RESTRICTED
WORLD TRADE WT/COMTD/1/Add.10
28April 1997
ORGANIZATION(97-1837)
EXAMINATION OFTHE SOUTHERN COMMON MARKET AGREEMENT
Note ontheMeeting of20September 19961
Chairman: Mr.Stuart Harbinson (Hong Kong)
1. TheCommittee onRegional Trade Agreements continued theexamination oftheAgreement
establishing theSouthern Common Market (MERCOSUR) atitsFourth Session. Themeeting took
upthefollowing topics:
- General Remarks
- Elimination ofDuties, Charges andOther Restrictions Applied intheParties 'Trade
- TheCoordination ofMacroeconomic Policies
- TheEstablishment ofaCommon External Tariff andtheAdoption ofaCommon Trade
Policy inRelation toThird States orGroups ofStates
- Rules ofOrigin
- Measures Related toImports From Third Countries
- National Treatment
- MERCOSUR 'sExternal Relations
- Settlement ofDisputes
- Trade Creation/Trade Diversion
- Services
- Transparency inImplementing theAgreement
General Remarks
2. TheChairman drewtheattention ofdelegates tothenewdocumentation thathadbeenreceived
fromtheParties, andsaidthatdocument WT/COMTD/1/Add.4, which contained newquestions and
replies ontheMERCOSUR Agreement, would serve asthebackground document fortheday's
discussion.
3. Therepresentative ofBrazil, speaking onbehalf ofMERCOSUR, provided anhistorical account
oftheevents leading totheestablishment ofMERCOSUR. HesaidMERCOSUR wasbornoutof
economic aswellaspolitical considerations. Itwasimportant torecall MERCOSUR 'sbackground
inorder tounderstand itsgoals. Itsobjective wasfullparticipation ofitsParties inanopeninternational
environment. MERCOSUR wastherefore setupasanopenintegration agreement. Itconstituted a
platform forcompetitive insertion intoaworld economy characterized simultaneously byglobalization
andregionalization. Itwasalsoaforum forcoordination ofmacroeconomic policies. Between 1990
and1995, totalimports bytheParties from within theMERCOSUR region increased by176.4 per
1Themeeting wasconvened inWTO/AIR/404.WT/COMTD/1/Add.10
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centinUSdollars, while imports fromthirdparties increased by163.4 percent. Thiswasremarkable
considering thatworld imports increased byamere 38.9percent.
4. Another representative ofBrazil saidthatthesigning oftheTreaty ofAsunción inMarch 1991
setunderway theprocess ofMERCOSUR integration. During theperiod 1991-1994, theParties agreed
onandimplementedaTradeLiberalizationProgrammewiththeviewtoeventuallyestablishingacustoms
union. Tothatend,theyadopted acommon external tariff (CET) andaseries ofrules designed to
giveimpetus totheobjective ofachieving acommon tradepolicy. Withtheestablishment ofthecustoms
union on1January 1995, theinstruments ofcommon trade policy agreed uponduring thetransitional
period 1991-1994 were putintopractice. Theentry intoforce oftheProtocol ofOuro Preto wasof
particular importance, asitconferred legalpersonality onMERCOSUR, thusaffording MERCOSUR
theability tonegotiate andconclude agreements initsownname withthirdcountries andinternational
organizations. Anexample ofthiswasthesigning oftheFramework Agreement forInter-Regional
Cooperation between MERCOSUR andtheEuropean Union inDecember 1995.
5. Therepresentative ofBrazil continued, saying thatsignificant progress hadbeenmade interms
oftheshare ofintra-MERCOSUR trade thatwasconducted freeofduties, which presently amounted
to95percentoftradeamong theParties. Between 1991and1995, intra-MERCOSUR tradeincreased
from $4billion to$15billion, anincrease ofabout 300percent. Thecommitment oftheParties to
theprinciple ofopen regionalism wasborne outnotonlybythetrends intrade, butalsobythe
relationships MERCOSUR wasforging withthirdparties andinternational organizations. Intheperiod
betweenOctober1995andSeptember1996,MERCOSURhadconcludedagreementswithChile,Bolivia
andtheEuropean Union. Inaddition, there were plans toconclude free-trade areas (FTAs) with
Venezuela, Colombia, Ecuador, PeruandMexico. MERCOSUR participated inacoordinated way
inthenegotiations oftheFreeTrade Area oftheAmericas, aninitiative which would linkallthe
countries oftheAmericas andtheCaribbean. Informal contacts weremaintained withANZCERTA,
CARICOM andCanada, andtheParties intended toextend those contacts toJapan, India andRussia.
