Explanatory Memorandum to COM(2016)564 - Signing of an agreement with Iceland concerning additional trade preferences in agricultural products

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1. CONTEXT OF THE PROPOSAL

Reasons for and objectives of the proposal

The EU and Iceland are signatories to the Agreement on the European Economic Area (EEA Agreement) which provides for the free movement of goods, with the exception of agricultural and fisheries products. As regards agriculture, Article 19 of the EEA Agreement provides that the Parties will carry out, every two years, review on the conditions of trade in agricultural products and decide on a reciprocal and mutually beneficial basis on the further reduction of any type of barriers to trade in the agricultural sector.

The current negotiations were conducted from 4 July 2012 to 17 September 2015. This Agreement was initialled by the Parties on 17 September 2015 and provides for further trade preferences for trade in agricultural products, including additional fully liberalised tariff lines. As a result almost 90 % of EU agricultural products will enter Iceland duty-free. For more sensitive products such as meat, dairy, fruit, vegetable and ornamental plants, additional tariff quotas or tariff reductions have been agreed upon.

The intention of both Parties is that this Agreement enters into force on the seventh month following the date on which the Parties have notified each other that the required internal procedures have been completed.


Consistency with existing policy provisions in the policy area

The previous agreement took the form of an exchange of letters liberalising trade in agricultural products between Iceland and the EU, based on Article 19 of the EEA Agreement. The previous agreement entered into force on 1 January 2007. It provided for mutual tariff rate quotas and reductions in duty. It also included an undertaking by the Parties to resume bilateral negotiations under Article 19 of the EEA Agreement two years’ time.

The 2007 EU-Iceland bilateral agricultural trade agreement increased the duty-free access of Icelandic agricultural products to the EU market to 51.9 % of trade and increased the duty-free access of EU agricultural products to the Icelandic market to 66.4 % of trade. These figures demonstrate that there was ample room for further trade concessions. Therefore, the latest round of negotiations aimed at:

• increasing the degree of liberalisation on both sides;

• increasing the current tariff rate quotas; and

• opening new tariff rate quotas for additional agricultural products.


Consistency with other EU policies

The deepening of trade relations with Iceland fits into the overall context of EU trade policy and is beneficial for the EU since the EU is a net exporter of basic agricultural products to Iceland. The 2014 trade balance was EUR 129 million in favour of the EU, with EU exports reaching EUR 150 million against EUR 21 million imports. The main products exported by the EU are fruit and vegetables and cereals, where to a large extent, duty-free access to the Icelandic market exists for these commodities. Imports into the EU from Iceland are mainly seaweed and algae, sheep meat, live horses and fur skins.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

In April 2012 the Council authorised the Commission to launch a new round of negotiations with Iceland to achieve additional preferences for trade in agricultural goods under Article 19 of the EEA Agreement.


3. BUDGETARY IMPLICATIONS

This agreement will have no impact on the expenditure side of the EU budget. The new concessions granted on imports from Iceland will likely result in a reduction of own resources through a lower collection of customs duties.