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2017

Annual Activity Report

Directorate General for Trade

Ref. Ares(2018)1720253 - 28/03/2018

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Foreword

The Director-General or equivalent head of Commission department may insert here an introductory message.


Table of Contents

THE DG IN BRIEF 4

EXECUTIVE SUMMARY 5

A) KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF DG TRADE’S GENERAL AND SPECIFIC OBJECTIVES ........................... 5 B) KEY PERFORMANCE INDICATORS (KPIS) ......................................................................................................................... 9 C) KEY CONCLUSIONS ON FINANCIAL MANAGEMENT AND INTERNAL CONTROL .......................................................................... 11 D) PROVISION OF INFORMATION TO COMMISSIONER MALMSTRÖM ...................................................................................... 11

1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG 12

Specific objective 1: Trade Negotiations ...................................................................................................... 13 Specific objective 2: Effective implementation ............................................................................................. 20 Specific objective 3: Tackling unfair trade .................................................................................................... 27 Specific objective 4: A sustainable approach to trade .................................................................................. 30

2. ORGANISATIONAL MANAGEMENT AND INTERNAL CONTROL 33

2.1 FINANCIAL MANAGEMENT AND INTERNAL CONTROL ................................................................................................ 33 2.1.1 CONTROL RESULTS ........................................................................................................................................... 33 2.1.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS ................................................................................................... 41 2.1.3 ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS .................................................................. 43 2.1.4 CONCLUSIONS AS REGARDS ASSURANCE ................................................................................................................ 45 2.1.5 DECLARATION OF ASSURANCE ............................................................................................................................ 46

DECLARATION OF ASSURANCE 47

2.2 OTHER ORGANISATIONAL MANAGEMENT DIMENSIONS ............................................................................................ 48 2.2.1 HUMAN RESOURCE MANAGEMENT ...................................................................................................................... 48 2.2.2 BETTER REGULATION ........................................................................................................................................ 50 2.2.3 INFORMATION MANAGEMENT ASPECTS ................................................................................................................ 50 2.2.4 EXTERNAL COMMUNICATION ACTIVITIES ............................................................................................................... 50


THE DG IN BRIEF

DG Trade is in charge of developing and implementing the common trade policy of the European Union in accordance with the objectives set out in Article 207 of the Treaty on

the Functioning of the EU. DG Trade supports the EU's Trade Commissioner in shaping a

trade environment that is good for European citizens and for European business and helping world trade and development, thereby boosting competitiveness, jobs and growth

in the process.

DG Trade negotiates bilateral, pluri- and multilateral trade agreements, ensures that the

rules agreed are actually applied, and works closely with the WTO and other multilateral institutions. This means tackling international trade and customs barriers, backed up

where needed with EU legislation. Trade negotiations cover a wide range of areas such as goods, services, intellectual property, investment, government procurement, access to

energy and raw materials, customs and trade facilitation, competition (including subsidies

and State Owned Enterprises), trade and sustainable development, investment and regulatory co-operation. DG Trade ensures that businesses can operate fairly in the EU

and across the world and makes full use of its powers to tackle unfair competition, dumping and subsidisation. Success in Europe is inextricably bound up with the success

of the EU’s trading partners, both in the developed and developing world. For this reason, sustainable development and development policy in general are central to the overall

approach.

While DG Trade does not manage any specific spending programme, in 2017 it managed

a budget of about €22 million (about €17.5 million in its operational budget and about

€4.5 million in its administrative budget). This budget has remained stable over recent years. At the same time trade-related objectives are also embedded in the different

financial programmes managed by other Commission departments, mainly under the heading of the Multiannual Financial Framework covering the EU as a global player

(Heading 4).

As the EU's prime negotiator and guardian of an effectively implemented EU trade policy,

DG Trade’s mission is largely dependent on close working relations with its partners, both inside and outside the Commission. In playing its role in trade policy, DG Trade works

very closely with the European Parliament and the Council of the European Union and

with other international organisations, such as the World Trade Organisation (WTO) and the Organisation for Economic Co-operation and Development (OECD), as well as with

the Civil Society. Its success draws strongly on its close working relationships with the European External Action Service (EEAS) and other Commission services.

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

General is supported in managing operations by two Deputy Directors Generals, who bear overall responsibility for Directorates B, C and D; and E, F, G and H respectively.

Operational activities are supported by the Policy Coordination, Information and

Resources Directorate (A); reporting directly to the Director General. In addition, DG Trade has staff posted in EU Delegations and in three Commission representations, for

which DG Trade is the Appointing Authority.

As demonstrated through the indicators, DG Trade is well-managed and works efficiently.

It is operating today under considerable resource pressure both at Headquarters and in EU Delegations throughout the world. In a climate of staff reductions across the

Commission, it remains challenging to continue to support the current agenda, perform outreach and raise public awareness of its work and effectively carry out the increased

implementation work, in addition to the increasing workload brought from the new

initiatives launched in 2017.


EXECUTIVE SUMMARY

The Annual Activity Report is a management report of the Director-General of DG Trade to the College of Commissioners. Annual Activity Reports are the main instrument of

management accountability within the Commission and constitutes the basis on which

the College takes political responsibility for the decisions it takes as well as for the coordinating, executive and management functions it exercises, as laid down in the

Treaties1.

a) Key results and progress towards the achievement of

DG Trade’s general and specific objectives

On 13 September, in his annual State of the Union address, President Jean-Claude Juncker stated: "I want us to strengthen our European trade agenda. Yes, Europe is

open for business. But there must be reciprocity. We have to get what we give. Trade is

not something abstract. Trade is about jobs, creating new opportunities for Europe’s businesses big and small. Every additional €1 billion in exports supports 14,000 extra

jobs in Europe. Trade is about exporting our standards, be they social or environmental

standards, data protection or food safety requirements."

At the occasion of the State of the Union speech, Trade Commissioner Cecilia Malmström said: "The world needs leaders in trade. The EU continues to champion free

and fair trade, at the forefront of a group of like-minded countries. Today's package of proposals shows this leadership in action. It also demonstrates our determination to

develop EU trade policy in a way that's as open and inclusive as possible. And in the coming weeks I will be working closely with the European Parliament and EU

governments, through the Council of the EU, to move these proposals forward as quickly

as possible."

2017 was a fruitful year for DG Trade delivering on several areas of the EU’s

trade policy demonstrating the EU added value in this policy field. Concrete outputs were delivered not only on bilateral and multilateral relations, but also in the regulatory

sphere.

The Commission adopted as part of President Juncker’s State of the Union

speech a new Trade Package, which included several initiatives:

A Communication on “A Balanced and Progressive Trade Policy to Harness Globalisation”.

A recommendation to the Council to authorise the opening of negotiations

for free trade agreements with Australia and with New Zealand,

respectively. For the first time, the Commission decided to make public these negotiation directives (see other results towards a fully transparent trade policy

further below), along with the impact assessment report.

A recommendation to the Council to authorise the opening of negotiations for a Convention establishing a multilateral court for the settlement of

investment disputes. This court would replace the Investment Court System (ICS) currently foreseen in the EU’s bilateral agreements and the Investor-State

Dispute Settlement arrangements that exist in more than 3000 current bilateral

1 Article 17(1) of the Treaty on European Union.


investment treaties. These are the first ever discussions at multilateral level on the reform of the investor-state dispute settlement.

A proposal for a new framework for screening of Foreign Direct Investment into the EU. It consists of a dedicated Communication outlining the

strategic need for such a screening entitled “Welcoming Foreign Direct Investment while Protecting Essential Interests” as well as a Proposal for a Regulation of the

European Parliament and the Council establishing a framework for screening of foreign direct investments into the European Union. These steps are taken in

order to make sure that the EU remains one of the world’s most open investment regimes, and thereby a source of growth and jobs while protecting its essential

interests.

On 21 September 2017, the

Comprehensive Economic and Trade Agreement

(CETA) between EU and Canada entered into

provisional application. Canada is one of the EU's

oldest and closest strategic partners. Canada and the EU

have a long history of shared

values and therefore work closely together on many

global challenges such as the environment, climate change, energy security, regional stability etc. Canada is the 11th largest economy in the world and is the 12th largest

trading partner of the EU. With CETA, European companies are receiving the best treatment that Canada has ever offered to any trading partner, thus levelling the playing

field on the Canadian market for EU operators. By opening markets, CETA should support growth and jobs in the EU and bring further benefits for European consumers.

The most prominent negotiating achievement in

2017 was undoubtedly the finalisation of the

negotiations of an Economic Partnership Agreement

(EPA) with Japan. This agreement is one of the largest

and most comprehensive

economic agreements that either the EU or Japan have

concluded so far. This EPA involves approximately 30 percent of the world GDP, and will open up tremendous trade

and investment opportunities for both partners. It will also strengthen economic cooperation between Japan and the EU and reinforce their competitiveness as mature but

also innovative economies.

Another major milestone in 2017 was the ruling of the European Court of

Justice (ECJ) on the division of competences between the EU and its Member States in the Singapore FTA. This has triggered a reflection process between the

Commission, the EU’s Member States and the European Parliament on the future architecture of trade and investment agreements; a process which has implications for

the imminent signature and entry into force of free trade agreements with Singapore and Vietnam, negotiations which had already reached a political conclusion in 2014 and 2015

respectively.


DG Trade’s negotiation force focused intensively on talks with Mexico and Mercosur in 2017. Significant

progress was made towards

reaching a balanced agreement with Mexico for modernising the

existing trade pillar of the 2000 EU-Mexico Global Agreement.

Simultaneously, the talks with four countries of the South

American sub-regional trading bloc Mercosur advanced on a

trade chapter in the future EU-Mercosur Association

Agreement.

As for the modernisation of the 2005 EU-Chile Association Agreement, the

Commission recommended on 24 May to the Council to authorise the opening of negotiations. The Council gave its green light in November 2017 and negotiations were

subsequently launched during the same month. A first substantive negotiation round took place in Santiago de Chile in January 2018.

On the multilateral track, the Trade Facilitation Agreement agreed at the World

Trade Organization’s 9th Ministerial Conference entered into force in February

2017 after two-thirds of the WTO membership completed their domestic ratification process. This agreement aims to simplify and clarify international import and export

procedures, customs formalities and transit requirements.

With regard to the EU’s anti-dumping and anti-subsidy legislation, two major amendments were agreed in the European Parliament and the Council in 2017.

The first one provides for a new method for calculating dumping on imports from countries where there are significant market distortions, in particular owing to state

interference. This amendment entered into force just over a year after being proposed by

the Commission. The second amendment aims at modernising the EU’s Trade Defence Instruments providing for new rules to shorten the current 9 month investigation for the

imposition of provisional measures and making the system more transparent.

Finally, the Council and the European Parliament adopted in May 2017 a new EU regulation to ensure responsible importation of the so-called 'conflict minerals'

tin, tantalum, tungsten and gold. This regulation will ensure that companies involved in mining, processing and trade in minerals do not intentionally or unintentionally contribute

to risks associated with conflict financing and human rights abuses, but focus on

generating income, growth and prosperity, and support the livelihood of local communities.

From the transparency and reporting angle, DG Trade also accomplished new results in

2017:

In the context of the effective implementation of the trade and investment policies, the Commission decided in September to create an expert group on EU

trade agreements. This is a group which will allow the Commission to engage with

representative organisations with expertise in economic, social, ethical and/or environmental issues in its implementation of the EU's trade policy.

At the same time, the Commission, starting with Australia and New Zeeland,

decided to publish its draft negotiation directives accompanying its recommendations to Council to open negotiations at the time of their proposal, and

continued to recommend that Council publish the final version.

Two major reports with regard to the EU's trade policy were released in 2017 in

addition to the more regular reporting. The report "Implementation of the Trade


Policy Strategy Trade for All" showed that DG Trade is delivering on a progressive trade policy to harness globalisation. Another report "Implementation of Free Trade

Agreements" is the first of its kind shedding light on what happens after trade

agreements are negotiated and have entered into force. This publication is another step towards a fully transparent and inclusive trade policy, in line with the Commission's

commitments set out in the EU's 2015 'Trade for All' strategy.

In 2017 DG Trade

published 17 negotiation round reports published 65 legal text proposals

held 23 meetings with civil society and other interested parties, including

meetings during specific negotiation rounds. launched four public consultations on Impacts Assessments and Sustainability

Impact Assessments


b) Key Performance Indicators (KPIs)

In this section, the three most relevant KPIs as identified in the DG Trade 2016-2020

Strategic Plan are presented.

KPI 1 : Preference utilisation rates of EU preferential trade arrangements2 for the EU and partners' side

This indicator will show the extent to which operators will be making use of the EU preferential arrangements. It will

give an indication how well these agreements are formulated and how the uptake is handled in the EU Member

States and the partner countries.

Source of data: Eurostat and national customs registrations

Baseline

2012

Interim

Milestone

2018

Target

2020

Latest known result

2015/2016

Preference utilisation EU importers

FTA 2012 2013 2014

Chile 93% 93% 94% Increase of rates The target is to increase the

percentage according to

recent trend. It is difficult to

predict an exact percentage

at a specific moment in

time. Ultimately, the desire

is of course to have full

coverage over time as this

will have the greatest

impact on the economy

95% - 95%

Mexico 68% 67% 61% 52% - 58%

Colomb

ia

…. 85% 96% 97% - 97%

Peru 95% 97% 98% - 97%

South

Africa

90% 91% 91% 85% - 78%

South

Korea

78% 82% 84% 85% - 87%

Turkey 92% 92% 93% 93% - 93%

Ukrain

e

…. - 89%

Preference utilisation EU exporters

FTA 2012 2013 2014 2015/2016

Chile 79% 78% 78% Increase of rates The target is to increase the

percentage according to

recent trend

76% - 74%

Colomb

ia

56% 63% - 71%

Costa

Rica

18% … - 38%

Egypt 55% 57% 41% - 59%

Monten

egro

76% 86% 86% 85% - 85%

South

Korea

65% 68% - 71%

Looking at the latest known results from 2016, it is noticeable that most results are rather stable showing good use of the agreements.