Elimination ofDuties, Charges andOther Restrictions Applied intheParties 'Trade
6. Therepresentative oftheUnited States stressed theimportance oftransparency. Hisdelegation
wasdisappointed bythelackofspecific information intheresponses provided bytheMERCOSUR
Parties toquestions submitted. TheParties hadnotasyetprovided theWTO Secretariat withthe
information andtrade datanecessary tocarry outtheanalysis required under Article XXIV:5 of
GATT 1994. Thelackofdatahadmade itdifficult todetermine whether there hadbeenabreaking
oftariff bindings. Hesought clarification onthestatus ofthelistsoftariff exemptions. Contrary to
earlier statements totheeffect thatthese werefinal, thelistsseemed tobechanging frequently. He
asked theParties toexplain howtheywould harmonize theirnon-tariff measures andtoindicate whether
barriers would remain attheendofthetransition period. Healsowondered when MERCOSUR 's
CET would takeeffect.
7. Therepresentative ofBrazil saidthattheParties hadrecently submitted totheSecretariat the
trade datarequired foranalysis under Article XXIV:5. Thistrade dataconfirmed thatthecreation
ofMERCOSUR hadbenefitted third parties. TheUnited States, inparticular, hadseenitsexports
tothesub-region surge. There hadonlybeenaminor amendment totheCET toallow amember
country toimport rawmaterials atareduced rateifthose particular products wereinshort supply in
theregion. Thisseemed tobeastandard provision inmostcustoms unions agreements. Concerning
thetransition period, theParties hadentered intoaconsolidation phase on1January 1995, anditwas
expected thatallParties would bring theirtariffs intofullconformity withtheCETbytheyear2001.
Thetariffmeasures mentioned bythedelegate oftheUnited States wereinfullconformity withGATT
Articles XXandXXI.WT/COMTD/1/Add.10
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8. Therepresentative ofCanada saidthathisdelegation wasnotentirely satisfied withtheresponses
thathadthusfarbeenprovided bytheMERCOSUR Parties tothetechnical questions ithadsubmitted.
ItwasnotclearhowtheParties would harmonize theirtechnical barriers totrade (TBT) andsanitary
andphytosanitary (SPS) measures andother regulations ofcommerce. Hewondered whether the
representative ofMERCOSUR would beabletoexplain thenature oftheharmonization process -in
particular, themodalities being followed, thetime-schedules, theproducts covered andtheultimate
objective oftheParties. Howwould theharmonization ofmeasures affect intra-regional trade? What
would bethefateofbilateral agreements onSPSconcluded between amember stateandathirdparty?
Would there beimport controls onproducts originating intheParties, orwould there becompletely
freecirculation ofthegoods afterharmonization? Would theParties takedecisions onaconsensus
basis, andwould theadoption ofnewmeasures bebased onriskassessment? There wasthepossibility
thatharmonization would leadtotheadoption ofimport restrictions, which might varyintheirintensity
from oneParty toanother. Asthequestions wererather technical, hedidnotexpect answers tobe
provided attheday'smeeting. TheParties could provide answers inwriting atalaterdate.
9. Therepresentative ofBrazil saidthatallMERCOSUR Parties weresignatories totheWTO
SPSandTBTAgreements, andassuchallmeasures instituted bythemwereconsistent withtheterms
ofthese twoAgreements. Measures instituted byMERCOSUR inthepasthadfacilitated trade to
thebenefit oftheParties andthird parties. Forproducts notcovered bytheharmonized measures,
aParty'sdomestic regulation would prevail, unless there wasaninternationally recognised standard.
MERCOSUR Parties, especially Brazil, imported substantial amounts offoodproducts, andassuch
hadaninterest inensuring thecompatibility oftheirtechnical regulations withtherelevant multilateral
rules. Theprimary motive oftheParties wastoremove allbottlenecks preventing thefreeflowof
products, especially agricultural products, within theterritory. Some progress hadbeenmade inthis
respect.
