WT/TPR/S/12 Trade Policy Review
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V. TRADE POLICIES AND PRACTICES BYSECTOR
(1) Overview
1. Under theprevious centrally-planned economy production decisions weremade andindustrial
capacity wasbuiltwithlittleawareness ofeconomic costs. When thetransition toamarket economy
began in1990, including asubstantial opening tointernational competition, itwasnotclearwhether
theindustrial structure oftheCzech Republic would complement orconflict withitscomparative
advantage. Intheevent, theearlyyears ofthetransition havecreated onlymoderate sectoral adjustment
pressures.
2. TheCzech Republic haslargely resisted anycallsforanactive industrial policy. Neither
domestic norexport subsidies arewidespread. Taxincentives orexemptions aremostly applied
horizontally. Thetariff schedule istransparent andisnotexcessively complicated byconcessions or
exceptions. Most industry assistance isscheduled tobetemporary andseems genuinely tobeaddressed
toward theindustrial restructuring thattheauthorities feelisnecessary asaresult ofthecontinuing
economic transition toamarket economy.
3. Regardless oftheirintent, other policies doinfluence resource allocation andhaveimportant
effects oneconomic sectors. There isadistinct pattern ofescalation throughout thetariff schedule
forimported manufactured products, astariffs onhighly processed products areconsistently higher
thanthose onlessprocessed products. Policies areinplace toassist agriculture, intheform of
guaranteedproducerprices,exportsubsidies,creditsubsidiesandthelike.Priceregulationandexclusive
supplyrelationshipsremaininsomeserviceandenergyindustries,suchastransport,telecommunications,
andnatural gas.Stateenterprises inindustries considered bytheGovernment tobestrategic willnot
beprivatized, leaving openthepossibility thattheymaysome daybeusedasinstruments ofindustrial
policy.
(2) Agriculture andPrimary Products
4. Theauthorities haveindicated thatCzech agricultural policy seeks abalance between consumers
andproducers andthattheprotection ofinefficient producers isnotapolicy goal. Although international
competition inagriculture isviewed asdesirable, theauthorities feelthattheadjustment ofCzech
agriculture tointernational market conditions, andtothetrading practices ofother countries, must
begradual. A"suitable" level ofagricultural protection istobemaintained inorder tosoften the
transition tointernational market conditions andtoprotect Czech agriculture fromsubsidized imports.
5. TheCzech Republic 'sagricultural policy embraces fourprincipal long-term objectives: price
stability, foodsecurity, environmental quality, andforeign market access. TheGovernment 'spolicy
istohelpstabilize prices ofthose agricultural commodities considered tohavelongproduction cycles
(such asbeefandmilk, butalsocereals); thisisprimarily pursued through theactivities oftheState
Fund forMarket Regulation. Second, theCzech Government willseeka"tolerable threshold" of
domestic foodsecurity, particularly withrespect tobeef, milkandcereals. Third, theGovernment
regards agriculture ashaving anecological function; itaimstomaintain anunspoiled rurallandscapeCzech Republic WT/TPR/S/12
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andtoencourage thecreation ofahighquality ruralenvironment.1Finally, theCzech Republic seeks
mutual reductions ofagricultural trade barriers withother countries.
6. Theauthorities alsohaveseveral short-term objectives foragriculture thatareassociated with
theongoing economic transformation. Firstamong theseisthecompletion ofagricultural privatization
andthesettlement ofclaims forlandrestitution; itisexpected thatprivate farmers willutilize land
andother productive inputs more efficiently. Second, theauthorities hopetofacilitate completion of
thetransition byensuring thatadequate financial credit isavailable tofarmers; thisistheprimary
motivation behind theloanguarantees andinterest subsidies oftheSupport andGuarantee Fund for
Farmers andForestry. Arelated objective istofacilitate industrial restructuring inagriculture; for
thispurpose, attenuation programmes areinplace. Fourth, theauthorities aimtoimprove foodquality
andsafety. Finally, theauthorities hopetoreduce thesocial burden ofunemployment thathasresulted,
insome regions, fromtheprivatization ofStatefarms; regional assistance programmes willaddress
these social concerns.
7. Agriculture accounted forsome 6percentofGDP and7percentofemployment in1994.
Czech agricultural exports (SITC 0)in1994 were 5.0percentoftotalmerchandise exports, and
agricultural imports were7.1percentoftotalmerchandise imports. Themaincrops, interms ofshares
oftotalplanted area,arewheat, barley, andrapeseed; thereissubstantial livestock production ofbeef,
pigmeat, poultry anddairy. Leading agricultural andfoodexports aredairyproducts, beer,liveanimals,
andmeatproducts. Themain agricultural andfoodimport products orproduct groups arefruitand
vegetables, animal feedproducts, tobacco, andcoffee, teaandcocoa.
8. Agricultural production intheCzech Republic declined by24percentintheperiod 1989 to
1993, mainly because ofasharp reduction inthesector 'sterms oftrade (Table V.1).2During this
period, agricultural output prices rose21percentwhile theprices ofagricultural inputs roseby
142percent. State subsidies asashare ofsectoral value added declined from 62percentin1989
to7percentin1993 and1994.3
1Programmes undertaken forenvironmental reasons, according totheauthorities, include subsidies for
afforestation, grassing anderosion control; some credit guarantees andinterest subsidies under theSupport and
GuaranteeFundforFarmersandForestry;andtheMinistryofAgriculture'sinfluenceonlandtenureadjustments,
which itexercises soastoimprove theecological andwater management situation.
2These figures partly reflect theeffects ofdrought in1993. Even by1992, however, output haddeclined
26percentfrom its1989 level.
3Data provided bytheauthorities.WT/TPR/S/12 Trade Policy Review
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Table V.1
Summary ofdevelopments intheagricultural sector, 1989-94
1989 1990 1991 1992 1993a1994a
Growth ingross agricultural output (GAO) (percent
change from previous year)... -2.3 -8.9 -12.1 -2.4 -5.9
-Crops ... -0.7 -2.9 -17.2 4.8 -5.9
-Livestock ... -3.4 -13.1 -8.0 -7.5 -4.8
Share ofcrops inGAO 41.2 41.8 44.6 42.0 45.1 44.9
Input prices (index; 1989=100) 100.0 ... ... 189.7 241.5 260.1
Output prices (index; 1989=100) 100.0 104.1 103.3 111.3 120.6 126.3
Retail foodprices (index; 1989=100) 100.0 110.6 159.7 174.2 203.2 222.1
aPreliminary data.
...Notavailable.
Source: Dataprovided bytheCzech authorities.
9. Partly reflecting changes intherelative price ofdifferent food groups following price
deregulation,thecompositionoffoodconsumptionintheCzechRepublichaschangedmarkedly,shifting
awayfromlivestockproducts.Annualpercapitaconsumptionofmeatdeclinedfromanaverage96.7kg.
intheperiod 1988-1990 to84.9kg.intheperiod 1992-1994. Similarly, milkconsumption inthis
period dropped from93.5litresto76.6litres. Consumption offruitincreased from64.5kg.to71.4kg.
While thepercapita consumption ofpotatoes hasnotchanged substantially, consumption ofother
vegetables rosefrom 68.6kg.to71.6.
(i) Agricultural policies
10. TheCzech Government isdirectly involved inagriculture inseveral ways, including thesetting
ofintervention prices andgranting ofexport subsidies forsome commodities, theprovision of
concessionary loans andcredit guarantees, andvarious trade policy instruments suchasm.f.n. tariff
quotas (Tables IV.3andIV.4), preferential tariff quotas (Table IV.5), seasonal tariffs (Table IV.6),
automatic export licensing andautomatic import licensing, aswellasm.f.n. andpreferential tariffs.
Inaccord withCzech commitments under theWTO Agreement onAgriculture, variable import levies
onmany agricultural products were replaced bytariffs inJanuary 1995.
(a) Import-related policies inagriculture
11. Czech tariffs onimports ofprimary agricultural products average 8.7percentbutrange as
highas155percent(onsome potatoes). Allagricultural tariffs arebound andareapplied attheir
bound rates, asaretariffs inallother sectors. Themargins ofpreference currently applied under the
CzechRepublic'spreferentialagreementsandGSPschemearelow.Thesourcewiththegreatestaverage
preference margin istheEuropean Union (EU), witha0.7percentaverage margin andan8.0per
centaverage preferential tariff(Table AV.1). Preferential treatment ofCzech imports fromdevelopingCzech Republic WT/TPR/S/12
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countries applies to7.4percentofagricultural tarifflines(HS1-24) under theCzech Republic 'sGSP
programme, asmall share compared tothatinother sectors (Chapter IV(2)(ii)(k)).4
12. Tariff quotas were established bytheCzech Republic inJanuary 1995 forsome 24product
groups, including many meatanddairy products, under theminimum access commitments negotiated
intheUruguay Round (Chapter IV(2)(ii)(f)). Tariff preferences under preferential trade agreements
apply in17ofthese product groups, withratesusually below thein-quota m.f.n. tariff rate. In12of
these product groups, including dairy products, rapeseed andwine, parts ofthem.f.n. tariff quota
areactually reserved forpreferential partners,5leaving onlyaportion ofthem.f.n. tariffquota available
fornon-preferential suppliers.6Atsome timeduring 1995, temporary tariff quotas wereinplace for
canemolasses, sugar beetmolasses, andflax(Table IV.4); these tariff quotas were implemented as
aresult ofshortages onthedomestic market and,under thecustoms union agreement, required the
approval ofSlovakia. Inaddition, tariff preferences extended bytheCzech Republic onimports of
some 48products, including some dairy products, fruitandvegetables, meat products andcereals,
under thevarious preferential agreements aresubject totariff quotas (Table IV.5). Thisincludes one
product, poultry meat, forwhich apreference isextended toexports fromtheUnited States; onsome
tariff linesthemargin ofpreference isashighas27percentage points.
13. TheCzech Republic usesseasonal tariffs on13fruits andvegetables, including potatoes,
tomatoes, grapes andpears (Table IV.6). Inseason, which istheperiod during which thedomestic
product isbeing marketed, theratesrange from 155.0 percentforsome potatoes to9.5percentfor
perry pears andplums. Thein-season tariff onproducts covered byseasonal tariffs averages some
15percent. During other periods, seasonal tariffs donotexceed 4.7percent.
(b) TheState Fund forMarket Regulation: intervention purchases andexport subsidies
14. TheState Fund forMarket Regulation (SFMR) isapublic agency established in1991 asan
independent economic body.7Itsucceeded theFederal Fund forMarket Regulation, which carried
outidentical functions andactivities, upon thedissolution oftheCzech andSlovak Federal Republic
(CSFR). Themain purpose oftheSFMR istopromote market stability bylimiting excessive price
4Under theCzech GSPprogramme imports from theleast-developed developing countries enter dutyfree,
while imports from other developing countries facetariffs equal tozero, halfofthem.f.n. rate,orthefullm.f.n.
rate, depending onthetariff line.
5Thepractice ofreserving portions ofanm.f.n. tariff quota forcertain trading partners has,inanother context,
been raised asanissue intheWTO Committee onAgriculture.
6Anextreme example isthatofsome potatoes inseason (Table IV.3). Them.f.n. tariff rateis155.0 per
centwhile thein-quota rateforthefirst26,894 tonnes is50.0percent. However, most ofthisisreserved for
theEU(15,000 tonnes) orHungary (2,000 tonnes). Thepreferential tariff for1995 onpotatoes from theEU
is9.0percentwhile thatonpotatoes from Hungary is70percentofthem.f.n. rate. Thatis,in1995 imports
ofpotatoes from theEUbearatariff of9.0percentonthefirst15,000 tonnes, 50.0 percentforanyfurther
shipmentswithinthe24,894globalquota,and155.0percentabovethatamount.ImportsofpotatoesfromHungary
bearatariff of35percentforthefirst2,000 tonnes, 50.0percentforanyfurther shipments within theglobal
tariff quota, and155.0 percentforanyadditional shipments. (SeealsoWTO document G/AG/N/CZE/1,
June 1995).
7TheSFMR wasestablished bytheActontheState Fund forMarket Regulation. Itwasnotified totheWTO
indocument G/STR/N/1/CZE.WT/TPR/S/12 Trade Policy Review
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movements andbyguaranteeing minimum prices forselected agricultural products. Since theSFMR
doesnothaveamonopoly position, private traders remain freetoexport orimport.
15. TheSFMR Council decides onthecommodities tobesubject toregulation andontheguaranteed
(minimum reference) prices thatittargets forthedomestic market.8Based onitsshort-term forecasts
forsupply anddemand, theSFMR arranges commodity purchases orsalesinorder toinfluence the
market price.9Intervention prices wereineffect in1995 forwheat anddairy products. Intervention
prices inrealterms havedeclined substantially since 1991 (Table V.2). In1993 theSFMR arranged
purchases ofKc1.35billion. Thevalue ofintervention purchases wasKc2.6billion in1994 and
Kc1.3billion in1995. Intervention purchases ofKc1.8billion areanticipated in1996.
Table V.2
Intervention prices oftheState Fund forMarket Regulation, 1991-95
(Kcpertonne, unless otherwise indicated)
1991 1992 1993 1994 1995
Wheat forfood 3,000 3,000 3,000 3,240a
2,700a2,700
Milk (Kcperlitre) 5.4 5.4 5.4 5.7 6.0
Bulls andheifers (Kcperkg.,live
weight)28 28 28 28 n.a.
Pigs(Kcperkg.,liveweight) n.a. n.a. 25 n.a. n.a.
n.a. Notapplicable.
a Theintervention price waschanged during theyear.
Source: Dataprovided bytheCzech authorities.