2 A selection of countries is shown, where agreements have been in place for a certain time.


KPI 2 : Percentage of EU trade covered by applied bi-lateral and regional agreements,3

This indicator will show the extent of the EU trade covered by EU's applied preferential trade and investment

agreements and the evolution of this coverage. The figures are based on trade in goods and services.

Source of data: DG Trade / Eurostat

Baseline

2013-15 goods /

2012-14 services

These figures now

exclude services with

Switzerland, as they had

mistakenly been included

in the Strategic Plan

Interim Milestone

2018

Target

2020

Latest known result

2015-17 goods/

2014-16 services

Impo

rts

Export

s

Total Imports Exports Total Import

s

Exports Total Impor

ts

Export

s

Total

21% 24% 23% 31% 35% 33% 54% 62% 58% 22% 26% 24%

Although the EU welcomed nine new countries as trade agreement partners in 2016 and another significant partner in 2017, it will take some time before the above indicators will

show results. This is due to the time lag of latest known results.

KPI 3 : Percentage of fully liberalised imports from the world (i.e. at zero duty4)

This indicator will show the extent of the EU's applied preferential treatment for merchandise imports (EU imports

extra EU) and its evolution. The bigger the share, the better economic conditions and opportunities for EU

consumers, and EU operators using imports as inputs in their businesses.

Source of data: Eurostat

Baseline

2015

Interim Milestone

2018

Target

2020

Latest known result

2016

70% Increase Increase 70%

The indicator remains at the same level as the year before.

3 This indicator does not cover multilateral WTO nor the plurilateral sectoral negotiations and agreements

4 Most Favoured Nation (MFN) duty free, Generalised Scheme of Preferences (GSP) duty free and other duty

free


c) Key conclusions on financial management and internal control

In accordance with the governance arrangements of the European Commission, the staff

of DG Trade conducts its operations in compliance with the applicable laws and regulations, working in an open and transparent manner and meeting the expected high

level of professional and ethical standards.

The Commission has adopted a set of internal control standards/principles, based on

international good practice, aimed to ensure the achievement of policy and operational objectives. The financial regulation requires that the organisational structure and the

internal control systems used for the implementation of the budget are set up in accordance with these standards/principles. DG Trade has assessed the internal control

systems during the reporting year and has concluded that the internal control

standards/principles are implemented and function as intended Please refer to AAR section 2.1.3 for further details.

In addition, DG Trade has systematically examined the available control results and indicators, including those aimed to supervise entities to which it has entrusted budget

implementation tasks, as well as the observations and recommendations issued by internal auditors and the European Court of Auditors. These elements have been

assessed to determine their impact on the management's assurance as regards the achievement of control objectives. Please refer to Section 2.1 for further details.

In conclusion, management has reasonable assurance that, overall, suitable controls are

in place and working as intended; risks are being appropriately monitored and mitigated; and necessary improvements and reinforcements are being implemented. The Director

General, in his capacity as Authorising Officer by Delegation has signed the Declaration of Assurance.

d) Provision of information to Commissioner Malmström

In the context of the regular meetings during the year between the DG and the Commissioner on management matters, also the main elements of this report and

assurance declaration have been brought to the attention of Commissioner Malmström,

responsible for trade.


1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG

As set out in its Strategic Plan 2016-2020, DG Trade pursues its DG specific objectives in context of three of the Commission's general objectives. These specific objectives,

together with their link to the general objectives5 are set out in the figure below. DG Trade’s policy actions are also aimed at achieving the objectives set out in the trade and

investment policy strategy Communication "Trade for All", adopted by the College of Commissioners on 14 October 20156.

5 The title of Priority 6 has been updated and made geographically neutral in view of the slowing down of

trade talks with the United States, the new geopolitical context, and the new dynamism in trade talks with

other important regions of the world. The Commission has reflected this reality by changing the previous

General Objective ("A Reasonable and Balanced Free Trade Agreement with the U.S") and introducing a new

impact indicator replacing the old one "Share US in total EU FDI stocks".

6 COM(2015)497 of 14 October 2015. The Trade for All Strategy was complemented by a new package

Communication (COM(2017) 492) in the context of President Juncker’s 2017 State of the Union speech

entitled “A balanced and Progressive Trade Policy to Harness Globalisation”. This package adds to and

completes the existing very intensive trade agenda of the Union in order to respond to the current

opportunities and challenges Europe faces, while furthering Europe’s essential interests.

1. A New Boost for Jobs,

Growth and Investment

6. A balanced and

progressive trade policy to harness globalisation

9. A Stronger Global Actor

Specific objective 1: Trade Negotiations

Specific objective 2: Effective Implementation

Specific objective 3: Tackling Unfair Trade Specific objective 4: A

Sustainable Approach to Trade

http://eur-lex.europa.eu/legal-content/AUTO/?uri=CELEX:52015DC0497&qid=1490703416416&rid=1


Specific objective 1: Trade Negotiations

A wide coverage of the world's trade through regional, multi-, pluri- and bilateral agreements concluded by the EU ensuring the best economic

conditions and opportunities for consumers, workers, citizens and

enterprises, including SMEs, in the EU and non-EU countries, particularly

in Developing Countries

Activities and outputs under this specific objective contribute to various extents to the Commission's General objective 1, 6 and 9. DG Trade has been strongly pursuing its

comprehensive negotiation agenda aiming to increase the coverage of the trade between the EU and its trading partners with preferential tariffs and simplified regulatory

procedures for the benefit of EU citizens. Increasing opportunities for exports and imports have proven to boost the economy and create jobs in the EU. Trade agreements

are also an important element for the EU as a global actor in stabilising relations with

partners countries. In this context, trade negotiations are one of the core elements of towards a balanced and progressive trade policy to harness globalisation.

The multilateral and plurilateral agenda

In the run up to the 11th Ministerial Conference (MC11) of the World Trade

Organisation in December 2017, the EU, represented by DG Trade, had challenged its 163 WTO partners to plan for substantive outcomes with a

suitable package including text proposals in areas such as e-commerce, domestic support in agriculture, horizontal subsidies, fisheries subsidies, domestic regulation in

services, and on issues of interest to SMEs, such as transparency and good regulatory

practices of work. The successes of the last two Ministerial Conferences brought some optimism that despite significant differences of views among its Members, the WTO is still

capable of delivering important negotiated outcomes; however, MC 11 made clear that success is not a given and that the WTO's negotiating and deliberative function are facing

fundamental problems. In fact the Conference failed to reach any substantive outcome other than the decision to pursue negotiations on fisheries subsidies (Ministerial Decision

on Fisheries Subsidies) and other decisions extending the moratoria on customs duties on electronic transmissions and on non-violation and situation complaints (Work Programme

on Electronic Commerce and TRIPS non-violation and situation complaints, as well as a

decision on the Work Programme on Small Economies and a decision establishing a working party on accession for South Sudan. The lack of consensus on other issues led a

number of WTO Members, including the EU, to initiate work within subsets of WTO Members on e-commerce, domestic regulation in services, investment facilitation and

Micro, Small and Medium-sized Enterprises (MSMEs).

”All WTO Members have to face a simple fact: we failed to achieve all our objectives, and did not achieve any multilateral outcome. The sad reality is that we did not even agree to

stop subsidising illegal fishing. Now, I hope that several WTO members, whose actions here in Buenos Aires prevented an outcome, will use the time following this Ministerial

meeting for valuable self-reflection”, Malmström said.

Participants in the WTO’s Information Technology Agreement (ITA) met on 28 June to discuss implementation issues related to the Information Technology

Agreement (ITA) and to report on work in the area of non-tariff barriers (NTBs). This discussion took place at the occasion of the 20th anniversary of the ITA. As part of

the ITA Committee’s work programme on NTBs affecting trade in information technology products, the EU together with a small group of like-minded members have been

focusing their discussions on issues such as conformity assessment, transparency and e-labelling. On transparency, the group is discussing ways to enhance the quality of

notifications of products covered by the ITA as well as current practices and regulations

related to electronic labelling for ICT products. As the last of the major participants, Japan finally ratified and implemented the expanded ITA in 2017. Work continued to


encourage the four remaining WTO members that agreed to the expanded ITA to ratify it. In addition, DG Trade continued to encourage more original ITA participants to join the

expanded ITA, following the examples of Macao and Georgia.

DG Trade continued working towards the launching of the 5th review of the Pharma

arrangement so as to incorporate new active ingredients for duty-free treatment. However, the launch of the review has so far been blocked by the United States.

In terms of plurilateral sectoral negotiations, there were no substantive developments in 2017 due to lack of political will of some of the EU’s negotiating partners. As such the

negotiations which started in July 2014 together with 17 partners of the World Trade Organization (WTO), including the EU, for an Environmental Goods Agreement

(EGA)7 to remove barriers to trade in environmental or "green" goods that are crucial for

environmental protection and climate change mitigation did not advance. Nor were talks resumed for a Trade in Services Agreement (TiSA)8 particularly due to the current US

administration's agenda not being favourable for bridging differences that had already appeared in the negotiations towards the end of 2016.

The Commission recommended to the Council to authorise the opening of negotiations

for a Convention establishing a multilateral court for the settlement of investment disputes9 on 13 September 2017. As part of this process an impact assessment was

finalised in September 201710. The Council is expected to adopt the authorisation to

negotiate in early 2018. This court would replace the Investment Court System (ICS) currently foreseen in the EU’s bilateral agreements and the Investor-State Dispute

Settlement arrangements that exist in more than 3000 current bilateral investment treaties. In July 2017 the United Nations Commission on International Trade Law

(UNCITRAL) agreed to initiate multilateral discussions on the reform of investor state dispute settlement. These are the first ever discussions on this issue at multilateral level.

These discussions will first examine the problems before potentially moving to work on solutions. Work started in 2017 and will continue in 2018.

7 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1116

8 http://ec.europa.eu/trade/policy/in-focus/tisa/

9 COM(2017)493 final of 13 September 2017

10 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1505303601241&uri=SWD:2017:302:FIN

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1505306108510&uri=COM:2017:493:FIN


Finalising concluded bilateral and regional negotiations

The most prominent

achievement in terms

of trade negotiations in 2017 is

undoubtedly the finalisation of the

negotiations of an Economic

Partnership Agreement (EPA)

with Japan, announced on 8

December 201711.

The agreement is the result of an intensive

process of negotiation rounds and

intersessional meetings particularly

in 2017. The EU-Japan EPA is one of the largest and most comprehensive economic agreements that either the EU or Japan have concluded so far. This EPA involves

approximately 30 percent of the world GDP. It will open up tremendous trade and

investment opportunities and will contribute to strengthening the economies for both partners. It will also strengthen economic cooperation between Japan and the EU and

reinforce their competitiveness as mature but also innovative economies. This agreement also includes, for the first time, an SME chapter specifically designed for small businesses

to draw maximum benefits from the opportunities created by the FTA. A strong chapter on Trade and Sustainable Development is also part of the agreement, reaffirming both

sides' strong commitment to labour and environmental standards. Following this agreement, the EU and Japan carried out the legal verification of the text, also known as

"legal scrubbing", completing this task in February 2018. The English text of the

agreement is now being translated into the other 23 official languages of the EU, as well as into Japanese. The Commission will subsequently submit the agreement for the

approval of the European Parliament and Council, aiming for its entry into force before the end of the current mandate of the European Commission in 2019.

After confirming the conclusion of this process in a phone call with Prime Minister Abe, Commission President Jean-Claude Juncker said: "This is the EU at its best, delivering

both on form and on substance. The EU and Japan send a powerful message in defence of open, fair and rules-based trade. This agreement enshrines common values and

principles, and brings tangible benefits to both sides while safeguarding each other's sensitivities. In line with the commitment made in July, we finalised the discussions

before the end of the year. We will now do the necessary to submit the agreement to the European Parliament and EU's Member States so that our companies and citizens can

start exploring its full potential before the end of the mandate of my Commission."

Another major milestone in 2017 is the ruling12 of the European Court of Justice

(ECJ) on the division of competences between the EU and its Member States in the Singapore FTA13. Consequently the Commission has started a reflection process

with Member States and with the European Parliament on the future architecture of trade and investment agreements with non-EU countries, including on the need to negotiate


12 Opinion 2/15

13 http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156035.pdf

http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156035.pdf


and propose for signature and conclusion two separate agreements: a free trade agreement covering areas where the EU has exclusive competence according to the

Treaty of the Functioning of the Union and an investment protection agreement covering

areas where the EU shares competences with the EU Member States. Taking account of this process, the Commission intends to submit proposals for signing and concluding the

agreements with Singapore and Vietnam once this reflection process and internal procedures, including translations are completed in 2018.

As for the Economic Partnership Agreements (EPA) with African countries, the signature processes of the EPAs with West Africa and the East African Community (EAC) could not

be completed in the partner regions as certain individual countries are not yet in a position to sign. In West Africa 13 out of 16 partner countries and in EAC two out of five

partner countries have signed these EPAs. Signatures of all the parties are needed before provisional application can start.