10. Therepresentative oftheEuropean Communities stressed theneed forallregional trade
agreements (RTAs) tocomply withtherelevant multilateral rules. Itwasimperative forMembers
toadhere tothekeyprinciple oftransparency, andprovide theCommittee withallrelevant information
toenable ittoundertake theexamination required under theWTO Agreement. Sheasked iftheParties
could provide information onwhich products fellwithin theambit oftheTrade Liberalization
Programme, andonthecurrent volume oftradeintheseproducts among theParties. What diditmean
inconcrete terms thatAnnex 1toArticle 12oftheAgreement provided thattheTrade Liberalization
Programme would notapply toagreements onagricultural products previously concluded within the
framework oftheTreaty ofMontevideo? Sheasked ifthenational labelling requirements ofamember
statewould apply withequal force intheterritory oftheother Parties.
11. Therepresentative ofBrazil saidthatrulesonlabelling applied equally toMERCOSUR Parties
andtothirdparties. Herequested theECdelegation tosubmit itstwoquestions onlabelling inwriting.
12. Therepresentative ofSwitzerland thanked theParties fortheinformation provided through
theSecretariat, butsaiditdidnotshedlightonanumber ofimportant things, including thesetting-up
oftheCET. Hisdelegation wasawaiting theanswers tothequestions theyhadposed. Hewondered
whether theParties drew adistinction between non-tariff restrictions thathadtobeeliminated, and
non-tariff measures thathadtobeharmonized. Ifsuchadistinction existed, itwould behelpful to
know thecriteria. HadMERCOSUR abolished allnon-tariff measures? Ifnot,which measures were
stillinforce? Finally, herequested further information onhowfartheharmonization process had
gone.
13. Therepresentative ofBrazil saidthatalistoftariff restrictions could befound intheAnnex
oftheAsunción Treaty. These measures were, however, eliminated bytheParties inDecember 1994.
Some non-tariff measures wereinforce, andthetechnical committee oftheTrade Commission wasWT/COMTD/1/Add.10
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intheprocess offinalizing alistofnon-tariff measures currently inforce within thecustoms territory.
Thelistwasmentioned indocument WT/COMTD/1/Add.4 onpage23.
14. Therepresentative ofSwitzerland saidthathewished tohavefurther details onthecriterion
forthedistinction between restrictions andmeasures.
15. Therepresentative ofBrazil explained thatnon-tariff restrictions were those thathadtogo
through aprocess ofelimination, which included therecognition bytheMERCOSUR Parties thatthere
wasnojustification forkeeping them, while themeasures tobeharmonized would betheonesretained
forreasons suchaspublic health andsafety.
16. Therepresentative ofJapan stressed theimportance ofRTAs 'complying withtherelevant
multilateralrules.CouldthePartiesprovidehisdelegationwithtradestatisticscoveringtheperiod1993-
1995? Hisdelegation wasalsointerested inreceiving more information about theCET, particularly
thetariffelimination list.Itwould facilitate theexamination process iftheParties would make available
theinternal tariff exemption listandprovide information onwhen theremaining barriers, including
safeguard measures, were tobeeliminated.
17. Therepresentative ofBrazil saidthattheParties hadalready submitted thetrade statistics to
theSecretariat, aswellastheexemptions listrequested bytheJapanese delegation. Brazil andArgentina
hadtwoyears within which tophase outtherestrictive measures, while Uruguay andParaguay had
three years tocomply withthatobligation. TheParties werecurrently intheprocess ofdrafting their
safeguard laws, which would beWTO-consistent.
18. Therepresentative oftheSecretariat saidthattheSecretariat hadreceived import statistics
covering theperiod 1992-1994 from theParties. They hadbeen verified, andthere were afew
outstanding problems which needed tobesolved. Heconfirmed thattheSecretariat hadreceived the
listofexemptions andhadmade some technical adjustments toit.Since then, thelisthadbeensent
backtotheParties forverification. TheSecretariat expected thelisttobeavailable forconsultation
inthenearfuture.
19. Therepresentative ofJapan saidthatthepurpose ofrequesting thetradestatistics wastoestablish
whether theconcession ratewasbelow theCET. Ifso,thentheParties should havestarted compensation
negotiations withinterested parties within theframework ofArticle XXIV:6 andArticle XXVIII.
20. TheChairman referred therepresentative ofJapan toWT/COMTD/1/Add.5, which seemed
tocontain theinformation thathisdelegation needed.
