1
Introduction
1.01 In the original Treaty of Rome signed in 1957, the common market, and more particularly the customs union, was the cornerstone of the venture which was the European Economic Community in 1958. As testimony to this fact, the fathers of that Treaty chose to set out the provisions relating to the customs union immediately after the eight introductory articles.1 As we shall see in the course of this chapter, the Treaty of Maastricht transformed the European Economic Community into the European Community (EC) and also created the European Union governed by the Treaty on the European Union (TEU). What is more, with the Treaty of Lisbon, which came into force on 1 December 2009, the Community ceased to exist and was merged into the Union.2 At the same time, the EC Treaty became the Treaty on the Functioning of the European Union (TFEU), although the TEU has remained in force as a separate Treaty. At the same time, the term âcommon marketâ, which appeared frequently in the EC Treaty, has been replaced by the âinternal marketâ throughout the Treaties. Despite all these changes, the internal market, and the free movement of goods in particular, still lies at the very heart of the European Union.
The purpose of this book is to examine only a part of the provisions on the customs union, namely Articles 34 to 37 TFEU (formerly Articles 28 to 31 of the EC Treaty).3 In principle, these provisions prohibit quantitative restrictions and measures of equivalent effect on imports and exports between Member States. Briefly stated, quantitative restrictions are non-tariff quotas or total bans on trade, while the concept of measures of equivalent effect covers a multitude of other trade restrictions not falling under any other Chapter of the TFEU. It cannot be sufficiently emphasised that this concept is not limited to technical customs matters, but covers such questions as intellectual property, price controls and indications of origin. However, this prohibition on quantitative restrictions and measures of equivalent effect is subject to a number of exceptions, which will also be examined. In addition, this book will briefly consider the powers of the Union to pass legislation to eliminate technical barriers to trade. On the other hand, trade between the Union and third countries falls outside the scope of this work, except trade within the European Economic Area, which is covered by Chapter 14.
First, Articles 34 to 36 TFEU must be put in their context, both in historical terms and in terms of their place in the EU as a whole. To understand the historical context of these provisions one must glance at two quite separate organisations, the GATT and the OEEC.
1.02 The General Agreement on Tariffs and Trade was concluded by 23 countries in October 1947 and came into force âprovisionallyâ in January 1948. Its object was to guard against protectionism in international trade. It was conceived as part of a much grander plan, the establishment of an International Trade Organisation which never saw the light of day, as it was blocked by the United States. Yet with the aid of a number of changes, the GATT was able to operate on its own without its intended institutional base. By 1994 more than 100 countries from all corners of the globe were party to the GATT. While the GATT provides that tariffs are only to be reduced, it requires the outright abolition of quantitative restrictions: Article XI, entitled âGeneral Elimination of Quantitative Restrictionsâ, provides in paragraph 1 that âno prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintainedâ between contracting parties.4 The subsequent paragraphs and articles contain a number of exceptions to this rule, the most important of which is the balance of payments exception in Article XII. This permits a contracting party to adopt import restrictions necessary:
(i) to forestall the imminent threat of, or to stop a serious decline in its monetary reserves, or
(ii) in the case of a contracting party with very low monetary reserves, to achieve a reasonable rate of increase in its reserves.
Without using the term âmeasures of equivalent effect to quantitative restrictionsâ, the GATT does in fact contain certain rules relating to such measures. These are to be found not only in Article XI, but also in Article III.1 which states inter alia that measures on the sale, transport, distribution or use of products âshould not be applied to imported or domestic products so as to afford protection to domestic productionâ. They are also to be found in Article III.4 which provides:
The Uruguay Round of negotiations which commenced in 1986 under the auspices of the GATT resulted in a series of Agreements signed in Marrakesh in April 1994. Those Agreements, which came into force on 1 January 1995, provide inter alia for the establishment of the World Trade Organisation.5 Those Agreements created a new GATT (GATT 1994), while the old GATT (GATT 1947) lapsed at the end of 1996; but the language of Articles III, XI and XII remains unchanged. Virtually all countries and territories which were party to GATT 1947 â including the European Community and all its Member Statesâare now party to GATT 1994. Member States of the European Community have long ceased to be bound by GATT as between themselves.6
For many years the Court declined to take cognisance of GATT obligations at all on the basis that the GATT was not directly applicable.7 However, the judgment in FEDIOL v Commission8 heralded a reversal of this position: the Court will now have regard to GATT as regards Community restrictions on trade with third countries, albeit only in cases concerning Community legislation expressly mentioning GATT obligations or which aims to give effect to such obligations.9 However, a further twist occurred in Portugal v Council10 where, after analysing their ânature and structure â, the Court held that the WTO Agreements of 1994 are not âin principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutionsâ. Nevertheless, it did add the following proviso:
1.03 At all events, the Organisation for European Economic Co-operation (OEEC) was set up by a Convention signed shortly after the GATT, in April 1948.12 It was primarily intended to administer the aid provided under the Marshall Plan for the post-war economic reconstruction of Western Europe. Accordingly, it included all non-communist European States other than Finland, although the Federal Republic of Germany and Spain did not become members until 1949 and 1959 respectively. In addition, the United States and Canada became associate members in 1959, and Yugoslavia took part in certain activities of the Organisation as from 1957. Since the abolition of barriers to trade was seen as being intimately linked to Europeâs economic recovery, the Council of the OEEC called on its members as from 1949 to make a series of fixed reductions of their import quotas, subject to certain escape clauses. This culminated in a decision of January 1955 to raise the basic minimum level of liberalisation to 90 per cent of the value of imports, which decision was referred to in the original Articles 31 and 33(6) of the Treaty of Rome; (these provisions were repealed by the Treaty of Amsterdam). By the end of 1956 overall liberalisation had covered over 85 per cent of trade, so that much had been done to pave the way for the entry into force of the Treaty of Rome. In 1961, the Organisation was transformed into the Organisation for Economic Co-operation and Development (OECD) including the United States, Canada. Australia. New Zealand and Japan among its members. A number of other developed or relatively developed countries have joined the organisation since then.
