WORLD TRADE
ORGANIZATIONS/C/N/189
11 February 2002
(02-0902)
Council for Trade in Services Original:  English
JOINT COMMUNICATION FROM THE EUROPEAN COMMUNITIES
AND THEIR MEMBER STATES AND THE REPUBLIC OF LITHUANIA
Notification pursuant to Article V:7(a) of the General Agreement for Trade in Services
Pursuant to Article V, paragraph 7(a) of the GATS, the European Communities and their
Member States, on the one part, and the Republic of Lithuania, on the other part, hereby notify the
"economic integration agreement" as instituted by the Europe Agreement concluded between
themselves.  The formal notification is made in a ccordance with the "standard format for information
on economic integration agreements on services" as taken note of by the Committee on RegionalTrade Agreements at its meeting on 2 May 1997.
To facilitate the examination by the Members, th e relevant provisions on trade in services in
this agreement have been identified in the notification.  The full text of the Europe Agreement where
these provisions can be found, in their original version, is available at the WTO Secretariat.  TheEurope Agreement is published in the Official Journal of the European Communities (Official Journal
L 51 of 20 February 1998, p. 3) and in the Official Journal of the Republic of Lithuania ("Valstybes
Zinios", 1998, No. 11-266).
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I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership and dates of signature, ratification and entry into force
The Europe Agreement establishes an association between the European Communities and
their Member States (15), acting within the framewor k of the European Union, of the one part, and the
Republic of Lithuania, of the other part.  The agreement entered into force on 1 February 1998 after
the ratification process had been concluded by the 15 EU Member States and Lithuania, The Europe
Agreement was signed on 12 June 1995.
2. Type of agreement
The Europe Agreement is the basic legal instrument of the relationship between the EU and
Lithuania.  It establishes gradually a free-trade area between the EU and Lithuania, provides for a
political dialogue, legal approximation and various other areas of co-operation.  No new customs
duties or quantitative restrictions can be introduced in trade between the European Union andLithuania from the date of entry into force of  the Europe Agreement.  The Europe Agreement
provides for progressive alignment with Community rules as well as a number of specific provisions
in such areas as capital movement, rules of competition, intellectual and industrial property rights and
public procurement.  The Europe Agreement constitutes a key element of the EU's pre-accession
strategy which aims at preparing Lithuania for EU membership.S/C/N/189
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3. Scope
As regards the services sectors, the Europe Agreement covers in principle all services sectors
and all modes of delivery (see II(b) below).
II. PROVISIONS AFFECTING TRADE IN SERVICES
1. (a) Provisions in the Europe Agreement which are relevant to the scope of the GATS:
- Article 1 – Objective;
- Title I – "General principles":  Articles 2 and 3;
- Title IV – Chapter 1 "Movement of workers";  Chapter 2 "Establishment";
Chapter 3 "Supply of services" and Chapter 4 "General provisions;
- Title V – Chapter 1 "Current payments and movement of capital";
Chapter 2 "Competition and other economic provisions" and
Chapter 3 "Approximation of laws";
- Title VI – "Economic cooperation", in particular Articles 74 on Investment
promotion and protection;  Article 75 on Small and medium-sized
Enterprises;  Article 81 on Energy;  Article 83 on Environment;  Article 84
on Transport;  Article 85 on Telecommunications, postal services and
broadcasting;  Article 87 on Banking, insurance and other financial servicesand Article 94 on Tourism;
- Title X – "Institutional, general and final provisions".
(b) These provisions on the Europe Agreement constitute an agreement liberalising trade
in services between the European Communities and their Member States, on the one
part, and the Republic of Lithuania, on the other part, in the sense of Article V,paragraph 1, given that:
- it provides for universal sectoral coverage of all service activities and the
temporary exemption under Article 44-45 (i.e. establishment in air transport
services, inland-waterway transport services and maritime transport services);
- it provides for the liberalisation of trade through all modes of supply:  "cross
border" trade, "consumption abroad", "commercial presence" (with or
without movement of natural persons) as well as "presence of natural
persons" (see in particular Articles 37, 41, 42, 44, 49, 52, 56 and 59);
- it provides for the absence or elimination of substantially all discrimination
through elimination of existing discriminatory measures and prohibition of
new or more discriminatory measures (see in particular Articles 37, 44, 49,50, 52 and 53);
- the degree of liberalisation of trade in services between the Community and
its Member States, on the one part, and the Republic of Lithuania, on the
other goes beyond the requirements and disciplines of the GATS in many
respects.  To achieve full national treatment, additional disciplines and meansof liberalisation are foreseen such as:  mutual recognition of qualifications;
approximation of laws;  behaviour of monopolies and exclusive service
providers;  restrictive business practices and payments, transfers and free
movement of capital.S/C/N/189
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(c) Consideration should also be given, pursuant to Article V, paragraph 2 of GATS to
the relationship of this agreement to the wider process of economic integration
between the European Communities and their Member States, on the one part, and the
Republic of Lithuania, on the other part, provided for under the Europe Agreement.