21. Therepresentative ofAustralia welcomed theefforts oftheParties toestablish acustoms union
andsaidthatAustralia recognized thepotential ofMERCOSUR tobeapositive force forreform and
liberalization. Hestressed theimportance oftransparency, andsaidthattheanswers provided bythe
Parties tohisdelegation 'squestions were somewhat short. Hehoped thattheParties would indue
course provide detailed andcomprehensive answers. Notwithstanding thefactthattheParties had
notified theirAgreement under theEnabling Clause, theywereobliged toconduct negotiations with
interested parties within theframework ofArticle XXIV:6 andArticle XXVIII ofGATT 1994. The
Parties should endeavour tomake available allrelevant information required under Article XXVIII
soastoenable negotiations tocommence assoonaspossible. HesaidthatAustralia 'stradeinproducts
suchasaluminium, malted barley, wineandvarious manufactured products hadbeenadversely affected
bythecreation ofMERCOSUR.
22. Therepresentative ofBrazil saidthattheParties recognized their responsibilities under
Article XXIV:6 andwould beaddressing theconcerns ofinterested Members assoonaspracticable.WT/COMTD/1/Add.10
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Theinformation onsupplying countries would beprovided shortly. Hereiterated thattheParties were
committed totheprinciples ofopenregionalism andthatMERCOSUR would remain outward-looking.
Evidence ofthiscommitment could beseenfrom thetrade figures theParties hadsubmitted tothe
Secretariat. Third parties should benefit fromtheParties 'reduction ofcustoms duties. Theaverage
leveloftheCETwaslower thantheaverage customs duties priortotheformation ofthecustoms union
foratleastthree oftheMERCOSUR Parties.
23. Therepresentative ofAustralia saidthat,prior tothecreation oftheMERCOSUR customs
union, Australia hadbeentheprincipal supplier ofaluminium tooneoftheParties ofMERCOSUR.
Nocustoms duties hadthenbeenlevied onthisproduct. Withthecreation ofMERCOSUR, however,
theproduct wassubject toa5-6percenttariff. This seemed inconsistent with theterms of
Article XXIV:5(a), which required members ofacustoms union nottointroduce duties which were
higher ormore restrictive thantheyhadbeenprior totheformation ofthecustoms union.
24. Therepresentative ofHungary stressed theimportance oftransparency andsaidthather
delegation would beinterested inreceiving detailed andprecise information inresponse tothequestions
ithadraised. There wastheprospect thatthecreation ofthecustoms union would affect Hungarian
trade incertain textiles, clothing andfootwear products, asArgentina wascurrently applying tariffs
inexcess ofthebound rates. Thematter hadbeenraised inbilateral negotiations withArgentina, but
nosolution hadbeenproposed byArgentina.
25. Therepresentative ofBrazil replied thattheappropriate forum forhandling thisissue wasin
theMarket Access Committee.
TheCoordination ofMacroeconomic Policies
26. Therepresentative ofPerureferred totheAction Programme ofMERCOSUR forthenext
fouryears (Programme 2000), andasked whether theParties hadestablished ablueprint thattheywould
follow. Hadanyplans beenmade withregard tothecoordination ofmacroeconomic policies inthe
fiscal, monetary, andexchange fields? Therepresentative ofBrazil answered inthenegative. He
explained that,while theParties hadagreed onsome objectives intheAction Programme, nospecific
calendar orschedule hadbeensetbecause thepreoccupation in1995andearly1996hadbeentoestablish
thecustoms union andtoassure thatitfunctioned properly. There was,however, anatural convergence
ofmacroeconomic policies adopted bythefourParties. TheParties hadhadfrequent informal meetings,
especially intheaftermath oftheMexican crisis, sothere wasahighlevelofcoordination evenifno
specific resolution ordecision hadbeenadopted. Turning toaddress question 17,concerning thevarious
taxstructures andthetaxburden inthedifferent Parties, hesaidthatthiswasamatter which wasbeing
studied further inconnection withtheProgramme 2000.
