RESTRICTED
WORLD TRADE WT/REG11/9/Add.1
20April 1998
ORGANIZATION(98-1561)
Original: English Committee onRegional Trade Agreements
CENTRAL EUROPEAN FREE TRADE AGREEMENT
Questions andReplies
Addendum
Thisdocument reproduces questions addressed totheParties andthejointresponses provided
bythem. Thequestions andreplies setoutbelow areorganized inaccordance withdocument
WT/REG11/2.
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I. BACKGROUND INFORMATION ONTHE AGREEMENT
2. Introduction andGeneral Assessment ofCEFTA
Could theParties totheAgreement provide datawhich indicate trade creation effects
oftheAgreement onthird countries?
Theobjective oftheCEFTA istoenhance mutual economic andtraderelations andtocontribute
totheexpansion ofoverall world trade. Since theAgreement 'sentry intoforce, thirdcountry trade
ofeachParty increased.
Examination ofthetrade creation effect ofafreetrade agreement doesnot,intheParties ´
view, belong totheconformity testunder Article XXIV:5 (b).
What portion ofeachoftheparties 'external trade isconducted withpreferential partners?
Table 1
Preferential Foreign Trade oftheCzech Republic in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 26,735.00 100.00 22,334.00 100.00
European Union 16,749.90 62.70 13,570.20 60.80
EFTA 563.10 2.10 381.20 1.70
Slovak Republic 2,253.30 8.40 2,888.60 12.90
CEFTA 1,392.70 5.20 2,018.60 9.00
Bulgaria 22.00 0.08 60.50 0.27
Others* 61.50 0.20 179.50 0.80
Sub-total (preferential trade) 21,042.50 78.68 19,098.60 85.47
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*Estonia, Lithuania, Latvia andState ofIsraelWT/REG11/9/Add.1
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Table 2
Preferential Foreign Trade ofHungary in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 21,234,012.6 100.0 19,099,940.1 100.0
European Union 13,325,836.0 62.8 13,602,299.5 71.2
EFTA 388,909.4 1.8 267,149.0 1.4
CEFTA 1,534,006.0 7.2 1,704,812.7 8.9
Sub-total (preferential trade) 15,248,750.4 71.8 15,574,261.2 81.5
Table 3
Preferential Foreign Trade ofPoland in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 42,307.50 100.00 25,571.30 100.00
European Union 26,998.20 63.80 16,526.50 64.20
EFTA 1,044.70 2.05 395.50 1.50
CEFTA 2,652.30 6.30 1,738.10 6.80
Lithuania 111.80 0.30 338.00 1.30
Sub-total (preferential trade) 30,807.00 72.90 18,998.10 73.80
Table 4
Preferential Foreign Trade ofRomania in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 11,275.40 100.00 8,428.90 100.00
European Union 5,919.60 52.50 4,762.30 56.50
EFTA 169.10 1.50 109.60 1.30
CEFTA 631.40 5.60 345.60 4.10
Republic ofMoldova 67.70 0.60 126.40 1.50
Sub-total (preferential trade) 6,787.80 60.20 5,343.90 63.40WT/REG11/9/Add.1
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TABLE 5
Preferential Foreign Trade oftheSlovak Republic in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 10,264.40 100.00 8,792.60 100.00
European Union 4,054.70 39.50 3,953.20 44.96
EFTA 171.10 1.67 109.20 1.24
Czech Republic 2,360.09 22.99 2,343.55 26.66
CEFTA 607.25 5.92 1,061.43 12.07
Bulgaria 7.50 0.07 23.50 0.27
Others* 33.52 0.33 52.47 0.59
Sub-total (preferential trade) 7,234.16 70.48 7,543.35 85.79
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*Estonia, Lithuania, Latvia andState ofIsrael
TABLE 6
Preferential Foreign Trade ofSlovenia in1997
(inmil.USD andinpercentage)
Imports Exports
Total, from which: 9,358.30 100.00 8,372.40 100.00
European Union 6,309.20 67.40 5,326.10 63.60
EFTA 688.30 7.30 479.60 5.70
CEFTA 194.40 2.10 86.50 1.00
Bulgaria 14.90 0.16 12.60 0.15
Others* 61.40 0.66 169.00 2.00
Sub-total (preferential trade) 7,268.20 77.62 6,073.80 72.45
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*Estonia, Lithuania, Latvia andMacedoniaWT/REG11/9/Add.1
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4. Scope andProduct Coverage
From theinformation provided, itisnotobvious what thisagreement actually covers.
