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II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(1) General Framework
1. InNovember 1992 theFederal Assembly oftheCzech andSlovak Federal Republic adopted
alawproviding forthedissolution oftheFederation intothesovereign States oftheCzech Republic
andtheSlovak Republic on1January 1993. TheConstitution oftheCzech Republic andtheCharter
ofFundamental Rights andFreedoms wereadopted bytheCzech National Council inDecember 1992
andtookeffect upondissolution. TheCzech Constitution establishes asystem withaPresident, aPrime
Minister, andabi-cameral Parliament consisting oftheChamber ofDeputies andtheSenate.1The
Constitution maybeamended onlybyathree-fifths majority inbothchambers. Among theimportant
economic principles enshrined intheCzech constitution aretherôleoftheStateinensuring theeconomic
useofnatural resources andtherightofemployees toassociate andtostrike.
2. TheConstitution isthehighest lawintheCzech Republic andmaybeamended onlybya
Constitutional law.Alllaws, actsandinternational treaties mustbeconsistent withtheConstitution.2
Laws mustbeconsistent withtheConstitution andallConstitutional laws. International treaties entered
intobytheCzech Republic areincorporated intoCzech lawonlythrough domestic legislation andthus
require thesignature ofthePresident andtheapproval ofasimple majority intheChamber ofDeputies.
3. Decrees maybeissued bytheGovernment toadminister laws; theyarelimited inscope by
thelegislation under which theyareissued andmaynotbeinconsistent withanyother legislation.
Legal regulations within thescope ofalawmaybeissued byMinistries. Review oflaws, treaties
anddecrees isperformed bytheCzech judiciary.
4. According totheauthorities, Czech lawrequires theGovernment toactinamanner consistent
withtheWTO Agreement, which theCzech Republic approved inDecember 1994.3According to
theauthorities, private persons canbring legalaction against theGovernment inregard toanyobligations
thathavebeenimplemented intolaw. Such actions would bebrought toDistrict Courts.
(i) ThePresident
5. ThePresident oftheCzech Republic isHead ofState andiselected toafive-year termby
asimple majority oftheDeputies andoftheSenators. ThePresident mayserve amaximum oftwo
terms. ThePresident isnotaccountable forthedischarge oftheOffice toanyindividual orbody.
6. Thekeypowers ofthePresidency include therighttoappoint andremove thePrime Minister
andother Ministers oftheGovernment, theright todissolve theChamber ofDeputies andtocall
elections totheChamber, therighttoreturn toParliament adopted billsother thanconstitutional laws
(section 1(iii)), theright totakepartinsessions ofbothchambers ofParliament andinsessions of
theGovernment, andtherighttoappoint judges oftheConstitutional Court, theSupreme Court and
1TheChamber ofDeputies, which intheinterim executes thefunctions oftheSenate, approved legislation
inSeptember 1995 tocreate theSenate.
2However, international treaties onhuman rights andbasic freedoms thathavebeenratified andpromulgated
takeprecedence overlaw.
3TheWTOAgreemen twasapprovedbyParliament,ratifiedbythePresident,andpromulgatedintheCollection
ofLaws (No. 191/1995 Coll.).TheCzech Republic WT/TPR/S/12
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othercourts. International treaties arenegotiated andratified bythePresident, although hemaytransfer
thenegotiation ofinternational agreements totheGovernment or,withitsapproval, toitsindividual
members. ThePresident represents theStateinexternal affairs andisthecommander-in-chief ofthe
armed forces.
(ii) TheGovernment
7. TheGovernment isthesupreme executive body. Itisheaded bythePrime Minister, whois
appointed bythePresident, while other Ministers areappointed bythePresident upon theproposal
ofthePrime Minister. TheGovernment mustappear before theChamber ofDeputies within thirty
daysofitsappointment andrequest avoteofconfidence, andmayrequest avoteofconfidence atother
times. Government decisions aremade asabody, andpassage ofaresolution bytheGovernment
requires theconsent ofanabsolute majority ofallitsmembers. TheGovernment may,within thelimits
ofthelaw,issuedecrees fortheexecution ofalaw.4Ifspecifically authorized bylaw,ministries and
other administrative offices mayissue legalregulations onthebasis of,andwithin thelimits of,the
law. Proposals ontrade policy arenormally considered bytheGovernment before being senttothe
Parliament (section 2(ii)).