TheEstablishment ofaCommon External Tariff andtheAdoption ofaCommon Trade Policy
inRelation toThird States orGroups ofStates
27. Therepresentative ofCanada referred tohisearlier statement andsaidthattheUnderstanding
ontheInterpretation ofArticle XXIV ofGATT 1994 required parties tosupply information relevant
toArticle XXIV:6 negotiations before modifying concessions. Thefirstsetofdocuments allowing
WTO Members tobegin theiranalysis ofthepotential trade impairment stemming fromtheCEThad
onlyrecently beendistributed, 18months aftertheentry intoforce oftheCET. Itappeared thatthe
information provided bytheParties failed tostatewhich countries hadprincipal supplying rights in
theconcessions which werebeing modified. Itwould beappreciated iftheParties could make available
thatinformation assoonaspossible. Itwould alsobehelpful iftheParties could provide informationWT/COMTD/1/Add.10
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onanyrecent orproposed changes totheCETSchedule, aswellasinformation onthelistofexceptions
ofindividual MERCOSUR Parties. Wasitwasstillpossible foraParty toseekanexception from
theapplication oftheCET? Mention hadbeenmade ofashortage ofrawmaterials being oneofthe
grounds forexemption. What werethemodalities andprocedures foranindividual Party toseekan
exception? Finally, wasittheintention oftheMERCOSUR Parties tosubmit aconsolidated schedule
intheWTO asasubstitute forthecurrent country schedules?
28. Therepresentative ofBrazil responded thattheParties hadstated previously thattheyplanned
tosubmit aconsolidated schedule induecourse. Heconfirmed thataderogation could besought from
theapplication oftheCET ifaparticular product wasinshort supply intheregion. Itwashis
understanding thattheEChadasimilar provision. Anyderogation hadtobeapproved bytheTrade
Commission, which might impose conditions tobeobserved bytheParty, including thephase outof
themeasure byafixed date. Thistypeofexemption waslimited tospecific market conditions. It
wasnotofthesamenature asthetariffexemptions totheCET, which would remain inforceuntil2000,
andwhich were designated forconvergence. Heassured Members thattheParties would provide
statistics onwhich countries were themain suppliers.
29. TherepresentativeoftheUnitedStatessaidthathisdelegationwasnotsatisfiedwiththeresponses
given toquestions 19through 36.Itwould havebeenpreferable ifthequestions hadbeenanswered
individually. Perhaps theParties would respond tothequestions inwriting. Itappeared thatsome
MERCOSUR Parties hadbroken theirtariffbindings, yettheyhadfailed tocommence Article XXIV:6
negotiations. Twoyears wasalongperiod, andassuchtheParties should takeimmediate steps to
startnegotiations withthirdparties having legitimate interests. ItwasalsotimetheParties replaced
thetariff schedules ofindividual countries withaschedule forthecustoms union asawhole. The
Parties wererequired tosupply theSecretariat withtheirindividual applied tariffratesineffect before
theformation ofthecustoms union. Thealltheinformation necessary fortheSecretariat tocarry out
theArticle XXIV:5(a) analysis hadbeenprovided bytheParties.
30. TherepresentativeofSwitzerlandsaidthatitwouldbehelpfulifthePartieswouldmakeavailable
anupdated version oftheirtariffSchedule toreflect alltheexemptions which werestillinforce. This
could bedoneonacountry-by-country basisstating thedateonwhich theexemptions hadtobephased
out. When would thenational tariffs bereplaced bytheMERCOSUR one?
31. Therepresentative ofBrazil saidthatthescope ofMERCOSUR 'sCET hadbeendefined at
theCouncil ofOuro Preto inDecember 1994. Thelistofexemptions, which hadbeensenttothe
WTO, wasthesame ashadbeendefined there. Between November 1995 andApril 1996, some
exceptional changes were made. Amajority ofexemptions totheCETwould bephased outbythe
year2001. Those applicable intheinformatics andthetelecommunications sector would bephased
outby2006.
32. Therepresentative oftheEuropean Communities associated herdelegation withthecomments
made bytherepresentatives oftheUnited States andCanada regarding thelackofinformation and
thedelay inproviding answers tothequestions posed byMembers. Shewelcomed thepromise to
update thelistofexceptions andcirculate ittoMembers. Shewondered whether there would be
convergence ofapplied orbound ratesunder theCET. What wasthetarifftreatment forthird-country
goods transferred from oneParty toanother during thetransition period? Would itchange afterfull
convergence oftheCET in2006? Could theParties confirm when theCET would enter intoforce
fortextiles, clothing andfootwear products, andcould theygiveanindication astowhatthelevels
might be?Would theduties bespecific oradvalorem? Could theParties confirm thattheCETwould
notexceed those intheirindividual WTO commitments?WT/COMTD/1/Add.10
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33. Therepresentative ofBrazil saidthatthefinallistfortextiles wasdefined intheCET.