8TheCouncil ischaired bytheMinister ofAgriculture andconsists oftheDirector oftheSFMR and
representatives from theMinistries ofFinance; Economic Competition; Industry andTrade; andAgriculture;
aswellasfrom theprivate sector andParliament.
9Forexample, suppose thattheSFMR setsaminimum reference price of1.0forsome commodity. Ifthe
SFMR forecasts indicate thatmarket supply anddemand forthiscommodity inthecoming months willbesuch
thattheresulting price willbe0.8,theSFMR willestimate thequantity ofthecommodity thatwould need to
beremoved from themarket inorder toresult inaprice of1.0. TheSFMR willpurchase thisquantity and
theCouncil thendecides whether tostore itorexport it.Czech Republic WT/TPR/S/12
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Table V.3
Intervention purchases andexport subsidies oftheSFMR, 1993-94
1993 Intervention purchases 1994 Intervention purchases
Tonnes Kcmillion Tonnes Kcmillion
Wheat forfood 33,092 144.7 656,385 2,417.2
1993 Export subsidies 1994 Export subsidies
Tonnes Kcmillion Tonnes Kcmillion
Food potatoes 2,104 0.4 23,010 10.2
Cattle 26,957 149.7 4,681 26.5
Syrup from potato starch 0 0.0 92 0.7
Pigmeat 9,392 194.4 2,582 53.4
Milk powder 24,401 150.0 20,051 216.4
Other dairy products 34,665 957.9 29,912 834.1
Malt 0 0.0 73,700 43.5
Sugar 20,017 66.1 0 0.0
Starch 0 0.0 13,293 105.8
Source: Dataprovided bytheCzech authorities.
16. TheSFMR mayuseexport subsidies rather thanintervention purchases. Traders bidonthe
subsidy thattheywould require fromtheSFMR tobuythecommodity attheminimum reference price,
withcontracts being awarded tothetraders requesting thesmallest subsidy. These subsidies arethe
difference between thedomestic purchasing price andtheexport price. In1993 theSFMR export
subsidies totalled some Kc1.5billion, 95percentofwhich wasonlivestock products, particularly
dairyproductsandlivecattle(TableV.3).Thevalueofexportsubsidiesin1994wassomeKc1.3billion
(87percentonlivestock products) andin1995 wasKc1,064 million (100percentonlivestock
products); in1996export subsidies areexpected toequal Kc1,258 million, allonlivestock products.
TheCzech Republic, likeother developed country participants intheUruguay Round, committed to
reduce, by2000, thevalue ofitsagricultural export subsidies by36percentandthevolume ofits
subsidized exports by21percentfromthe1986-1990 baseperiod. Thelargest baseoutlays, andthus
thelargest reduction commitments inthevalue ofexport subsidies, areformilkpowder, other dairy
products, andmalt(Table V.4).WT/TPR/S/12 Trade Policy Review
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Table V.4
Czech agricultural export subsidy reduction commitments intheUruguay Round
Outlays (Kcmillion) Quantities ('000tonnes)
Base 2000 Base 2000
Beef 484.1 309.8 63.0 49.8
Pork 111.9 71.7 12.8 10.1
Poultry eggs, poultry products 366.1 234.3 28.8 22.8
Sheep meat 10.5 6.7 0.7 0.55
Milk powder 1,946.9 1,246.0 84.7 66.9
Other dairy products 1,999.9 1,280.0 79.5 62.8
Fruit, vegetables andtheirproducts 125.7 80.4 10.9 8.6
Hops, seeds 221.6 141.8 12.1 9.6
Vegetable oilfats 50.3 32.2 9.1 7.2
Sugars, sugar confectionary 99.2 63.5 6.2 4.9
Beer 86.4 55.3 188.5a148.9a
Wine 24.3 15.6 4.7a3.7a
Spirits, beverages 107.7 68.9 71.2a56.2a
Starch 75.9 48.6 15.1 11.9
Malt 841.9 539.9 309.8 244.7
Cereal, flour products 230.6 147.6 82.9 65.5
aMillion litres.
Note: Thebaseperiod refers to1986-90.
Source: WTO, Uruguay Round Schedule XCIII -Czech Republic.
(c) TheSupport andGuarantee Fund forFarmers andForestry: concessionary loans andcredit
guarantees
17. Agricultural producers weresqueezed byrapidly increasing input prices andslowly increasing
output prices during theperiod 1989-1993. Thiscontributed todeclining profitability inthesector,
which inturnplayed arôleinlower investment amid agrowing hesitation onthepartofcommercial
lenders toextend credit. Consequently, theshare ofeconomy-wide gross fixedinvestment taking place
inagriculture dropped from nearly 12.6percentin1989 to3.8percentin1992. Inresponse, the
Support andGuarantee Fund forFarmers andForestry (SGFFF) wasestablished in1994 tosupport
agricultural restructuring byfacilitating investment. TheSGFFF doesnotdiscriminate between co-
operatives andprivate farmers initsactivities.
18. TheSGFFF received aState budget contribution in1994 ofKc2.6billion. Inaddition, it
draws income from itsholding ofaportfolio ofshares ofagro-food enterprises thatwereprivatized
inthefirstwave ofvoucher privatization andhaveanaccounting value ofsome Kc3.5to4.0billion.10
TheStatebudget allocation in1995wasKc2.3billion. TheSGFFF supported investments totalling
Kc9billion in1994 andanexpected Kc12billion in1995.
19. TheSGFFF facilitates investment intheagriculture sector through amixture ofconcessionary
loans andcredit guarantees; these grant collateral, tocomplement thatoftheborrower, andsubsidize
interest payments. Thissubsidy rateisdetermined quarterly andin1994, when interest ratesonthese
10OECD (1995).Czech Republic WT/TPR/S/12
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loans wereabout 18percent, thesubsidy wastypically some 8percentage points. Theduration of
loans isgenerally fouryears, although insome cases thisisextended toaslongasnineyears. Credit
guarantees allow borrowers thatwould otherwise obtain loans onlyatratesabove themarket average
toobtain them instead atlower ratesfromcommercial banks; theyarethuseconomically equivalent
toacredit subsidy.
20. TheSGFFF operates several programmes, thelargest being PROVOZ, ZEMEDELEC and
SLOZBY (Table V.5). PROVOZ (Operation) isashort-term loanprogramme thatconcerns operating
costsonly(e.g., seeds andfertilizers). ZEMEDELEC (Farmer) isalong-term programme thatprovides
loans tofarmers forinvestments inmachinery andequipment. Under SLOZBY, alsoalong-term
programme, loans aremade toenterprises thatprovide agricultural services. Other loanprogrammes
areaimed attheinstallation ofyoung farmers (MLADI), regional development inareas withhigh
unemployment andharsh production conditions (AGROREGION), environmental quality (KRAJINA),
thesettlement ofrestitution andtransformation claims made onco-operative farms (RESTITUENT),
thesupport ofentrepreneurs whoacquired theproperty offormer State farms (NABYVATEL), and
thesettlementofloansinheritedfromStatefarmsaspartoftheprivatizationprocess(TOZ).Asindicated
inTable V.5,thelargest share ofsubsidies andcredit guarantees goestoco-operatives, followed by
limited liability companies andprivate farmers. More thanhalfofthese subsidies andguarantees are
issued under theZEMEDELEC (Farmer) programme. Successful applicants forthese programmes
must receive atleasthalfoftheirincome from primary farm production andmust havesettled all
transformation andrestitution claims.WT/TPR/S/12 Trade Policy Review
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Table V.5
Concessionary loans andcredit guarantees extended bytheSGFFF, 1995
Type of
enterpriseApplications Approved
applicationsCredit
value
('000Kc)Requested
guarantees
('000Kc)Level ofsubsidies
('000Kc)Subsidies
paid
('000Kc)
Private farmers 1,080 994 1,880,633 1,028,295 452,592 73,486
Limited liability
companies595 560 2,771,334 1,648,447 542,271 80,013
Joinstock
companies286 268 1,765,980 712,588 409,658 49,422
Co-operatives 954 921 3,782,629 1,081,247 797,447 132,570
Other 20 12 28,600 9,480 5,702 983
Type of
programmeApplications Approved
applicationsCredit
value
('000Kc)Requested
guarantees
('000Kc)Level ofsubsidies
('000Kc)Subsidies
paid
('000Kc)
Operation 942 891 2,439,288 508,352 246,016 103,812
Farmer 1,778 1,669 6,787,429 3,275,263 1,720,452 198,678
Services 181 169 963,022 672,074 238,337 33,092
Restituent 11 10 15,069 0 2,865 891
NewOwner 23 16 24,368 24,368 0 0
TOZ 0 0 0 0 0 0
Landscape 554 538 ... ... ... ...
Youth 284 264 ... ... ... ...
Agroregion 373 348 ... ... ... ...
Total 2,935 2,755 10,229,176 4,480,057 2,207,670 336,472
... Notavailable.
Source: Dataprovided bytheCzech authorities.
(d) Agricultural inputs
21. Prices foragricultural inputs usedbyboththeStateandnon-State agriculture sectors aremarket-
determined. Thedecontrol ofthese prices in1990 and1991 ledtorapid increases andaconsequent
decline inthequantities ofinputs demanded. Thereduced useofagricultural inputs, along withlower
employment, caused output perhectare tofall; these declining yields were largely responsible for
theoverallcontractionofagriculturaloutput.While,asnoted,theStatesubsidizescreditforthepurchase
ofinputs, nodirect input subsidies areoffered.
(e) Agricultural restructuring subsidies andother domestic support
22. TheGovernment hasmade restructuring subsidies available toproducers intheagriculture
sector inorder tohelpstabilize thesector andtocreate conditions foritsfurther development. In1994Czech Republic WT/TPR/S/12
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thevalue ofsubsidies approved wasKc2.9billion andwasexpected tototalKc3.5billion in1995
(Chapter IV(5)(iv) and(Table IV.18)).
23. Direct payments arepaidtopromote theconversion ofarable landtograssland inlessfavoured
areas withaprice persquare metre lessthanKc2.8in1995. These payments, which totalled
Kc201million in1994 andKc52million in1995, aremade onaperhectare basis. Anadditional
Kc438million wasprovided in1994asdirect subsidies forthemaintenance, forenvironmental reasons,
ofgrassland inlessfavoured areas. Direct payments equal toKc13million werealsomade in1994
topromote theconversion ofarable landtoforest. These programmes remained ineffect in1995.
24. Inaddition, indirect support foragriculture isprovided inseveral ways. Theprogrammes,
andtheamounts ofState funding in1994, were: genetic research (Kc619million foranimals and
Kc133million forplants), improvement ofanimal health conditions (Kc165million), cultures
(Kc11.5million), andinformation programmes fortheagro-food sector (Kc50million). In1994
theStateprovided Kc18million insupport foradvisory andextension services totheagro-food sector.
25. TheCzech Republic 'sbasetotalAggregate Measure ofSupport (AMS) ascalculated forthe
Uruguay Round isKc17,014 million. Ithascommitted toreduce thistoKc13,611 million by2000.11
(f) Tax-related measures inagriculture
26. Thevalue-added tax(VAT) rateonagricultural production is5percent, compared tothe
22percentratethatisapplied onmostgoods. TheVAT onbiofuel isalsosetatthereduced 5per
centrate; thecapacity tomanufacture biofuels fromrapeseed intheCzech Republic hasrecently been
created. Biofuel producers areexempt from payment oftheexcise taxonrawmaterials otherwise
subject tothetax,andfrom income taxes forthefirstsixyears ofproduction.
(ii) Privatization, landtenure, andagricultural restructuring
27. TheLandLaw,theLarge Scale Privatization LawandtheTransformation Lawsetrestructuring
oftheagriculture sector setinmotion intheformer CSFR in1991 and1992.12Based onthese laws,
co-operative farms (which accounted forthreefifths ofCzech farmlandinthe1980s) andStatefarms
were converted intoother types oftenure based onprivate ownership.13
28. ThefarmingsectorintheCzechRepublicconsistsofStatefarms,privatelyownedco-operatives,
corporate farms, individual family farms, andtrading companies (Table V.6). Since 1989 thesize
andrelative importance ofthese landtenure sectors havechanged. While lessthan1percentof
agricultural landwasprivately farmed inthe1980s,1418percentoflandwasprivately farmed by1993
andthisfigure roseto97percentbyearly 1995 (some ofthisbeing leased fromtheState). Privately
operated farms accounted for77percentofthetotalvalue ofagricultural production in1993. Land
newly heldbyprivate farmers wasformerly inStatefarms, innon-agricultural entities, orincollectives.
11WTO, Uruguay Round Schedule XCII -Czech Republic, PartIV.
12OECD (1994).
13Asat1989, 61percentofagricultural landwasheldincollectives, 26percentinState farms, lessthan
1percentinprivate farms, and13percentinother entities (data provided bytheauthorities).
14Theright oflandownership wasnotabolished intheformer Czechoslovakia.WT/TPR/S/12 Trade Policy Review
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State farms comprised 15.3percentofagricultural landin1993 andcontributed 13percentoftotal
agricultural production. Nearly alllandremaining inStatefarms isbeing privately operated. Former
collective farms, which averaged some 2,600 hectares insizein1989, have beensubdivided and
transformed intoprivate shareholder co-operatives averaging 1,600 hectares.15Co-operative farms
comprised 48percentofagricultural landin1994 andanestimated 48percentofagricultural
production.