8. TheGovernment maycomment onalldraftlaws. Members oftheGovernment mayattend
sessions ofbothhouses ofParliament, theircommittees andcommissions, andhavetherighttospeak
atthese sessions. TheGovernment maydemand thattheChamber ofDeputies complete itsdiscussion
ofagovernment draftlawwithin threemonths ofitssubmission solongastheGovernment linkswith
thisdemand arequest foravoteofconfidence.
(iii) TheParliament
9. Legislative power intheCzech Republic isvested intheParliament, which consists oftwo
chambers: the200-member Chamber ofDeputies (lower house) andthe81-member Senate. Members
ofParliament areelected byuniversal, equal anddirect suffrage: deputies areelected tofour-year
terms byproportional representation andSenators areelected tosix-year terms onthebasisofamajority
system.5TheChamber ofDeputies discharges thefunctions oftheSenate pending itsestablishment,
andduring theinterim theChamber ofDeputies maynotbedissolved. Legislation onelections to
theSenate failed onearlier attempts butpassed theChamber ofDeputies inSeptember 1995. The
firstelections totheSenate willbeheldinNovember 1996.
10. TheChamber ofDeputies maintains nineParliamentary Committees, threeofwhich (theBudget
Committee,theEconomicCommitteeandtheAgricultureCommittee)dealmainlywitheconomicissues.6
11. Draft laws maybesubmitted totheChamber ofDeputies byaDeputy, theSenate, the
Government ortheboard ofrepresentatives ofahigher territorial self-governing unit(landorregion).7
After approval bytheChamber ofDeputies draft lawsaresenttotheSenate, which mayapprove,
4Theduration ofdecrees andgovernment regulations isunlimited, unless specified otherwise.
5AllDeputies areelected atthesame time, while onethird ofallSenators aretobeelected every twoyears.
6Deputies orSenators whoaremembers oftheGovernment maynotserve asaChairman orVice-Chairman
ineither house, norasamember ofacommittee.
7TheBillonState Budget maybesubmitted onlybytheGovernment.WT/TPR/S/12
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reject, orpropose amendments tothem. IftheSenate rejects thedraftlaw,theChamber ofDeputies
votes again onthedraft, which maybeadopted byasimple majority ofDeputies. IftheSenate proposes
amendments, theChamber ofDeputies votes again onthewording approved bytheSenate. The
President mayreturn anadopted law,except aConstitutional law,andtheChamber ofDeputies then
votes again onthesame law,without theoption ofamendment. Thelawmaythenbere-approved
byasimple majority ofallDeputies. Adopted lawsaresigned bythePresident, thePrime Minister
andtheChairman oftheChamber ofDeputies andbecome effective oncepromulgated.
(iv) Thejudiciary
12. TheCzech judiciary consists oftheConstitutional Court, theSupreme Court, theSupreme
Administrative Court, andhigh, regional anddistrict courts. Judges atalllevels maynotbedismissed
ortransferred against theirwillexcept fordisciplinary reasons thatarestipulated bylaw.
13. TheConstitutional Court isanindependent judicial bodyfortheprotection ofconstitutionality;
its15judges areselected bythePresident withtheconsent oftheSenate andserve ten-year terms.8
TheConstitutional Court decides whether laws, decrees andlegally binding regulations areconsistent
withtheConstitution, constitutional laws, other laws, andinternational agreements under Article 10
oftheConstitution. Itsdecisions maynotbeappealed. Laws andregulations found tobeincompatible
cease tohaveeffect.
14. Other Czech Courts hearcases involving civil, commercial (including competition law)and
criminal matters, andruleonthelegality ofdecisions made byadministrative bodies. They mayalso
settle lawsuits regarding international trade relations. Judges, whomusthaveauniversity education
inlaw,areappointed bythePresident foranunlimited term. TheConstitution allows Parliament to
stipulate thattheSupreme Administrative Court passdecisions ontheannulment oflegalregulations
thatmaybeatvariance withlaw,oronsome controversies concerning thescope ofpowers ofState
bodies andbodies ofterritorial self-administration. TheSupreme Administrative Court isnotyet
functioning. TheSupreme Court isthehighest judicial bodyinmatters other thanthose falling under
thejurisdiction oftheConstitutional Court ortheSupreme Administrative Court.