On-going negotiations

DG Trade’s negotiators focused much on talks with Mexico for modernising the existing trade pillar of the 2000 EU-Mexico Global Agreement14. These negotiations intensified in

2017 with five negotiation rounds held in Brussels and Mexico City which were supplemented by a number of intersessional meetings. As a result, significant progress

was made towards reaching a balanced agreement for both parties. DG Trade launched work with an independent contractor to carry out a Sustainability Impact Assessment

(SIA)15 to provide the EU negotiators with information on the possible impacts of the modernised agreement in this area. To ensure a transparent negotiation process, reports

of the round as well as the textual proposals by the EU were published on the trade

policy section of the Europa website16

Another big focus of the EU’s negotiating experts was the talks with four countries of the

South American sub-regional trading bloc Mercosur17 on a trade chapter in the Association Agreement between the two parties. Five rounds were held alternatively in

Brasilia and Brussels during 2017 that led to significant progress in areas such as trade in goods, rules of origin, SPS, TBT, services, government procurement, and trade and

sustainable development. An SIA was equally kicked off in 201718.

In our immediate neighbourhood, only a technical negotiation round was held in the early

2017 with Tunisian19 counterparts in the context of advancing towards a Deep and

Comprehensive FTA (DCFTA). Tunisia asked for time to undertake a number of studies including an ex-post impact assessment of the existing Association Agreement. Following

the change of government a new Tunisian chief negotiator has now been appointed and the plan is hold the next round before the summer 2018. The Moroccan side in charge

of negotiations for a DCFTA with the EU has not yet lifted its suspension of negotiations pending the outcome of in-depth studies and domestic consultations. It has also further

limited contacts with the EU following the European Court of Justice ruling on the affiliation of Western Sahara. Negotiations are still ongoing with Morocco to extend the

Agricultural Agreement to cover the Western Sahara following the ECJ Judgement.

Bilateral talks with China20 for an agreement on investment protection (IPA) continued in 14 http://ec.europa.eu/trade/policy/countries-and-regions/countries/mexico/

15 http://www.siaeumexico.com/


17 http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

18 http://www.eumercosursia.com/

19 http://ec.europa.eu/trade/policy/countries-and-regions/countries/tunisia/

20 http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/


2017 with four rounds of negotiations held in Beijing and Brussels. The negotiating parties have continued text-based discussions for topics over which exchanges are

already advanced, such as expropriation and transparency. On the issues relating to

national treatment, the EU and China clarified their respective understanding of the scope and function of the non-discrimination obligations. Exchanges on sustainable

development, financial services and the umbrella clause are still at an initial stage.

In April 2017 chief negotiators met in Yangon to discuss issues outstanding from the 4th

round of negotiations held in December 2016 on the Investment Protection Agreement (IPA) between the EU and Myanmar21. The parties discussed the newest elements of the

EU's reformed approach to investment protection and investment dispute resolution, including a robust code of conduct for the judges of the Investment Court System. This

built on the agreement found on the transparency and sustainable development chapters. Despite the good technical progress, no further negotiation round was held as the

Commission does not consider the current political circumstances conducive to conclude

the negotiations.

Based on the 2007 negotiating directives for FTAs with the Association of South East

Asian Nations – ASEAN – and its Member States, in 2016, negotiations were launched with the Philippines22 and Indonesia23. Two rounds have taken place so far with the

Philippines of which the last one in February 2017, whereas EU negotiators have met three times with their Indonesian counterparts including twice in 2017. Work was

launched to carry out an SIA in December. Simultaneously, work is in preparation for region to region talks with the objective to negotiate an EU-ASEAN trade agreement.

As to the planned SIA for the EU’s trade negotiations with India24, this was not triggered

as negotiations have not yet resumed. Key outstanding issues include improved market access for certain goods and services, government procurement, geographical

indications, sound investment protection rules, and sustainable development.

In the past year, DG Trade worked together with the European External Action Service

(EEAS) to finalise a new framework agreement with Armenia25, enhancing our bilateral relations, including trade. A successful outcome was reached at the fifth Eastern

Partnership summit in Brussels on 24 November 2017, where Armenia and the EU signed a new Comprehensive and Enhanced Partnership Agreement (CEPA). The CEPA improves

conditions for bilateral trade compared to the former bilateral Partnership and

Cooperation Agreement and to the WTO framework. The disciplines contained in the new agreement will generate more entrepreneurship and competition and provide traders,

investors and services suppliers' with greater trading and cooperation opportunities.

Negotiations for Association Agreements with Andorra, San Marino and Monaco have

taken place on a regular basis over the year in Brussels. It aims at integrating the three small-sized states, which are already part of Customs Unions, in the Single Market. These

negotiations are led by EEAS, working in close coordination with the Commission services. DG Trade participated notably in the negotiations on the chapter dealing with

trade in goods.

Negotiations with the United States on the Transatlantic Trade and Investment Partnership (TTIP) were paused until further notice at the end of 2016. A number of

factors have affected TTIP's prospects. There were already significant differences of view

21 http://ec.europa.eu/trade/policy/countries-and-regions/countries/myanmar/

22 http://ec.europa.eu/trade/policy/countries-and-regions/countries/philippines/

23 http://ec.europa.eu/trade/policy/countries-and-regions/countries/indonesia/

24 http://ec.europa.eu/trade/policy/countries-and-regions/countries/india/

25 http://ec.europa.eu/trade/policy/countries-and-regions/countries/armenia/


at the end of the Obama Administration, both on market access and new rules. It was not clear how these could be overcome. The new US Administration's agenda of economic

nationalism, reflected in a series of policy initiatives, has further reduced the overlap

between our policies. The stance of the new Administration with regard to climate change, and in particular the intention to withdraw from the Paris agreement, is another

complicating factor, since it widens the gap with regard to the EU's goal of setting high environmental standards in trade agreements in order to support sustainability. It would

therefore need to be clarified if there is a sufficient level of shared ambition and common ground before deciding whether and how to proceed with the negotiations.

The proposal of new bilateral negotiations

As part of the Trade package accompanying President Juncker’s State of the Union speech 2017, the Commission recommended to the Council to authorise the opening of

negotiations for free trade agreements with Australia26 and with New Zealand27.

At the same time the Commission decided to make public at the time of their proposal the negotiation directives, along with the impact assessment report. As it has done for

other recent negotiating directives, the Commission also recommended to the Council to publish the final negotiation directives once adopted.

In the Trade for All communication the Comission commited to explore launching negotiations on investment with Hong Kong and Taiwan, building on the investment

provisions under negotiation with China. In the context of our bilateral relations and regular dialogues on trade and investment with Hong Kong and Taiwan, investment

Working Groups have been created which will help assess the prospects for a high

ambition agreement.

As for the modernisation of the 2005 EU-Chile Association Agreement, the Commission

proposed28 to the Council on 24 May to authorise the opening of negotiations. The Council authorised its Decision on 13 November 2017 and negotiations were

consequently launched on 16 November 2017. A first substantive negotiation round took place in Santiago de Chile in January 2018.

On 21 December 2016 the Commission recommended to the Council to authorise the launch of negotiations with Turkey29 to enhance EU-Turkey bilateral trade relations and

to modernise the Customs Union between the two partners. The draft negotiation

directives have been intensively discussed in Council during 2017. These discussions have not led to any Council decision yet.

In February 2017 the European External Action Service and the Commission launched negotiations with Azerbaijan30 for a Comprehensive Agreement based on negotiation

directives adopted by the Council on 14 November 2016. DG Trade contributed to the negotiation process with regards to the trade provisions during the two first substantive

rounds held respectively in June and September 2017.

On 19 December 2017, the European External Action Service and the Commission

26 COM (2017) 472 final

27 COM(2017) 469 final

28 JOIN (2017)19/02 – The negotiating directives adopted by the Council were made public on 22 January

2018. http://www.consilium.europa.eu//media/32405/st13553-ad01dc01en17.pdf

29 http://ec.europa.eu/trade/policy/countries-and-regions/countries/turkey/

30 http://ec.europa.eu/trade/policy/countries-and-regions/countries/azerbaijan/




launched negotiations with Kyrgyzstan31 for a Comprehensive Agreement based on negotiation directives adopted by the Council on 9 October 2017. This first introductory

round served to outline and discuss political priorities and general provisions. DG Trade

will lead the negotiation process with regards to trade provisions, the first round of which is planned for the beginning of March 2018.

31 http://ec.europa.eu/trade/policy/countries-and-regions/regions/central-asia/


Specific objective 2: Effective implementation

Effective implementation of the EU's trade and investment policies secured, amongst other, through proper monitoring, enforcement and

support

Once agreements are in place, implementation can start and it is thus important

that implementation is closely monitored and rights being enforced. Naturally this next step in the EU's trade policy reinforces the Commission's priorities on boosting the

EU economy, creating jobs, harnessing globalisation through a balanced and progressive trade policy and being a strong global actor.

Two major reports were released in 2017 with regard to the EU's trade policy.

The first report "Implementation of the Trade Policy Strategy Trade for All32"

showed that DG Trade is delivering on a progressive trade policy to harness

globalisation. It concludes that the first two years implementing the Trade for All strategy have seen considerable concrete progress towards an effective, transparent and

responsible trade policy that responds to economic challenges and seizes opportunities. The EU is shaping rules of global trade by pursuing progressive and innovative

agreements, as illustrated by the Canada and Japan agreements.

The second "Implementation of Free Trade Agreements"33 is the first annual

report of its kind and it sheds light on what happens after trade agreements are negotiated and have entered into force. This publication is another step towards a

fully transparent and inclusive trade policy, in line with the Commission's commitments

set out in the EU's 2015 'Trade for All' strategy. The report shows that it is often the EU agricultural and motor vehicles' sectors that benefit the most. For example, exports of

cars to South Korea have increased by 244% since 2011, and in the case of the agreement with Colombia and Peru there was a 92% and 73% increase, respectively, in

the exports of EU agricultural goods. The report also looks at the impact of the provisions included in the 'Trade and Sustainable Development' (TSD) chapters, covering

environment protection and labour rights, present in the most recent agreements. While it is too early to draw general conclusions on the implementation of sustainable

development goals included in EU trade agreements, there are already numerous

examples of positive collaboration on issues going beyond trade liberalisation that have been made possible thanks to these agreements.

The report also identifies areas for improvement to increase the benefits of existing agreements. Despite the overall positive impact of trade agreements for EU exports, EU

companies do not take full advantage of the opportunities offered. For example, the extent to which EU businesses are using tariff reductions is lower on the EU side than on

our partners' side. For exports to countries where there are recent trade deals in place, EU companies make use of available duty rebates for around 70% of their exports,

whereas our partners use that duty rebate in around 90% of cases. The report highlights

an increasing need to raise awareness amongst EU companies – particularly small and medium-sized ones – about the opportunities that these deals offer, to expand their

exports and grow their businesses.

This first "Implementation of Free Trade Agreements" report complemented other

individual reports produced on an annual basis for the most recent trade agreements.

Annual reports have thus been produced for the EU's trade agreements with South

32 COM (2017) 491 final

33 COM(2017)654 final


http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52017DC0654


Korea34, Central America35 and Colombia/Peru36.

The annual report for Korea shows that the FTA has worked well with high increase

rates in all trade domains. Compared to the last year before the provisional application of

the FTA (2010 to 2016), EU goods exports have increased by almost 60 % leading to an EU trade surplus of €3.1 bn. EU exports of services to Korea increased by almost 50%

and 32% for EU imports from 2010 to 2015, with a €4.8 billion EU trade surplus in 2015. Over the same period, EU inward FDI stocks from Korea increased by almost 60% (to

€21 billion) and EU outward FDI stocks by 33% (to €50 billion).

The third annual report of the implementation on the Trade Agreement with

Colombia and Peru as well as the third annual report on the implementation of the EU-Central America Association Agreement noted that the agreements had a stabilising

effect, although bilateral trade between the EU and these countries in some areas decreased due to the economic slowdown in Latin America and the fall in commodity

prices, which affected exports to the EU. In turn, the agreements contributed to

diversification of exports from these countries to the EU, notably through the increased exports of various agricultural products.

The regular report about trade and investment barriers37 was published in June 2017. In its new more focused and result-oriented format, the report confirmed a rise in

protectionism (EU exporters reported 36 new barriers in 2016, reaching a total stock of 372 obstacles in 51 countries across the world). It also demonstrated that the Market

Access Strategy is delivering in tackling barriers. Just during the course of 2016, a total of 20 existing obstacles – including several long-standing ones – were resolved in 12

different countries around the world in several sectors. A broader, high level

communication campaign enhanced the awareness of stakeholders regarding our Market Access Partnership.

In addition to formal reporting, in relation to individual bilateral agreements, DG Trade monitors the implementation of its agreements through the institutional set-up those

agreements establish or foresee.

Most recently, the EU-Canada Comprehensive Economic and Trade Agreement (CETA)

entered into force on a provisional basis on 21 September 2017. An institutional structure is in the process of being set up to monitor its implementation. In addition, as committed

during CETA ratification Parties have launched a review of the chapter on trade and

sustainable development, trade and labour and trade and environment. Further work is also ongoing on the CETA Investment Court System in line with commitments

undertaken during CETA ratification. Furthermore communication tools, highlighting the opportunities that CETA creates have been developed. These tools have been

disseminated widely amongst EU Member States, EU trade associations and other stakeholder

s to make EU business

aware of

the opportunitie

s that CETA creates.

