RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG44/M/1
19 October 1998
(98-4029)
Committee on Regional Trade Agreements
Nineteenth Session
EXAMINATION OF THE FREE TRADE AGREEMENT BETWEEN
ROMANIA AND THE REPUBLIC OF MOLDOVA
Note on the Meeting of 24 September 1998
Chairman: Mr. Chul-Ki Ju (Korea)
1. Under Agenda Item F.VII of its Nineteenth Session, as found in Airgram
WTO/AIR/915/Rev.1, the Committee on Regional Trade Agreements (hereinafter CRTA or theCommittee) took up the first round of examinati on of the Free Trade Agreement between Romania
and the Republic of Moldova (hereinafter Ro mania-Moldova FTA or the Agreement).  The
examination was conducted on the basis of the Standard Format for Information on Regional Trade
Agreements and accordingly followed its layout.  The following topics were discussed:
A. General Statements
B. Section I Background Information on the Agreement
I.3 Scope
I.4 Trade data
C. Section II Trade Provisions
II.1 Import restrictions
II.2 Export restrictions
II.3 Rules of originII.4 Standards
II.5 Safeguards
II.6 Anti-dumping and countervailing measures
A. General Statements
2. The Chairman said that the Committee's task was to examine the Romania-Moldova FTA
which had been notified to the WTO on 24 September 1997.  The Agreement had been signed on
15 February 1994 and had entered into force on 1 January 1995.  He proposed, in line with past
practice, that the Committee use the Standard Format submitted by the Parties (WT/REG44/2) to
guide the debate.
3. The representative of Romania welcomed the opportunity to submit the Agreement for
examination for which one of the Parties, Romania, was a Member of the WTO and the other, the
Republic of Moldova, was at an advanced stage in its accession process.  The Agreement had been
signed on 15 February 1994, had been ratified by the respective Parliaments of the two Parties in the
Autumn of the same year and had entered into force on 1 January 1995.  In their wish to achieve thisAgreement, the Parties had been guided by the importance of the traditional, historical and spiritual
bonds between Romania and the Republic of Moldova and the common values which united them, as
well as by their wish to strengthen these bonds and establish closer and more durable cooperation andWT/REG44/M/1
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economic integration.  The Parties were convinced that the establishment of a free-trade area would
contribute to the increase of free trade and development and to the closer integration of their
economies.  The Agreement had the purpose of promoting the intensification of bilateral and
multilateral trade on the basis of mutual advantage and did not place obstacles to the trade of third
parties.  The Agreement was a contribution by the Parties to the harmonious development andexpansion of world trade and was fully in conf ormity with Article XXIV of GATT 1994.  In
concluding the Agreement following the relevant provisions of the GATT 1994, the Parties were
formally convinced that it would contribute to the strengthening of Romania's participation in the
multilateral trading system and to the preparation and facilitation of the integration of the Republic of
Moldova into this system.  At the same time, it would contribute to the process of European
integration.  The Agreement set up a free-trade area between Romania and the Republic of Moldova
in the sense of the definition provided in Article XXIV:8 of the GATT 1994.  It covered all tradebetween the Parties.  Customs duties for products originating in the Parties, and quantitative
restrictions and other equivalent measures had been  eliminated from the Agr eement's entry into force.
He recalled the efforts made by both Parties, although the obligations were incumbent only on
Romania as a member of the WTO, to provide information on the basis of the Standard Format,
accompanied by data on bilateral trade.  The provis ions of the Agreement referred exclusively to the
regime of preferential trade between the two Parties and did not create obstacles regarding their
policies and trade regulations with regard to third c ountries, in conformity with Article XXIV:5(b).  In
examining the Agreement through the provisions of paragraphs 5 and 8 of Article XXIV regarding the
reasonable time-limit for the establishment of a free-trade area and the elimination of customs duties,
delegations should not interpret the provisions of the Agreement as a precedent, but as a factualelement which responded to the specific situatio n in relations between Romania and the Republic of
Moldova and therefore could have no impact on the examination of other agreements concluded by
Romania or on the Committee's systemic debate.  Finally, although Romania had not received any
requests for additional information or clarification concerning the Agreement, his delegation was
ready to respond to any questions on the basis of the information available.