(2) Trade Policy Formulation
(i) Institutions
15. Trade policy intheCzech Republic isformulated inthecontext oftheinstitutional setting
described inthepreceding section. Thebroad framework forinternational trade isprovided bythe
Commercial Code (ActNo.513/1991 Coll.), Customs Act(No.13/1993 Coll.), andseveral other
lawsandregulations.TheseincludeActNo.42/1980Coll.oneconomicrelationswithforeigncountries,
asamended; Decree No.560/1991 Coll., ontheconditions ofissuing licences forexports andimports
ofgoods andservices; andimplementing decrees totheCustoms Actissued bytheMinister ofFinance.
TheCommercial Code regulates theeconomic activities ofdomestic andforeign persons. Itincludes
theprinciples ofaccounting andtherulesontheCompany Register, competition, commercial companies
andco-operatives. TheCommercial Code replaced 84actsanddecrees, including theInternational
Trade Code, theEconomic Code andtheJointVenture Act.Theforeign exchange régime isregulated
bytheForeign Exchange ActNo.457/1992 anditsimplementing decrees. Laws onbanking include
8Judges oftheConstitutional Court musthaveauniversity eduction inlawandatleasttenyears ofexperience
inthelegal profession.TheCzech Republic WT/TPR/S/12
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ActNo.21/1992 onbanks andActNo.6/1993 ontheCzech National Bank. Thelegalbasis ofthe
taxsystem islaiddown inActNo.212/1992 onthetaxsystem.
16. Theformulation, co-ordination andimplementation oftrade-related policies, within thelimits
defined bylaws, fallmainly under theresponsibility oftheMinistry ofIndustry andTrade (MIT)
(Box II.1). TheMITisthecentral authority ofStateadministration fornational industrial policy, trade
policy, foreign economic policy, energy policy, domestic trade, foreign trade, consumer protection
andcommoditystockexchanges.Intheareaofforeigneconomicrelations,theMITco-ordinatesbilateral
andmultilateral trade policy andtrade negotiations andimplements obligations resulting from these
negotiations, including those under theWTO andthose withtheEuropean Union (EU), European Free
Trade Area (EFTA) andtheCentral European FreeTrade Area (CEFTA).9TheMIToperates the
foreign trade licensing régime andexercises control overthemarking andtesting ofraremetals. It
supervises theCzech Energy Inspection Authority, theCzech Trade Inspection Authority, theMarking
Office andtheLicensing Office.
17. TheOffice ofIndustrial Property Rights intheMinistry ofCulture administers thelawon
intellectualpropertyprotection.TheMinistryofPrivatizationco-ordinatesandoverseestheprivatization
ofStateenterprises, while theNational Property Fund (NPF) implements theprivatization plan. The
Czech Agency forForeign Investment (CzechInvest), assists foreign investors inestablishing their
operations intheCzech Republic. TheMinistry ofEconomy hasresponsibility formany industrial
andservices sectors oftheCzech economy. TheGeneral Directorate ofCustoms, responsible forsuch
areas ascustoms control andenforcement, investigations, andthecollection anddevelopment ofdata,
isdirectly subordinate totheMinistry ofFinance. TheMinistry ofAgriculture plays acentral rôle
inmaking agricultural trade policy, particularly withregard totheStateFund forMarket Regulation,
which isadministered byacommittee thatalsoincludes representatives fromothergovernment agencies.
TheMinistry ofEconomic Competition ensures theeffectiveness ofeconomic competition inthe
Czech Republic; itcomments ontheeffects ofrelevant proposed legislation anddecrees and,along
withthecourts, enforces Czech competition law.TheCzech National Bank hasjurisdiction overmany
foreign exchange matters.
(ii) Process
18. Trade policy initiatives normally begin withaproposal from oneormore oftheministries
oragencies. Proposals areconsidered bytheGovernment, andinput from other relevant ministries
andoutside organizations issought. Thisprocess mayleadtheGovernment toaccept, amend, orreject
theproposal. TheGovernment nextproposes drafts oflawstotheParliament, where committees have
beencreated withexpertise in,andresponsibilities for,tradeandothereconomic matters. Parliamentary
Committees withresponsibilities fortrade matters include theForeign Affairs Committee, Economic
Committee, Budget Committee, andtheConstitution andLawCommittee.