Could theParties clearly explain what theagreement covers, what isexcluded andwhat iscovered
bybetter thanm.f.n. -greater thanzerotariff preferences, including percentage oftrade covered
andnumber oftariff linescovered ineachcategory. Please break-out agricultural trade separately.
Statistics willbeprovided later.
Itappears thattariffs ononlysome products included intheagreement willbeeliminated,
while others aresubject to"preferential" -lessthan m.f.n. butgreater than zero tariffs.
Article XXIV provides fortheelimination oftariffs, notthereduction oftariffs. How dothe
Parties justify thereduction, butnotelimination oftariffs onintra-trade?
TheCEFTAprovidesforthecompleteeliminationofanoverwhelmingnumberoftariffscovering
byfarsubstantially allthetradebetween theParties. TheParties do,therefore, believe thatpreferences
granted atzerolevelcover substantially allthetrade.
IntheParties 'view, inthenotion of"substantially allthetrade", thereduction tolessthan
MFN ratebutgreater than0isalsoincluded.
II. TRADE PROVISIONS
1. Industrial Products
2. Agricultural Products
CantheParties confirm thattheyhave notraised duties tothird countries according to
GATT Article XXIV:5?
Yes.TheParties confirm that,inaccordance withArticle XXIV:5, theyhavenotraised duties
tothirdcountries.
CouldthePartiescommentonanynon-tariffmeasures(chargesandquantitativerestrictions)
thatareapplied tothird countries butnottointra-CEFTA trade?
TheCzech Republic, Hungary, Poland, Slovak Republic andSlovenia presently donotmaintain
anynontariff-measure (charges andquantitative restrictions) intrade withthirdcountries, different
from those which areapplied totheCEFTA Parties. Romania maintains acustoms feeintheMFN
trade, which isbound initsschedule under the"Other Duties andCharges" column.
How have Uruguay Round tariff reductions bytheParties totheAgreements affected
thelevelofpreferences granted? Willthelevelofpreference decline bytheendoftheliberalization
period orwilltheabsolute margin ofpreference bemaintained?
Thelevelofpreference willdecline bytheendoftheUruguay Round tariffreductions period.WT/REG11/9/Add.1
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3. Rules ofOrigin
Aretherules oforigin among theParties restrictive tothird countries? Could theParties
prove thattherules oforigin donotcreate restrictive, distorting ordisruptive effects onthird
countries 'trade andinvestment interest?
Wasthere adrawback rule? Hasano-drawback rulebeenintroduced? Iftheno-drawback
rulehasbeen introduced, doesitmean raising ofbarriers tothird countries?
Thepurpose oftherulesoforigin istodetermine whether aproduct iseligible tobenefit from
preferential treatment. Newrulesoforigin based ontheconcept ofpan-European cumulation andapplied
between theParties asof1997 areevenmore flexible withrespect toinput material ofthirdcountry
origin andserve better theinterest ofglobal trade liberalization.
Therefore, intheviewoftheParties totheAgreement, these rules arenotrestrictive tothe
thirdcountries.
Could theParties explain whytheybelieve therules oforigin willnotresult inhigher
tariff barriers tothird countries, particularly inviewoftherules oncumulation?
Thepurpose oftherulesoforigin istodetermine whether aproduct iseligible tobenefit from
preferential treatment. Newrulesoforigin based ontheconcept ofpan-European cumulation andapplied
between theParties asof1997 areevenmore flexible withrespect toinput material ofthirdcountry
origin andserve better theinterest ofglobal trade liberalization.
Therefore, intheviewoftheParties totheAgreement, these rules arenotrestrictive tothe
thirdcountries.
4. Safeguards
4.1 Balance ofpayments difficulties (Article 32)
Could theParties explain howBOP measures would beapplied toward theother Parties
totheAgreement?
Please seereply toquestion "4.1Balance ofpayments difficulties".
4.2 Structural adjustment (Article 28)
Could theParties explain theprovision onstructural adjustment? Hasthisprovision ever
been used?
Article 28provides foraderogation from theprovisions ofArticle 3foralimited duration
(atmaximum until theendofthetransitional period) inexceptional cases forsector undergoing
restructuring orfacing serious difficulties, orconcerning infant industries.