4. The representative of the United States supported the effort made by the Parties to widen their
trade relations and to improve their economies and the welfare of their people.  His delegation was
aware that this Agreement formed part of the process of deeper European integration which his
delegation supported.  It was also mindful of the WTO's rules which all Parties to an agreement
should follow and of the importance of ensuring that regional trade agreements were supportive of the
multilateral trading system.  He welcomed the information provided in the Standard Format.
5. The representative of the European Comm unities welcomed the examination of the
Agreement which his delegation saw as a contribution to the development of commercial and trade
relations across the continent of Europe and which it considered as a positive development in the
future of international relations in Europe.  His delegation was grateful for the information provided
by the Parties and would participate in the examination with an open, constructive and positive
approach.
B. Background Information on the Agreement
6. The representative of the United States noted that the Agreement had been notified 20 months
after the date of its entry into force and asked fo r an explanation for the delay in notification.  The
representative of Romania regretted the late submission of the notification and affirmed that this had
not been due to any lack of will  by the Parties to follow the obligations under the WTO.  They had
been confronted with a shortage of human resources and had required a long time to think about the
rules of GATT, in particular Article XXIV.  The conclusion of their reflection was to notify under
GATT Article XXIV.WT/REG44/M/1
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7. The representative of the United States noted that the trade data provided referred only to one
of the Parties, Romania.  It would be useful if da ta regarding the other Party could be provided as well
as trade data with respect to third parties from the date in which the FTA came into effect.
8. The representative of Japan appreciated the fact that the Agreement covered all trade
including agriculture and supported the representative of the United States' request for third-party
trade data.  In light of Hong Kong, China's paper regarding the relationship between "substantially all
the trade" and rules of origin, he asked whethe r trade flows between the two countries might be
affected by preferential rules of origin, even though all HS Chapters were covered.  He asked for data
on trade volume of items regarded as being of Romanian or Moldovan origin, according to
preferential rules of origin and also according to non-preferential rules of origin rules.  If the rules of
origin were generous then the calculation of the trade volume of covered items divided by the total
trade of the Parties might be 100 per cent, but could drop if the preferential rules of origin were strict.He said he would provide the question in writing.
9. The representative of Australia supported the request for statistics and asked for the
percentage of trade between the Parties, both in total and by sector, for which duties and other
regulations of commerce had been eliminated, for which concessions had been given, and the
percentage of trade which was excluded from the FTA.  He also asked for details on tariff lines whichwere subject to concessions.
10. The representative of Romania said he would provide preliminary replies to the questions
raised and would provide written responses in case the questions will be submitted in written form.  In
response to the United States representative's question on the presentation of the statistical data, he
said that only the trade of Romania had been prov ided in the document and that what had been shown
as exports from Romania  covered an element of the information required.  The Republic of Moldova
had presented detailed statistics in the process of its negotiation for accession to the WTO and all the
data could be corroborated.  In order to give a complete picture, he said that the bilateral trade of
exports and imports cumulative between Romania and Moldova represented 1 per cent of the total
commerce of Romania.  The percentage was similar in the case of imports from Moldova in the totalimports of Romania and likewise for exports.  He said that statistics re garding the total trade of
Romania imports and exports had already been presented in the context of the examination of other
free trade agreements in which Romania was involved, such as the agreements with EFTA and the
European Communities.  Moldova had also provided st atistics on its total trade in the course of its
accession process.  In any case and if necessary, the Parties could provide this information.  Referring
to the scope of the Agreement, he said that in te rms of values it covered all trade, i.e. 100 per cent of
both industrial and agricultural products and 100 per cent of tariff lines.  He noted that the specificcoverage of this Agreement should not be interpreted as a precedent in the examination of other
preferential agreements to which Romania was party because this was a specific case of economic
relations.  Lastly, in response to the Japanese representative's question concerning the actual value of
preferential trade and the total trade which theoretically could include products non originating in the
Parties, he said that since the Agreement's entry into force statistics on bilateral trade betweenRomania and Moldova had not recorded any trade other than preferential trade.