9Intheareaofmultilateral andbilateral trade affairs, theMIT co-operates withtheMinistries ofForeign
Affairs, Finance, andAgriculture, aswellasother government agencies.WT/TPR/S/12
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BoxII.1 Czech Ministries with substantial trade andeconomy-related powers
Ministry ofIndustry andTrade
TheMinistry ofIndustry andTrade co-ordinates foreign trade policies, negotiates trade agreements,
co-ordinates theimport andexport licensing régimes, provides guidelines andregulations forboth
domestic and foreign trade and operations ofcommodity exchanges and hascertain sectoral
responsibilities.
Ministry ofEconomy
TheMinistry ofEconomy 'sresponsibilities include those intheareas ofsmall business, post and
telecommunications, export promotion, tourism, engineering andtechnology development, regional
development, geological research andmining, standardization, metrology andthetesting activities subject
totheState authorities.
Ministry ofFinance
TheMinistry ofFinance hasresponsibilities inareas thatinclude customs, foreign exchange, price
controls, theState budget, theregulation offinancial markets andtheoverseeing offinancial services
industries. TheGeneral Directorate ofCustoms isdirectly subordinate totheMinistry.
Ministry forNational Property Administration anditsPrivatization
TheMinistry ofPrivatization isatemporary Ministry charged with administering andmanaging the
property owned bytheState andearmarked forprivatization. Itprovides guidelines andregulations for
theimplementation ofprivatization operations andguarantees transparency ofthedatapublished onthe
companies earmarked forprivatization.
Ministry forEconomic Competition
TheMinistry ofEconomic Competition isresponsible forpromoting economic competition andfor
protecting against therestriction offaircompetition. Itadvises theGovernment oncompetition policy
andontheimpact ofproposed policy changes oneconomic competition.
Ministry ofAgriculture
TheMinistry ofAgriculture hastrade-related responsibilities inthefarming, forestry, hunting andfishery
industries andinthefood industry. TheMinistry hasresponsibilities onmatters relating tocommodity
exchanges, andveterinary, sanitary andphytosanitary regulations andstandards.
Ministry ofTransport
TheMinistry ofTransport regulates transport andfreight tariffs, including thepassenger tariffs within
theentire State-owned transport sector. Italso co-ordinates thedevelopment oftransportation
infrastructure.
Source: Joint Ventures Club (1995).TheCzech Republic WT/TPR/S/12
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19. TheMinistry ofIndustry andTrade leads andco-ordinates thenegotiation ofregional trade
agreements, withtheco-operation oftheMinistry ofFinance, Ministry ofAgriculture, andother
agencies. Before each negotiation, andfollowing consultations with theSlovak authorities, a
memorandum ontrade liberalization isprepared containing themain principles forthenegotiations.
Thefinalagreement isapproved atameeting oftheGovernment. Once approved, theGovernment
proposes theagreement totheParliament foritsapproval andthentothePresident forratification.
Intheframework oftheCzech-Slovak Customs Union, theregional free-trade agreements arenegotiated
togetherwithSlovakia,andtheCustomsUnionSecretariatparticipatesinthenegotiationsasanobserver.
20. TheWTO Agreement wasformally approved bytheCzech Republic inDecember 1994. The
Agreement required theapproval ofthePresident andasimple majority ofvotes intheChamber of
Deputies.
(3) Trade Policy Objectives
21. Since theendof1989 thebasic political andeconomic objective oftheCzech Republic has
beentoincrease thestandard ofliving bybuilding aneffective market economy. Trade policy isviewed
asanessential toolinachieving efficient resource allocation. Inthisrespect, theCzech Republic
maintains fewnon-tariff measures anditstariff rates aremoderate, although thetariff structure is
escalatory (Chapter IV(2)). Whether bilateral ormultilateral, theCzech Republic iscommitted to
undertaking liberalization incompliance withWTO rules. Sectoral policies thatwould distort the
allocation ofproductive resources inthedomestic economy havelargely beenavoided, although there
areexceptions inareas suchasagriculture (Chapter V(2)).
(4) Multilateral Trade Relations
22. Czechoslovakia wasanoriginal member oftheGATT. Following dissolution oftheCSFR,
theCzech Republic acceded totheGATT under normal market economy conditions inApril 1993.10
According toadecision thathadbeentaken inDecember 1992, theGeneral Agreement andrelevant
instruments wereapplied totheCzech Republic bytheCONTRACTING PARTIES onaninterim basis
prior totheformal accession. TheCzech Republic signed theMarrakesh Agreement and,in
December1994,accomplisheddomesticratificationoftheUruguayRound,becominganoriginalmember
oftheWorld Trade Organization.