MERCOSUR Parties werecurrently applying specific duties onaprovisional basis, butthese would
bechanged toadvalorem duties inthefuture.
34. Therepresentative ofHungary saidthattheerection ofnewtrade barriers byaparty toan
RTAraised questions astotheRTA'scompatibility withtheprovisions ofArticle XXIV. Herdelegation
would therefore beinterested inreceiving precise andcomplete information regarding allquestions
appearing insections IandIIIofthebackground document.
35. Therepresentative ofJapan saidthathisdelegation would beinterested inknowing theviews
ofMERCOSUR, andparticularly Brazil 's,ontheautomobile policy. Wasthepolicy unique toBrazil,
orwasitlinked totheMERCOSUR Agreement. Itappeared thatthereason behind theautomobile
policywasthestandardizationofthecompetitionconditionswithinMERCOSUR.HowdidtheBrazilian
authorities viewthetariff quota regime under thebilateral agreement onautomobiles between Brazil
andArgentina?
36. Therepresentative ofBrazil saidthat,astheautomobile policy wasthesubject ofbilateral
consultationsbetweenJapanandBrazil,hepreferrednottorespondtothequestionatthistime,especially
considering thatthematter wasnotgermane toquestion ofMERCOSUR consistency therelevant WTO
rules. TheOuroPreto Council Meeting ofDecember 1994hadmade itclearthatMERCOSUR 'sregime
would befree-trade oriented andconsistent withtherules oftheWTO. Thecurrent policy inthe
automobile sector should beseenasatemporary measure which wasstilltobedefined bytheParties.
Thebilateral agreement between Brazil andArgentina hadbeennegotiated under Montevideo Treaty,
although itwaspreserved under MERCOSUR. Itwould, however, bephased outoncethecommon
regime wasputineffect. Internal trade would thusbesubject tothenewrulesthatwould takeeffect.
Inother words, there would befreetrade inautomobiles within thecustoms territory, andtheParties
would apply aCET.
37. Therepresentative oftheEuropean Communities saidthatitwasherunderstanding thata
transitional automobile regime would beputinplace forthree years (1996-1999) while afinalregime
wasbeing decided upon. Hadanysucharrangement beenagreed tobytheParties, andifso,was
itinoperation among allofthem?
38. Therepresentative ofBrazil saidthateachParty wasapplying itsownnational regime, which
incorporated previous agreements. Thiswould continue untiltheCET fullytookeffect.
Rules ofOrigin
39. Therepresentative ofJapan wished toknow whether MERCOSUR 'srulesoforigin imposed
anyextra burdens onthirdparties.
40. Therepresentative ofBrazil saidthatMERCOSUR 'srules were practically thesame asthe
rulesthathadexisted inthecountries priortotheformation ofthecustoms union. Forproducts which
could notmeetthegeneral MERCOSUR rules, 60percentregional content wasrequired. Therules
oforigin wereofdirect relevance tocountries which hadpreferential arrangements withMERCOSUR.
Intheabsence ofsuchanarrangement, theCETwould apply, andtherules oforigin might cease to
beofrelevance inthatcontext.
41. TherepresentativeoftheEuropeanCommunitieswonderedwhetherArgentina'snewrequirement
fororigin declaration, which required avisafrom theArgentine Mission intheexporting country,
reflected ageneral change inMERCOSUR 'spractices oraunilateral measure byArgentina only.WT/COMTD/1/Add.10
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42. Therepresentative ofArgentina saidthatthemeasure inquestion hadbeennotified tothe
Committee onRules ofOrigin andtheCommittee onImport Licensing. Itwastransparent andnon-
discriminatory, asitwasapplied toMERCOSUR Parties andthirdparties alike. Asthere were no
multilateral rules onpreferential rules oforigin, itwasdifficult toundertake acomparison exercise.
43. Therepresentative oftheEuropean Communities wondered what theprovisions onorigin
certificates would bewithin theframework oftheAgreement onCommon Rules ofOrigin. Would
therulesoforigin determine which products benefitted fromzeroduties intrade amongst theParties.
