerned.

               (4)The European Union supports the efforts of the United Nations to find a mutually acceptable political solution which would provide for the self-determination of the people of Western Sahara consistent with the principles and purposes of the Charter of the United Nations.

               (5)It is therefore appropriate to negotiate a modification of the relevant protocols to the Association Agreement.

               HAS ADOPTED THIS DECISION:

               Article 1

               The Commission is hereby authorised to negotiate, on behalf of the Union, an international agreement on the adaptation of protocols to the Association Agreement between the European Union and the Kingdom of Morocco. The Commission shall be the head of the negotiating team comprising also the High Representative of the Union for Foreign Affairs and Security Policy.

               Article 2

               The negotiating directives are set out in the Annex.

               Article 3

               The negotiations shall be conducted in consultation with the [name of the special committee to be inserted by the Council].

               Article 4

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        Protocol 4 to the Euro-Mediterranean Agreement, concerning the definition of "originating products" and methods of administrative cooperation.

                     (2)

                        Protocol 1 to the Euro-Mediterranean Agreement, concerning the arrangements applicable to the importation into the European Union of agricultural products, processed agricultural products, fish and fishery products originating in the Kingdom of Morocco.

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 19.4.2017
            COM(2017) 191 final
            ANNEX
            to the
            RECOMMENDATION FOR A COUNCIL DECISION
            authorising the opening of negotiations on the adaptation of protocols to the Agreement between the European Union and the Kingdom of Morocco

               ANNEX

               DIRECTIVES FOR THE NEGOTIATION OF AN AGREEMENT BETWEEN

               the European Union and the Kingdom of Morocco on the adaptation of protocols to the Association Agreement between the European Union and the Kingdom of Morocco

               The negotiation should be based on the privileged partnership developed between the European Union and the Kingdom of Morocco and should aim at adapting the instruments of this partnership to the shared ambition of the parties to further such partnership, the Association agreement and its Protocols forming essential parts thereof.

               The Commission should ensure that trade preferences foreseen in the EU-Morocco Association Agreement and its protocols are provided to products originating in Western Sahara. No additional tariff preferences should be negotiated as such. The Commission should also ensure that the agreement explicitly provides for an appropriate framework and process allowing the parties, on the basis of regular exchanges of information, to evaluate its impact during implementation, and discuss impediments to the proper functioning of the agreement.

               This entails appropriate revisions in relevant Protocols to the Association Agreement.

               The form of the agreement should be an exchange of letters.

               The Commission should have enough information to assess, at the time of signature, the potential implications of the agreement on sustainable development, in particular as regards the benefits for the local population and the exploitation of natural resources of the territories concerned.

               It shall be ensured that the protocols are applied in line with the provisions of the Association Agreement relevant to the respect of fundamental freedoms and human rights.

               The Commission should endeavour to ensure that, at the time of its proposal for signature and conclusion, the people concerned by the agreement have been adequately involved.

               The Commission should do its utmost to ensure that the agreement can be implemented as soon as possible.

               The negotiations and their outcome should be supportive of the efforts of the United Nations Secretary-General to find a solution providing for the self determination of the people of Western Sahara consistent with the principles and purposes of the Charter of the United Nations.


               EUROPEAN COMMISSION
            Brussels, 5.6.2019
            COM(2019) 505 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2019 National Reform Programme of Germany and delivering a Council opinion on the 2019 Stability Programme of Germany

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2019 National Reform Programme of Germany and delivering a Council opinion on the 2019 Stability Programme of Germany

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
                  2
               , and in particular Article 6(1) thereof,

               Having regard to the recommendation of the European Commission,

               Having regard to the resolutions of the European Parliament,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 21 November 2018, the Commission adopted the Annual Growth Survey, marking the start of the 2019 European Semester for economic policy coordination. It took due account of the European Pillar of Social Rights, proclaimed by the European Parliament, the Council and the Commission on 17 November 2017. The priorities of the Annual Growth Survey were endorsed by the European Council on 21 March 2019. On 21 November 2018, on the basis of Regulation (EU) No 1176/2011, the Commission also adopted the Alert Mechanism Report, in which it identified Germany as one of the Member States for which an in-depth review would be carried out. On the same date, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area, which was endorsed by the European Council on 21 March 2019. On 9 April 2019, the Council adopted the recommendation on the economic policy of the euro area (‘Recommendation for the euro area’).