11. The representative of the Republic of Moldova thanked the representative of Romania for his
presentation of the Agreement and clarified some points regarding statistical data. During the
accession process his delegation had presented a set of statistical data regarding trade between
Moldova and third countries covering the periods of 1993, 1994 and 1995 (documentsWT/ACC/MOL) and was prepared to add statistica l data for the years 1996-1997.  Regarding rules of
origin, he fully supported the position of the representative of Romania.WT/REG44/M/1
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12. The representative of Japan said that in page 9 of WT/REG44/2 his delegation had observed a
decrease in imports from Moldova to Romania from 1995 to 1996 from USD 104.5 million to
USD 79.8 million and asked if there was any reason for this decrease.
13. The representative of Romania replied this was not a decrease, but a fluctuation, and that in
interpreting the changes in bilateral trade various factors should be borne in mind.  Firstly, direct
economic relations between Romania and Moldova had been established in 1991 when the Republic
of Moldova was created.  Secondly, he reminded the Committee that the two Parties to the Agreement
were confronting major economic difficulties. This had had an inevitable impact on economics and on
the evolution of trade between the two partners.  Trade had steadily increased, not only between the
Parties involved, but also with other WTO Members.
C. Trade Provisions
14. The representative of New Zealand welcomed a number of aspects of this Agreement, in
particular the comprehensive coverage of 100 per cent of trade between the Parties and the fact that
customs duties had been eliminated on 100 per cent of trade at the Agreement's entry into force.
However, he had noted that there was a residual element on customs duties or charges remaining.  He
had noted that there was a residual element on cust oms duties or import charge of 0.5 per cent and
0.25 per cent applied by Romania and the Republic of Moldova, respectively, (Section II.1(a) of theStandard Format) which continued to be applied and that such charges were needed to develop and
improve the Customs Authorities' infrastructure.  He asked for further clarification on the nature of
this charge.  Would it be in place for a limited period of time or would it remain in place for the
foreseeable future?  This raised a question regard ing the attainment of the complete elimination of
duties and other restrictive regulations of commerce and a general question relating to otherprovisions of the GATT 1994, for example under Article VIII.  He asked if this charge was applicable
to imports from third countries and whether it was a transitional measure.
15. The representative of the United States welcomed the question raised by the representative of
New Zealand regarding the residual import duty charge of 0.5 per cent and 0.25 per cent retained by
Romania and Moldova respectively.  He asked about the transitional aspect of this measure and itsrelation to other provisions of the GATT including Article VIII.  He asked for confirmation from the
Parties that, apart from the import charges of 0.5 per cent and 0.25 per cent, no other duties were
being collected on imports.  He also asked the Parties to explain if there were any specific rules with
respect to the imposition of duties on agriculture, for example a tariff-rate quota in which, perhaps, the
tariff rate had not been satisfied.  With respect to quantitative restrictions, the documentation referred
to quantitative restrictions having equivalent effect with respect to agricultural products.  Would the
Parties indicate what these measures were?
16. The representative of the European Communities echoed the questions raised by the
delegations of New Zealand regarding the import charge levied in Romania and Moldova.  He asked
for further information on this regard.
17. The representative of Japan expressed his delegation's doubts regarding the consistency of the
ad valorem  import charge with Article XXIV and asked whether the Parties had increased MFN
duties after the formation of the Agreement.