34 COM(2017)614 final

35 COM(2017)160 final

36 COM(2017)585 final

37 http://trade.ec.europa.eu/doclib/docs/2017/june/tradoc_155642.pdf

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1508941473097&uri=CELEX:52017DC0614

https://publications.europa.eu/en/publication-detail/-/publication/ef8d6e00-19f3-11e7-808e-01aa75ed71a1/language-en/format-PDF

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52017DC0585&from=EN


As to the EU-South Korea FTA38, 13 out of sixteen implementation bodies (seven

specialised committees, seven working groups and two dialogues) met in 2017, as well

as the annual FTA Trade Committee at ministerial level. The committees acknowledged the positive trends in the development of bilateral trade relations and discussed

outstanding issues in a number of areas, e.g. FTA amendments, labour rights, beef, geographical indications and customs procedures.

Meanwhile, the ongoing analysis of the EU-Korea FTA which has led so far to the publication of the interim evaluation report39 has found that the FTA has been effective in

liberalizing and facilitating trade in goods, and seems to have contributed to promoting trade in services and investment. It has also found that although the FTA has increased

some administrative costs for businesses, as well as costs for the EU linked to the FTA’s institutional structure, the agreement has led to high tariff savings and facilitated a

number of technical procedures for business and has been overall welfare enhancing for

both the EU and Korea. With regard to the multiparty Trade Agreement between the EU and Colombia/Peru/Ecuador and the Central America agreement40, the

annual Trade Committee with Colombia and Peru took place in November 2017. With regard to Central America41, the Parties agreed to hold the next meeting of the

Association Committee in June 2018. In addition, work was done by EU Delegations and Headquarters on implementation of specific issues as well as

dissemination/communication activities in the EU and the partner countries. Furthermore accompanying development cooperation actions were planned under the relevant

instruments in order to support implementation of the agreements, including a strong

focus on trade and sustainable development.

With regard to the EU-Chile Association Agreement, the 15th Trade Coordinators

Meeting (TCM) took place in Brussels in November 2017, and various trade-related committees met before the TCM.

In the Eastern Neighbourhood, under the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA)42 as part of the Association Agreement (AA), an annual Association

Committee in Trade configuration/Association Council and 4 thematic Sub-Committees were held and the Rules of Procedure of the Sub-Committees adopted. In the context of

the implementation of the regulatory approximation commitments in the Trade and

Trade-Related part of the AA, the Sanitary and Phytosanitary (SPS) strategy and a public procurement roadmap are in the process of being added to the Agreement. Also, new

temporary Autonomous Trade Measures have been adopted and entered into force on 1 October 201743 with the aim of supplementing the trade concessions available under the

DCFTA.

Likewise for DCFTAs with Georgia and Moldova44, an annual meeting of the

38

The EU-Korea FTA has been provisionally applied since July 2011, and amended in 2014 to include Croatia

as a party to the FTA with effect from 1 July 2013. It entered into force in December 2015.

39 https://static1.squarespace.com/static/5798bbd2be6594e06f727388/t/5950bcf0e4fcb533d1d45dd7/149846

3505732/EU-Korea+FTA+Interim+Technical+Report+Part+1+-+2017-06-19.pdf

40 The EU-Colombia/Peru Trade Agreement is provisionally applied since 2013. Ecuador acceded to the

Agreement on 1 January 2017.

41 The EU-Central America FTA is provisionally applied since 2013.

42 The trade part of the EU-Ukraine Association Agreements is provisionally applied since 1 January 2016.

43 Regulation (EU) 2017/1566 of the European Parliament and of the Council of 13 September 2017.

44 Both the Georgia and Moldova Association Agreements entered into force on 1 July 2016. Provisional

application already started in September 2014.


Association Committee in Trade configuration and four specialised Sub-Committees took place in 2017 (two of the four in the case of Georgia). Updates of the regulatory

approximation annexes on SPS, public procurement and technical barriers to trade (TBT)

of the Association Agreement were finalised in 2016.

With all Euromed partners the implementation of the existing Free Trade Agreement

under the Euromed Association Agreements is ongoing: Trade sub-committees were held with Algeria, Egypt, Jordan and Palestine in 2017 and will be organised with Israel,

Lebanon, Tunisia and Palestine before the summer of 2018. With the Gulf Cooperation Council a new annual Trade and Investment dialogue was launched in 2017 to formalise

discussions of a number of trade and investment barriers in the absence of a bilateral FTA, for which negotiations remain suspended since 2008. With Iran discussions at

expert level on trade and investment, initiated in November 2016, will continue in 2018.

The implementation of Economic Partnership Agreements (EPAs) with African,

Caribbean and Pacific countries (ACPs) has also continued in 2017, with seven agreements in the implementation stage. For the Cariforum45 EU EPA, the Joint Council,

preceded by the Trade and Development Committee, took place in Brussels in November 2017, and the Parliamentary Committee as well as the Consultative Committee took

place in Trinidad and Tobago in October and November 2017, respectively The EPA Committee with the Pacific (Papua New Guinea and Fiji) took place in Brussels in October

2017. As for the EPAs with African partners, the following EPA Committees were held: with the Eastern and Southern Africa in Madagascar in October 2017, with SADC in

February 2017 and November 2017, with Cote d'Ivoire in April 2017 and with Cameroon

in Brussels in December 2017.

We continued to implement the EU strategy on China adopted in June 201646. We, in

particular, focused on bilateral strategic discussions on trade and investment issues covering China’s lack of market-oriented economic reforms; overcapacity concerns

(particularly on steel, but also in the sectors covered by China's Made in China 2025 policies); increasing Chinese investments in the EU as well as decreasing EU investments

in China; market access issues in China; China's industrial policies; better protection of intellectual property rights and avoidance of forced technology transfer in China. The

implementation of the strategy also entailed plurilateral and multilateral discussions at

the level of G7, G20, OECD and WTO, notably on issues such as overcapacity or export credits. Finally, alliance building with like-minded partners and ensuring coherence and

consistency with other EU policies have been key elements to implement our strategy.

DG Trade made good progress in 2017 in facilitating trade through mutual

recognition agreements (MRAs). It negotiated with the United States a comprehensive revision of the annex on Good Manufacturing Practices of the 1998 US-EU

MRA to recognise inspections of manufacturing sites for human medicines. The revised annex, which became operational in November 2017 and is progressively implemented,

saves costs and resources for the administrative authorities and for manufacturers, by

avoiding duplicative inspections. In addition, two Joint Committee Decisions were adopted to update the MRA between the EU and the Swiss Confederation, ensuring its

effective functioning in line with latest EU legislation.

DG Trade continued to engage with key trading partners to cooperate towards

an adequate and efficient protection and enforcement of intellectual property (IP) rights. It was done mainly through regular bilateral Dialogues and/or Working

Groups that enabled the Commission to raise systemic IP issues, to share best practices

45 Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Lucia,

Saint Vincent and the Grenadines, Saint Kitts and Nevis, Surinam, Trinidad, Tobago, and the Dominican

Republic.

46 http://eeas.europa.eu/archives/docs/china/docs/joint_communication_to_the_european_parliament_and_th

e_council_-_elements_for_a_new_eu_strategy_on_china.pdf


and, to offer developing countries help e.g. in improving domestic legislation and enforcement practices. In 2017 we held IPR Dialogues and Working Groups with China,

Hong Kong, Korea, Taiwan, Thailand, Turkey, Ukraine and USA. In addition, IP-

Subcommittee meetings took place with Colombia, Peru and Ecuador. New technical cooperation programmes (IP Key) were launched with China, South-East Asia and Latin-

America.

DG Trade actively participated in the development of EU policies in the area of IP. It

made a significant contribution to the IP enforcement package which was published in November 201747. DG Trade's services also prepared a report on the protection and

enforcement of IPR in third countries ("Third Country Report"), to be finalised and published in the first quarter of 2018. It has also initiated the establishment of a

counterfeiting and piracy watch list to identify marketplaces (physical and online) which reportedly infringe IPR; the watch list is to be published in 2018.

DG Trade continued its work to remove and prevent trade barriers through the

Market Access Partnership with Member States and stakeholders. During the course of 2017, a total of 44 existing obstacles – including several long-standing ones –

were resolved in 27 different countries around the world in several sectors, creating additional export opportunities for EU companies worth billions of Euros per year – the

magnitude of a medium-sized free trade agreement. In the wake of the rise in protectionism detected in the Report on Trade and Investment Barriers (see above), DG

Trade is committed to reinforce the Partnership, with enhanced prioritisation of actions to remove barriers, strengthened coordination with stakeholders, and wider communication

and outreach, to enhance awareness by stakeholders regarding our Market Access

Partnership.

DG Trade's activities in this area also include intensive work to remove and prevent

market access barriers in the Sanitary and Phytosanitary (SPS) areas supported by the SPS Market Access Working Group. Clear priorities have been identified and agreed on a

mid- to long term strategy to tackle SPS barriers and continued financial support to international standard setting organisations granted. Key successes in 2017 include

removing SPS barriers for exports of pig meat, poultry and apples and pears to Mexico in the context of the FTA negotiations, facilitating exports of products of animal origin to

Brazil, ensuring market access for beef from a greater number of EU Member States in

non-EU countries such as Taiwan and Japan and an increased recognition of EU regionalisation policy in case of avian influenza outbreaks by some of our trade partners.

Furthermore, DG Trade continued its efforts to enforce the EU’s multilateral and bilateral rights and obligations through the WTO's dispute settlement and the

bilateral dispute settlement mechanisms throughout the year. Since the beginning of this year, we have seen results, at different stages, in several disputes. On the

offensive side: the EU has a complete success in the pork dispute against Russia (confirming also the principle of regionalisation of SPS measures) but a loss in the Boeing

II dispute. The EU won cases against Russia on Light Commercial Vehicles (LCV) (under

appeal) and Brazil on Taxes (under appeal). On the defensive side: the EU defended itself effectively in the Fatty Alcohols (Indonesia) and in the poultry dispute (China). The EU

has ensured effective implementation of disputes brought in 2016 (Columbia on spirits and China on Raw Materials III). Russia implemented the panel report in the tariffs case.

The EU is carefully keeping under review compliance in other cases and protects its position where necessary.

The EU has also taken a leading role in defending the WTO's dispute settlement system, in particular, in the light of the blockage of the appointment process for Appellate Body

members.

47 http://europa.eu/rapid/press-release_IP-17-4942_en.htm


The Trade Facilitation Agreement agreed at the World Trade Organization’s 9th Ministerial Conference entered into force in February 2017 after two-thirds of the WTO

membership completed their domestic ratification process. This agreement aims to

simplify and clarify international import and export procedures, customs formalities and transit requirements. It will make trade-related administration easier and less costly,

thus helping to provide an important and much needed boost to global economic growth. EU customs authorities will play a leading role in the implementation of the agreement,

acting both as an example to follow and as an engine for further progress in trade facilitation within the EU and at international level. The agreement will also help improve

transparency, increase possibilities for small and medium-sized companies to participate in global value chains, and reduce the scope for corruption. In this context, a factsheet

has been published to highlight the “European Commission’s support for Trade Facilitation”48. The EU notified its transparency and aid measures for the implementation

by developing countries and Least Developed Countries (LDCs) of their "category C49"

commitments. The EU contributed actively to the meetings of the Trade Facilitation Committee in the WTO.

Commissioner for Trade Cecilia Malmström said at the occasion of the entry into force of the Trade Facilitation Agreement: "Better border procedures and faster, smoother trade flows will revitalise global trade to the benefit of citizens and businesses in all parts of the

world. Small companies, that have a hard time navigating daily bureaucracy and

complicated rules, will be major winners."

In the multilateral framework, the WTO's review of the EU's trade policy in July 2017 was a success. This was achieved thanks to good coordination among the many

Commission DGs involved in this exercise, which required us to respond to 1300 questions from the WTO membership.

In order to make sure that the EU remains one of the world’s most open investment

regimes, and thereby a source of growth and jobs while protecting its essential interests, the Commission proposed on 13 September 2017 a new framework for screening of

Foreign Direct Investment into the EU. It consists of a dedicated Communication outlining the strategic need for such a screening entitled “Welcoming Foreign Direct

Investment while Protecting Essential Interests”50 as well as a Proposal for a Regulation of the European Parliament and the Council establishing a framework for screening of

foreign direct investments (FDI) into the European Union51. In addition, a Staff Working Document was published, also providing information on FDI inflows, their implications

and the potential risks they may pose for security and public order in the EU.

In the Communication, the Commission announced two complementary measures, one being the launch of an in-depth study. The study will address, in particular, Foreign

Direct Investment in strategic sectors or assets which may raise security or public order concerns. It will include data collection, analysis of trends, and assessment of the impact

of such investments, including through case studies. Its results should feed into the decision-making process for the proposed Regulation. The second complementary

measure announced is the setting up of a coordination group dedicated to inward foreign direct investment, including all issues within the scope of the proposed Regulation. The

group was set up on 29 November 2017 and it will be chaired by the Commission and

composed of representatives of Member States. DG Trade aims at holding the first meetings of this group in the first half of 2018.

48 http://trade.ec.europa.eu/doclib/docs/2017/february/tradoc_155332.pdf

49 Members of category C will need additional time and capacity building support to implement the measure

50 COM(2017) 494 final

51 COM(2017) 487 final

https://ec.europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-494-F1-EN-MAIN-PART-1.PDF

https://ec.europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-487-F1-EN-MAIN-PART-1.PDF


Finally, in order to support more effective implementation of the trade and investment policies, the Commission decided52 in September 2017 to create an

expert group on EU trade agreements. This is a group which will allow the

Commission to engage with representative organisations with expertise in economic, social, ethical and/or environmental issues in its implementation of the EU's trade policy.

The nomination of 28 experts53 has been based on an open call for applications and a clear set of criteria. The first two meetings of the group are scheduled to take place in

February and April 2018. More information about the group is available on the Commission's register of expert groups54.

