Concept and Foundations of Community Preference
Die Community Preference refers to an economic and legal policy principle that, within the European Union (EU), establishes preferential treatment for goods, services, or producers from member states over those from third countries. This concept became especially relevant in the framework of the Common Agricultural Policy (CAP) and the movement of goods, significantly shaping the structure of the European internal market.
Community preference is the result of the objective to create as uniform a market as possible within the Community and to promote economic integration among member states, while at the same time ensuring external protection against third countries. It is mainly expressed through customs regulations, quotas, and, within the framework of agricultural policy, through market regulation measures.
Development History and Legal Sources
Historical Development
The principle of community preference was first introduced in 1957 with the signing of the Treaties of Rome and the associated founding of the European Economic Community (EEC). The aim was to create a Common Market based on four fundamental freedoms: the free movement of goods, persons, services, and capital. In this context, community preference was intended to ensure harmonization within the member states and strengthen economic cohesion.
Primary Legal Foundations
Im primary Union law the term community preference is not explicitly found, but the concept can be derived from several provisions, particularly from:
- Article 110 of the Treaty on the Functioning of the European Union (TFEU) (Prohibition of internal fiscal discrimination)
- Articles 34 to 36 TFEU (Prohibition of quantitative restrictions and measures having equivalent effect between member states)
- Article 39(1)(d) TFEU (Objective of the Common Agricultural Policy, “to ensure a fair standard of living for the agricultural community” with an emphasis on security of supply)
Secondary Legislation and Political-Programmatic Determinations
The practical implementation and shaping of community preference were carried out in particular through regulations of the European Union, which apply in the agricultural sector and are relevant to external trade measures. The corresponding market regulations provided detailed provisions, for example regarding:
- Import regulations and import duties for certain agricultural products
- Licensing requirements and quotas
- Subsidy regulations in favor of production sites within the internal market
Community Preference in the Internal Market
Impact on the Movement of Goods
Community preference is particularly evident in dealings with third countries. Within the European internal market, goods originating from member states are granted preferential treatment over those from third countries. This means that goods produced or traded within the Community enjoy duty-free movement, exemption from charges, and non-discriminatory access throughout the internal market.
By contrast, goods from third countries are often subject to customs duties, import quotas, or certification requirements, which serve to provide external protection for the interests of the Community. Goods that are in free circulation within the Union thus enjoy community preference, and this status is specifically regulated in customs law.
Implementation in Agricultural and Fisheries Markets
Within the Common Agricultural Policy (CAP) and certain aspects of fisheries policy, community preference plays a central role. It is concretized by measures such as import quotas, protective tariffs, price compensation systems, and subsidies, in order to protect the incomes of European farmers and ensure supply security for consumers in the EU.
Community Preference in Customs Law
Significance for the Origin of Goods
EU customs law places particular importance on distinguishing between goods “with proof of origin” from the EU (or from certain preferential agreement countries) and those from third countries. Community preference is only granted if goods meet the specifically established rules of origin and are in free circulation.
Community Preference and Preferential Agreements
In addition to pure community preference, there are various preferential agreements in international trade through which certain third countries are also granted preferential treatment under specific conditions. However, within the Union and in relation to third countries, community preference always takes precedence.
Development, Limitations, and Phasing Out of Community Preference
Dismantling and Current Legal Developments
With progressive market integration, the establishment of a customs union, and a myriad of international trade agreements, the significance of classical community preference has diminished. In particular, the liberalization of agricultural trade and international obligations under the World Trade Organization (WTO) have led to a partial dismantling of internal preference measures.
International trade agreements, such as the European Economic Area (EEA) Agreement or free trade agreements with third countries, require the EU to gradually open its market, thereby reducing the fundamental priority of Community products.
Limitations Due to the Prohibition of Discrimination
Community preference is limited by the general prohibition of discrimination and by the WTO rules on equal treatment of all trading partners (“most-favored-nation principle”). Accordingly, preference measures must not result in impermissible disadvantages for third countries if international obligations conflict with them.
Community Preference and Its Current Legal Significance
Legal Situation After Brexit
With the United Kingdom’s exit from the European Union on January 31, 2020, the country has become a third country. As a result, community preference generally no longer applies to goods and services from Great Britain, unless this is agreed upon by the withdrawal agreement or specific subsequent arrangements.
Significance for Businesses and Trade
For economic operators, community preference is of considerable practical importance, particularly in import and export processing, customs procedures, and rules of origin. Correct documentation and proof of community origin are prerequisites for claiming preferential treatments, such as exemption from customs duties.
Literature and Further Sources
- EU Treaty Texts
- European Commission – Common Agricultural Policy
- Ulrich Everling: “Community Preference – Development and Current Significance,” Journal of European Economic Law, 2004.
Community preference has shaped European law and the European economic order for decades. Despite certain reversals due to international market liberalization, it remains a key factor in understanding the European internal market and a relevant component of numerous legal acts and administrative processes in the EU.