18. The representative of Romania said that as his country was the only Party bound by WTO
rules and obligations, he could speak only on its behalf.  Regarding the import charge of 0.5 per cent
for Romania and 0.25 per cent for Moldova, the idea was to develop and improve the Customs
Authorities' infrastructure.  This levy which was applied on an MFN basis, was covered by Article IIof the GATT 1994 regarding other taxes and charges and the level of 0.5 per cent was consolidated in
Romania's Schedule of Tariff Concessions.  Regarding the existence of other residual duties, heWT/REG44/M/1
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replied that there were none.  The duration of the application of these export charges was not
specified, but was transitional in view of the nature of the purpose for which it had been established.
Unfortunately, both Parties to the Agreement had inherited a shaky situation in terms of customs
infrastructure which needed to be improved in or der to meet the requirements and rules of the WTO.
In addition, in the recent years, both Parties had been confronted with an increased number ofviolations at the borders, tax evasion and other offences which had absorbed more financial resources
than had been anticipated.  In response to the United States representative's questions on the collection
of duties and tariff quotas on agricultural products, he said that, in the case of Romania, all duties for
agricultural goods had been removed and that tariff quotas were not an instrument of preferential
trade.  He said that he had not understood the link made by the United States and the Japanese
representatives between this issue and Article XXIV:8 and he asked for further clarification.  There
was no contradiction or inconsistency between the preferential trade established under the Agreementand the provisions of  Article XXIV:8(b) of the GATT 1994.
19. The representative of the United States said that he had asked for confirmation that the Parties
did not collect any taxes whatsoever at the border, apart from those charges mentioned in
Section II.1(a) of the Standard Format.  The representative of Romania replied that he had already
confirmed this.  In response to the question raised by the Japanese representative concerning the level
of MFN rates after the signing of the Agreement, he affirmed that Romania had not increased its MFN
rates.  According to the information provided by Mo ldova in its accession process, it was rather in the
process of dismantling such rates.
20. The representative of Canada asked whether these charges had been introduced at the time of
the Agreement's entry into force or if they were already in effect.
21. The representative of the United States asked whether the Parties were collecting any taxes at
the border apart from the charges that were noted in Section II.1(a) of the Standard Format.
22. In reference to the import charge to develop and improve Customs Authorities' infrastructure,
the  representative of New Zealand asked whether the tariffs applied to MFN trade also had an
element of this charge included in them.  From the way this charge was expressed in Section II.1(a), it
was not clear that it was a charge of the sort co vered by Article II.2 of the GATT 1994.  Would the
Parties clarify the precise provision through which this charge was justified?
23. The representative of Romania answered the question posed by the representative of Canada,
saying that the 0.5 per cent import charge was fully consolidated in Romania's Schedule which had
been negotiated in the Uruguay Round and had been imposed prior to the establishment of any free-
trade area.  Regarding the questions raised by the representative of the United States, he said that
Romania did not collect any other import duties at the border apart from the one specified in SectionII.1(a) of the Standard Format.  Finally, the 0.5 per cent import charge was applied on an MFN basis
and its consolidation in Romania's Schedule of Tariff Concessions was a proof in that sense.  His
delegation justified this charge under the basis of the provisions of the Article II:2 of the GATT 1994.
24. The representative of the European Communities asked if the standing export charge on
exports from the Parties to others was a transitional measure and whether it applied to other MFN
partners. The representative of the United States repeated his question about the measure relating to
quantitative restrictions with respect to agricultural products.
25. The representative of Romania replied that the answer given referring to the 0.5 per cent
import charge also applied to the export charge, the MFN coverage, and the question of transitional
application.  He also reconfirmed that there were no preferential tariff quotas and that the Agreementretained no trade restrictions of a quantitative nature for agriculture products.WT/REG44/M/1
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26. The representative of Japan recalled that his delegation was interested in the difference
between preferential rules of origin and non-preferential rules of origin.  He also asked whether they
had been changed from a change in tariff heading to a value-added test or whether the local content
ratio had been raised compared to non-preferential rules of origin.