               (2)As a Member State whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Germany should ensure the full and timely implementation of the Recommendation for the euro area, as reflected in recommendations (1) and (2) below. In particular, investment measures and supporting wage growth will help address the first euro area recommendation as regards euro area rebalancing, and shifting taxes away from labour will help address the third euro area recommendation for what concerns the functioning of the labour market.

               (3)The 2019 country report for Germany
                  3
                was published on 27 February 2019. It assessed Germany’s progress in addressing the country-specific recommendations adopted by the Council on 13 July 2018, the follow-up given to the recommendations adopted in previous years and Germany's progress towards its national Europe 2020 targets. It also included an in-depth review under Article 5 of Regulation (EU) No 1176/2011, the results of which were also published on 27 February 2019
                  4
               . The Commission’s analysis led it to conclude that Germany is experiencing macroeconomic imbalances. In particular, the slowly declining current account surplus remains high and has cross-border relevance. The surplus slightly narrowed in 2018 in the context of a pick-up in domestic demand and is expected to continue to decline gradually in the coming years, while remaining above the threshold set in the Macroeconomic Imbalance Procedure. The surplus reflects a subdued level of domestic investment relative to savings in both the private and public sectors. Measures have been taken to boost private and public investment, which has increased substantially. This has contributed to a growth more driven by domestic demand. Nevertheless, as a share of GDP, investment and consumption could have been expected to grow more given the favourable financing conditions, the public investment backlog, especially at municipal level, and the available fiscal space. Wage growth increased somewhat with the tightening labour market, yet real wage growth remains modest.

               (4)On 16 April 2019, Germany submitted its 2019 National Reform Programme and, on 17 April 2019, its 2019 Stability Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

               (5)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds ('ESI Funds') for the 2014-2020 period. As provided for in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council
                  5
               , where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of that provision in guidelines on the application of the measures linking the effectiveness of the ESI Funds to sound economic governance
                  6
               .

               (6)Germany is currently in the preventive arm of the Stability and Growth Pact. In its 2019 Stability Programme, the government plans a budget surplus of between ½ and ¾% of GDP over 2019-2023. Based on the recalculated structural balance
                  7
               , the medium-term budgetary objective — a structural deficit of 0.5% of GDP — continues to be overachieved throughout the programme period. According to the 2019 Stability Programme, the general government debt-to-GDP ratio is expected to fall below the 60% of GDP Treaty reference value in 2019 and to gradually decline to 51¼% in 2023. The macroeconomic scenario underpinning those budgetary projections is favourable. Based on the Commission 2019 spring forecast, the structural balance is forecast to register a surplus of 1.1% of GDP in 2019 and 0.8% of GDP in 2020, above the medium-term budgetary objective. General government debt is forecast to remain on a firm downward path. Overall, the Council is of the opinion that Germany is projected to comply with the provisions of the Stability and Growth Pact in 2019 and 2020. At the same time, while respecting the medium-term budgetary objective, it would be important to use fiscal and structural policies to achieve a sustained upward trend in private and public investment, notably at regional and municipal levels.

               (7)Public and private investment increased robustly in 2018, but the investment ratio remains below the euro area average. Public investment in 2018 grew by 7.7% nominally and 3.8% in real terms, but more efforts are still needed to clear the large investment backlog, particularly for investment in infrastructure and education. Real public investment growth has been positive for the last 3 years, after a period of negative growth rates. This reflects government efforts to boost investment. However, investment at municipal level remained lower than depreciation and the investment backlog accumulated by 2018 rose to 5% of GDP. Together with the favourable budgetary position, this indicates that there is scope to increase investment at all levels of government, in particular at regional and municipal levels. Investment in public infrastructure is still held back by capacity and planning constraints at municipal level. Measures to overcome these constraints have been introduced, but have yet to show sustained tangible results. Moreover, there is scope to improve digital public services and public procurement. Private investment has increased noticeably, but not across all asset types. Equipment investment has grown robustly in response to record-high capacity utilisation. Housing investment continues to boom. However, the construction sector now reports capacity constraints and price increases. Non-residential construction has been increasing sluggishly in real terms, suggesting that essential infrastructure may not have kept up with the economy’s needs.