Securing effective implementation of the EU's trade and investment of the 41 trade agreements currently in place (including those under provisional application) through

proper monitoring, enforcement and support is important. This has been helped, on the one hand, by the regular meetings of an internal FTA Coordination and Coherence Group

inside DG Trade, and, on the other hand, by the creation at the end of 2016 of the senior

role of Coherence Officer for Implementation to ensure more effective and coherent implementation. The FTA group discusses on a regular basis strategic issues related to

the implementation of the EU’s trade agenda, such as coordination of negotiation rounds and the enhancing templates for negotiations.

52

http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3556&news=

1&new_groups=1&month=09&year=2017

53 http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156487.pdf

54 http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3556&news=1


Specific objective 3: Tackling unfair trade

Maintain and improve a transparent, efficient and effective system to

combat distortions and unfair trade practices in international trade

The EU uses trade defence instruments to re-establish a competitive

environment for the EU industry when harmed by unfair imports. DG Trade has throughout 2017 committed to maintaining and improving a transparent, efficient and

effective system to combat distortions and unfair trade practices. As such this specific objective contributes to the Commission's general objective of expanding the EU

economy and maintaining jobs in the EU. In 2017, there were more than 350.000 jobs in

the EU in areas covered by EU's trade defence measures. DG Trade completed all investigations within the mandatory deadlines or even earlier.

In addition, measures taken under the umbrella of the EU’s trade defence mechanism balances the commercial policy that the EU is leading in order to harness globalisation.

In November 2016, the Commission had presented a proposal55 for a new method for calculating dumping on imports from countries where there are significant

market distortions, in particular where the State has a pervasive influence on the economy. Following adoption by the European Council and the European Parliament and

its publication in December56, the revised legislation entered into force just over a year

after being proposed by the Commission. It introduces a new way of calculating whether dumping has occurred in imports into the EU from countries where the economy is

distorted owing to state interference. The purpose of this new legislation is to make sure that Europe has trade defence instruments that are able to deal with current realities –

notably state-induced distortions which too often lead to overcapacities – in the international trading environment, while fully respecting the EU's international obligations

in the legal framework of the WTO. In parallel with the publication of changes to the EU's anti-dumping legislation, the Commission released the first country report envisaged by

the new legislation57. This Regulation introduces changes to the EU's anti-dumping and

anti-subsidy legislation.

President Jean-Claude Juncker said: "The EU is and will remain one of the most open markets in the world. We are and will remain in the first line defending open, fair and

rules-based trade. This, however, should not be mistaken as naivety. Our unshakable and facts-based conviction that trade brings prosperity will not prevent us from

defending our workers and companies with all legitimate tools when others do not play

by the rules. With this new legislation and a new set of modernised tools […], Europe will be able to keep pace and deal more effectively with the ever changing realities of the

international trading environment."

A second amendment to the EU’s anti-dumping and anti-subsidy legislation, based on a 2013 Commission proposal to modernise the EU’s Trade Defence Instruments58 was

agreed upon in 2017. The new rules will shorten the current 9 month

investigation for the imposition of provisional measures and make the system more transparent. The companies will benefit from an early warning system that will

help them adapt to the new situation in case provisional duties are imposed. Smaller

55 COM (2016)721

56 Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending

Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the

European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not

members of the European Union OJ L 338, p. 1-7

57 http://trade.ec.europa.eu/doclib/html/156474.htm

58 COM(2013)192

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companies will also get more targeted assistance from a specific help desk to make it easier for them to trigger and participate in trade defence proceedings. Also, in some

cases, the EU will adapt its 'lesser duty rule' and may impose higher duties. This will

apply to cases of unfairly subsidised inputs in case of significant raw material distortions in the exporting country. Finally, trade defence measures will apply to the continental

shelf of the EU if the products concerned are consumed in significant quantities there.

As announced in the ‘Trade for All’ Communication, DG Trade has significantly improved

transparency of Trade Defence in 2017. The Commission has so far implemented two of the initiatives announced in the Communication: the TRON platform59 – an IT tool

ensuring increased access to the file for interested parties - is now fully operational, including a notification module through which DG Trade formally communicates and

notifies the parties in each procedural step. Moreover, transparency towards the general public has also been enhanced with the Commission systematically publishing online

executive summaries of all complaints or requests for review60. Going beyond its

commitments, DG Trade took an additional step towards deepening transparency by disclosing, since 1 August 2017, to each interested party subject to a verification visit a

full mission report of the visit to that party, while a concise version of such report is also included in the non-confidential file, accessible to other interested parties.

In the current situation of overcapacity in the steel sector, a Global Forum on steel excess capacity was launched in Berlin in December 2016 to implement the

commitment undertaken by G20 Leaders. The EU has been instrumental in making the ministerial meeting of the Global Forum in November 2017 a success. At this meeting

Global Forum Members agreed on an ambitious package of concrete policy solutions

According to the agreed package, Global Forum members must ensure market-based outcomes in the steel industry, refrain from market-distorting subsidies and other

government support measures that contribute to overcapacity, provide a level playing field between state-owned and private companies, and enact effective adjustment

polices. This agreement spells out the market-distorting practices at the root of overcapacity and is underpinned by a robust monitoring mechanism on capacity and

policy developments to track implementation in 2018 and 2019.

Commissioner for Trade Cecilia Malmström said on the occasion of the Global Forum:

"The problem of excess capacity of steel has real effects on people's lives – especially those who become unemployed. Today, we have agreed on an important and effective

package to tackle the pressing issue of global steel overcapacity. These wide-ranging policy solutions will help create a level playing field and support EU growth and jobs. This

is a global challenge, and it has to be dealt with accordingly. In the run-up to the World Trade Organisation's 11th Ministerial Conference in Buenos Aires, this success underlines

the importance of effective multilateral cooperation to solve global problems. Of course,

our work is not yet done. Now we need to walk the talk. Our industry, our workforce, our consumers and citizens depend on these commitments being carried out effectively. As

co-chair of this Forum during next year, the EU will follow the implementation of these

measures closely."

In parallel, and in addition to this multilateral exercise, DG Trade will continue to push

China to deliver on its bilateral commitments and establish a bilateral platform on steel

with similar objectives to those of the Global Forum.

DG Trade also works to avoid the emergence of overcapacity in other sectors, such as

semiconductors. The October 2017 meeting of the GAMS (Governments/Authorities Meeting on Semiconductors) yielded useful results, with an agreement to enhance

transparency on subsidies and avoid that encryption regulations become market access barriers.

59 http://trade.ec.europa.eu/tdi/

60 http://trade.ec.europa.eu/tdi/notices.cfm


The Commission implemented its trade defence regime to address the various forms of

injurious unfair trade practices to which the Union industry can be exposed.

For instance, in hot-rolled flat steel from China, the Commission concluded that, while

the Union industry was not yet suffering material injury as a result of unfairly priced imports from China, such injury was clearly imminent and therefore decided to impose

measures to avoid the occurrence of material injury. In the case at hand, both anti-dumping and anti-subsidy measures needed to be imposed as it was found that imports

from China were not only priced below their normal value but were also benefitting from significant unfair subsidisation.

The importance of protecting Small and Medium Sized Enterprises (SMEs) from unfair competition also featured prominently in 2017. For instance, the Commission decided to

maintain anti-dumping measures on imports of Ceramic Tiles from China following an

expiry review. The Commission also initiated two new proceedings concerning imports of Tyres and E-bikes from China. In those three sectors, the Union industry consists of a

large numbers of SMEs.

At the same time, the Commission took account of important interests of the

downstream industry in Europe and decided to renew the measures on Solar Panels for

only 18 months.


Specific objective 4: A sustainable approach to trade

Improved sustainable economic, social and environmental conditions for consumers, workers, citizens and businesses in the EU and in non-EU

countries and a special focus on human rights, responsible management

of supply chains and good governance

The "Trade for All" Communication committed the Commission to reinforce its action within trade policy to promote sustainable development, human rights

and good governance, in the spirit of the UN's 2030 Agenda for Sustainable

Development, including by ensuring effective implementation of related FTA provisions and the Generalised Scheme of Preferences61. In this sense the outputs under this

specific objective, as listed below, contribute to a large extent to the Commission’s priority 9 enhancing the EU's position as a stronger global actor.

The Commission has continued to negotiate ambitious Trade and Sustainable Development (TSD) provisions to ensure that trade and economic prosperity is

accompanied by a high level of environmental protection, social equity and cohesion. This includes obligations for our trade partners to implement effectively the fundamental

International Labour Organisation (ILO) Conventions and the Multilateral Environment

Agreements (MEAs), including climate change, to which they are a Party.

For trade agreements already in force, the Commission has intensified its interaction with

trading partners to implement effectively TSD provisions, on issues such as decent work, occupational health and safety, working conditions and labour inspection, as well as the

conservation and sustainable management of the environment or promotion of sustainable production and Corporate Social Responsibility.

Recognising the need to support the effective implementation of the Paris Agreement on climate change, references to the support and implementation of that landmark

agreement have been strengthened. This has started with the recently concluded

negotiations with Japan.

On 11 July 2017, the Commission launched a debate on the enforcement and

implementation of EU FTA's TSD chapters. The basis for this debate is a non-paper prepared by the Commission services and transmitted to the Member States and the

European Parliament and made public62.

The Generalised Scheme of Preferences (GSP) continued to offer generous trade access

to the EU market coupled with a strong engagement with national authorities with GSP beneficiaries on human rights and sustainable development. A report assessing the

performance of the scheme during 2016-2017, including the legislative and practical

developments in GSP+ countries linked to the implementation of relevant 27 international conventions was published early January 201863.

An external study was launched to assess the application of the current GSP Regulation. The study will be adopted through a Commission report in the first half of 2018. The

61 The EU's Generalised Scheme of Preferences (GSP) is designed to help developing countries integrate in the

international trade system by making it easier for them to export their products to the EU. This is done in

the form of partly or fully reduced tariffs for their goods when entering the EU market. Through the

additional export revenue which is generated, GSP fosters growth in their income and supports their

development. The scheme has three components, two of which GSP+ and Everything But Arms offer

additional benefits. EBA ensures that Least Developed Countries can import all products other than arms

free of duties to the EU. GSP+ offers additional tariff reductions for developing countries which sign up to

putting into practice key UN human rights and International Labour Organisation conventions.

62 http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf

63 COM(2018) 36 final

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study has found that for the 80 countries that were eligible for GSP preferences throughout the period 2011-2016, they have in fact increased their exports collectively

under the respective arrangements. This has been especially the case for the 49 EBA

countries and the 8 GSP+ countries. Moreover, both EBA and GSP+ beneficiaries under investigation have significantly increased their utilisation rate since 2014, indeed by more

than 10 percentage points. However, the findings on export diversification were mixed: measured by number of tariff lines for which non-zero exports have been recorded,

export diversification has been more important for standard GSP beneficiaries, but decreased considerably at all sector levels for GSP+ beneficiaries. EBA beneficiaries

experienced significant growth in tariff lines on export diversification.

Sri Lanka was granted access to GSP+64, whereas Côte d'Ivoire, Ghana, and Swaziland

lost GSP preferential access (effective as of 1 January 2019) as these countries now have other preferential market access arrangements with the EU. Paraguay was removed from

GSP and GSP+ lists (also effective as of 1 January 2019) as it was classified as upper-

middle income country for three consecutive years. Lastly, Equatorial Guinea was removed from the EBA list (effective 1 January 2021) as it is no longer considered a

least-developed country by the UN.

On 13 November 2017, the Commission adopted a Communication on achieving

prosperity through trade and investment in view of updating its joint EU Strategy on Aid for Trade65. The updated Strategy emphasises the need for greater alignment of EU's Aid

for Trade with our regional or bilateral trade agreements (including EPAs) and unilateral GSP preference schemes and gives focus on issues such as women's economic

empowerment, responsible business conduct and fair and ethical trade.

Work intensified to promote trade aspects of Corporate Social Responsibility/Responsible Business Conduct (CSR/RBC). In the context of the trade pillar of the EU-Central America

Association Agreement, a workshop dedicated to creating awareness and sharing best practices on Responsible Global Value Chains was be held in May in San Jose, Costa Rica.

Furthermore, DG Trade has renewed its support to the OECD work on due-diligence in the garment sector and has developed together with the FPI a 9 million euros project on

responsible supply chains designed to promote responsible business conduct approaches in key Asian trading partners (China, Japan, Myanmar, Vietnam, Thailand and the

Philippines) to be implemented by the ILO and the OECD.

The application process for the first edition of the "EU Cities for Fair and Ethical Trade" Award was opened on 7 December 2017. The award aims at acknowledging and raising

awareness on the policies carried out at local level in the EU in the area of fair and ethical trade. The ceremony for the first edition will take place on 27 June 2018.

The European Commission and the International Trade Centre (ITC) hosted the International Forum on Women and Trade in Brussels on 20 June 2017. This Forum

took stock of current trade policy's contribution to the economic empowerment of women, raised awareness of gender issues in trade, and considered how trade can

promote the advancement of gender equality through a combination of multi-stakeholder

engagement and a progressive approach to sustainable development. In this context a first quantitative assessment, to be renewed in 2018, on how EU exports support jobs for

women across Europe was carried out66. A follow-up study will be launched by the ITC with the financial support of the EU in 2018. Furthermore, for the first time, the

Commission has proposed provisions on gender issues in the negotiations with Chile. DG Trade has also supported the adoption of the Joint Declaration on Trade and Women's

Economic Empowerment in the margins of the 11th WTO ministerial conference. The

64 OJ L 125, 18.5.2017

65 COM(2017)667 final

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declaration gathered support of 118 WTO members and observers. It is a non-binding instrument aiming to provide a platform for WTO Members to promote an inclusive trade

agenda ensuring trade benefits for all.