Would animported product havefreecirculation inthecustoms territory, ifcustoms duties hadbeen
paidinoneofthecountries?
44. Therepresentative ofBrazil saidinorder foraproduct fromoneoftheMERCOSUR tohave
freecirculation within MERCOSUR, acertificate oforigin wasneeded iftheproduct incorporated
components fromthirdcountries uptothepermitted levelof40percent. Certificates oforigin also
hadtobeproduced withrespect toproducts which were exempted from theCET.
45. TheChairman saidthatitwashisunderstanding thatuponthepayment oftheCET, aproduct
would normally beentitled tocirculate freely within thecustoms territory, unless itwasonthelist
ofexceptions inthecountry towhich itwasbeing re-exported. Insuchacase,thedifference between
theCET andthetariff applicable intheother Party would havetobepaid.
46. Therepresentative ofCanada wondered whether reimbursement could besought withrespect
toextradutypaidonaproduct which hadentered aParty where itwasontheexemption listandwhich
laterwastrans-shipped totheterritory ofanother Party.
47. Therepresentative ofBrazil replied thatitwasnotpossible toseekreimbursement inthescenario
mentioned.
Measures Related toImports from Third Countries
48. Therepresentative oftheUnited States saidthathisdelegation wasnotfullysatisfied withthe
rather general responses which weregiven toquestions 49to56.What wasthecurrent status ofthe
common regulations being drafted onsafeguards, anti-dumping andcountervailing duties?
49. Therepresentative ofBrazil saidthatthecommon rulesonthesubjects would closely follow
therulesoftheWTO. Negotiations werefairly advanced withresect tothenegotiations onanti-dumping
andsafeguards. Thetextswere almost ready andcould beadopted shortly. They would beWTO-
consistent.
50. Therepresentative oftheEuropean Communities wondered whether, forpurposes ofthe
Agreement onSafeguards andtheAgreement onSubsidies andCountervailing Measures (SCMs),
MERCOSUR would constitute oneorseveral domestic markets?
51. Therepresentative ofBrazil saidthatinrespect ofdumping andsubsidies, therules would
beapplied totheMERCOSUR Parties asagroup, asrequired under theWTO rules. With regard
tosafeguards, theParties would follow theestablished WTO rules, which permitted them toact
independently orasagroup inMERCOSUR. Therepresentative ofArgentina called attention to
Article 16:2oftheSCM Agreement.WT/COMTD/1/Add.10
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National Treatment
52. Therepresentative ofBrazil saidthatArticle 7oftheTreaty ofAsunción confirmed thenational
treatment principle. Article 8mandated thatParties respect bilateral agreements concluded prior to
theformation ofthecustoms union. Nothing inthose Articles implied anykindofnewtreatment.
MERCOSUR 'sExternal Relations
53. Therepresentative ofCanada wondered whether theParties were going tonotify theFTAs
thattheyhadconcluded withChile andBolivia.
54. Therepresentative ofBrazil saidthattheMERCOSUR agreements withChile andBolivia were
negotiated intheframework oftheMontevideo Treaty. Itwashisunderstanding thattheagreements
would benotified under theEnabling Clause bytheLatin American FreeTrade Association Secretariat.
Theagreement withChile would takeeffect on1October 1996, while theonewithBolivia would come
intoforce on1January 1997. Inthecaseoftheagreement withChile, tariff elimination would be
phased in.Every product thathadnotbeentouched inearlier negotiations would beconsidered anew
product forwhich tariffs would beeliminated inaneight yearperiod. Fortariffs onproducts that
hadbeennegotiated between Mercosur andChile intheframework ofbilateral agreements, theperiod
wastenyears, andforproducts which were ontheexception listatthebeginning ofthebilateral
negotiations, theperiod would be15years. Forsome specific products suchaswheat andflour, an
18yearperiod would apply.
Settlement ofDisputes
55. Therepresentative oftheUnited States requested theParties toprovide asummary ofthesalient
features oftheBrasilia Protocol. Heurged Committee Members whose agreements weretobeexamined
bytheCommittee toprovide summaries ofallimportant documents necessary fortheexamination
process.