Economic integration is not only taking place in the field of services, but also inrespect of trade in goods and in economic relations in general.  In addition, this
Agreement will help the Republic of Lithuania to achieve its objective to become a
member of the European Union.
(d) The European Communities and their Member States, on the one part, and the
Republic of Lithuania, on the other part, have negotiated their Schedule of Specific
Commitments and list of MFN exemptions.  The Europe Agreement aims at
facilitating trade between the Parties.  No provisions of the Europe Agreement aim atraising the level of restrictions of trade in services in respect of any other WTO
Member.
2. Rules of Origin
A "Community company" or a "Lithuanian comp any" respectively shall mean a company set
up in accordance with the laws of a Member States or of Lithuania respectively and having itsregistered office or central administration or principal place of business in the territory of the
Community or Lithuania respectively.  However, should the company, set up in accordance with the
laws of a Member State or Lithuania respectively, have only its registered office in the territory of the
Community or Lithuania respectively, the company shall be considered a Community or a Lithuanian
company respectively if its operations possess a real and continuous link with the economy of one ofthe Member States or Lithuania respectively (Article 46).
3. Standards/Recognition
The Europe Agreement foresees measures necessary for mutual recognition of qualifications
(Article 50) and to achieve gradual reduction of differences between Lithuania and the Community in
standards, technical regulations and conformity assessments procedures (Article 76).
4. Safeguards
The Europe Agreement has provisions for balance-payments difficulties in the Community or
in Lithuania (Article 65:2) and for limited derogations for Lithuania from the provisions on
establishment in special cases including:  Lithuanian industries undergoing restructuring, facing
serious difficulties or elimination/drastic reduction of the total market share, or for newly emerging
industries in Lithuania (Article 51).  These provisions have not been applied so far.
5. Subsidies and State-Aid
Article 64 contains a number of provisions as regards subsidies and state aids.  It contains
inter alia  a general prohibition of any public aid which distorts or threatens to distort competition by
favouring certain undertakings or certain products.  Any practices contrary to this rule shall be
assessed on the basis of criteria arising from the application of the rules of Article 87 (ex-Article 92)
of the Treaty establishing the European Community.  In applying this provision, the parties recognisethat during the first four years after the entry into force of the Europe Agreement, any public aid
granted by Lithuania shall be assessed taking into account the fact that Lithuania shall be regarded as
an area identical to those areas of the Community described in Article 87(3)(a) of the Treaty
establishing the European Community.  In addition, special implementing rules on state aids shall be
developed to implement the above-mentioned provisions.  These rules are currently in the process ofbeing adopted.  Each party shall ensure transparency in the area of public aid.S/C/N/189
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6. Government Procurement
Article 68 contains provisions on non-disc rimination as regards public procurement.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and reservations
Exceptions are provided for under Articles 55 (public policy, security and health) and 121
(security).
2. Accession
The Europe Agreement does not contain any provisions allowing other countries to accede to
the Agreement.  However, with necessary modi fications, the Agreement shall apply to any new
Member State of the European Communities.
3. Dispute settlement procedures
Each of the two parties may refer to the Association Council any dispute relating to the
application or interpretation of this Agreement.  The Association Council may settle the dispute by
means of a decision, which will be binding for each party (Article 114).
4. Relations with other trade agreements
Article 27 states that the Europe Agreement shall not preclude the maintenance or
establishment of customs unions, free trade areas or arrangements for frontier trade except in so far asthey alter the trade arrangements provided for in the Agreement.  Consultations shall take place within
the Association Council concerning agreements establishing such customs unions or free trade areas
and, where requested, on the other major-related issues.
5. Institutional framework
The Europe Agreement provides for a cycle of annual meetings of the Association Council
(ministerial level) and the Association Committee (high level officials) as well as frequent multi-
disciplinary sub-committee meeting (technical level).  These institutions of the Europe Agreement
have assumed an enlarged role in the pre-accession proc ess, in particular in regard to monitoring the
progress made by Lithuania in the adoption and implementation of the acquis communautaire .
Exchanges between the European and Lithuanian Parliaments are taking place within a JointParliamentary Committee which meets 1-2 times a year.
IV. OTHER
The full text of the agreement is available from:
- the WTO Secretariat;
- European Commission;
- the Republic of Lithuania.
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