In the same spirit of promoting good governance, in cooperation with EU Member States and the European Parliament the Commission has developed an innovative approach on

anti-corruption and trade agreements, and has proposed ambitious provisions on this in the negotiation with Mexico. A similar approach has also been proposed in the

negotiations with Chile.

In the current deteriorating security environment, it is also important that trade policy

contributes to the preservation of international peace and security whilst ensuring the protection of human rights. Therefore, the Commission tabled in 2016 a legislative

proposal67 for a modernisation of EU export controls for dual use items68. The purpose of the proposal is to strike a balance between ensuring a high level of security,

and maintaining the competitiveness of European companies involved in legitimate trade

in dual-use items. In 2017, the Council and the European Parliament advanced discussions of the proposal, with the Parliament's INTA Committee adopting its report in

November 2017. DG Trade also actively engaged with stakeholders and participated in a series of outreach events, culminating with the organisation of an Export Control Forum

on 19 December 2017.

At the same time, DG Trade supported the effective implementation of controls through

regular meetings of the Dual-Use Coordination Group, while technical expert groups bringing together experts from the Commission and Member States as well as, where

appropriate, industry and civil society, assessed the feasibility of promoting electronic

licensing systems across the EU, prepared EU Guidelines on industry compliance and monitored trade in cyber-surveillance technology. A delegated act was adopted in 2017

to update the EU list of dual-use items in light of technological developments. DG Trade also promoted the transparency of export control activities, especially with the release of

a dedicated annual report in November 2017, and ensured EU participation in some meetings of the multilateral export control regimes, as well as dialogue with third

countries.

In conflict-affected and high-risk areas, companies involved in mining, processing and

trade in minerals have the potential to generate income, growth and prosperity, and

support the livelihood of local communities. At the same time, companies may also risk contributing to or being associated with significant adverse impacts, including conflict

financing and associated human rights abuses. The so-called 'conflict minerals' tin, tantalum, tungsten and gold (3TG) are associated with particular risks in this regard, and

can find their way into e.g. our mobile phones, cars and jewellery. Therefore, the EU adopted in May 2017 a new EU regulation to ensure responsible importation of

3TG and that companies do not intentionally or unintentionally contribute to the aforementioned risks; thereby consolidating the EU's global leadership in this important

policy area. The requirements for EU importers will apply as of 1 January 2021 so that

companies have time to adapt. In the meantime, the Commission is bringing forward a series of initiatives to facilitate the effective implementation of the regulation and

continues its outreach dialogues on conflict minerals with a number of trading partners.

67 COM(2016)616

68 Regulation (EC) No 428/2009

http://trade.ec.europa.eu/doclib/docs/2016/september/tradoc_154976.pdf


In 2017, the Commission also made progress on its work on non-binding guidelines on the criteria for conflict-affected and high-risk areas and ex-post checks as well as on a

delegated act on the criteria and methodology for the recognition of supply chain due

diligence schemes; in view of finalising these initiatives in the course of 2018.

With respect to the ‘Anti-Torture’ Regulation, Commissioner Malmström co-chaired in

the margins of the UN General Assembly the successful launch - - of a Global Alliance to end trade in goods that could be used for torture or capital punishment on 18 September

2017. The Global Alliance is a joint initiative between the EU, Argentina and Mongolia. At the meeting a joint political declaration was adopted by the 58 participating countries69.–

DG Trade supported actively its Commissioner and the Service for Foreign Policy Instruments (FPI) in their efforts to promote the EU model and encourage third countries

to develop and adopt similar legislation.

69 http://www.torturefreetrade.org/


2. ORGANISATIONAL MANAGEMENT AND INTERNAL CONTROL

This section answers to the question how the achievements described in the previous

section were delivered by DG Trade. This section is divided in two subsections.

The first subsection reports the control results and all other relevant information that

support management's assurance on the achievement of the financial management and internal control objectives. It includes any additional information necessary to establish

that the available evidence is reliable, complete and comprehensive; appropriately covering all activities, programmes and management modes relevant for the DG.

The second subsection deals with the other components of organisational management: human resources, better regulation principles, information management and external

communication.

2.1 Financial management and internal control

Assurance is an objective examination of evidence for the purpose of providing an

assessment of the effectiveness of risk management, control and governance processes.

This examination is carried out by management, who monitors the functioning of the

internal control systems on a continued basis, and by internal and external auditors. Its results are explicitly documented and reported to the Director-General. The reports

produced are:

A signed declaration by all Authorising Officers by Sub-Delegation confirming that all

transactions authorised by them during 2017 were legal and regular and implemented

in accordance with the principles of sound financial management;

The report issued for the attention of the Internal Control Coordinator on the state of

play of internal control systems in DG Trade;

The reports from Authorising Officers in other DGs managing DG Trade's budget appropriations;

The limited conclusion on the state of control in DG Trade issued by the Internal Audit Service (IAS);

The observations and the recommendations reported by the internal (IAS) and external (European Court of Auditors) auditors.

This section reports the control results and other relevant elements that support management's assurance. It is structured into (a) Control results, (b) Audit observations

and recommendations, (c) Effectiveness of the internal control system, and resulting in

(d) Conclusions as regards assurance.

2.1.1 Control results

This section reports and assesses the elements identified by management that support the assurance on the achievement of the internal control objectives70. The DG's

assurance building and materiality criteria are outlined in the AAR Annex 4. Annex 5 outlines the main risks together with the control processes aimed to mitigate them and

70 Effectiveness, efficiency and economy of operations; reliability of reporting; safeguarding of assets

and information; prevention, detection, correction and follow-up of fraud and irregularities; and adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments (FR Article 32).


the indicators used to measure the performance of the control systems.

DG Trade is a policy DG with a relatively small budget, where the majority of the budget

is implemented through direct management, while part of the contributions to

international organisations are implemented though delegated agreements, i.e. indirect management. DG Trade’s budget was implemented in 2017 as follows:

Total expenditure Commitments

in M €

Payments

in M € Administrative expenditure (excl. external staff) 4.28 0.4

Contributions to International Organisations 5.08 5.11

Procurement activities 11.64 9.59

Cross sub-delegations to other DGs 0.01 0.12

Total (as presented in Annex 3) 21.01 15.22

Co-delegation to other DGs 0.85 4.55

Total expenditure 21.86 19.77

The expenditure managed by DG Trade falls into the following categories:

Administrative expenditures

More than 90% of the administrative budget (missions expenses, meetings of

committees and expert groups, training, conferences and other miscellaneous expenditure) managed by DG Trade is actually paid by PMO. Missions represent more

than 80% of all administrative expenditure in DG Trade.

Contributions to international organizations

Overall, the value of the payments linked to contributions to international organizations represented about 34% of the total budget expenditure in 2017. DG Trade awarded

direct grants and delegated agreements to international organisations with a view to implement multilateral programmes and initiatives, notably in the field of trade related

assistance to strengthen the capacity of developing countries to participate effectively in

the multilateral trading system and regional trading arrangements and to improve their trade and investment performance.

Procurement activities (contracts)

Overall, the value of payments linked to signed contracts represented about 63% of the total budget expenditure in 2017. DG Trade mainly acquired services for economic and

impact assessment studies, organising conferences and negotiation rounds, IT support,

legal and other services. These services are generally provided by specialised consultants or service providers through public procurement.

Cross sub-delegations

DG Trade has cross sub-delegated appropriations to the DGs listed below. Being Commission services themselves; their Authorising Officer by Delegation (AOD) is

required to implement the appropriations subject to the same rules, responsibilities and

accountability arrangements. The cross sub-delegation agreement requires the AOD of the DG, to whom the appropriations have been delegated, to report on the use of these

appropriations.


DG Consumed commitment

appropriations in M €

Consumed payment appropriations in M €

DG COMM 0.01 0.01

DG SANTE - 0.10

DG DEVCO - 0.01

For the 2017 reporting year, the cross-delegated AODs have themselves reported

reasonable assurance on the delegated budget managed by them on behalf of DG Trade.

They have signalled no serious control issues. For the amounts that have not been spent by the cross-delegated AODs, no report has been received.

Considering the very small amount entrusted to these other DGs, and bearing in mind

the reports without reservation from the Authorising Officers in those DGs, DG Trade will not perform any additional controls as regards legality, regularity and error rates.

Coverage of the Internal Control Objectives and their related main indicators

Control effectiveness as regards legality and regularity

DG Trade has set up internal control processes aimed at ensuring the appropriate

management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the

nature of the payments concerned.

DG Trade continues to operate a combination of a fully centralised financial circuit and a

decentralised financial circuit with counter-weight. All transactions are therefore subject to an independent ex-ante financial verification (100% of transactions). No ex-post

function is set up. In addition, a combination of preventive, detective and corrective

controls are embedded into the programming and planning, verification, execution and monitoring, management and reporting, and communication processes so as to ensure

effective mitigation of the financial and management risks.

In addition, for all the contributions to international organisations, the disbursement of

funds takes place after the conclusion of a Pillar Assessed Grant or Delegation Agreement

(PAGODA agreement) with the beneficiary. Each agreement requires that international organisations have successfully passed the pillar assessments. A verification check is

normally done only in cases when there are indications of possible incorrect spending of EU funds. As there have been no indications that the funds were not correctly spent in

2017, no expenditure checks were initiated during last year.

The objective of the control system is to ensure that the DG has reasonable assurance that the amount of financial operations authorised during the reporting year and which

would not be in conformity with the applicable contractual or regulatory provisions, does not exceed 2% of the total expenditure for the reporting year.

During 2017 a total of 647 payments amounting to M€ 15.22 were made, 95.05 % of

them on time, with an average payment deadline of 20.5 days.

In DG Trade, the 2% threshold applies to any transaction that has been registered as an

exception or a non-compliance event and which has a quantifiable impact on the legality and regularity of the underlying transaction.

In 2017, 4 non-compliance events were recorded as control weaknesses. None of these non-compliance events had an impact on the legality and regularity of the transactions.

All concerned events related to formal compliance issues which do not have a negative impact on the budget.

The correction of detected erroneous invoicing which involved an amount unduly


invoiced, resulted in 23 credit notes for a total amount of EUR 39,731 and 26 cases of claiming an ineligible amount totalling EUR 1,132. Please refer to table 8 in annex 3 for

details. All errors and irregularities have been discovered before the actual payment, with

the exception of one case linked to unclear reporting from an International Organisation which required the issuing by DG Trade of the only recovery order in 2017 for an amount

of EUR 47,292, representing 0.9% dedected error rate. In addition, no other elements were brought to the attention of the AOD which could give rise to a financial correction or

an ex-post recovery.

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

OBJECTIVE INDICATOR TARGET 2017 2016 2015 2014 2013

Compliance with ICS8

No of financial exceptions

Keep stable/ reduce

None 1 2 4 3

No of non-compliance events

Keep stable/ reduce

4 7 10 2 3

No of decisions overriding controls

None None None None None 1

Complaints in procure-ment procedures

No of legal cases following complaints in procurement procedures

None None None None None None

ASSESSMENT Compliance with ICS 8: the rate of financial exceptions/non-compliance

events decreased in 2017 compared to 2016. An examination of the nature of the non-compliance did not reveal any fundamental weaknesses in the control

system. In addition, they were considered not to impact the legality and

regularity of the underlying transactions. Legal cases: In 2017, there were no legal cases, nor complaints, about a

procurement procedure.

DG Trade considers that there is no indication that transactions managed by DG

Trade would not be legal and regular. All corrections take place before the

actual payment is made (ex-ante), there are no errors left at the moment of

payment. Nonetheless, to calculate the error rate, DG Trade has taken a most

conservative approach and estimates the error rate being at 0.5%.

In the context of the protection of the EU budget, at the Commission's corporate level, the DGs' estimated overall amounts at risk and their estimated future corrections are

consolidated.

For DG Trade, the estimated overall amount at risk at payment71 for the 2017 payments

made is 0.06 M€. This is the AOD's best, conservative estimation of the amount of

71 In order to calculate the weighted average error rate (AER) for the total relevant expenditure in the

reporting year, the detected, estimated or other equivalent error rates have been used.


relevant expenditure during the year (12.20 M€) not in conformity with the applicable contractual and regulatory provisions at the time the payment is made.

The internal control strategy foresees the implementation of an ex-ante control of 100%

of the expenditure authorised. Given that there is no ex-post control function setup, no future corrective capacity after the payments have been made is being considered.

As a result the estimated overall amount at risk at payment is considered to be the same as the estimated overall amount at risk at closure of 0.06 M€.