Table V.6
Number offarms, landareaandemployment, bytypeoffarm, 1989-1994
1989 1991 1993 1994
No.offarms 3,205 14,000 52,003 60,666
State 174 308 303 229
Co-operatives 1,024 1,187 1,334 1,429
Corporate 0 25 1,270 1,338
Individual (family) 2,007 12,479 49,096 57,554
Other n.a. n.a. 0 116
Land area('000hectares) 4,307 4,287 4,283 4,281
State 1,089 1,096 657 114
Co-operatives 2,622 2,601 2,117 2,044
Corporate 0 7 728 1,099
Individual (family) 13 140 780 993
Other 583 443 1 31
Employment (no.ofpersons) 533,057 410,911 270,849 245,859
State 127,865 94,967 25,157 5,300
Co-operatives 403,192 307,929 184,965 146,450
Corporate n.a. n.a. 42,920 62,892
Individual (family) 2,000 3,015 17,807 31,217
Other 0 5,000 0 0
Source: Dataprovided bytheCzech authorities.
29. Therestitution offarmlandtopre-1948 landowners under alawpassed inMay1991slowed
theprivatization andrestructuring process. Restitution claims, limited to150hectares perperson,
could befileduntiltheendofAugust 1993; some 233,000 claims werereceived. Some 80percent
ofclaims were forfivehectares orless,while only0.3percentofclaims were formore than50
hectares. BytheendofSeptember 1995, 76percentofthese claims hadbeenprocessed andover
onemillion hectares hadbeenreturned toclaimants. Therestitution process istobecompleted in1996.
30. Changes inlandholding havehadanoticeable impact onthesize-distribution ofprivate farms
(Table V.7). Theshare ofprivate farms thatcontain lessthanonehectare remained atabout 50per
centfrom 1991 to1993. However, theshare ofmid-sized farms (10to50hectares and50to100
hectares) dropped, withashifttoward small farms of1to10hectares andlarge farms ofmore than
100hectares. Asat1January 1995, theaverage sizeofprivate farms was16hectares.16
15Individual shareholders holddeed toaparticular plotoflandintheco-operative andarefreetoremove
thislandfrom theco-operative.
16OECD (1995), Table 1.4.1.Czech Republic WT/TPR/S/12
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Table V.7
Distribution ofprivate farms, bysize,intheCzech Republic, 1989-93
Endof
yearNo.ofprivate
farmsBelow
1hectare1to10
hectares10to50
hectares50to100
hectaresMore than
100hectares
1989 3,205 ... ... ... ... ...
1991 14,000 7,000 1,275 5,000 700 25
1993 52,003 27,858 14,831 7,034 1,222 1,058
...Notavailable.
Note: Datafor1989 and1991 areexpert estimates. In1994 there were 60,666 private farms.
Source: Dataprovided bytheCzech authorities.
(iii) Agricultural commodities
(a) Crops
31. Cropproduction accounts foranincreasing share ofthevalue ofCzech agricultural production;
thisshare rosefrom 41.2percentintheperiod 1988-1990 to45.1 percentin1993, andwas
44.9percentin1994. However, by1994 thevalue ofcropproduction haddeclined bymore than
20percentfromits1989 level(Table V.8). Thispartly reflected thesmaller landareabeing sown,
buttheoverriding cause wasadecline inyields resulting fromreduced inputuse.Asnoted, thisresulted
primarily fromrapidly increasing input prices andslowly increasing output prices fortheagricultural
sector.
Table V.8
Developments inthecrop sector, 1989-95
1989 1990 1991 1992 1993 1994 1995
Production (Kcmillion) 44,700 44,400 43,100 35,700 37,400 35,200 ...
Area sown ('000hectares) 3,278 3,271 3,252 3,210 3,179 3,118 3,104
... Notavailable.
Source: Dataprovided bytheCzech authorities.
32. Wheat accounts forabout onequarter ofthevalue ofcrops produced intheCzech Republic.
Wheat production in1994wasequal tosome 3.7million tonnes, compared toanaverage 4.3million
tonnes during theperiod 1989-90; although yields havedeclined, theareaplanted towheat hasreturned
toits1989 level (Table V.9). During 1993, intervention purchases ofwheat under theauspices of
theSFMR totalled 33,092 tonnes atacostofKc144million; in1994, 656,385 tonnes werepurchased,
atacostofKc2.4billion.WT/TPR/S/12 Trade Policy Review
Page 90
Table V.9
Production andtrade ofwheat, 1989-94
1989 1990 1991 1992 1993 1994
Production ('000tonnes) 4,090 4,624 4,081 3,412 3,304 3,713
Yield (tonnes perhectare) 4.9 5.6 5.1 4.5 4.2 4.6
Area sown ('000hectares) 829 823 799 758 783 812
Intervention price (Kcpertonne) n.a. n.a. 3,000 3,000 3,000 3,240a
2,700a
Netexports ('000tonnes) ... ... 66.3 1.0 -222.0 -16.0
a Theintervention price waschanged during theyear: 3,240 Kc/ton424,080 t;2,700 Kc/ton232,305 t
n.a. Notapplicable.
... Notavailable.
Source: OECD (1995); dataprovided bytheCzech authorities.
33. TheCzech Republic 'simport tariff ondurum wheat is6.6percent,tobereduced to3.0per
centby1January 2000 asaresult ofUruguay Round commitments. Unlimited quantities ofimports
fromtheEuropean Union mayenter dutyfree. Them.f.n. tariffs onother types ofwheat range from
24.4to29.3percent,andaretofalltoarange of21.2to25.5percentby2000; nopreferences are
applied. TheCzech Republic doesnotextend GSPbenefits toimports ofeither durum orother wheat
from developing countries.17
34. TheCzech Republic hasaUruguay Round commitment toreduce export subsidies oncereals
andflourproducts fromtheirbaselevelofKc230.6 million toKc147.6 million by2000. Thebase
quantity is82,900 tonnes, nottoexceed 65,500 tonnes by2000.
35. Czech percapita consumption ofpotatoes hasincreased slightly since1989-90, perhaps linked
tothedecline inconsumer incomes, andpotatoes form animportant partofthetypical Czech diet
(Table V.10). Production, which haddeclined during theinitial years ofeconomic transition, returned
in1993toapproximately thelevelof1989. Inrecent years, potato imports havetypically accounted
forsome 2to3percentofdomestic consumption.
Table V.10
Production andtrade ofpotatoes, 1989-94
1989 1990 1991 1992 1993 1994
Production ('000tonnes) 2,422 1,755 2,043 1,969 2,395 1,231
Percapita consumption (kg.) 82.8 78 84 84 84 73
Area sown ('000hectares) 115 109 113 110 103 76.6
Netexports ('000tonnes) -6 -48 -77 0 4 24
Source: Dataprovided bytheCzech authorities.
17Imports fromleast-developed developing countries receive duty-free GSPtreatment inallproduct categories
(Chapter IV(2)(ii)(k)).Czech Republic WT/TPR/S/12
Page 91
36. Thetariff onpotato imports fromJulythrough December is155percent. Under itsUruguay
Round commitments, theCzech Republic isreducing thistariff to100percentby2000 andhas
introduced anm.f.n. tariff quota, limiting imports atthereduced tariff rateof50percentto
26,894 tonnes (Table IV.3). Preferences aregiven to15,000 tonnes ofimports from theEU(which
aresubject toatariff ofeither 9or10percent, depending onthetariff lineunder which theyenter)
andto2,000 tonnes ofimports from Hungary (atatariff equal to70percentofthein-quota m.f.n.
rate,i.e.,35percent). TheCzech Republic reserves these quantities forthepreferential suppliers,
andonlytheremaining 9,894 tonnes ofthem.f.n. tariffquota areopentonon-preferential suppliers.18
Seasonal tariffs areapplied therestoftheyear, withazerodutyineffect from1January until15May
anda10percentdutyineffect from16Mayuntil30June. In1995, theCzech Republic introduced
temporary m.f.n. tariff quotas forpotatoes, eliminating thein-quota tariff for4,000 tonnes ofpotato
starch, 70,000 tonnes ofpotatoes, other thanforstarch production, andforunlimited quantities of
seedpotatoes andpotatoes forstarch production. These tariffquotas wereintroduced duetoweather-
related domestic shortages.
(b) Livestock products
37. Czech percapita consumption ofmostlivestock products usedtobehighincomparison with
other (non-centrally-planned) economies ofsimilar income levels. Thedecontrol ofprices in1990
and1991along withothermarket reforms ledtosubstantially higher consumer prices fortheseproducts
andconcurrently, withimport liberalization, abroader range ofalternative foods became available
toconsumers. Asaresult, percapita consumption ofmeatdeclined 12percentfrom thelate1980s
to1994; butter consumption fell44percentandfluidmilkconsumption wasdown by20percent
(Table V.11). Thefallinthequantity ofmeatdemanded contributed toa24percentcontraction in
realdomestic output from 1989 to1994.
38. Tariffs onimports oflivestock products areamong thehighest intheCzech tariff. Thesimple
average m.f.n. tariffonliveanimals (HS01)is19.5percent.19Tariffs onmeatproducts (ISIC 3111)
average 29.9 percentandthose ondairy products (ISIC 3112) average 27.4 percent. The
Czech Republic established tariff quotas under theWTO Agreement onAgriculture forbovine meat;
swine; poultry meat; butter; andyogurt (Table IV.3). Portions ofsome m.f.n. tariffquotas arereserved
forpreferential suppliers, withmore thanonethirdofthem.f.n. tariff quota being reserved insome
cases (sheep andsheep meat; dried meatandedible meatoffal; andmilkandcream). Inthecaseof
milkandcream, ofthe1,273 tonne m.f.n. tariff quota, 1,000 tonnes arereserved fortheEuropean
Union. Comparatively fewtariff preferences aregranted andGSPtreatment isgiven toasmall share
oftariff linesincomparison toother industries (Table IV.8). Forexample, theaverage preferential
tariffs onmeatproducts range from 26.1percentforSlovenia (anaverage preference margin of3.8
percent)to29.9percent(nopreferences) forEFTA. Theaverage rateunder theGSPis29.8percent
18WTO document G/AG/N/CZE/1, June 1995.
19Theaverage tariff of19.5 percent, reported inTable IV.11, isthesimple average oftheaverage tariff
within eachsix-digit HSclassification; these six-digit classifications havedifferent numbers ofsubordinate eight-
digittariff lines. InthecaseofHS01,thismethodology yields adifferent result from thatobtained bytaking
asimple average ofalleight-digit tariff lines contained inHS01;theaverage using thelatter methodology is
37.2percent. Both methods have merit. Thelatter method gives equal "weight" toeachtariff linewithin a
country 'stariff schedule, aquality thatmost users probably expect from the"simple" average tariff. Theformer
methodgivesanequalweighttoaparticularsix-digitHSclassificationnomatterhowmanysubordinateeight-digit
tariff linesmaybeincluded init,andthusnomatter thecountry studied. Thiswould seem tobemore appropriate
forcross-country comparisons, asHStariff classifications areharmonized onlytosix-digits.WT/TPR/S/12 Trade Policy Review
Page 92
(exceptthatimportsfromleast-developeddevelopingcountriesenterdutyfree).Theaveragepreferential
tariffs ondairy products range from 22.3percent(apreference margin of5.1percent) fortheEU
to27.4percentforEFTA andRomania. Nopreferences areoffered under theGSP(Table AV.1).
Where preferences exist, thevolume ofimports isoften restricted bypreferential tariff quotas
(Table IV.5). Livestock products onwhich there arepreferential tariff quotas include butter, cheese
andmeatofswine.
Table V.11
Developments inthelivestock sector, 1986-94
Average
1986-891990 1991 1992 1993 1994
Production volume ('000tonnes)
Beefandveala272.7b267.7 298.5 218.4 203.0 163.0
Porka519.2b525.0 469.2 503.2 483.0 445.0
Poultry meata149.2b157.2 156.0 133.7 122.3 123.8
Milk (litres, million) 4,900b4,700 4,100 3,724 3,443 3,170
Percapita consumption (kg.)
Meat (excluding fish) 94.6 96.5 88.4 86.6 84.2 81.8
Butter 9.5 8.7 6.1 5.5 5.3 5.3
Milk (litres) 96.9 91.4 87.4 74.6 73.0 65.9
Exports
Liveanimals (Kcmillion) ... ... 2,668 2,005 2,224 1,759
Dairy products (Kcmillion) ... ... 5,071 5,230 6,222 5,313
Meat andoffal(Kcmillion) ... ... 2,284 1,197 1,311 838
aCarcass weight.
bFigure for1989 only.
...Notavailable.
Source: Dataprovided bytheCzech authorities.
(3) Mining, Quarrying andEnergy
39. TheCzech economy isparticularly energy-intensive, withanoverall ratioofenergy useto
GDP some twotothree times higher thanthatinOECD countries.20Pastpolicy encouraged energy
usebysetting prices forusers below economic costandmaythushaveinfluenced thecomposition
ofCzechindustry,whichincludesalargeshareofenergy-intensiveheavyindustriessuchassteelmaking.
LowenergypricesmayalsohaveinfluencedtheproductionandconservationpracticesofCzechindustries
andconsumers, since itappears thatCzech producers usesubstantially more energy thanwestern
20IEA(1994).Czech Republic WT/TPR/S/12
Page 93
European producers toproduce thesame product.21While theCzech Republic produces substantial
amounts ofcoal,ithaslittlemeans toproduce other energy types. Theability ofmany manufacturing
industries tocompete oninternational markets thusdepends ontheiraccess toforeign energy supplies
atcompetitive prices.