               (8)Public expenditure on education, at 4.1% of GDP in 2017, remained below the Union average of 4.6%. Out of overall government expenditure, 9.3% was spent on education, which is also below the EU average of 10.2%. Spending on education and research remained at 9% of GDP in 2017, falling short of the national target of 10%. Even if education expenditure increased in real terms, the large investment backlog grew further due to demographic developments. Legislative changes allowing direct investment by the federal government in digital education in addition to the resources allocated by the Länder (Digitalpakt) are promising, but have yet to show results. Challenges such as growing student numbers, teacher shortages, digitalisation and further expansion of early childhood education and care will require appropriate public financing. Additional spending on education and on research and innovation is crucial for increasing Germany’s potential growth and adapting to technological change.

               (9)Germany has made progress in recent years in increasing its research and development intensity, mainly as a result of an increase in research and development spending by large companies, especially in medium-high tech manufacturing sectors and in particular the automotive sector. The research and development intensity of small and medium sized businesses is significantly below the EU average and continues to fall behind. Small and medium-sized businesses tend to benefit less from cooperation with public research institutes than large companies. These two factors harm business innovation, which are on a long-term downward trend. Additional investment in research and development are essential not only to increase innovation capacity across the economy and boost productivity, but also to facilitate the transition to a low-carbon and circular economy, notably in relation to sustainable transport, green energy technologies, eco-innovation and recycling, and to further increase the performance of the public research sector and its contribution to these goals.

               (10)Digitalisation of the German economy is progressing slowly and small and medium-sized businesses remain slow adopters of digital technologies. Germany is lagging behind in deploying very high-capacity broadband (gigabit speeds) at national level, and particularly in rural areas, where stronger investment could improve productivity growth. Only 9% German households (in mid-2018) is covered by high-performance fibre-based access networks, compared with the EU average of 30%. Instead, upgrading existing copper cable networks (vectoring) continued to be the incumbent’s preferred technological solution. While many services rely on very high speed connectivity, 23 700 business parks were not connected to a fibre network in 2017 and 28% of all companies lacked access to networks of at least 50 megabits. A lack of such connectivity holds back investment, especially by small and medium-sized businesses, many of which are located in rural and semi-rural areas. Public intervention in the deployment of ultrafast (≥100 Mbps) broadband infrastructure in rural areas remains crucial, and different options going beyond subsidies could be explored. Performance in digital public services and in e-health is far below the EU average. Only 43% of German internet users used e-government services in 2018 (compared to an EU average of 64%). Regarding e-health, 7% of Germans have used health and care services provided online (compared to an EU average of 18%). E-Prescription is used by 19% of general practitioners (compared to an EU average of 50%).

               (11)More investment in transport infrastructure and clean mobility solutions is needed in Germany to tackle mobility and air quality challenges, as well as to support climate change mitigation and adaptation. Greenhouse gas emissions from road transport have increased over the last 5 years. Air quality in Germany gives serious cause for concern, especially in urban areas where traffic accounts for about 60% of harmful NOx emissions. Freight transport could benefit from more developed inter-modality solutions. Cars remain by far the most commonly used means of transport for daily commuting and the average time spent in traffic jams is about 30 hours per year. Congestion and looking for parking spaces has been estimated to cost EUR 110 billion per year, or about 4% of Germany’s GDP. Although vehicles running on alternative fuels have seen the steepest increase in new registrations, the numbers remain low. Car sharing and ridesharing are still heavily underexploited. Considerable public and private investment will also be needed in view of new supply chains for batteries and critical raw materials.

               (12)Germany's electricity networks are slowly adapting to renewable production and significant investment in transmission and distribution grids remains necessary. Substantial delays in carrying out many projects have entailed considerable costs to German and European electricity networks and electricity markets. Of the 1800 km of the grid projects identified in the 2009 Energy Network Expansion Act, only around 800 km had been implemented by the second quarter of 2018, in part because of public opposition. Delays in extending the grid will lead to higher congestion costs and result in more distortions in market functioning, both inside Germany and across borders. Investments in energy networks that promote sector coupling, diversification and an appropriate grid infrastructure are crucial for the flexibility of the energy system and for better integration across different sectors of the economy in view of the achievement of energy and climate targets.