Table 1 - Estimated overall amount at risk at closure

DG Trade

"payments

made" (FY;

m€)

minus newa

prefinancing

[plus

retentions

madeb] (in

FY; m€)

plus clearedc

prefinancing [minus

retentions (partially)

releasedb and

deductions of

expenditure made by

MS]

(in FY; m€)

= "relevant

expenditure"d

(for the FY;

m€)

Average

Error Rate

(weighted

AER; %)

estimated

overall

amount at

risk at

payment

(FY; €)

Average Recoveries

and Corrections

(adjusted ARC; %)

estimated

future

corrections

[and

deductions]

(for FY; €)

estimated overall

amount at risk at

closuree (€)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Programme,

Budget

Line(s), or

other relevant

level

as per AAR

annex 3,

table 2

as per ABAC

DWH BO

report on

prefinancing f

as per ABAC DWH BO

report on

prefinancing f

= (2) – (3) +

(4)

Detected

error rates,

or

equivalentg

estimates

= (5) x (6) based on 7Y-avg

historic ARC (as per

ABAC DWH BO report

on corrective

capacity)f: (2,1%),

but adjustedh to be

the best but

conservative

estimate for the

current MFF

= (5) x (8) = (7) – (9)

Procurement 9.6 0.0 0.0 9.6 0.5% 0.05 0.0% 0.00 0.05

Contributions

to

International

organisations

5.1 4.4 1.4 2.1 0.5% 0.01 0.0% 0.00 0.01

Administrative

expenditures 0.4 0.0 0.0 0.4 0.5% 0.00 0.0% 0.00 0.00

Other 0.1 0.0 0.0 0.1 0.5% 0.00 0.0% 0.00 0.00

Overall, total

15.2 4.4 1.4 12.20 0.5%

0.06

mEUR;

0.5% of

(5)

0.00% 0.00 mEUR;

0% of (5)

0.06 mEUR; 0.5% of

(5)


a New PF actually paid by out the DG itself during the FY (i.e. excluding any PF received as transfer from another DG)

b In Cohesion, the (10%) retention made, which is later released or (partially) withheld by the Commission

c PF actually having been cleared during the FY (i.e. their 'delta' in FY 'actuals', not their 'cut-off' based estimated 'consumption')

d For the purpose of equivalence with the ECA's scope of the EC funds with potential exposure to L&R errors (see the ECA's AR methodological Annex 1.1 point

10), also our concept of "relevant expenditure" includes the payments made, subtracts the new pre-financing paid out [& adds the retentions made], and adds

the previous pre-financing actually cleared [& subtracts the retentions released and those (partially) withheld; and any deductions of expenditure made by MS in

the annual accounts] during the FY. This is a separate and 'hybrid' concept, intentionally combining elements from the budgetary accounting and from the general

ledger accounting.

e For some programmes with no set closure point (e.g. EAGF) and for some multiannual programmes for which corrections are still possible afterwards (e.g.

EAFRD and ESIF), all corrections that remain possible are considered for this estimate

f [if possible] differentiated for the relevant portfolio segments at a level which is lower than the DG total

g In Shared Management, e.g.: "validated/adjusted error rates", "residual error rates at MS-level, as reported by the MS Audit Authorities and

applied/adjusted/projected by the DG", etc.

For types of expenditure with indications that the equivalent error rate might be close to 'zero' (e.g. administrative expenditure, operating subsidies to agencies),

we recommend to use 0.5% nevertheless as a conservative estimate.

h Even though based on the 7 years historic average of recoveries and financial corrections (ARC), which is the best available indication of the corrective capacity

of the ex-post control systems implemented by the DG over the past years, the AOD has adjusted this historic average, in order to come to the best but

conservative estimate of the expected corrective capacity average to be applied to the reporting year's relevant expenditure. Considering that DG TRADE is a DG

with entirely ex-ante control system, the ex-post future corrections are considered to be 0.0%.


Cost-effectiveness and efficiency

Based on an assessment of the most relevant key indicators and control results, DG

Trade has assessed the cost-effectiveness and the efficiency of its control system and has reached a positive conclusion.

DG Trade quantifies the costs for carrying out the controls described in annex 5 on the basis of the human resources required for these controls and estimates their benefits, in

so far as possible, in terms of the amount of errors and irregularities prevented, detected and corrected by these controls (as shown in Annex 3, table 8). However, most benefits

are non-quantifiable since they cover non-financial gains such as compliance with

regulatory provisions, deterrent effects, system improvements and protection from reputational damage.

DG Trade has produced an estimation of the costs of the main control processes. DG Trade estimates the overall cost of control at € 1.4 mil72.

Apart from the Commission’s own cost of control (in the strict sense) mentioned above, there are fees paid to international organisations for their overall

administration/management in the broad sense (which are however known to cover broader costs than only control in the strict sense): 7% of the final amount of the direct

eligible costs actually incurred.

DG Trade applies a 100% ex ante verification to all transactions. This verification includes mainly procurement procedures and direct awards of grants. To a large extent, both are

governed by a regulatory framework which cannot be curtailed. No ex-post control function is established.

DG Trade, being considered as small-spending DG and not being possible to split the cost of controls into the Direct and Indirect Management modes, retained a single overall cost

of control indicator:

The cost of control as well as the level of appropriations authorised remained stable

compared to 2016. DG Trade considers the necessity of these controls to be undeniable,

as they are essential to ensure compliance with regulatory requirements. As demonstrated in annex 5 a substantial part of the appropriations would be at risk if these

controls would not be in place. For these reasons, the overall cost of control has to be seen in relation to the relative small payments value (15.2 M€).

72 This corresponds to 9.7 FTE, representing the estimated combined effort of actors in the financial and

operational units involved in the execution and verification of financial transactions in DG Trade.


Taking into account the obligations resulting from the regulatory framework, the total costs of controls and both the quantifiable and non-quantifiable benefits, DG Trade

considers that the controls performed today are efficient and necessary. DG Trade continues to reflect on its control model and examines whether it is possible to make it

even more cost-effective and efficient.

Fraud prevention and detection

DG Trade has developed and implemented its own anti-fraud strategy in 2013,

elaborated on the basis of the methodology provided by OLAF. It has been updated in

2015.

Despite its small budget, DG Trade has put in place various control levels to minimise the

risk of fraud in financial transactions as outlined above and in annex 5. Furthermore, clear procedures and guidelines on how to detect and report potential fraudulent cases,

including whistleblowing, have been put in place and shared with staff.

In 2017 no cases were reported by DG Trade to OLAF. Moreover, and to DG Trade’s

knowledge, there are no cases linked to financial procedures or staff matters currently being investigated by OLAF. Cooperation with OLAF continues to work well in the area of

fraud linked to trade defence investigations.

2.1.2 Audit observations and recommendations

This section reports and assesses the observations, opinions and conclusions reported by

auditors in their reports as well as the limited conclusion of the Internal Auditor on the state of control, which could have a material impact on the achievement of the internal

control objectives, and therefore on assurance, together with any management measures taken in response to the audit recommendations.

Audits completed in 2017

In October 2017 the IAS completed an audit on "Internal processes supporting trade policy negotiations", where the internal auditors concluded that the internal processes in

DG Trade to support trade policy negotiations across the Commission are effective and efficient. Nevertheless, the IAS detected some areas for improvement and issued five

recommendations (none of them considered critical or very important). The action plan has been established to address all recommendations that should be fully implemented

by the end of 2018.

Implementation of audit recommendations

In 2017, DG Trade continued to monitor systematically the implementation of

recommendations stemming from audit reports. A comprehensive state of play of audit

recommendations is regularly updated and its summary is brought to the attention of DG Trade’s management and staff through spring and/or autumn review. Whenever deemed

necessary, specific issues resulting from on-going/closed audits are presented in other settings in DG Trade. Action plans are systematically established following each audit

with active involvement of all auditees concerned.

In July 2017 the IAS finalised a follow-up of the open recommendations under the audit,

completed at the end of 2015, "Are the European Trade Defence Instruments (TDIs) managed effectively and efficiently to defend the European Union against trade

distortions?" concluding that all recommendations addressed to DG Trade were

adequately and effectively implemented. Also in 2017 the only recommendation that remained open under the audit on management of local IT was considered fully

implemented by the IAS in July 2017.


As regards the IAS audit on Ethics in DG Trade, completed at the end of 2016, the internal auditors recognised that DG Trade set up and implemented an effective ethics

framework based on strong support from the management and on appropriate procedures adapted to the DG's specific environment. It did not reveal any cases where

ethics rules were breached and did not identify critical or very important weaknesses. The IAS detected some areas for improvement and issued two recommendations: (1) the

improvement of internal processes concerning contacts with interest groups and requests for access to documents. This recommendation was fully implemented in 2017; (2) the

implementation of additional, awareness raising, monitoring and reporting on ethics,

where the full implementation is expected by the end of 2018.

In relation to the weaknesses detected during the Financial and procurement

management audit, the IAS had decided to downgrade one very important recommendation, after DG Trade's management demonstrated the completion of a

number of actions proposed to address this recommendation. While the drafting of a reflection paper on the control model to be applied in DG Trade for the financial and

procurement management was put on hold, several measures have been implemented to increase efficiency and effectiveness in this field. These aim at further simplifying

financial management in DG Trade while at the same time maintaining the high quality of

control systems in place. This recommendation should be fully implemented in the course of 2018.

Finally, almost all the weaknesses identified in the 2014 ECA Special Report73, that were within DG Trade's competence, were addressed within the set deadlines and DG Trade

will continue to report to the EP and the Council in the context of the follow up to the Discharge if requested. There is only one out of six recommendations remaining to be

fully implemented in relation to the Generalised System of Preferences' monitoring (which should be reinforced to meet its policy objectives). The recommendation should

be considered to be fully addressed upon presentation of the mid-term review of the GSP

to the legislative authorities as required by the legal base (estimated for the end of June 2018).

None of the above mentioned recommendations were rated as critical or required the issuance of a reservation. Moreover, DG Trade's control system is not considered to be

affected by these recommendations.

In its contribution to the 2017 AAR exercise, the IAS concluded that the audited DG

Trade's internal control systems are effective. This conclusion is based on all work undertaken by the IAS in the period 2015-2017 and taking into account the actions plans

adopted to implement recommendations made by the IAS in 2015-2017.

As a result of the assessment of the risks underlying the auditors’ observations together with the management measures taken in response, the management of

DG Trade believes that the recommendations issued do not raise any concerns

towards the assurance. These recommendations are being implemented as part

of on-going and continuous efforts by DG Trade to seek for further improvement

and efficiency in its processes.

73 Special Report 2/2014 "Are preferential trade arrangements appropriately managed?"


2.1.3 Assessment of the effectiveness of the internal control systems

The Commission has adopted a set of internal control standards, based on international good practice, aimed to ensure the achievement of policy and operational objectives. In

addition, as regards financial management, compliance with these standards is a compulsory requirement.

DG Trade has put in place the organisational structure and the internal control systems suited to the achievement of the policy and control objectives, in accordance with these

standards and having due regard to the risks associated with the environment in which it

operates. Within the DG, Unit A.1 is responsible for advising, monitoring compliance, assessing and reporting on the internal control systems74 in DG Trade. One official in Unit

A.1 assists DG Trade's Internal Control Coordinator (Director A) in his tasks.

The present assessment relates exclusively to the implementation of internal control

systems for which DG Trade is responsible and, therefore, does not include reporting on internal control arrangements in EU Delegations.

Management assesses on a continuous basis the effectiveness of the internal control systems, in order to determine whether they work as intended and ensuring that any

control weaknesses in the system are detected, analysed and considered for

improvement. In addition, management performs specific assessments to ascertain whether the internal control systems and their components are present and functioning.

The purpose of these management assessments is to provide reasonable assurance that the internal control standards/principles adopted by the Commission are implemented

and functioning in the DG, that the assessment findings are evaluated and that any deficiencies are communicated and corrected in a timely manner, with serious matters

reported as appropriate.

The 2017 assessment of the internal control systems was launched in December 2017

and completed in February 2018 with the report sent to the Internal Control Coordinator.

The following elements have been taken into account in order to build reasonable assurance on the functioning of the entire internal control systems in DG Trade:

Results of the staff survey;

Qualitative assessments by the units/sectors/teams in charge of the

implementation of particular Internal Control Standards;

A desk review by Unit A.1 of information collected throughout the year, in

particular records from management meetings, the quarterly management meetings on administrative matters and meetings covering specific internal

control issues;

The results of DG Trade's risk assessment exercise;

The reports by the Authorising Officers by Subdelegation (AOSD Declaration);

The IAS opinion on the state of control;

Relevant audit results (IAS, ECA);

Other control information (OLAF, IDOC);

74 DG Trade has implemented the new Internal Control Framework (C(2017)2373 final, 19.4.2017) in

2018. The 2018 AAR will be based on this new framework.


The register of exceptions and non-compliance events.

Based on the above elements it can be concluded that the internal control standards are

effectively implemented and functioning. For certain elements covered under specific Internal Control Standards, minor additional measures should be taken to further

improve the effectiveness of DG Trade's internal control systems under standards N°1 Mission, N°2 Ethical and Organisational Values, N°8 Processes and Procedures and N°11

Document Management.

Regarding the mission, some Directorates and Units do not have their mission

statements available in the intranet.

With regard to the controls existing in the ethics area, DG Trade's ethical framework is up to date, aligned with the corporate framework and adapted to the DG's specific

environment. Nevertheless, there is still an open recommendation following an audit from the IAS finished in November 2016 on the need to increase monitoring and reporting.

Based on that, an Ethics survey was launched among DG Trade staff and results were received in December 2017. The results are now been analysed to determine what

actions should be taken as a follow up.

Regarding processes and procedures, in the 2017 risk assessment exercise, management

confirmed again that one of the most important risks at DG level relates to the leaks of

sensitive negotiating documents. DG Trade has put in place all the necessary mitigating measures to address this risk within the Commission. In practice the main challenges in

this area have taken place after the documents have been transmitted to other institutions. Moreover, in the audit on internal process of supporting trade negotiations

the IAS recommended to DG Trade to perform an analysis of the security provisions put in place to protect sensitive information and to take the necessary measures to allow the

negotiators to work within adequate technical conditions.

Finally, one of the management tools which are used to conclude on the effectiveness of

controls and/or to assess where changes need to be applied, are the reports on

exceptions and non-compliance events. In 2017 there were no exceptions and the number of non-compliance events decreased in comparison with 2016 and can be

considered as reasonable. Moreover, the non-compliance events did not reveal any fundamental weaknesses in the control system and they were considered as not having

an impact on the legality and regularity of the underlying transactions.