40. Themain goals ofCzech energy policy aretoensure reliable energy supplies atacceptable
prices; tominimize harmful environmental effects ofthegeneration, distribution andconsumption
ofenergy; andtoprepare thesector forentry intotheEuropean Union. Theauthorities seektoreach
thefirstgoalbyencouraging competition, butbelieve thatregulation iswarranted inmany parts of
thissector because oftheexistence ofnatural monopolies (particularly forthedistribution ofelectricity,
gasandheat) andthestrategic importance ofthenatural gaspipeline. Itisalsofeltthatreliability
ofenergy supplies willbeenhanced bydiversifying sources andtypes ofenergy; theconclusion of
long-term contracts fornatural gassupply andadiversification ofthesources ofoilimports arelikely
approaches. Environmental objectives aretobesupported byState energy pricing policy, which is
toinduce thegreater useofenvironmentally lessharmful energy sources andleadtoabsolute reductions
inprimary energy use. Environmental goals arealsotobesupported byarestructuring ofthecoal
mining sector, theuseofcleaner technologies forcoal-fired power stations, andanincrease intheshare
ofnuclear plants inpower generation. Short-term objectives ofenergy policy include finalizing the
privatization ofthesector (totheextent thisisintended) andthenecessary industrial restructuring;
reducing thepollution associated withexisting large sources ofcontamination through, forexample,
asystem ofenvironmental finesandcompensations; andcompleting theinstitutional arrangements
withregard totheEnergy Agency, anewregulating authority, andbasic legislation.
41. Overall, onethirdofenergy use,including nearly allcrude oilandnatural gas,isimported
(TableV.12).22Energyimportscompriseaboutoneeighthoftotalmerchandiseimports.Russiaremains
thedominant source ofimports ofcrude oilandnatural gas;thisreliance onasingle source isareason
whythediversification ofsources ofsupply isseenasimportant. Energy exports arenotassubstantial,
although exports ofcoal, refined petroleum products andelectricity account for10to20percentof
domestic production. Transit feesstemming from natural gaspipelines comprise asubstantial share
ofservices exports (section (5)).
21Onesetofestimates noted inareport oftheInternational Energy Agency indicated thattheproduction
ofpigironused35percentmore energy, cement 32percentmore energy, andcardboard 67percentmore
energy intheCzech Republic thaninwestern Europe (IEA, 1994, p.79).
22Data arefrom 1993 onanoilequivalent basis. Some coalisexported, sonetimports ofenergy comprise
onefifthofconsumption.WT/TPR/S/12 Trade Policy Review
Page 94
Table V.12
Energy production, trade anduse,1993a
(Thousands oftonsofoilequivalent)
Coal Crude
oilPetrol.
prods.Gas Nuclear Hydro Elec-
tricityHeat Total
Total primary supply 25,301 6,015 891 5,084 3,086 128 -181 0 40,324
Domestic production 31,523 61 0 126 3,086 128 0 0 34,924
Imports 1,225 6,058 1,419 5,644 0 0 78 0 14,423
Exports -7,177 -66 -597 0 0 0 -259 0 -8,099
Stock changes -270 -38 69 -686 0 0 0 0 -925
Netgeneration offinal
energy products from
primary sourcesb-16,917 -6,015 5,508 -1,533 -3,086 -128 3,784 4,256 -14,132
Total final consumption 7,778 0 6,399 3,546 0 0 3,603 4,266 25,581
Industry 3,597 0 2,167 1,377 0 0 2,048 2,562 11,751
Transport 39 0 2,990 0 0 0 0 0 3,029
Agriculture 222 0 673 111 0 0 0 39 1,065
Residential 876 0 281 1,137 0 0 895 1,001 4,191
Other sectors 1,704 0 256 1,285 0 0 660 654 4,559
Non-energy use 26 0 32 0 0 0 0 0 58
a Estimated datafor1993.
b Includes ownuse,distribution losses, provision ofpublic electricity, andother non-final energy uses.
Source: Based ondataprovided inIEA(1994); anddataprovided bytheCzech authorities.
42. Tariffs onimports arelowthroughout thesector. Theaverage m.f.n. tariff throughout the
mining sector (ISIC 2)is0.3percent, andnorateexceeds 5percent(Table AV.1). Under
Czech regional tradeagreements, tariffpreferences aregiven onimports ofabroad range ofproducts
within thesector, butwithconsistently lowm.f.n. tariffs these preferences areunlikely tohavecaused
much trade diversion.
(i) Coalmining
43. Thecoalmining industry (ISIC 21)intheCzech Republic accounts forabout 3percentof
employment. Coal exports account forsome 2percentoftotalCzech merchandise exports, and
domestically produced coalaccounts fornearly allthecoalusedintheCzech Republic. Forboth
environmental andeconomic reasons, theindustry isexpected tocontract overthenextdecade.
Production oflignite, which accounts forsome 80percentofcoalproduction, andhardcoalhave
already declined byonequarter from 1989 to1993. During thistime, employment fellbysome 40
percent(to110,000 persons) while fourof20lignite mines andnineof24hardcoalmines wereclosed.23
By2005, production levels areexpected todropto55percent(lignite) and65percent(hard coal)
of1993levels. Thiscontraction reflects thedecisions oftheauthorities tosettheindustry onamarket
23Three additional lignite mines andonehardcoalmine aretobeclosed by1996. By2010, onlythree mines
ofeach typeareexpected tobeinoperation.Czech Republic WT/TPR/S/12
Page 95
basis, through privatization andpricederegulation.24From 1989to1993, realcoalprices forhouseholds
(relative toother prices intheeconomy) increased by30percent.25
44. Allm.f.n. tariffs oncoalandcoalproducts (ISIC 21)arezero. However, theCzech Republic
hasnon-automatic import licensing requirements inplaceoncoalinorder toprotect thedomestic brown
coalindustry and,according totheauthorities, forenvironmental reasons. Thismayhaveasubstantial
trade-restricting effect. Imports oflignite arelimited to500,000 tonnes annually, anamount which,
according totheauthorities, isbelow demand. Annual imports ofblack (hard) coalandclosely related
products arelimited to300,000 tonnes (coal forcoke) and1.2million tonnes (coal energetic)
(Table IV.9).
45. State subsidies tocoalmining firms totalled some Kc2.8billion in1993 andKc3.3billion
in1994. Ofthese amounts, three quarters wasallocated totheclosing ofmines (tocover technical
andsocial costs) andtheremainder toactive mines tocover costsofpre-1993 environmental damages.
In1995, Kc3.1billion wasallocated tocover costsat34sites; Kc4.3billion isexpected tobepaid
in1996.
(ii) Natural andother gas
46. Gasaccounts for10to15percentofCzech primary energy consumption andisexpected to
increase inimportance ascoalusedeclines. Domestic gasproduction equals 2percentoftotaluse
andnearly allimports ofnatural gasarefromRussia. Natural gasaccounts forthreequarters ofcurrent
gasconsumption andcompetes withcoal,rather thanoilproducts (asinmany countries), intheindustrial
sector. Natural gasimports in1993and1994accounted for3percentoftotalmerchandise imports.
Largely asaresult oftheconversion ofheating plants from lignite togas,gasdemand isforecast to
double between 1993 and2005. Some 85percentofthisincreased demand isexpected tobemet
byimports, which areforecast torisebynearly three quarters between 1993 and2005.
47. Natural gasprices forhouseholds aresubsidized fromprofits earned fromtransit feesfornatural
gaspassing through theCzech Republic towestern Europe (section 5).26Ceiling prices aresetby
theMinistry ofFinance forgasdelivery tohouseholds, allowing fortherecovery ofhalftotwothirds
ofcosts.27Gasprices toindustry arealsoregulated, andaresettocover theaverage costofsupply
anddistribution; these aresome onethird higher thanprices charged toconsumers. Prices areto
begradually increased, thenderegulated.
48. TheCzech gasindustry consists ofasingle joint-stock company forsupply andtransmission,
which iswholly owned bytheState, andeightregional distribution companies. Aproposal tomaintain
complete State ownership ofthesupply andtransmission company, Transgas, untiltheelimination
ofthesubsidy forhousehold gas,hasbeenputforward bytheMinistry ofIndustry andTrade. Because
ofitsperceived strategic importance, when thecompany isprivatized theStateisexpected tomaintain
24Thedominant energy import-export company wasconverted toajoint-stock company in1989 andwas
subsequently privatized in1992; coalproducers ownasubstantial share ofthecompany.
25Including thevalue-added tax,which wasintroduced during thisperiod. Prices were measured against
theGDP deflator.
26Deliveries tohouseholds account forabout onequarter ofthevolume oftotaldeliveries.
27Losses ondeliveries tohouseholds wereestimated atKc2billion in1992 andKc1.8to2.0billion in1993.WT/TPR/S/12 Trade Policy Review
Page 96
majority ownership; however, foreign investors areexpected tobeabletoholdminority shares. Shares
intheregional distribution companies were distributed during 1994, with79percentgoing tothe
National Property Fund and5percentbeing made available aspartofthesecond wave ofcoupon
privatization,2percenttoemployees,and4percentearmarkedfortherestitutionofpropertyconfiscated
bythecommunist government. Some 34percentofshares willbetransferred tomunicipalities by
theNPFand20percentwillbesoldbytheNPFtoalocalorforeign strategic partner inthefuture;
theNPFwillretain some 20percentofshares indefinitely.
(iii) Crude oilandpetroleum products
49. Virtually allcrude oilusedintheCzech Republic isimported fromRussia, withthese imports
accounting forsome 4percentoftotalmerchandise imports.28Thecrude oilisusedindomestic
refineries, which produce some 90percentofCzech consumption requirements ofrefined oilproducts.
Refining activity contracted byabout 30percentfrom1989to1993, partly reflecting reduced demand
fromlargeindustrial userssuchastheironandsteelandchemicals industries. Refineries wereconverted
tojoint-stock companies wholly owned bytheState inearly 1994 and,although partially privatized
through thesecond wave ofcoupon privatization, these remain majority-owned bytheState.29
Privatization atthedistribution levelremains incomplete. TheState'spetroleum products distribution
company, Benzina, wassplitintothree joint-stock companies inearly 1994butthese companies were
notpartofthesecond wave ofcoupon privatization.
50. Allcrude oilexploration, production, anddelivery operations arethemonopoly ofthelargely
State-owned joint-stock company Moravske Naftove Doly (Morovian OilMines). Imports ofcrude
oil(HS2709) enterdutyfree,while imports ofrefined petroleum products faceanaverage m.f.n. tariff
of4.3percent.30Licences arerequired fortheimportation ofcrude oilandpetroleum products but
these arenormally granted automatically. Inpractice oneprivate company, Chemapol, accounts for
95percentofcrude oilimports andisaleading importer ofrefined petroleum products.
51. Prices ofwholesale petroleum products areregulated bytheMinistry ofFinance, which sets
ceiling prices based onformulas thatconsider thecostofcrude oilandother inputs, operating costs,
depreciation, andaprofit margin. Itisintended thatthese price ceilings willbeeliminated oncethe
refineries areprivatized; however, nodateforthishasbeenannounced. Prices forretail petroleum
products arenotregulated.
(4) Manufacturing (Table AV.1)
52. Manufacturing activity hasdropped sharply since thestartoftheeconomic transition, butthe
sector continues toplayacentral rôleintheCzech economy, withtrade policy having animportant
bearing. Theoutput ofmanufacturing industries in1993wasabout halfthelevelof1989(Table V.13).
28Anoilpipeline thatenters theCzech Republic from Germany opened inDecember 1995. Thisisintended
tosubstantially reduce theCzech Republic 'sdependence onRussian oilsupplied through theDruzba pipeline
viaUkraine andSlovakia. Thepipeline isexpected tocome fully onlineinApril 1996 andtohave anannual
capacity of10million tons.
29Ultimately, Czech refineries areexpected tobemajority-owned byCzech-controlled private firms, with
theState holding a34percent"strategic stake" andpossible 10to15percentownership byforeign firms.
30Refined petroleum products asdefined hereconsist ofISIC3530, which according totheWTO Secretariat
concordance includes allorportions ofHS2710-2713 and3819.Czech Republic WT/TPR/S/12
Page 97
Datafor1993indicate thatmanufacturing accounted forsome 29percentofGDP, down sharply from
anestimated 51percentshare in1991.31Thissevere contraction began withthecollapse oftrading
relationships withformer Council forMutual Economic Assistance (CMEA) partners; itwasintensified
bythegeneral lossofpurchasing power inCMEA countries astheybegan economic transition and
bytheinitial stages oftheconversion ofarmament industries. Industrial contraction wasparticularly
greatinthose Czech industries thatexported mainly toother CMEA countries, including some textile,
clothing andleather industries, machinery andequipment, transport equipment, andindustries linked
toarmament production.
Table V.13
Indices ofindustrial production, 1990-94
(Percentage change from previous year)
1990 1991 1992 1993 1994
Total industry -3.4 -24.4 -13.7 -7.4 ...
Mining andquarrying -8.7 -13.6 -12.8 -7.1 0.6
Electricity, gasandwater supply -3.2 -2.8 -3.0 -4.8 -2.8
Manufacturing -3.0 -26.4 -14.6 -7.7 0.2
Food industry ... -17.0 -14.6 -7.7 0.2
Textiles andapparel ... -35.8 -13.7 -14.2 -1.7
Leather andleather products ... -34.2 -14.0 -2.0 -1.2
Wood products ... -24.7 -21.4 -14.0 3.0
Paper andprinting ... -24.1 -3.2 -7.1 18.3
Coking, oilrefining, nuclear fuel ... ... 0.9 -8.1 8.0
Chemicals andman-made fibres ... -29.1 -9.3 -6.2 3.8
Rubber andplastic products ... -28.6 -4.9 -2.0 1.7
Ceramics, aggregates andearth ... -29.4 -6.0 -11.4 5.7
Metals andmetal products ... -30.5 -18.6 -6.5 3.3
Machines andinstruments ... -31.0 -24.9 -16.6 -4.8
Electrical andoptical devices ... -38.8 -29.0 -8.1 12.3
Transport machinery ... -28.5 -26.7 -3.4 -14.1
Production n.e.s. ... -24.0 -12.4 -10.4 -5.8
... Notavailable (comparable datanotavailable for1990 duetochange inclassification system).