1.04 The immediate forerunner of the European Economic Community was the European Coal and Steel Community (ECSC), set up by the Treaty of Paris of 1951. That Treaty lapsed on 23 July 2002, as it was concluded for only 50 years (Article 97 ECSC).13 On 1 January 1958 the ECSC was joined by the EEC itself, established by the Treaty of Rome signed in March of the previous year, and by the European Atomic Energy Community (Euratom) set up by another Treaty of Rome of the same date. These two treaties were concluded for an unlimited period (Article 312 EC (now Article 356 TFEU) and Article 208 Euratom).
Each of these organisations functions as a separate legal entity according to its own rules, but since the 1960s they have been run by the same institutions â the Commission, the Council of Ministers, the Parliament and the Court of Justice. This book is therefore confined to the European Union, although the ECSC and Euratom will be briefly mentioned at the beginning of Chapter 2.
1.05 Returning, then, to the TFEU itself, it is necessary to give a very brief outline of its principal provisions so that Articles 34 to 36 can be seen in the context of the Treaty as a whole. The establishment of a âcommon marketâ (now âinternal marketâ) always featured first in the list of tasks assigned to the Community by Article 2 of the Treaty of Rome, a provision now enshrined in Article 4(2)(a) TFEU. As early as 1982 the Court stated in a celebrated judgment:
No-one could seriously deny that this definition is extremely far-reaching, although the words âas close as possibleâ show that in some respects the common market is not quite complete.15
More specifically, as stated at the beginning of this chapter, one of the fundamental aims of the Treaty was and is to set up a customs union between the parties. According to a widely received definition, a customs union, in contrast to a free trade area, does not merely involve liberalisation of trade between the parties; it also entails the establishment of essentially uniform rules for goods coming from third countries.16 Acceptance of this definition is to be found both in an opinion of the Permanent Court of International Justice of 193117 and in Article XXIV(8)(A) of the GATT.18 The terms of the Treaty are in line with this definition. Accordingly, in its original form the Treaty contained provisions for the establishment and maintenance of a common customs tariff (Articles 18 to 29), most of which were repealed by the Treaty of Amsterdam; only Articles 31 and 32 TFEU (ex 26 and 27 EC) survived the cull. By the same token, the Treaty further provides for a common commercial policy with respect to trade with third countries in Article 207 TFEU (ex 133 EC). Likewise, Article 28 TFEU (ex Article 23 EC) stipulates that the provisions on the free movement of goods apply not only to products originating in Member States but also to goods originating in third countries but in free circulation in the Union. This means, in essence, that goods from third countries are assimilated to Union goods for this purpose when they have undergone all the appropriate import formalities and any customs duties payable have been levied.19
The Treaty provisions on the free movement of goods fall into two distinct sections â and a bit. Article 28 TFEU (ex 23 EC) lays down a total prohibition on customs duties and charges of equivalent effect between Member States, which fall outside the scope of this book. As already stated, Articles 34 to 36 cover quantitative restrictions and measures of equivalent effect on imports and exports between Member States. Article 34 prohibits such restrictions and measures when imposed on imports, while Article 35 bans the corresponding restrictions and measures applied to exports. Article 36 constitutes the major exception clause. In addition, Article 37 TFEU (ex 31 EC) relates to trade restrictions linked to or forming part of State monopolies. However, it is far from clear to what extent Article 37 is independent of the other provisions on the free movement of goods, a matter to which Chapter 12 of this book is devoted.
The free movement of goo...