Article28isinfullconformitywiththeGATT1994.Itisrecalledthat"anelementofpreference"
referred toinArticle 28oftheCEFTA would notbecreated bytheapplication ofthesaidArticle,
since thepreference itself would have been already created pursuant toArticle 3,asrequired by
Article XXIV:8. Indeed, theexceptional measures must beeliminated bytheendofthetransitional
period. After thisperiod, anymeasures based onArticle 28shallcease toapply.WT/REG11/9/Add.1
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During thetransitional period, measures maynotexceed acertain threshold orsurpass five
years (inthelatter caseauthorization oftheJointCommittee isnecessary). TheParties concerned may
request consultations intheJoint Committee before anymeasure istaken. Allmeasures must be
accompanied byaschedule forphasing out.Measures cannot beapplied onproducts benefitting from
fullliberalization formore thanthree years. Finally, itisforeseen thatmeasures mayonlytakethe
form ofincreased customs duties andmust, insodoing, maintain anelement ofpreference forthe
Parties concerned, thuspreserving thepreferential character oftheAgreement.
Itshould benoted thatnomeasures against thirdcountries could bebased onArticle 28of
theCEFTA.
Thesafeguard measure pursuant toArticle 28isapplied bytheRepublic ofPoland forthe
preferential imports ofpetrol anddiesel oil(asof1January 1996) andforthepreferential imports
ofsteelproducts (asof1January 1997).
4.3 General safeguards (Article 27)
With respect tosafeguard provisions oftheAgreement, aretheinterests ofthird countries
protected? When injury iscaused byproducts originating inaParty totheAgreement, willthe
Parties impose safeguards against products from third countries?
Interests andrights ofthirdcountries areprotected asnomeasures against themcanbebased
onanyprovision oftheAgreement which isapplied onlytotrade between theParties.
5. Anti-Dumping Measures
CantheParties confirm thattheywillnotimpose anti-dumping measures justbecause
other Parties impose theanti-dumping measures against third party products?
Yes. Parties totheAgreement arecommitted tocomplying withtheir obligations under
anti-dumping related WTO instruments.
6. Subsidies andState-Aid (Article 23)
Could theParties explain therationale forexempting trade inagricultural products and
fisheries from these provisions? Doother rules apply tothese sectors?
When theCEFTA Agreement wasnegotiated, theUruguay Round hasnotbeenconcluded
yet,nevertheless, exempting trade inagricultural products andfisheries from theprovision ofthe
paragraph 23:1doesnotexempt agricultural products from themeasures thatcould betaken under
Article 23:5.
7. Sector-specific Provisions
Could theParties explain thespecific rules applying toagriculture inthisAgreement?
Please, seerespective part ofthedocument WT/REG/11/2 andreplies towritten
questions (WT/REG/11/9).WT/REG11/9/Add.1
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Does anyParty totheAgreements provide bilateral preferential treatment toagricultural
products under m.f.n. tariff ratequotas (TRQs)? Please specify hownon-m.f.n bilateral TRQs
areadministered -bytypeofpreference onaproduct specific basis.
NoCEFTA Party provides bilateral preferential treatment toagricultural products under MFN
tariffratequotas. Please, seerelevant notifications bytheindividual CEFTA Parties intheCommittee
onAgriculture. Consequently, preferential bilateral TRQs arecountry andproduct specific ones.
Does anyParty totheAgreement provide bilateral preferential treatment toagricultural
products forsanitary/phytosanitary reasons? Please specify byproduct andhealth measure.
Initstrade withother CEFTA countries, none oftheCEFTA Parties provides bilateral
preferential treatment toagricultural products forsanitary/phytosanitary reasons.
IV. OTHER PROVISIONS
DotheParties haveplans tonegotiate anyprovisions ontechnical barriers totrade (TBT)
orsanitary andphytosanitary measures (SPS)?
Within theframework oftheCEFTA, theParties havenotyetagreed tonegotiate anyprovision
onTBTandSPS. Anyeventual action inthisfieldshallbeincompliance withtheWTO principles.
Doesthestandards regime create more obstacles totrade orrestrictions tothird countries,
compared withthefacilitated treatment among Parties?
Atpresent, thestandards regime between theParties isthesame asthatapplied inrelations
withthirdcountries. Noobstacles totradeordistortions tothirdcountries canbejustified onthegrounds
ofthenotification procedures ofdraftregulations asenvisaged byAnnex VtotheAgreement. However,
thedecision ontheimplementation ofthisAnnex hasnotbeentaken yet.
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