(i) TheCzech Republic andtheUruguay Round
23. TheCzech Republic 'sactive participation intheUruguay Round wasmotivated byitsdesire
forthesecure access ofCzech goods toforeign markets andforamore stable multilateral trading
environment tosupport itseconomic transition process. Theauthorities expect thattariff reductions
onindustrial goods willhelpincrease Czech exports andraise export prices. TheCzech Republic
alsosought more transparent conditions fortheapplication ofnon-tariff measures inorder toprevent
10TheProtocol iscontained inGATT document L/7183, March 1993. Thedateofentry intoforce is
1January 1993. Czechoslovakia wasanoriginal member oftheGATT anditsmembership predated theperiod
ofcentral planning; ittherefore hadausual protocol ofaccession. Itwastreated asaState-trading country
byanumber ofdeveloped contracting parties, which resulted, inter alia, intheextensive useofquantitative
restrictions against Czechoslovak exports andtheapplication ofspecific rules intheareaofanti-dumping and
countervailing dutyactions. Inthatperiod, Czechoslovak import (andexport) flows were determined byforeign
trade plans, while tariffs andother economic instruments didnotplayanyeconomic rôleininfluencing foreign
trade decisions atenterprise levels.WT/TPR/S/12
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theprotectionist abuse ofsuchmeasures. Itishoped thatthiswillleadtotheelimination ofquota
restrictions andlicensing procedures onCzech exports andtoasubstantial reduction inthenumber
ofanti-dumping actions. Thereduction ofproduction andexport subsidies foragricultural products,
thedevelopment ofmultilateral rulesforservices through theGeneral Agreement onTrade inServices
(GATS),theliberalizationofservicestradeundertheGATS,andthesafeguardingofintellectualproperty
rights under theAgreement onTrade-Related Intellectual Property Rights (TRIPS) wereallsupported
bytheCzech Republic.11Thelinking oflabour standards totrade policies wasstrongly opposed by
theCzech Republic.12During theUruguay Round, theCzech Republic co-ordinated closely with
Slovakia, itscustoms union partner, andthisco-operation hasbeenmaintained intheimplementation
stage oftheRound.
24. Asaresult oftheUruguay Round, theshare ofCzech tariff linesthatarebound increased
from 97percentto100percent, andallbindings areatcurrently applied rates. Implementation of
Uruguay Round commitments bytheCzech Republic isscheduled toreduce thesimple average m.f.n.
tariff ratefrom abase rateof8.2percentto6.3percentupon fullimplementation ofthe
Czech Republic 'stariff commitments.13
25. TheCzech Republic replaced variable levies onseveral agricultural products withbound
advalorem tariffs. Italsoagreed tolimitthevalue ofexport subsidies on15agricultural product groups,
including dairy products, malt, beef, andpoultry andeggs, tolevels 36percentbelow those inthe
baseperiod by2000. Regarding domestic agricultural support, theCzech Republic hascommitted
toreduce itsAggregate Measure ofSupport (AMS) by20percentfrom thebase period to
Kc13,611 million by2000 (Chapter V(2)).
26. TheCzechRepublicundertookarelativelylargenumberofobligationsregardingtradeinservices
duringtheUruguayRound.Sector-specificcommitmentsnottolimitmarketaccessornationaltreatment
withrespect tosome orallmodes ofservices supply wereaccepted inareassuchasprofessional services
anddistribution services. Horizontal commitments applying across allservice sectors wereaccepted
regarding theacquisition ofrealestate andthepresence of(foreign) natural persons.14The
Czech Republic 'sservices sector m.f.n. exemptions arelimited toaudiovisual services andsome forms
11Czech Foreign Trade, May 1993, p.5.
12GATT document MTN.TNC/MIN (94)/ST/91.
13These figures include theagricultural tariffs resulting from thetariffication ofvariables levies andother
non-tariff measures. Based ontheCzech Republic import pattern of1993, theweighted average tariff willfall
from abaseof5.9percentto4.5percent. Tariff reductions willbemore pronounced inagriculture thanin
industrialproducts:theweightedaverageagriculturaltariffwillbecutfrom13.0to9.3percentwhiletheweighted
average tariff onindustrial products willdrop from 5.2to4.1percent.