56. Therepresentative ofBrazil offered togiveadetailed response inwriting. Hestated that
MERCOSUR hadthree mechanisms. Two ofthese were under theresponsibility oftheTrade
Commission ofMERCOSUR andinvolved mainly consultations, thelegalconsequences ofwhich were
different from WTO consultations. Atthesecond stage, claims could besubmitted totheTrade
Commission. Theclaiming mechanism wasdetailed intheAnnex totheProtocol ofOuro Preto. If
anadverse decision weremade bytheCommission, theaggrieved Party could invoke thefinalstage
oftheprocess, which wassetoutintheProtocol ofBrasilia. Thatprocess involved going before an
adhoccourt toaskforreview ofthedecision oftheTrade Commission. Thedecisions oftheadhoc
court werefinalandbinding ontheparties tothedispute. Sofar,alldisputes hadbeenresolved at
theconsultations stage.
Trade Creation andTrade Diversion
57. Therepresentative ofJapan wondered whether theParties could provide statistics ontheirtrade
patterns forthepastfiveyears (1990-1995). Available information indicated that,whereas trade had
increased between theParties, trade withJapan actually decreased.
58. Therepresentative ofBrazil saidthattheParties would provide therelevant information for
ananalysis tobeundertaken assoonaspossible. Itwasdoubtful thatthecustoms union would haveWT/COMTD/1/Add.10
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anegative impact onJapan'strade, asproducts produced inthesub-region wereverydifferent from
products produced byJapan. Thisissuecould bethesubject offurther study bytheCommittee. Trade
figures circulated toMembers bytheParties revealed thatMERCOSUR Parties hadimported more
products from thirdparties thaninprevious years.
59. TherepresentativeoftheUnitedStatesrequestedtheMERCOSURPartiestofollowtheStandard
Formatwhenprovidinginformation,asitwasuser-friendlyandpermittedaneasycomparisonofessential
factsandtrade data.
Services
60. Therepresentative ofBrazil saidthat,asamatter oftransparency, theParties wereprepared
toanswer questions related toservices, eventhough thiswentbeyond theterms ofreference forthe
examination, astheMERCOSUR Agreement didnotdealwithservices.
61. Therepresentative ofJapan saidthat,notwithstanding theclaim bytheParties, references were
made inAnnex VoftheirAgreement tothemacroeconomic policy area,commercial issues, andinterior
andmaritime transport. Could theParties confirm thatinthefuture anymeasures taken withrespect
toservices would bewithin theframework ofArticle VoftheGATS?
62. Therepresentative ofBrazil saidthattheTreaty ofAsunción didforesee integration inthearea
ofservices. Tothatend,theParties hadstarted deliberating onaframework agreement onservices.
TheParties werestillformulating theirideas, andassuchwerenotinaposition topresent information
totheCommittee.
63. Therepresentative ofArgentina recalled thattheterms ofreference oftheWorking Party, which
hadbeentaken overbytheCommittee, wereadopted before thecoming intoforce oftheWTO. At
thetimeMERCOSUR hadbeennotified, theGATT hadnorulescovering TRIPS orservices. Should
theParties everreach anagreement onservices, theywould notify ittotheCouncil onTrade inServices.
Itwasimportant fortheCommittee tostaywithin theconfines ofitsterms ofreference.
Transparency
64. Therepresentative ofBrazil thanked Members fortheircooperation. Hehoped thathisanswers
hadshedlightonthemechanics andobjectives oftheMERCOSUR Agreement. There hadbeena
fruitful exchange ofideas, andthatwasverymuch appreciated. TheParties would endeavour toprovide
theCommittee withallinformation thathadbeenrequested andthathadnotyetbeenprovided tothe
Secretariat. Hesuggested thattherepresentatives ofMERCOSUR whowerebased inGeneva meet
withtheSecretariat toreview thedocuments thathadbeensubmitted bytheParties, soastohavea
clear ideaastowhatdocuments needed tobeprovided orupdated.
65. TheChairman thanked therepresentatives oftheMERCOSUR Parties forshedding lighton
themechanics andobjectives oftheirAgreement. Ithadbeenaproductive andinformative exercise.
Heendorsed thesuggestion made bytherepresentative ofBrazil andreminded delegations whohad
indicated thattheywould submit questions inwriting todosoassoonaspracticable. Heindicated
thatanother round ofexamination would beneeded toconsider further questions andanswers and
statistical information which would beprovided bytheParties.
66. TheCommittee tooknoteofthecomments made.