Frequently Asked Questions
What legal foundations govern community preference within Union law?
The legal foundations of community preference are essentially found in the treaties of the European Union, in particular the Treaty on the Functioning of the European Union (TFEU). The term itself was historically developed within the framework of the Common Agricultural Policy and the Common Commercial Policy. Community preference results from the obligation of the member states to strengthen the internal market and to promote the free movement of goods, people, services, and capital within the Union. In legal terms, community preference is specified in rules that favor products, services, and workers from member states over those from third countries – such as through the application of the common external tariff, the priority of European providers in procurement, or special quota regulations. The prohibition of discrimination based on nationality under Article 18 TFEU also plays a role, as community preference refers explicitly to preference over third countries, not within EU member states.
How is community preference applied in the context of the EU procurement directives?
In the context of the EU procurement directives, community preference has been a central element in granting European providers preferential access to public contracts in the member states. The relevant directives, such as Directive 2014/24/EU on public procurement, fundamentally require equal treatment of all companies established in the EU and prohibit discrimination on the basis of nationality. At the same time, member states are obliged to allow participation of third-country companies only under certain conditions, unless broader international obligations – for example under the GPA (Government Procurement Agreement) of the WTO – apply. The Court of Justice of the European Union (ECJ) regularly emphasizes in its case law that community preference serves to give priority to the European internal market, while disadvantaging companies from third countries must comply with international law obligations.
What role does community preference play in the Common Agricultural Policy (CAP)?
In the Common Agricultural Policy (CAP), community preference is a fundamental principle aimed at primarily promoting and protecting agricultural products from EU member states. This is ensured in particular by customs duties and trade policy protection instruments at the external borders of the EU. The aim is to protect European farmers from import competition from third countries and to guarantee supply security within the EU. Legally, this preference is embodied in Article 39 TFEU, but also in numerous regulations – particularly within the so-called common market organization law. Mechanisms are provided therein to shield the internal market or subject imports from third countries to conditions. However, community preference must always be interpreted in light of international trade agreements and WTO requirements, which has in some cases limited it in favor of bilateral or multilateral trade agreements.
To what extent is the principle of community preference legally compatible with the accession process of new member states?
When new members are admitted to the European Union, the principle of community preference must be explicitly observed. During accession negotiations, candidate countries commit to fully applying the foundations of the internal market, including the principle of community preference, after joining. Legally, this is established in the accession acts as well as in Article 49 TEU. For the period prior to formal accession, transitional arrangements can be made to provide for a gradual introduction of community preference and grant candidate countries a period of adjustment. After joining, the same rights and obligations apply to new member states as to existing members, so that they fully benefit from community preference. The compatibility with the prohibition of discrimination results from the fact that this principle is applied to third countries, not within the group of member states.
Can national regulations that provide for the preferential treatment of Union goods be considered an implementation of community preference?
A national regulation that expressly favors goods or services from other member states exceeds the limits of community preference and generally contravenes the Union law prohibition of discrimination under Articles 34 and 36 TFEU. Community preference refers exclusively to the relationship between EU members and third countries and therefore does not legitimize unequal treatment within the internal market. The implementation of community preference is a task for the Union, not for individual member states. National regulations that go beyond the Union law standard or create their own preference systems are regularly found by the ECJ to be incompatible with Union law. However, protective mechanisms at the EU’s external borders are permitted, provided they apply uniformly across the Union and do not compromise the integrity of the internal market.
What role does the case law of the European Court of Justice (ECJ) play in interpreting community preference?
The interpretation and application of community preference is significantly shaped by the case law of the European Court of Justice (ECJ). In particular, the ECJ clarifies in which cases and to what extent community preference is legally permissible and compatible with other fundamental principles of Union law. The ECJ has clarified that community preference entails an obligation to prioritize Union goods, services, and persons over those from third countries, but does not allow discrimination within the internal market. Furthermore, the ECJ regularly rejects national unilateral actions that restrict the access of third-country goods beyond what is permitted under Union law. In its judicial practice, the Court also sets limits, for example where international treaties – such as the GPA – require the equal treatment of third-country companies in certain areas. Therefore, the contours of community preference are constantly being refined in relation to other Union and international legal principles.
To what extent do international trade agreements (e.g. WTO, GPA) affect the legal significance of community preference?
International trade agreements, especially WTO law and the Government Procurement Agreement (GPA), significantly limit the legal scope of community preference. By taking on international legal obligations, the EU is required to grant certain third countries – in particular GPA contracting parties – market access similar at least to that of member states. The EU must therefore always ensure, when designing and applying community preference, that there is no impermissible discrimination against companies from these third countries. Legally, community preference is therefore always to be applied subject to existing international obligations. In the event of disputes, the ECJ examines whether and to what extent the preferential rule complies with the respective international legal requirements and annuls national or European measures, if they contravene international agreements.