14GATT document MTN.GNS/W/168.TheCzech Republic WT/TPR/S/12
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ofpassenger andfreight transportation.15These exemptions areclaimed foranyfuture, aswellas
existing, agreements, andforanindefinite period.16
27. Wherenecessary,theCzechRepublicistakingactiontoensuretheconformityofitstrade-related
policies withUruguay Round obligations. Thisisresulting inamendments tolegislation inthearea
ofintellectual property rights, forexample. Thiscognizance alsoextends intoareaswhere nodomestic
legislation orregulations currently exist(norarerequired bymultilateral rules), suchasanti-dumping
(Chapter IV(2)(xi)).
(5) Regional andBilateral Trade Relations
28. TheCzech Republic isamember ofsixpreferential trade agreements andmaintains several
agreements stipulating reciprocal m.f.n. treatment withcountries thatareneither GATT contracting
parties norWTO members. Trade withcountries withwhich theCzech Republic hasapreferential
trade agreement comprised some 80percentoftotalmerchandise trade in1994. Further details of
allpreferential agreements arespecified inChapter IV(2)(iv).
(i) Relations withSlovakia
29. TheCustoms Union Agreement withSlovakia came intoeffect inJanuary 1993, upon the
dissolution oftheCSFR (Chapter IV(2)(iv)(a)). TheAgreement establishes theCouncil oftheCustoms
Union, whose duties include thefollowing:
- toensure theco-ordination offoreign commercial andcustoms policies;
- toactonbehalf oftheCustoms Union inforeign relations inallmatters provided for
intheAgreement;
- topromulgate thecommon customs tariff andother trade policy measures;
- toprepare anannual report ontheimplementation oftheAgreement.
TheCouncil consists ofanequal number ofmembers oftheGovernments ofbothParties. Itisdirected
byitsPresident, anoffice thatrotates every six-months between aCzech representative andaSlovak
representative. TheCouncil meets atleastevery three months andthePresident convenes asession
oftheCouncil upon therequest ofeither country.
30. ThePermanent Secretariat, based inBratislava, isanexecutive bodyoftheCouncil. Arbitration
Commissions aretobeestablished onanadhocbasis tosettle disputes thatariseunder thecustoms
union andwillopen proceedings upon request either from theCouncil orfrom oneoftheParties.
AnArbitration Commission includes onearbitrator from theCzech Republic, onefrom theSlovak
Republic andaChairman (who maybeanational ofathirdcountry) agreed uponbythetwoappointed
arbitrators. Arbitration Commission decisions arebinding. TheAgreement onCo-operation in
Agriculture establishes theCommittee ontheCo-ordination ofEconomic Policy inAgriculture, a
permanent working bodyofthePermanent Secretariat oftheCouncil oftheCustoms Union. Disputes
15TheGeneral Agreement onTrade inServices (GATS) requires thatWTO Members grant m.f.n. treatment
toservices andservice suppliers ofother Members (Article II).However, itallows measures inconsistent with
GATS Article IItobemaintained provided theymeet theconditions oftheAnnex onArticle IIExemptions and
arelisted intheMember 'sschedule.
16Theduration ofsuchexemptions, inprinciple, should notexceed tenyears andshallbesubject tonegotiation
insubsequent trade-liberalizing rounds.WT/TPR/S/12
Page 24Trade Policy Review
involving agriculture come firsttotheCommittee before going totheCouncil and,ifnecessary, to
anArbitration Commission.
31. Proposals tochange thecommon tariff areconsidered byateamthatincludes representatives
from thePermanent Secretariat oftheCustoms Union andfromthefollowing ministries oragencies
ofeachofthetwocountries: Ministry ofFinance; Customs Administration; Ministry ofIndustry
andTrade (Ministry ofEconomy inSlovakia); andMinistry ofAgriculture. Informing a
recommendation,theteamanalysesthecurrentconditionsinthemarketconcerned,considerstherequests
ofindividual producers, traders andassociations, andtakes noteofthesuggestions ofministries and
other State authorities. Theteamsubmits arecommendation totheCustoms Union Council, which
issues aproposal. IntheCzech Republic, thisProposal ontheCustoms Tariff issubmitted tothe
Government bytheMinister ofFinance andisgiven forcebyagovernment decree. Following asimilar
process, itispossible foronecountry, withtheapproval oftheother, totemporarily reduce atariff
onaproduct.