Note: Dataareforfirms withover25employees.
Source: Dataprovided bytheCzech authorities.
53. Thecontraction inmanufacturing mayalsohavebeeninfluenced bytheearlyeffects ofeconomic
transition intheCzech Republic itself. Theloosening ofimport restrictions, forexample, forced Czech
manufacturers, many ofthem newly privatized, tofacegreater import competition justastheywere
responding tothelossofexport markets. Trade liberalization, foreign exchange liberalization, price
decontrols, andother reforms created opportunity aswell asadjustment pressures, however.
Manufacturing exports wereexpanding by1993andsubsequently contributed totheCzech Republic 's
renewed economic growth beginning in1994 (Table V.14 andTable V.15).
31Data areonafactor-cost basis atcurrent prices. Thedatafor1991 and1993 arenotstrictly comparable
andsome ofthedifference mayreflect achange inmethodology.WT/TPR/S/12 Trade Policy Review
Page 98
Table V.14
Indices ofindustrial exports, 1990-94
(Percentage change from previous year)
1990 1991 1992 1993 1994
Total industry -7.0 -7.6 -14.4 12.0 5.6
Mining andquarrying ... ... 1.7 59.1 6.5
Electricity, gasandwater supply ... ... -2.4 14.9 -28.6
Manufacturing ... ... -15.2 10.0 5.9
Food industry -1.9 17.6 -17.2 25.5 -11.3
Textiles andapparel -8.3 -7.1 -6.6 -1.0 5.5
Leather andleather products 1.8 -27.2 -15.9 14.7 7.3
Wood products -8.8 -0.5 -6.5 -2.3 27.0
Paper andprinting 1.6 19.5 7.9 -3.8 32.4
Coking, oilrefining, nuclear fuel ... ... 13.8 7.2 36.7
Chemicals andman-made fibres ... -14.2 6.5 11.7 16.8
Rubber andplastic products ... ... 24.6 7.2 27.0
Ceramics, aggregates andearth -7.3 2.1 19.1 -7.6 14.1
Metals andmetal products -1.6 9.0 1.7 20.3 14.7
Machines andinstruments ... ... -33.6 22.4 -2.5
Electrical andoptical devices -10.0 -36.0 -34.0 19.8 27.6
Transport machinery ... ... -42.7 3.6 -22.9
Production n.e.s. ... ... 2.1 -4.4 2.7
... Notavailable.
Note: Trade withSlovakia isexcluded. Dataareforfirms withover25employees, except 1991 data, which arebased onfirms with
over100employees.
Source: Dataprovided bytheCzech authorities.Czech Republic WT/TPR/S/12
Page 99
Table V.15
Shares ofmanufacturing value added, exports andimports, byindustry, 1994
(PercentandKcbillion)
Share of
manufacturing
value added, 1994
(percent)Share of
manufacturing
exports, 1994
(percent)Share of
manufacturing
imports, 1994
(percent)
Food products, beverages andtobacco 14.2 5.5 7.0
Textiles andapparel 7.4 7.7 4.1
Leather, leather products andfootwear 1.8 2.2 1.1
Wood andwood products 1.8 5.7 1.5
Pulp, paper &paper products; publishing &printing 4.8 2.7 3.4
Coke, refined petroleum products andnuclear fuel 3.8 2.3 2.1
Chemicals, chemical products andman-made fibres 6.6 10.4 16.3
Rubber andplastic products 3.0 2.2 2.0
Other non-metallic mineral products (inc.glass) 7.2 8.0 1.9
Basic metals andfabricated metal products 15.9 17.9 8.5
Machinery andequipment, n.e.s. 13.0 10.7 25.1
Electrical andoptical equipmenta7.0 6.3 16.9
Transport equipment 8.7 12.4 7.9
Manufacturing, n.e.s. 4.8 6.0 2.2
Total manufacturing Kc234.8 billion Kc321.1 billion Kc307.9 billion
a Trade dataforthiscategory include professional andscientific equipment, which accounts forthree quarters oftheimports.
Note: Trade withSlovakia isexcluded. Based onoutput ofindustrial enterprises with25ormore employees.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
54. TheCzechRepublic'simportpoliciesformanufacturedproductsare,withtheimportantexception
offoodprocessing, relatively liberal. Theaverage m.f.n. tariff onallmanufactured products is8.2
percent, butlessthan6percentwhen food, beverage andtobacco products areexcluded. Tariffs
onmanufactures are,however, highly escalatory, averaging 1.5percentonproducts atthelowest
stageofprocessing, 6.0percentonsemi-processed manufactures and10.0percentonfullyprocessed
manufactured exports.
55. Margins oftariffpreference forimported manufactured products resulting fromCzech regional
trade agreements andGSPscheme aregreater thanthose inagriculture ormining. Theaverage
preferential tariff onimported manufactures from theEU,forexample, is5.5percent, anaverage
preference margin of2.7percentage points (Table AV.1). Nevertheless, because m.f.n. tariffs are
moderate andbecause preferential agreements areinplace withtheCzech Republic 'smajor trade
partners, thesepreferences arenotlikely tocause substantial overall changes inthesources fromwhich
theCzech Republic imports; nor,forthesame reasons, isthislikely tochange aslarger preference
margins areimplemented overthenextseveral years (Chapter IV(2)(iv)).WT/TPR/S/12 Trade Policy Review
Page 100
56. In1994, theEUaccounted for39percentoftotalmanufacturing imports (excluding those
from Slovakia), EFTA countries for9percent, andother preferential partners (Hungary, Poland,
Romania andSlovenia) forlessthan1percenteach(Table AV.1). Imports fromcountries thatqualify
forGSPtreatment comprised 1.2percentofmanufacturing imports.32
(i) Food products, beverages andtobacco (ISIC 31)
57. TheCzech foodprocessing, beverages andtobacco industries together accounted forsome
14percentofmanufacturing value added in1994. Realoutput intheindustry fellby35percent
during theperiod 1990to1993. TheCzech Republic isanetimporter oftheproducts ofthissector,
with1994imports equal toKc21.6billion andexports equal ofKc17.6billion; in1994theseproducts
accounted for7.0percentofmanufacturing imports and5.5percentofmanufacturing exports
(Table V.15).
58. Thesector isthemostheavily protected intheeconomy (Table AV.1). M.f.n. import tariffs
average 19.0percent,more thantriple theaverage of5.8percentfortherestoftheeconomy. Tariffs
arehighin:meatprocessing (ISIC 3111), where theyaverage 29.9percentandrange upto232.7
percent; dairy products (ISIC 3112), witha27.4percentaverage; sugar refining (ISIC 3118), a
50.3percentaverage;distillingandspirits(ISIC3131),a45.7percentaverage;andwine(ISIC3132),
a70.1percentaverage. Tariffs inthesector arealsohighly escalatory, averaging 1.1percentfor
goods inthelowest stage ofprocessing, 19.2percentforsemi-processed goods, and22.6percent
forfullyprocessed goods (Table V.16). Imports from theEUandEFTA tendtocomprise alarger
share oftheimports ofhighly processed products ascompared tounprocessed orsemi-processed goods.
Across allproducts ofthesector, 20percentofhighly processed product imports come fromtheEU,
while only6percentofunprocessed product imports arefromEUcountries. Incontrast, GSPimports
tendtoaccount foralarger share ofunprocessed product imports thanimports ofhighly processed
goods, although thispattern isnotconsistent across allsub-sectors oftheindustry.
32Nearly halfofmanufactured GSPimports consist oftextiles andclothing. Theshare ofCzech imports
from countries thatreceive GSPtreatment in1994 was10.6percentfortextiles andclothing and0.7percent
forother manufacturing imports.Czech Republic WT/TPR/S/12
Page 101
Table V.16
Tariff escalation andtrade infoodmanufacturing
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n.
tariff (%)Share of1994 importsa(percent)
Importsa
(Kcbillion)Exportsa
(Kcbillion)EU EFTA GSP
Food, beverages &tobacco
(ISIC 31)Low 1.1 5.7 2.0 3.8 3.2 1.9
Medium 19.2 10.7 1.0 1.1 0.6 0.7
High 22.6 19.8 3.1 2.5 17.8 15.0
Food products (ISIC 311) Low 0.1 2.8 2.8 1.9 2.4 1.6
Medium 13.7 9.8 1.0 1.1 0.6 0.7
High 17.4 17.0 2.1 3.6 11.3 9.9
Meat products (ISIC 3111) Low 0.0 2.6 0.2 0.5 0.7 0.7
High 31.5 18.9 2.5 4.4 1.4 1.1
Dairy products (ISIC 3112) Medium 23.3 n.a. n.a. n.a. 0.0 0.0
High 27.5 37.7 0.0 0.1 0.9 4.6
Fruit &vegetables canning
(ISIC 3113)Low 0.8 2.4 0.0 16.6 0.2 0.8
Medium 4.8 11.7 0.2 1.4 0.4 0.1
High 8.4 19.6 1.7 7.3 2.7 0.9
Fishproducts (ISIC 3114) Low 0.0 3.7 6.2 0.1 1.0 0.0
Medium 0.0 n.a. n.a. n.a. 0.0 0.0
High 0.0 8.8 2.3 5.1 0.7 0.0
Vegetable &animal fats&
oils(ISIC 3115)Low 0.0 n.a. n.a. n.a. 0.0 0.0
Medium 0.0 n.a. n.a. n.a. 0.0 0.0
High 8.1 3.7 1.7 0.0 3.7 1.3
Grain millproducts
(ISIC 3116)Low 0.0 1.2 0.0 0.0 .3 0.0
Medium 19.2 n.a. n.a. n.a. 0.0 0.0
High 4.8 16.6 0.0 0.7 0.2 0.0
Bakery products (ISIC 3117) High 14.6 29.3 0.4 6.8 0.5 0.6
Sugar products (ISIC 3118) Medium 67.0 n.a. n.a. n.a. 0.0 0.0
High 0.0 n.a. n.a. n.a. 0.0 0.0
Cocoa &chocolate
(ISIC 3119)Medium 4.6 4.9 0..0 0.7 0.1 0.0
High 15.3 32.6 6.6 5.8 1.2 1.2
Other foodproducts &
animal feeds (ISIC 312)Low 7.4 14.1 0.0 9.3 0.8 0.3
Medium 60.0 n.a. n.a. n.a. 0.0 0.0
High 12.7 34.3 1.1 1.3 3.5 0.5
Beverages (ISIC 313) High 56.6 26.0 18.0 0.2 1.5 3.8
Manufactured tobacco
(ISIC 314)High 38.8 0.6 0.0 0.0 1.5 0.8
n.a. Notapplicable.
a Trade withSlovakia isexcluded from thetotal. Bilateral trade shares, including thatforGSP, refer onlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.WT/TPR/S/12 Trade Policy Review
Page 102
59. Tariff preferences donotappear tooffer much relief from thishighprotection. While
preferential tariff rates economywide average about halfofm.f.n. rates, inmost foodprocessing,
beverages andtobacco industries average preference margins (onasimple average basis) aresmall.
Forexample, theaverage preference margin forimports ofproducts inthese industries fromtheEU
is1.9percent(Table AV.1). Preferences, totheextent theyexist, tendtobeonhighly processed
products. Forexample, forfoodproducts, beverages andtobacco inthelowest stage ofprocessing
(where theaverage m.f.n. tariffis1.1percent)average preferential tariffs are0.9percentforHungary,
1.0percentfortheEUandunder theGSPscheme, and1.1percentforothers.33Forhighly processed
goods (where theaverage m.f.n. tariff is22.6percent) average preferential tariffs range from 17.1
percentforSlovenia to20.1percentfortheEUand21.5percentforEFTA, while theaverage rate
under theGSPscheme is22.3percent.
60. Current preferences aresubstantial, however, forproducts ofthedistilling andspirits industry
(ISIC 3131). Them.f.n. tariffs average 45.7percent,butpreferential tariffs average 19percentfor
imports from theEUandEFTA, and33percentforHungary andPoland. TheEUandEFTA
respectively accounted for29and32percentofCzech imports ofthese products in1994.
61. Therelatively lowprotection ofother sectors, which implies thatcostsofintermediate inputs
arenotgreatly distorted, combined withthehighnominal protection ofthesector, suggests thateffective
protection isprobably veryhigh. Theimpact ofsustained higheffective protection istopulllarger
amounts ofproductive resources intothesector thanisefficient.
(ii) Textiles andclothing
62. Textiles andclothing (ISIC 321and322)account forsome 7.4percentofmanufacturing value
added, 7.7percentofmanufacturing exports and4.1percentofmanufacturing imports (Table V.15).
Until 1990 thesector 'soutput washeavily directed toward CMEA partners, withsome 42percent
ofexports -equal to5percentoftotalproduction -soldtoCMEA partners. Thus, withthedrop
ineconomic activity inCMEA countries, thesector contracted sharply beginning in1991, andin1993
thetotaloutput ofthesector waslessthanhalfits1990level(Table V.13); employment intheindustry
dropped from 175,000 toabout 133,000 during thisperiod. Production levelled offin1994, with
thedecline inoutput limited toa2percentdrop, while exports ofthesector increased 5percent.
Exports towestern markets havebegun toexpand afteraperiod ofdecline thattheauthorities believe
wascaused bythecollapse oftheCMEA market, theliberalization offoreign tradeandweak domestic
demand.