27. The representative of Australia asked whether the Romania-Moldova rules of origin
complemented the System of European Cumulation of  Origin.  The representative of the United States
asked how the rules of origin interfaced with this system.
28. In response to the Japanese representative's question regarding the difference between
preferential and MFN rules of origin, the representative of Romania expressed surprise as he did not
see a link between them.  As the Annex to the Agreement on Rules of Origin stated, preferential rulesof origin should be established to determine the origin of goods which could benefit from preferential
treatment.  This was nothing new and the same approach had been followed in the autonomous systemof preferences.  In response to the question posed by the representatives of Australia and the United
States, he said that the European System of Cumulation of Origin did not apply to the
Romania-Moldova FTA.
29. The representative of the United States asked whether the Parties intended to negotiate any
provisions on Technical Barriers to Trade (TBT) or Sanitary and Phyto-Sanitary measures (SPS).
Regarding safeguards, he asked for an explanation of  the provision on structural adjustment and if this
provision had ever been used.  Finally, would th e Parties explain how balance-of-payments actions
would be applied to other Parties to the Agreement?
30. The representative of Japan asked whether there was any case in which safeguards would not
apply among the Parties, but would be applied towards third countries.
31. The representative of Australia asked if any safeguard measures had been taken under the
Agreement and, if so, on what products, for what measure and for what duration.
32. In response to the United States representative's question, the representative of  Romania said
that there were no plans to negotiate any TBT or SPS provisions and that the Agreement provided for
an exchange of information on TBT provisions.  Regarding the question concerning balance ofpayments, if it was necessary to apply such an action it would be applied in conformity with the
relevant provisions of the WTO, on an MFN basis.  Regarding the Japanese representative's question
about the application of safeguard measures to th ird countries but not among Parties, the Agreement
did not specifically provide for such a possibility.  It provided for the Parties to apply safeguard
measures in the circumstances provided for in the Agreement, on an MFN basis.  Thus far, no
safeguard measures had been taken by the Parties and in case of additional information he would
correct his reply.  Finally, the safeguard clause relating to structural adjustment had been included inthis Agreement as in certain other agreements concluded by European countries in transition, taking
into account their specific economic situation.  The general safeguard clause enabled the Parties under
certain circumstances, which were specifically connected with structural adjustment and which were
described in the Agreement, to adopt safeguard measures that were limited in duration and limited as
to the goods.
33. Recalling that the Parties could apply safeguards on an MFN basis, the representative of
Japan asked if a Party could apply safeguards against third countries, in a case where the cause came
from one of the Parties.
34. The representative of Romania said that the Japanese representative's interpretation of his
reply was erroneous as his first reply was in the context of general safeguards and whether such
general safeguards applied to the Parties to the Ag reement.  The situation referred to was differentWT/REG44/M/1
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because it dealt with the situation caused by trade wi thin the free-trade area mainly determined by the
preferential regime.  In this case it was obvious that special safeguards which only applied to the
preferential trade regime would be applied only within the Agreement and would not be applied to
third parties.
35. The representative of Australia, acknowledging that competition policy was not covered
explicitly by WTO, asked what criteria applied in assessing when an action prevented, restricted or
distorted competition or when an action by dominant undertakings constituted an abuse of their
position and if these considerations were subject to a specific legally binding process.
36. The representative of Romania recognized that this was a complex question and affirmed that
one of the main objectives of the Parties had been to set up regulations for competition.  It had been
decided that the Parties could choose the legal path through special bodies created by the law on
competition to deal with these problems.
37. The Chairman said this concluded the first round of the examination of the Romania-Moldova
FTA.  He indicated that Members had until 9 October 1998 to submit written questions to the
Secretariat and that Romania's replies should reach the Secretariat by the end of October, so that the
relevant document could be distributed in time for the next examination of the Agreement scheduled
for the November meeting of the Committee.
38. The Committee took note of the comments made.
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