The new Commission's Internal Control Framework is fully applicable as from 1 January

2018. In this context, the Director of Resources, Information and Policy Coordination was appointed as Director responsible for Risk Management and Internal Control (RMIC) in

DG Trade as from 1 January 2018.

Based on all above elements it can be concluded that all internal control standards are effectively implemented and functioning and that they provide a

reasonable assurance regarding the achievement of the business objectives with

some improvements needed in areas identified above.


2.1.4 Conclusions as regards assurance

This section reviews the assessment of the elements reported above (in Sections 2.1.1,

2.1.2 and 2.1.3) and draws conclusions supporting the declaration of assurance and whether it should be qualified with reservations.

Review of the elements supporting assurance

While DG Trade has a relatively small budget to manage, the key controls implemented in DG Trade and which were not altered in 2017, operate appropriately as confirmed by

the different audits conducted. The outcome of all the audits, the regular and comprehensive follow-up of the related audit recommendations and the results of the

internal control assessment constitute important components of assurance in this respect.

Taking into account the conclusions of the review of the elements supporting assurance, DG Trade considers that the information presented above gives a full and fair

presentation of the systems in place to ensure that resources assigned to the DG have

been used for their intended purposes and in accordance with the principles of sound financial management and those of legality and regularity.

It is therefore possible to conclude that the internal control systems implemented by DG Trade provide sufficient assurance to appropriately manage the risks relating to the

legality and regularity of the underlying transactions. Furthermore, it is also possible to conclude that the internal control systems provide sufficient assurance with regards to

the achievement of the other internal control objectives.

Overall Conclusion

In conclusion, management has reasonable assurance that, overall, suitable controls are

in place and working as intended; risks are being appropriately monitored and mitigated; and necessary improvements and reinforcements are being implemented. The Director

General, in his capacity as Authorising Officer by Delegation has signed the Declaration of

Assurance.


2.1.5 Declaration of Assurance


DECLARATION OF ASSURANCE

I, the undersigned,

Director-General of DG Trade

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

report gives a true and fair view.

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

this report have been used for their intended purpose and in accordance with the principles of

sound financial management, and that the control procedures put in place give the necessary

guarantees concerning the legality and regularity of the underlying transactions.

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

such as the results of the self-assessment, ex-post controls, the limited conclusion of the Internal

Auditor on the state of control, the observations of the Internal Audit Service and the lessons learnt

from the reports of the Court of Auditors for years prior to the year of this declaration.

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

institution or those of the Commission.

Brussels, 31 March 2018

Jean-Luc Demarty


2.2 Other organisational management dimensions

In order to illustrate how the Commission is continuously trying to improve its

functioning with a view of investing its resources not only to the most relevant objectives but also in the most economical and efficient manner, DG Trade has chosen the following

two examples of specific efforts that it has made to improve the economy and efficiency of financial and non-financial activities. For a full overview of the performance indicators

on organisational management please refer to annex 2.

Example 1 - HR management

Given the continued visibility and high political pressure on trade policy DG Trade

remains determined to work effectively and efficiently to absorb both the effects of

budgetary constraints and continuous high workload as far as possible within existing

teams by developing more horizontal cooperation, ad hoc cross unit/directorate project

teams and constantly reviewing the need for redeployment options, both at Headquarters

and in Delegations.

The HR BC, together with the Head of Unit TRADE A1 and the Resource Director, meets on a regular basis the Director General to discuss the human resource situation in DG

Trade. Measures to adapt the staffing levels where necessary are decided and in most cases solved through internal redeployments or redistribution of tasks between

directorates and units. Continuous close dialogue and collaboration with middle and senior managers ensures that the HR BC and the Resources Director receive the relevant

information needed for engaging with the Director General on such decisions.

Example 2 – streamlining financial management

DG Trade will closely follow-up the development of the eProcurement project and pursue

the deployment of the ensuing applications as the main driver of efficiency gains in

financial management.

Following the implementation of E-ordering in 2015, DG Trade implemented two other e-modules in 2017: e-fulfilment and e-submission. E-fulfilment allows electronic handling of

time sheets and may allow e-invoices to be automatically "certified correct" provided

they fulfil certain conditions. E-submission (electronic submission of offers) allows tenderers submit their offers electronically in a secure way and consequently brings

efficiency gains during the opening and evaluation of the tenders.

DG Trade continues to analyse the cost-effectiveness and efficiency of its processes and

appropriate measures are proposed, mainly relating to simplification of validation chains and level of responsibilities, when they are considered beneficial.

2.2.1 Human resource management

The HR Modernisation project, as laid down in the Communication on Synergies and

Efficiencies, was rolled out in the Commission as of 16 February 2017. HR services for

DGs are now delivered by the Account Management Centres (AMCs). Within each DG, the HR Business Correspondent coordinates strategic HR matters and prepares the

related decisions of the DG's management. DG Trade contributed in a pragmatic and positive manner to ensure that the project was rolled out as smoothly and efficiently as

possible for all involved, staff, managers and the partners within the HR Community.

DG Trade’s specific objective relating to Human Resources is to motivate and

retain highly qualified staff in order to maintain an effective and efficient operation of DG Trade. Therefore DG Trade continued in 2017 to treat this angle as a

priority.


The latest staff survey took place in 2016 and a new survey is planned to be launched by central services during 2018. Therefore for the purpose of reporting on the indicators in

2017 the reference target remains those of 2016. DG Trade's staff engagement (i.e. the overall indicator for staff satisfaction) in 2016 remained above the Commission average

at 67% and improved by 2 percentage points since the 2014 staff satisfaction survey. Despite this very positive feedback, results on well-being continue to be below the

Commission average (26%) and have even decreased since the 2014 staff satisfaction survey. The staff survey also showed the need to improve and increase internal

communication actions.

Being mindful of the very high workload in DG Trade, further actions seeking to improve work-life balance/well-being, focusing on managing stress and

workload (including through elements of flexibility like teleworking and flexitime) were seen as priority in 2017. For this purpose a specific action plan to

address the 2016 staff survey results was put in place in 2017 with a special focus on career development, work-life balance, well-being and internal communication and from

which actions will continue to be implemented in the different areas in 2018. For example a Health Day, which was much appreciated by staff, was organised in autumn 2017

addressing some of these concerns. We also started the preparations for a specific AST

teambuilding event and a full Health week to take place in 2018. As regards learning and development, special focus will be put on actions on management development and well-

being, in addition to those on trade policy. For example, a pre-management development programme was designed in 2017 and will be launched in the first half of 2018. Specific

management courses relating to the prevention of burn-outs, unconscious bias and emotional intelligence were also designed and prepared in 2017 and will continue or be

launched in 2018.

Moreover, DG Trade continuously seeks to analyse and address how to most

efficiently and effectively use its human resources. This enables it us to prepare for

forward planning of staff in order to optimise the human resources needed for implementing its policy objectives, while at the same time ensuring staff engagement

through learning and development, well-being, fit@work and diversity actions. Furthermore, to address staff motivation, an internal mobility exercise (launched

for the first time in 2016) was organised again in 2017 for both AD and AST staff. With the continued high workload for DG Trade staff, well-being and staff

motivation will continue to be a priority also for the coming year.

In addition to regular discussions with senior management, and the preparation of ad hoc

strategic notes and a resource report, we organise each year a spring and autumn

review, where, together with Senior Management, we look at the human resource and mobility situation in the DG. These reviews also help DG Trade's senior management to

decide how to meet the increasing workload demands with existing staff levels; to decide any needs for further reinforcement, or whether to consider internal redeployments of

staff. Through this process, and in close discussion with the Director General, continuous redistribution of human resources within the DG is possible so that

we can meet our priorities while at the same time balance insufficient staff levels and turnover of staff. Where necessary, we take mitigating actions. In 2017 we

launched the idea of creating short-term "project teams" for urgent high priority dossiers

and which is to be implemented in 2018 on a pilot basis.

Finally, as in previous years, DG Trade continued taking very seriously its

commitment to promote gender equality. Compared to the baseline figure 2015 (18.5%) we have in 2017 increased substantially the percentage of female middle

managers and reached our target of 30%. In addition, DG Trade reached in September 2017 the additional target of first appointment of two female middle managers. DG Trade

also participated in the compulsory middle management mobility exercise, launched by DG HR in May 2017. This exercise resulted in two new middle managers, one female and

one male, joining DG Trade on 1 September and 1 October 2017 respectively.


2.2.2 Better regulation

In line with the Better Regulation Agenda, DG Trade submitted three impact assessments

to the Regulatory Scrutiny Board in 2017. All three documents received a positive opinion on their first submission. These submissions concerned the impact assessment regarding

the comprehensive Australia and New Zealand FTAs, the modernisation of Chile Association Agreement and the multilateral investment court.

2.2.3 Information management aspects

According to DG Trade’s objective to register and file documents in ARES and making

them retrievable and thus to be shared in the DG and reusable by other DGs, the number

of registered documents that were not filed went down in 2017 (0.95%) improving the already positive results from 2016 (0.99%). The improvement in the overall results for

all DGs is explained by the mandatory filing introduced in the ARES last version.

In addition, following the full implementation of the 100% electronic e-signatory in Ares

launched in January 2017, DG Trade had 93.6% of registered documents with fully approved e-signatory in 2017. This procedure has facilitated a better use of electronic

workflows, with the reduction of errors caused by the parallel circulation of paper files and a reduction of paper storage.

There was a reduction of 12.5% in the number of emails registered with Areslook in

2017. Part of the reduction is explained by the general reduction in the registered document in Ares (6.4%) in 2017. Furthermore, the target of this output has been

revised in the Management Plan 2018 considering that the number of emails registered with Areslook have reached a proper level (33.50% in 2017) and should be maintained in

the future.

The Negotiations Support Tool (NEST) supports the planning of negotiations through

calendar management functions and it is gradually becoming a repository of the relevant policy information relating to trade negotiations.

Another information management tool which is used by DG Trade is our TradeTogether

platform that supports collaborative and group work in various services of the DG.

The Event Management Tool (EMT), developed by DG FISMA, has successfully passed the

pilot phase and it is now used across the DG as a transparency tool to record meetings with external stakeholders.

2.2.4 External communication activities

In 2017, there was a continued high level of interest around bilateral negotiations

(CETA, Japan notably), the State of the Union Trade package in September 2017

including the legislative proposal on investment screening, as well as developments related to trade defence (adoption of new methodology and

modernisation of trade defence rules). The DG's communications, information, outreach and transparency work has therefore focused to a large extent on these priority issues

and how they fit into the wider priorities of this Commission, notably, delivering jobs, growth and investment. Nevertheless, DG Trade has also shown through its

communications efforts that EU trade policy is more than just these two important negotiations, and has covered other bilateral trade negotiations, as well as the

multilateral dimension and the values agenda. The 2017 Progress Report on the Trade for

All communication outlines progress achieved since the beginning of the Juncker Commission on all these issues.

DG Trade continued pursuing this approach not only from Commission headquarters in Brussels, but also from Commission representations in the Member States, in particular


in the three Member States where specific posts for trade communications and outreach officers were created (Berlin, Paris and Vienna). This includes working with a contractor

to develop ‘contextualised’ content and stories on trade as well as outreach actions in Member States. Similar efforts have been undertaken by many of our trade sections

across the EU's Delegation network, particularly in those countries where new agreements are in force, have been provisionally applied or are under negotiation.

Within the Commission, DG

Trade worked with

other DGs (in particular DG

Communication's spokespersons'

service) to implement the communication

strategy and monitor the impact of our

communication policy

in Member States' media, social media

and politics. DG Trade also cooperates

with the European Parliament, the

Council and third party actors (think

tanks and civil society

organisations). The DG supported press

and media relations through lines to take,

technical media briefings and

interviews as well as seminars dedicated to trade for groups of journalists.

In terms of social media, DG Trade uses primarily its Twitter account (31,500 followers at

a 15% annual follower growth rate, the highest among EC accounts without any paid social media promotion - with a very strong engagement rate of 10%, by far the highest

among all Commission accounts, and 2 out of top 5 best performing tweets among all DGs) as well as the Commission central social media accounts and coordinates closely

with the Commissioner’s communications adviser with regards to the Commissioner’s Twitter account with over 61,000 followers. We also cooperate with the with

Representations in Member States and the Delegations around the world that also use their social media channels. DG Trade and the Commissioner Twitter account as well as

additional social media channels from the Commission and the Representations in MS

have become increasingly important in our strategy to give visibility to our actions and increase our outreach.

In relation to transparency, DG Trade continued to step up its transparency policy by deciding to publish Commission's proposals to the Council for negotiating directives and

the opening of negotiations as well as the explanation of the political agreement sent to Member States and the EP, in addition to negotiating texts and round reports. 82

documents were published in 2017 (17 negotiation round reports plus 65 negotiation text proposals).

Communication activities also focused on stakeholder involvement and on an interactive

process with the civil society. In 2017, DG Trade organised 23 civil society dialogue


meetings on different trade policy issues and launched 4 public consultations.

The new expert group (mentioned above) on trade agreements composed of 28

representatives of businesses, trade unions and NGOs, was created by a Commission decision in September 2017. Following the completion of the selection process of member

organisations by the end of 2017, it started its work in February 2018.

DG Trade organised its flagship event on trade policy, the EU Trade Policy Day, in

December 2017. The event was very successful, with nearly 450 people that attended and with thousands of people watching the web streaming session. On that day our

hashtag #EUTrade was for a while the number one hashtag in Belgium.

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