63. TheCzech Republic 'sm.f.n. import tariffs inthetextiles andclothing sector average 7.6
percent. Tariffs ontextile imports, which average 7.3percentoverall, risefrom0.2percentinthe
lowest levelofprocessing to6.4percentonsemi-processed textiles and9.6percentonfullyprocessed
textiles (Table V.17). Theaverage rateforclothing is10.5percent; asallclothing isconsidered
fullyprocessed, thisstrengthens thepattern oftariff escalation forthesector overall.
33Asimilar pattern holds forsemi-processed products. Theaverage m.f.n. tariff is19.2percentandaverage
preferential rates are19.0percentforHungary, 19.1percent under theGSP, and19.2percentforothers.Czech Republic WT/TPR/S/12
Page 103
Table V.17
Tariff escalation andtrade intextiles andclothing
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n. tariff
(percent)Importsa
(Kcbill.)Share ofimportsa(percent) Exportsa
(Kcbill.) EU EFTA GSP
Textiles (ISIC 321) Low 0.2 1.3 19.9 0.5 0.5 0.5
Medium 6.4 3.5 35.0 4.0 9.1 11.0
High 9.6 4.6 32.5 3.4 8.2 6.1
Clothing (ISIC 322) High 10.5 3.1 12.4 1.3 12.7 7.1
a Trade withSlovakia isexcluded from thedata. Bilateral trade shares, including thatforGSP, referonlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
64. Substantial tariffpreferences areoffered bytheCzech Republic tosome ofitstrading partners
fortextiles andclothing under preferential arrangements, mitigating theimport protection described
above. Textile imports fromtheEUandEFTA faceaverage tariffs of3.9percent,compared tothe
average m.f.n. tarifffortextiles of7.3percent; preference margins forimports fromHungary, Poland
andRomania aresomewhat smaller butimports from Slovenia faceanaverage tariff of0.5percent
(Table AV.1). Some onethirdoftextiles imports werefromtheEUin1994, while 3percentwere
from EFTA countries.
65. Inclothing, withanaverage m.f.n. tariff of10.5percent,imports fromtheEUandEFTA
faceaverage tariffs of7.3percent; theaverages aresomewhat higher forimports from Hungary
(9.2percent), andPoland andRomania (7.8percent). Thetariff rateonallclothing imports from
Slovenia iszero. Preferential ratesarescheduled todecline further during thenextfewyears.
66. TheCzech Republic offers preferences under itsGSPscheme onmany textiles products but
onfewclothing products (Table IV.8). Imports under theGSPaccounted for7percentoftextiles
imports and13percentofclothing imports in1994.
67. Exports ofsome Czech textiles andclothing products arerestricted bybilateral agreements
negotiated under theauspices oftheMultifibre Arrangement (MFA) andunder theEurope Agreement
withtheEuropean Union (EU). TheMFA quotas areapplied intrade withCanada, Norway andthe
United States (Table V.18).34These andthequotas forexports totheEUareadministered bythe
Ministry ofEconomy, andexport licences arerequired fortheexportation ofthese products tothe
restricted markets. Thecriteria fortheinternal allocation oftextile export quotas arenotpublished;
however, according totheauthorities theallocations arebased ontraditional trade flows andsome
30percentofthequotas arereserved fornewexporters onafirst-come-first-served basis.
34Asaresult oftheWTO Agreement onTextiles andClothing, therates ofgrowth ineffect attheendof
1994 serve asthebasegrowth rateforthese quotas. Intheinitial three years ofthetransition, thebasegrowth
rates arebeing increased by16percent, sothataquota thatwould have grown atanannual rateof1percent
will, during 1995, 1996 and1997, increase atanannual rateof1.16percent. Inmany cases, theAgreement
alsoleadstoconsiderablymoreflexibilityforexportingcountriesintermsofadministeringthequotas;Article2.16
oftheAgreement removes limitations ontheexporting country 'sflexibility tocombine unused quotas fromearlier
years (carryover), quotas from different product groups (swing), andfuture quotas (carry forward).WT/TPR/S/12 Trade Policy Review
Page 104
Table V.18
TheCzech Republic 'stextiles andclothing export restrictions under theMFA
Importer Product description1994
restraint
level (pcs.)GrowthaSwingbCOandCFcCombined flexibilityd
1994 1995
Canada Men'swoven suitsand
ensembles33,000 (4.0)
4.647.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Combed wool &wool
blend fabric150,000 kg. (3.5)
4.067.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Cotton terry towelling
toilet andkitchen linen284,437 kg. (6.0)
6.967.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Norway Jackets, blazers, etc.of
wool, cotton orman-
made fibres46,350 (3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
Trousers, slacks, jeans,
etc.115,360(3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
Bedlinen 51,500 kg. (3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
United
StatesWool woven fabric 1,508,750 m2(1.0)
1.167.0 CO+CF=11.0
CO=11.0
CF=7.0n.a.
(18.0)n.a.
(25.0)
Men'sandboys'
suit-type coats ofwool5,925 dozen (1.0)
1.167.0 CO+CF=11.0
CO=11.0
CF=7.0n.a.
(18.0)n.a.
(25.0)
Women 'sandgirls'wool
coats3,899 dozen (1.0)
1.167.0 CO+CF=11.0
CO=11.0
CF=7.0n.a.
(18.0)n.a.
(25.0)
Men'sandboys'wool
suits72,234 (1.0)
1.167.0 CO+CF=11.0
CO=11.0
CF=7.0n.a.
(18.0)n.a.
(25.0)
Woven man-made fibre
fabric of15to36per1,552,500 m2(6.0)
6.967.0 CO+CF=11.0
CO=11.0n.a.
(18.0)n.a.
(25.0)
n.a. Notapplicable.
a The1994 growth rateisinparentheses; thesecond number isthenewgrowth ratefor1995, including the16percentgrowth
rateincrease stipulated intheWTO Agreement onTextiles andClothing.
b "Swing" refers totheamount ofaquota thatmaybeborrowed from another product category.
c Carry-over andcarry (or"borrow") forward refertotheamount ofaquota thatmaybeapplied fromunused portions oftheprevious
year'slimits orfrom future allocations. Thefirstvalue isthelimitonthesumofcarry-over andcarry-forward; thesecond is
thecarry-forward limit.
d "Combined flexibility" wasalimitplaced onthesumofswing, carry over, andcarry forward. TheWTO Agreement onTextiles
andClothing (Article 2:16) states that"Noquantitative limits shallbeplaced ormaintained onthecombined useofswing, carry-over
andcarry-forward". With thecombined flexibility limits eliminated, from1995 thelimitissimply equal tothesumofthethree
components (noted inparentheses).
Source: WTO Secretariat, based onnotifications under Article 2.1oftheWTO Agreement onTextiles andClothing (WTO documents
G/TMB/N/61, G/TMB/N/62 andAdd.1, andG/TMB/N/63).Czech Republic WT/TPR/S/12
Page 105
68. Czech exports oftextiles andclothing totheEUarecovered byProtocol 1oftheInterim
Agreement, which entered intoforce inMarch 1992.35Tariffs onEUimports oftextiles andclothing
products arebeing reduced andaretobeeliminated byJanuary 1997. Tariffs oncertain categories
ofgoods re-imported intotheEUfollowing processing ormanufacturing (outward-processing trade,
orOPT) intheCzech Republic wereeliminated in1992. Quantitative restrictions onCzech exports
totheEUhaveexisted atleastsince 1987and,aspartoftheInterim Agreement, thetwoParties have
undertaken tonegotiate anewprotocol onquantitative arrangements; thisAdditional Protocol isto
leadtotheelimination ofquantitative barriers bytheendof1997. Also, asaresult oftheaccession
ofAustria, Finland andSweden totheEUatthebeginning of1995, theCzech Republic negotiated
anaverage 33percentincrease inquotas fordirect exports andanaverage 16percentincrease in
OPTquotas. According todataprovided bytheauthorities, quota-fill ratesexceeded 80percenton
fouroftwenty-four restricted categories during either 1993, 1994or1995; these categories andtheir
category numbers were cotton fabrics (2),adjusted cotton fabrics (2A), hairfibretissues (32), and
ropes andcords from synthetic fibres (90).
(iii) Chemicals
69. TheCzech Republic 'schemicals industry (ISIC 351and352)accounted for6.2percentof
manufacturing value added in1993and6.6percentin1994(Table V.15). Chemicals tradeaccounted
forsome 10percentofmanufacturing exports and16percentofmanufacturing imports in1994;
exports, afterhaving fallen in1991, increased ineachoftheyears 1992-94. Output oftheindustry
hadcontracted by40percentfrom 1990 to1993 asaresult, according totheauthorities, ofalarge
decrease indomestic salesasimports ofchemicals rosesharply following tradeliberalization. In1994
output expanded by4percentandexports roseby17percent.
70. Tariffs onchemicals imports arefairly low(Table V.19). Them.f.n. tariffs onindustrial
chemicals (ISIC 351)average 4.7percentandaverage tariffs onproducts ofother sectors range from
4.3percent(other chemicals andpharmaceuticals) to8.7percent(manufactured plastics). Tariffs
onchemical products areescalatory, although thecorrelation between stage ofprocessing andtariff
ratesisweaker thanthatinfoodmanufacturing ortextiles andclothing.36
35Anearlier agreement hadbeenineffect prior tothatdate. TheInterim Agreement alsocovers EUexports
totheCzech Republic ofthese products.
36Therates onindustrial chemicals aretypical ofthetariff escalation inthesector: theaverage tariff on
industrialchemicalsatthefirststageofprocessingis4.4percent,risingto4.6percentforsemi-processedproducts
and6.2percentforfully processed products.WT/TPR/S/12 Trade Policy Review
Page 106
Table V.19
Tariff escalation andtrade inchemicals
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n.
tariff (%)Importsa
(Kcbn.)Share ofimportsa(percent)Exportsa
(Kcbn.) EU EFTA GSP
Industrial chemicals,
resins andplastics
(ISIC 351)Low 4.4 2.0 34.2 2.3 7.6 2.7
Medium 4.6 22.4 47.5 9.2 0.1 23.0
High 6.2 2.4 28.5 3.2 0.3 0.5
Other chemicals
(paints, medicines)
(ISIC 352)Low 0.0 0.0 0.0
Medium 4.2 2.4 52.3 10.0 0.0 0.5
High 4.5 20.9 51.6 12.0 0.8 6.8
a Trade withSlovakia isexcluded from thedata. Bilateral trade shares, including thatforGSP, refer onlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
71. Substantial tariff preferences areinplace fortheCzech Republic 'spartners inpreferential
arrangements. These preferences lead,inmostcases, toatleastahalving ofm.f.n. tariffs forimports
ofchemical products fromtheEU,EFTA, Hungary andPoland, Romania andSlovenia. Because of
therelatively rapid implementation ofthefree-trade agreement withSlovenia, imports fromSlovenia
facethelowest average tariff, of0.2percent. Thesmallest preference margins tendtobethose for
imports from Romania. In1994, halfofallimports oftheproducts ofthissector werefromtheEU
and10percentcame from EFTA countries.
72. Some 40percentofStatechemicals enterprises wereincluded inthefirstwaveofprivatization,
withanother 35percentinthesecond wave.
(iv) Basic metals andfabricated metal products
73. Thebasic metals andfabricated metal products industry (ISIC 37andISIC381)contracted
sharply beginning in1990. Thiswaslargely aresult oftworelated external factors. First, there was
anearly complete lossofdemand fromformer CMEA trading partners forCzech ironandsteelproducts.
Exports toCMEA countries fellbytwothirds from1991 to1992. Second, thedomestic demand for
ironandsteelcollapsed, asCzech iron-using andsteel-using industries hadalsobeenoriented toward
CMEA markets; domestic useofrolled steel, forexample, fellfrom 6.8million tonnes in1989 to
3.3million tonnes in1994. Although thedataindicate thatCzech direct exports ofsteelproducts
themselves actually roseintheearly1990s, itappears thatdirect andindirect exports ofsteel(including
thesteelembedded inmore heavily processed products) fellsharply inthose years. Thecontraction
inoutput, including drops of38percentinrawsteeland27percentinrawironfrom1989 to1993,
wasalsoinfluenced byinternal factors (Table V.20). These include some shedding ofcapacity aspart
ofamodernization andtheinitial effects ofprivatization within theindustry.Czech Republic WT/TPR/S/12
Page 107
Table V.20
Production andexports ofprincipal ironandsteelproducts, 1989-94
('000tonnes andpercent)
Units 1989 1990 1991 1992 1993 1994
Raw ironproduction '000tonnes 6,396 6,106 5,317 5,082 4,652 5,268
Crude steelproduction '000tonnes 10,700 9,511 7,902 7,082 6,622 6,949
Rolled material
Production '000tonnes 8,166 7,753 6,204 5,759 5,505 5,825
Imports " 450 340 270 256 804 917
Exports " 1,793 1,840 2,220 2,462 3,122 3,389
Domestic use " 6,823 3,253 4,254 3,560 3,187 3,353
Average import price Kc/tonne ... ... ... 11,873a11,035 10,052
Average export price " ... ... ... 6,944 8,979 7,940
Steel pipes andtubes
Production '000tonnes 1,284 1,278 966 819 605 634
Imports " 50 37 21 9 39 73
Exports " 435 425 372 345 293 367
Domestic use " 899 890 615 483 351 340
Average import price Kc/tonne ... ... ... 74,836a27,157 28,575
Average export price " ... ... ... 13,225 14,251 12,990
Employment '000 122.4 115.0 105.2 91.4 85.0 76.7
Value ofproduction Kcbillion 61.3 59.9 78.5 67.5 67.2 68.6
... Notavailable.
a DatafortheCSFR.
Source: Dataprovided bytheCzech authorities.