32. Apayments clearance arrangement, which began inFebruary 1993when monetary union ended,
wasinoperation fortrade between thetwocountries until1October 1995, when itwasdissolved
(Chapter I).Atthattime, theCzech koruna wasmade convertible formostcurrent account purposes
andtheGovernment oftheCzech Republic accepted theArticle VIIIobligations oftheInternational
Monetary Fund.
33. Accordingtotheagreement,"theContractingPartiesshallpursueconformingcommercialpolicy
towards third countries" andunder Article 23theContracting Parties recognize thatanimportant
condition fortheimplementation oftheAgreement istheadoption ofthesame legalnorms intheareas
ofcustoms tariff, customs procedure andcustoms statistics, import andexport licensing procedures,
intellectual property protection, anti-dumping measures andcountervailing duties. Co-ordination is
required inthefields oftrade andforeign exchange regulations, economic competition, Stateaidand
public procurement. BothParties apply theCommon Customs Tariff, whose basic duties werethose
applicable intheformer CSFR on31December 1992. TheCommon Customs Tariff haspreserved
allconcessions granted totheGATT CONTRACTING PARTIES bytheformer CSFR. Thetwo
countries carried outtheirbilateral negotiations intheUruguay Round jointly andtheirfinalschedules
were, inprinciple, identical.
34. TheParties totheCustoms Union notified theAgreement totheGATT.17TheWorking Party
established fortheexamination oftheAgreement concluded thattheAgreement "was consistent with
theprovisions ofArticle XXIV oftheGeneral Agreement".18
(ii) Relations withtheEuropean Union
35. TheCzech Republic 'sAssociation Agreement withtheEuropean Union (EU)entered intoforce
on1February 1995; itsignals theprospect offullEUmembership fortheCzech Republic
(Chapter IV(2)(iv)(b)). TheCzech Republic isexpected tomake formal application formembership
intheEUatthebeginning of1996.
17GATT documents L/7212 andAdd.1, 30April and12May 1993.
18GATT document L/7501, 15July1994.TheCzech Republic WT/TPR/S/12
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36. TheAssociationAgreementincludestheInterimAgreementonTradeandTrade-RelatedMatters,
which hasbeeninforce sinceMarch 1992.19TheAssociation Agreement alsocommits thesignatories
totheprogressive liberalization ofthesupply ofservices across national borders20,although the
Czech Republic mayretain some national treatment exemptions inbanking andfinancial services
temporarily.21According totheauthorities, theextent ofliberalization inservices tradedoesnotexceed
theCzech Republic 'sm.f.n. concessions granted sofar.According totheauthorities, theissue of
whether theAssociation Agreement needs tobenotified totheWTO Council forTrade inServices
isunder consideration. TheAssociation Agreement alsoleads tobilateral liberalization ofthepublic
procurement markets oftheEUandtheCzech Republic. TheCzech Republic hasbegun toadopt EU
rules oncompetition, State aidandother areas asaresult oftheAssociation Agreement.
(iii) Other relations
37. TheCzech Republic alsomaintains preferential regional agreements withcountries ofthe
European FreeTrade Area(EFTA), theCentral European FreeTrade Area(CEFTA), Romania and
Slovenia (Chapter IV(2)(iv)). Several newinitiatives arebeing considered, including theexpansion
oftheCEFTA (Slovenia hasmetallsubstantial conditions foraccession) andtheconclusion offree-trade
agreements withBulgaria, Israel, Turkey, andtheBaltic States.
38. Agreements ontradeandeconomic relations containing m.f.n. treatment andother provisions
havebeenconcluded bytheCzech Republic withmany countries, principally those oftheformer Soviet
Union. Agreements areinforcewithAlbania, Belarus, Estonia, Kazakhstan, Latvia, Lithuania, Russia,
Tadzhikistan, Turkmenistan, andUzbekistan. Nonewtrade agreement hasbeenagreed between the
Czech Republic andtheformer Yugoslavia; a1991 agreement between theCSFR andtheSocialist
Federal Republic ofYugoslavia remains inforce.
19Keyprovisions aredescribed inChapter IV(2)(iv)(b).
20WTO (1995).
21East-West Fortnightly Bulletin, 23December 1994.