               (13)Housing in Germany has become less affordable. Since 2015, both rents and house prices have grown faster than their long-term averages, in particular in large cities. In 2017, 20% of the people aged 65 and over in Germany faced an excessive housing cost burden (i.e., the total housing cost represented more than 40% of their disposable income), compared to 10% of Europeans aged 65 and over. For the population with the lowest income, the housing cost overburden rate was 10 percentage points above the EU average of 35.3%. The government reacted with certain measures, including a ‘price brake’ restricting rent increases (Mietpreisbremse), a support scheme to buy new property (Baukindergeld), as well as a change of basic law to enable the federal level to financially support the construction of social housing. Nevertheless, the completion of new dwellings remains considerably below demand and well below the government target of 375 000 per year. Further measures may be necessary, such as accelerating the construction of social housing, improving transport options, as well as reforming land-use and building regulation.

               (14)Germany has particularly benefited from integration in the Single Market and plays an important role in its further development. However, barriers to competition in the business services sector in Germany remain high in comparison to other EU Member States. This concerns various areas, including regulated professions such as architecture, engineering, and legal services, where regulatory restrictions, such as reserve of activities and regulation on prices and fees, stifle competition. However, also unregulated business services face more restrictions to the general business environment compared to other Member States. Changes in the regulation of business services to increase competition would boost the efficiency and effectiveness of investment and economic activity.

               (15)After some improvements in previous years, there has been little progress over the past year to reform Germany’s tax system to foster domestic private investment and growth. The tax system remains complex, distorts decision-making, e.g. on labour market participation, investment and financing, and could provide more effective incentives for investment and consumption. Most progress was recorded with labour taxation, but this is not yet visible in the data. There is still potential to reduce distortive taxation on labour through a tax shift away from labour to sources of revenue more supportive to inclusive and sustainable growth. The taxation of earnings from labour in 2018 (the tax wedge) remained among the highest in the EU, both for average and low-wage earners. Social security contributions of employees are particularly high in an international comparison, and social security contributions overall account for about two thirds of the tax wedge, while income tax accounts for one third. In turn, revenues from environmental taxes as a share of GDP are among the lowest in the EU. The cost of capital and the effective average corporate tax rate, which differ across regions, are among the highest in the EU. The effective average tax rate amounted to 28.8% (national aggregate) as compared with an EU average of 20%. Due to the interplay of the corporate income tax, the local trade tax and the solidarity surcharge, the corporate tax system is complex, involves high tax administration costs and distorts the level and location of investments. In addition, the corporate income tax distorts financing decisions, with a bias towards debt financing, estimated to be the third highest in the EU, according to 2017 data. Lowering the capital costs on equity could increase private investment and strengthen the relatively under-developed venture capital market.

               (16)The labour market remains strong, while the labour market potential of certain groups is underused. The employment rate for ages 20-64 reached 79.9% in the fourth quarter in 2018, one of the highest in the EU. Unemployment sank to a record low of 3.2% by the beginning of 2019. High job vacancy rate and labour shortages are becoming increasingly apparent and are restraining production significantly in some regions and sectors. Still, the labour market potential of certain groups, like women and people with a migrant background, is underused. At 46.7%, Germany’s percentage of female part-time work is very high. Taxes on labour in Germany remain relatively high, including for lower wage earners. The particular rules governing joint income taxation for married couples (Ehegattensplitting) mute the incentives for second earners to work notably longer hours. People with a migrant background have a considerably lower employment rate than people with a native background, with a particularly high gap for women. Measures have been taken to support the integration of refugees in the labour market, but challenges remain, including their lack of proficiency in the German language, missing or non-transferable qualifications, caring responsibilities towards children and relatives, and lack of experience with informal rules on the German labour market.

               (17)The retirement of the baby boomer generation is affecting Germany more than other EU countries. In the long-run, this demographic change will strain German public finances, could challenge the adequacy of pensions, and could degrade the currently limited share of the older population (aged 65 and above) at risk poverty or social inclusion. By 2040, the country is expected to be facing one of the largest increases in spending in relation to GDP on public pensions in the EU (up by 1.9 percentage points of GDP), while the public pension benefit ratio is expected to fall by 4.4 percentage points, to 37.6%, according to the 2018 Ageing Report (European Commission, 2018d). Recent pension reforms increased benefit levels for certain groups, yet it is not clear that the achieved social benefits are commensurate to their considerable fiscal cost. The government also set two ‘stop lines’ (doppelte Haltelinie): a maximum pension contribution rate of 20% and minimum income replacement rates of 48% up to 2025. Retaining these limits is expected to require significant fiscal transfers, increasing further the burden on younger generations. In addition, the adequacy of the retirement income of low-income workers remains an issue.