74. In1994 theindustry accounted for15.9percentofvalue added intheCzech manufacturing
sector, 18percentofmanufacturing exports and8percentofmanufacturing imports. Exports of
metals andmetal products in1991and1992replaced onlyasmall share ofthesaleslostonthedomestic
market. According totheauthorities, theinability ofthesector toreorient alarger share ofitsproducts
toward other markets partially reflected European Union import restrictions. Exports increased more
rapidly in1993 and1994, stimulating areversal inthedecline ofoutput.
75. Theearlyprivatization ofStateenterprises mayhavecontributed totheironandsteelindustry 's
recent success. Most former State enterprises intheindustry wereincluded inthefirstwave ofthe
Czech andSlovak Federal Republic (CSFR) coupon privatization scheme beginning in1992. Bythe
endof1994, ofthe53enterprises selected forprivatization, theprocess wascomplete for26,and
25more hadbeenstarted.
76. AstheCzech Republic doesnothavemany ofthekeyinputs formaking iron,steelandother
basicmetals (with theexception ofcoke), itiscontinuing itsrelationship withformer CMEA countries
forthepurchase ofkeyinputs. Most oftheimported rawmaterials usedinmetallurgical production
areimported fromRussia andUkraine, withsmaller amounts fromBrazil andfromAfrican countries.WT/TPR/S/12 Trade Policy Review
Page 108
77. TheCzech market forimports ofbasicmetals andfabricated metal products isrelatively open.37
M.f.n. tariffs average 5.3percentforironandsteel(ISIC 371), 2.1percentfornon-ferrous basic
metals (ISIC 372)and6.0percentforfabricated metal products (ISIC 381)(Table AV.1). Thehighest
m.f.n. tariffprotection, withanaverage of8.9percent,isonmetal furniture andfixtures (ISIC 3812).
Tariffs aremildly escalatory inthesector, rising from0.3percentforbasic metals atalowstage of
processing to6.0percentforhighly processed fabricated metal products; most Czech trade takes
place insemi-processed basic metals andinfinished fabricated metal products (Table V.21).
Table V.21
Tariff escalation andtrade inbasic metals andfabricated metal products
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n.
tariff (%)Importsa
(Kcbn.)Share ofimportsa(percent)Exportsa
(Kcbn.) EU EFTA GSP
Basic metals
(ISIC 37)Low 0.3 0.2 0.5 0.0 0.0 3.6
Medium 4.5 14.5 26.1 7.7 0.1 36.8
High 3.2 0.0 n.a. n.a. n.a. 0.0
Fabricated metal
products (ISIC 381)Medium 3.5 0.0 n.a. n.a. n.a. 0.0
High 6.0 11.4 53.6 9.6 0.6 16.9
a Trade withSlovakia isexcluded from thedata. Bilateral trade shares, including thatforGSP, refer onlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
78. Reductions from m.f.n. tariffs aregranted topartners withwhich theCzech Republic has
preferential arrangements, withpreference margins usually equal tosome 2to3percentage points.
Importsfromthesepartnerscomprisedlargesharesoftotalimports(otherthanfromSlovakia)ofproducts
inthissector, including 38percentfromtheEUand8percentfromEFTA countries. Nopreferences
undertheGSPareofferedforironandsteelproductsotherthanforleast-developeddevelopingcountries,
which account forlessthan1percentofimports (Table IV.8).38
79. Imports ofsteelscrap, castironscrap, andcopper, aluminum andleadscrap aresubject to
automatic import licensing requirements. Licences areissued bytheMinistry ofIndustry andTrade
butrequire theconsent oftheMinistry oftheEnvironment, which stipulates conditions forimporting.
Exports ofmetal scrap aresubject tovolume quotas; in1995, these were: leadscrap (4,000 tonnes);
copper scrap (24,000 tonnes); aluminum scrap (16,000 tonnes); andironandcastironscrap
(700,000 tonnes). According totheauthorities, these aretransitional measures. TheCzech Republic
doesnotrestrict trade inmetal scrap withtheSlovak Republic.
37Imports accounted for27percentofdomestic consumption ofrolled materials and21percentofsteel
pipes in1994.
38Goods from least-developed developing countries receive duty-free treatment (Chapter IV(2)(ii)(k)).Czech Republic WT/TPR/S/12
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80. TheEUapplies tariff quotas onimports ofseveral steelproducts fromtheCzech Republic.39
These tariff quotas wereintroduced in1993asasubstitute forsafeguard measures taken in1992, and
werescheduled tobeeliminated attheendof1995.40Therestricted products andthequota volumes
for1995were: cold-rolled sheets (29,452 tonnes); wirerod(269,820 tonnes); hotstrip(6,600 tonnes);
seamlesstubes(77,774tonnes);andweldedtubes(to406.4mm.)(94,601tonnes).Exportsoffour-high
rolled sheets totheEUin1995 weresubject totariffs inaccordance withtheInterim Agreement and
toa25percentadditionaltariff,andwererestrictedto16,000tonnes.AnEUanti-dumpinginvestigation
concerning Czech exports ofpigiron(hematite), initiated inMay1994, hadnotbeencompleted by
end-June 1995.41Aseparate anti-dumping investigation wasopened bytheEUinJuly1995onimports
ofironandnon-alloy steelfrom theCzech Republic.42
81. While notrestricted bytariff quotas, Czech exports ofhot-rolled coilsandcutlengths tothe
EUaresubject totheduties applicable under theterms oftheAssociation Agreement andto
supplementary duties of25to30percent.
82. Asaresult ofananti-dumping action byArgentina, Czech exports ofcold-rolled sheet tothat
country aresubject toapreventive minimum export price ofUS$396.90 perton.43
(v) Other manufacturing industries
83. Other manufacturing industries ofparticular interest because oftheirtradepolicies, theirsize,
ortheirshares inCzech trade, arewood, wood products andfurniture (ISIC 33); paper andpaper
products(ISIC34);non-electricalmachinery(ISIC382);electricalmachinery(ISIC383);andtransport
equipment (ISIC 384)(Table V.13; Table V.14; Table V.15; Table AV.1).
84. Thewood,woodproductsandfurnitureindustryaccountedfor3percentofCzechmanufacturing
output in1993. Exports ofwood, wood products andfurniture totalled Kc18.3billion in1994, nearly
6percentofallmanufacturing exports. While domestic salesremained somewhat stagnant because
oflowconstruction activity (andthiscontinued into1995), exports weresuccessfully redirected from
theformer Soviet Union toward western Europe.
85. Tariffs onimports ofwood, wood products andfurniture average 5.1percentanddonotexceed
12.1percent.44FortheCzech Republic 'spartners inpreferential agreements, preference margins
effectively reduce these tariffs tosome 1to2percent, depending onthepartner. In1994, halfof
imports oftheproducts inthissector werefromtheEU,while 10percentwerefromEFTA countries
and2percentwere from countries receiving preferences under theGSP. Tariffs inthesector are
39Covered products in1994 were cold-rolled sheets, wirerod,hot-rolled strips, seamless tubes andwelded
tubes. According totheauthorities, thearrangement ontariff quotas withtheEUistheCzech Republic 'sonly
bilateral agreement onsteel trade.
40SeeWTO (1995), which includes information onthequota levels.
41WTO document G/ADP/N/4/EEC, March 1995.
42Euro-east, August/September 1995, p.22.
43WTO document G/ADP/N/4/ARG, October 1995.
44Tariffs increase from 0.6percentforproducts inthefirststage ofprocessing to3.4percentforsemi-
processed products and7.0percentforfully processed products.WT/TPR/S/12 Trade Policy Review
Page 110
escalatory, rising from0.6percentforunprocessed wood andwood products to9.0percentforwood
furniture andfixtures; mostCzech exports fromtheindustry areinsemi-processed andfinished products
(Table V.22). Forpreferential partners, theseverity oftheescalation isreduced. Theaverage rates
forimports from theEU,which aretypical oftheratesonimports from other preferential partners,
are0.0percentforunprocessed products, 0.8percentforsemi-processed products, and3.4percent
forfinished products. Average ratesforGSPimports atthese processing levels are0.0,1.3and4.6
percent, respectively.
Table V.22
Tariff escalation andtrade inwood andwood products
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n.
tariff (%)Importsa
(Kcbn.)Share ofimportsa(percent)Exportsa
(Kcbn.)European
UnionEFTA GSP
Wood andwood products
except furniture
(ISIC 331)Low 0.6 0.0 n.a. n.a. n.a. 1.2
Medium 3.4 1.0 37.3 26.4 1.5 7.6
High 5.6 0.7 48.0 8.8 4.0 3.5
Furniture andfixtures
except ofmetal (ISIC 332)High 9.0 3.0 ... ... ... 6.0
... Notavailable.
n.a. Notapplicable.
a Trade withSlovakia isexcluded from thedata. Bilateral trade shares, including thatforGSP, refer onlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
86. Exports ofrawtimber (pulpwood androundwood) andsawnwood require export licences from
theMinistry ofIndustry andTrade. Export quotas aresetonanannual basis. In1995, these quotas,
inthousands ofcubic metres, were: coniferous pulpwood (1,075); non-coniferous pulpwood (400);
coniferous roundwood (636); non-coniferous roundwood (45); coniferous sawnwood (1,800); and
non-coniferous sawnwood (60). Thestated objective ofexport restrictions istoensure adequate supplies
forprocessors. Thequotas aretobeexpanded in1996 (theauthorities indicated increases of20to
40percentonsome products) andabolished by1998.
87. Thepaper andpaper products industry, including printing andpublishing, accounted for
5percentofmanufacturing value added in1994. Products oftheindustry comprised 3percentof
theexports and3percentoftheimports ofthemanufacturing sector in1994; pulp, paper and
paperboard made upsome three quarters oftheexports. Imports ofwaste paper aresubject tonon-
automatic import licensing, withtheannual limitsetat50,000 tonnes (Table IV.9); according tothe
authorities, thislicensing requirement isinplace forenvironmental reasons.45Scrap paper and
paperboard aresubject toautomatic import licensing requirements forenvironmental reasons. M.f.n.
import tariffs average 9.1percentonpaper products and5.5percentonprinting andpublishing
products; fortheCzech Republic 'spartners inpreferential trade agreements, preference margins
45Importsofcontainersandboxesofpaperandpaperboardaresubjecttom.f.n.tariffsaveraging14.0percent.Czech Republic WT/TPR/S/12
Page 111
effectively reduce these tariffs byabout half. There issome escalation inthem.f.n. tariffs forpaper
products, which risefrom5.7percentforproducts inthefirststage ofprocessing to9.5percentfor
semi-processed products and9.6percentforfullyprocessed products (Table V.23). Allprinting and
publishing products areconsidered tobefullyprocessed products intheWTO Secretariat classification
scheme; theaverage tariff onprinting andpublishing products islower thanthose atallprocessing
stages ofpaper products. Thus theaverage tariffs forallpaper, printing andpublishing products are
5.7percentforproducts atthefirststage ofprocessing, 9.5percentforsemi-processed products and
7.8percentforfullyprocessed products. In1994 onethirdoftheimports ofthetypeofproducts
made bythissector werefromtheEU,onequarter werefromEFTA countries, and0.1percentwas
from countries receiving preferences under theGSP.
Table V.23
Tariff escalation andtrade inpaper andpaper products
(PercentandKcbillion)
SectorLevel of
processingAverage
m.f.n.
tariff
(percent)Importsa
(Kcbn.)Share ofimportsa(percent)Exportsa
(Kcbn.)EU EFTA GSP
Paper andpaperboard
(ISIC 341)Low 5.7 1.6 0.5 6.9 0.0 2.5
Medium 9.5 4.5 38.3 41.7 0.0 4.1
High 9.6 1.4 30.7 21.2 0.2 0.6
Printing and
publishing (ISIC 342)High 5.5 3.0 35.0 11.0 0.3 1.4
a Trade withSlovakia isexcluded from thedata. Bilateral trade shares, including thatforGSP, refer onlytoimports made at
preferential rates.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat; datareported are1995 tariffs and1994 trade.
Source: WTO Secretariat calculations based ondataprovided bytheCzech authorities.
88. Themanufacturing ofnon-electrical machinery comprised some 13percentofthevalue added
ofthemanufacturing industry in1994, andtradeoftheproducts ofthisindustry (including computers)
accounted for25percentofallmanufacturing imports andnearly 11percentofallmanufacturing
exports. Theaverage m.f.n. tariff forimported products competing withthisindustry is5percent,
andratesdonotexceed 12.0percent. These tariffs areeffectively reduced bymore thanhalfforthe
Czech Republic 'spartners inpreferential tradeagreements: theaverage rateonimports fromtheEU,
which account fornearly halfofallimports, is1.8percent,equal tothatonimports fromtheEFTA
States, which in1994 accounted for10percentofimports; forimports from Slovenia theaverage
rateis0.1percent.46
89. Electrical equipment andprofessional andscientific equipment manufacturing accounted for
7percentofmanufacturing value added in1994, while trade inelectrical equipment, together with
professional andscientific equipment, comprised 17percentofmanufacturing imports and6percent
ofmanufacturing exports. M.f.n. tariffs average 5.5percentforelectrical machinery and4.0percent
46Allproducts ofthisindustry areconsidered tobefully processed intheWTO Secretariat classification,
saveforthose thatenter under onetariff line; thusnomeasure oftariff escalation isavailable.WT/TPR/S/12 Trade Policy Review
Page 112
forprofessional andscientific equipment.47Preferential agreements effectively reduce these tariffs
byabout halfforimports frompreferential tradepartners; theaverage ratesonimports fromtheEU,
which account foronethirdofimports, are2.2percentforelectrical machinery and1.0percentfor
professional andscientific equipment, equal tothose onimports fromtheEFTA States, which account
for10percentofimports; theaverage ratesonimports fromSlovenia are0.5percentand0.3percent,
respectively.