               (18)Despite increasing labour shortages, real wage growth remains modest, while nominal earnings rose by 3.1% in 2018. In addition, a concentration of employment growth in better paid full-time jobs and a reduction of the share of marginal part-time work in total employment contributed to overall wage growth in 2018, also slightly ahead of productivity growth. Collective bargaining coverage continued to decline (by 2 percentage points from 2016 to 2017), to 49% in the west and 34% in the east. There are significant differences in terms of coverage across sectors, with better coverage in the public sector and industry, while services have a much lower coverage. Low-paid workers have generally benefited from the minimum wage that has been introduced since 2015. Hourly wages at the very bottom of the wage distribution, notably the two lowest wage deciles, increased substantially. However, the share of low-paid workers, at 22.5% in 2017, remains considerably above the EU average. The number of people employed only in mini-jobs fell by 6.8% over 2010-2018 and employment subject to social insurance rose by around 18.1% in the same period. Strengthening the conditions to promote wage growth would support domestic demand and contribute to euro area rebalancing.

               (19)Upward social mobility in education is low in Germany. National sources confirm little progress in reducing the influence of socio-economic background on educational outcomes. Germany has a good track record of integrating recently arrived migrants and refugees into education and training. However, people with a migrant background typically face bigger challenges than students with a native background (e.g., early school living rates and difficulty in finding apprenticeship places). Increasingly heterogeneous classrooms calls for strong efforts to reinforce the teaching profession, at a time of already considerable teacher shortage. The participation of employees in adult learning is a concern for future labour market performance of workers, in particular for the 7.5 million people who lack basic reading and writing skills.

               (20)Though the number of people at risk of poverty or social exclusion has fallen since its peak in 2014, challenges in equality of opportunities remain. In particular, the risk of poverty or social exclusion was, in 2017, 67 percentage points greater for the children of low-skilled parents than for the children of highly skilled parents. This gap is substantially higher than the average gap (53.9 percentage points) in the EU.

               (21)The programming of EU funds for the period 2021-2027 could help address some of the gaps identified in the recommendations, in particular in the areas covered by Annex D to the country report
                  8
               . This would allow Germany to make the best use of those funds in respect of the identified sectors, taking into account regional disparities.

               (22)In the context of the 2019 European Semester, the Commission has carried out a comprehensive analysis of Germany’s economic policy and published it in the 2019 country report. It has also assessed the 2019 Stability Programme and the 2019 National Reform Programme and the follow-up given to the recommendations addressed to Germany in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Germany, but also their compliance with Union rules and guidance, given the need to strengthen the Union’s overall economic governance by providing Union-level input into future national decisions.

               (23)In the light of this assessment, the Council has examined the 2019 Stability Programme and is of the opinion that Germany is expected to comply with the Stability and Growth Pact.

               (24)In the light of the Commission’s in-depth review and this assessment, the Council has examined the 2019 National Reform Programme and the 2019 Stability Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations (1) and (2) below.

               HEREBY RECOMMENDS that Germany take action in 2019 and 2020 to:

               1.While respecting the medium-term budgetary objective, use fiscal and structural policies to achieve a sustained upward trend in private and public investment, notably at regional and municipal level. Focus investment-related economic policy on education; research and innovation; digitalisation and very-high capacity broadband; sustainable transport as well as energy networks and affordable housing, taking into account regional disparities. Shift taxes away from labour to sources more supportive for inclusive and sustainable growth. Strengthen competition in business services and regulated professions.

               2.Reduce disincentives to work more hours, including the high tax wedge, in particular for low-wage and second earners. Take measures to safeguard the long-term sustainability of the pension system, while preserving adequacy. Strengthen the conditions that support higher wage growth, while respecting the role of the social partners. Improve educational outcomes and skills levels of disadvantaged groups.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        OJ L 306, 23.11.2011, p. 25.

                     (3)

                        SWD(2019) 1004 final.

                     (4)

                        COM(2019) 150 final.

                     (5)

                        Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320).

                     (6)

                        COM(2014) 494 final.

                     (7)

                        Cyclically-adjusted balance net of one-off and temporary measures, recalculated by the Commission using the commonly agreed methodology.

                     (8)

                        SWD(2019) 1004 final.