90. Theshares ofmanufacturing value added accounted forbytransport equipment in1994 was
9percent. Trade intheproducts ofthesector comprised some 12percentofmanufacturing exports
and8percentofmanufacturing imports in1994, withseven eighths oftheimports andnearly
three quarters oftheexports consisting ofmotor vehicles andtheirparts. M.f.n. tariffs onproducts
throughout theindustry average 7.7percent, buttariffs onmotor vehicle manufactures average
9.5percent. FortheCzech Republic 'spartners inpreferential tradeagreements, preference margins
reduce them.f.n. ratebyabout half; theaverage rateonimports from theEU(which account for
halfofallimports) is3.7percent, equal tothose onimports from theEFTA States (2percentof
imports), andtheaverage ratesonimports fromHungary andSlovenia are1.5percentand0.3percent,
respectively.
(5) Services
91. Theshare ofservices inCzech GDP hasrisen steadily to53percentin1994. Thesector
accounted foranestimated 50percentofcivilian employment in1994. Services tradehasanimportant
roleintheexternal accounts. In1994, revenues fromservices exports wereUS$4.5 billion, comprising
overaquarter ofallforeign exchange earnings andweretheequivalent of13percentofGDP; the
1994 services trade surplus ofUS$1.0 billion wasequivalent to2.9percentofGDP (Table I.1).
92. TheGeneral Agreement onTrade inServices (GATS) requires thatWTO Members grantm.f.n.
treatment toservices andservice suppliers ofother Members (Article II). However, measures
inconsistent withGATS Article IImaybemaintained, provided theymeettheconditions oftheAnnex
onArticle IIExemptions andarelisted intheMember 'sschedule. TheCzech Republic hasfivelisted
measures infourservice sectors: audiovisual services, water transport, railtransport, androadtransport
(Table V.24). These exemptions areclaimed foranyfuture agreements aswellasforexisting
agreements, andareclaimed foranindefinite period.48
47Allproducts ofthisindustry areconsidered tobefullyprocessed intheWTO Secretariat classification and
nomeasure oftariff escalation isavailable.
48Theduration ofsuchexemptions, inprinciple, should notexceed tenyears andshallbesubject tonegotiation
insubsequent trade-liberalizing rounds.Czech Republic WT/TPR/S/12
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Table V.24
Summary oftheCzech Republic 'sGATS m.f.n. exemptions
Sector or
sub-sectorDescription ofmeasure inconsistent
withthem.f.n. requirements ofGATS
Article IICountries towhich the
measure appliesIntended
durationRationale
Audiovisual
servicesMeasures taken toimplement existing or
future co-production agreements that
provide fornational treatment ofthe
covered works.
Measures taken toimplement support
programmes (e.g. Council ofEurope
Convention onTransfrontier
Television).Parties tothe
agreements
European countriesIndefinite
IndefiniteCultural objectives;
diversity inthe
Czech market.
Cultural exchange
among European
countries.
Internal waterways
passenger and
freight transportMeasures taken under existing orfuture
agreements thatreserve traffic rights to
certain foreign operators.Allcountries withwhich
agreements areorwill
beinforce.Indefinite Infrastructure
integrity; environ-
ment; regulation of
traffic rights.
Railpassenger and
freight transportMeasures taken under existing orfuture
agreements thatregulate traffic rights,
operating conditions andtheprovision
oftransport services inthe
Czech Republic andbetween the
countries concerned.Allcountries withwhich
agreements areorwill
beinforce.Indefinite Integrity ofrail
infrastructure;
environment;
regulation oftraffic
rights.
Road passenger
andfreight
transportMeasures taken under existing orfuture
agreements thatreserve orlimitthe
provision oftransport services and
specify operating conditions into,
across, andoutoftheCzech Republic to
thecountry concerned.Allcountries withwhich
agreements areorwill
beinforce.Indefinite Integrity ofroad
infrastructure;
environment;
regulation oftraffic
rights.
Note: TheAnnex onArticle IIExemptions totheGATS stipulates thatallm.f.n. exemptions granted formore thanfiveyears shall
bereviewed bytheCouncil forTrade inServices bytheendof1999.
Source: GATS documents GATS/EL/26, April 1994 andGATS/EL/26/Suppl. 1,July1995.
93. OtherthantheGATS,theCzechRepublicparticipatesintwointernationalagreementscontaining
provisionsaffectingtradeinservices:theEuropeAgreementwiththeEUandtheCzech-SlovakCustoms
Union (Chapter IV(2)(iv)).49
(i) Czech commitments under theGATS
94. Beyond negotiating andbringing intoforce theGATS, theUruguay Round ledtocertain
commitments within theGATS framework (Articles XVIandXVII). These commitments areintwo
forms: horizontal commitments, which apply toallsectors covered bytheGATS unless specifically
noted otherwise, andspecific commitments, which apply onlytothespecific sector orsub-sector
49Therelevant provisions oftheEurope Agreement were notclear, asthisagreement hasnotbeen notified
totheWTO. Article 27oftheCustoms Union Agreement between theCzech Republic andSlovakia states
that"Trade inservices between thecontracting parties (CPs) shall befreeonthedateofentry intoforce ofthis
Agreement andnorestrictive measures shall beintroduced inthistrade thereafter" andArticle 28states that
"...theCPsshall grant tonationals oftheother CPthetreatment equal tothatgranted toitsownnationals.
TheCPsmayconclude separate agreements containing details onindividual sectors ofservices."WT/TPR/S/12 Trade Policy Review
Page 114
indicated. Each commitment isbased ononeofthefourmodes ofsupply identified intheGATS:
(i)cross-border supply; (ii)consumption abroad; (iii)commercial presence; and(iv)presence of
natural persons.
95. TheCzech Republic actively participated intheUruguay Round services negotiations tobind,
orliberalize andbind, trade-restrictive policies. Itshorizontal commitments, likethose ofmostother
countries, arefewinnumber (Table V.25). Importantly, however, theCzech Republic agreed: not
tolimittheacquisition ofrealestate, other thanland, fortheestablishment ofacommercial presence;
andtoallow thetemporary presence offoreign natural persons insome jobcategories (specialists,
senior executives andsalesrepresentatives) andtooffer national treatment tothese natural persons.
Table V.25
Summary oftheCzech Republic 'shorizontal commitments onmarket access andnational treatment inservices
Sector or
sub-sectorCross-border supply Consumption abroad Commercial presencePresence ofnatural
persons
Acquisition
ofreal
estateMA-Nocommitments
NT--NocommitmentsMA-Nocommitments
NT--NocommitmentsMA-Nolimitations
NT--Realproperty maybe
acquired byforeign entities
onlybyestablishing aCzech
legal entity orjointventure.
Land purchase issubject to
approval.MA-Nocommitments
NT--Nocommitments
Presence of
natural
personsMA-Nocommitments
NT--NocommitmentsMA-Nocommitments
NT--NocommitmentsMA-Nocommitments
NT--NocommitmentsMA-Unbound, except
thatpersons inseveral
categories (senior
executives, specialists,
etc.)areauthorized
temporary presence.
NT--Nolimitations for
thecategories offered
under Market Access.
MA-market access; NT--national treatment.
Source: GATS document GATS/EL/26, April 1994.
96. TheCzech Republic hasmade arelatively large number ofspecific commitments.50These
aresummarizedinAnnexV.1,wheretheyareorganizedaccordingtotheServicesSectoralClassification
List(SSCL).51According totheauthorities, theCzech Republic hasavoided making commitments
inthose areas where theCzech regulatory framework isstillbeing prepared.
50These commitments areidentical tothose oftheCzech Republic 'scustoms union partner, Slovakia, except
forthefollowing:Slovakiahasahorizontalcommitmentregardingcommer cialpresencewhiletheCzech Republic
doesnot; theCzech Republic hasahorizontal commitment nottointroduce anymarket access limitations on
commer cialpresencefortheacquisitionofrealestate,whileSlovakiahasahorizontalcommitmentnottointroduce
anymarket access limitations forcommercial presence orthemovement ofnatural persons fortheacquisition
ofrealestate, except forland; while theCzech Republic hascommitted nottolimit national treatment ofthe
cross-border supply ofretailing services, Slovakia hasnosuchspecific commitment; onmarket access forthe
commercial presence oftravel agencies andtouroperators, Slovakia hascommitted itself tonolimitations while
theCzech Republic hasreserved theright touseaneconomic needs testbased onapopulation criterion.
51TheSSCL islisted inGATT Uruguay Round document MTN/GNS/W/120.Czech Republic WT/TPR/S/12
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(ii) PostandTelecommunications
97. Thetelecommunications sector accounted for2.0percentofGDPin1994, upfrom1.5percent
in1992. TheCzech Republic 'slong-distance andinternational telecommunications networks are
constructedandoperatedbytwofirms,SPTTelecomandCzechRadiocommunications.52Localnetworks
thataccess thelong-distance andinternational networks andprovide basictelecommunications services
havebeenopened toother domestic entities. Theprocess ofselecting these entities wascompleted
bytheMinistry ofEconomy inlate1995.
98. Competition intheprovision oflong-distance andinternational voice services isnotpermitted;
theprovision ofthese services isreserved forSPTTelecom untiltheyear2000, afterwhich itwill
beopened tocompetition. Thenetwork duopoly, SPTTelecom andCzech Radiocommunications,
alsoexercise thisduopoly withrespect toleased services, which maynotbere-sold. Competition
intheprovision ofmobile public services isnotpermitted; therightofsupply ofanalogue telephone
services hasbeengranted exclusively toEurotel (ajointventure ofSPTTelecom, BellAtlantic and
USWest), while twolicences forsupplying GSM digital services willbegranted bytheMinistry of
Economy inmid-1996. Onelicence willbegranted toEurotel andthesecond toajointventure between
Czech Radiocommunications andtheDutch-Swiss consortium. Competition isallowed, inprinciple,
inthemarket forcircuit-switched datatransmission services among licence holders; however, only
SPTTelecom nowhasalicencse. Inother areas ofbasic telecommunications (telex, telegraphs and
facsimile) competition isallowed, butaccording totheauthorities SPTTelecom exercises anatural
monopoly overtelexandtelegraph services.
99. TheMinistry ofFinance (MOF) hasthefinalauthority forregulating SPTTelecom prices for
domestic telecom services, suchastelephone, andforleased telephone, telegraph andtelexcircuits.
TheCzech Telecommunication Office regulates prices forinternational telecom services inco-operation
withtheMOF. Basic telecommunications prices arebased onthose established under theprevious
centrally-plannedsystem.Thesepricesdonotnecessarilybearanyrelationshiptocosts.53Theauthorities
areintheprocess ofestablishing acost-based price regulation scheme.
100. TheCTO, partoftheMinistry oftheEconomy, istheprimary regulatory body for
telecommunications, otherthanfordomestic pricing. Among itsregulatory functions istheformulation
oftechnical standards andregulations, which onceformulated areproposed totheCzech Office for
Standards, Metrology andTesting. Theallocation offrequencies ismade bytheIndependent Frequency
Commission, which includes membership from theCTO andtheMinistries ofDefense andInterior;
52Asof1March1995theownershipstructureofSPTTelecomconsistedoftheNationalPropertyFund(NPF),
with70percent;shareholdersfromvoucherprivatization,with26percent;theRestitutionFund,with3percent;
andtheFoundation Fund, with1percent. Following theselection ofastrategic foreign partner inmid-1995
tohold27percentofthecompany, theNPF retains 51percentownership, private shareholders 19percent,
andtheRestitution andFoundation Funds 3percent. Thestrategic partner selected wasaconsortium ofPTT
Netherlands (51percent) andSwiss Telecom (49percent). Foreign equity inSPTTelecom isnottoexceed
34percent; theauthorities state thatthislimitation maybeeliminated inthefuture. TheGovernment isto
decide by1999 onthefurther distribution ofshares now held bytheNPF. Some 69percent ofCzech
Radiocommunications isheldbytheState, with27percentbydomestic investors (through voucher privatization)
andtheremainder heldbytheRestitution Fund, Foundation Fund, oremployees ofthefirm.
53GATSdocumentS/NGBT/W/3/Add.33,October1995,theCzech Republic'sResponsetotheQuestionnaire
onBasic Telecommunications.WT/TPR/S/12 Trade Policy Review
Page 116
commercial frequencies areallotted onafirst-come-first-served basisandnational treatment isaccorded
toallsuppliers ofradiocommunications services.
101. TheCzech Republic 'sspecific commitments under theGATS intheareaoftelecommunications
arelimited tofacsimile services andvalue-added services (such aselectronic mailandvoice mail)
(Annex V.1). Forthese services therearenomarket access ornational treatment limitations oncross-
border supply orconsumption abroad. Market access fortheestablishment ofacommercial presence
islimited onlybyalicence requirement and,forfacsimile services, byalimitation onforeign ownership.
Theauthorities state thattheconditions forforeign ownership willbedetermined intheWTO
Negotiating Group onBasic Telecommunications, andthattheforeign ownership limitation maybe
eliminated.
102. Postal services intheCzech Republic areoperated byaState monopoly, Czech Post; the
authorities donotenvisage achange inthissituation. Thecompany wasseparated in1993 from the
State telecommunications company.
(iii) Financial services
103. Thefinancialservicessectoraccountedfor8.6percentofCzechGDPin1993and10.7percent
ofGDP in1994.
(a) Insurance andinsurance-related activities
104. According todataprovided bytheauthorities, following privatization anddomestic deregulation
during theperiod 1991-94 thenumber ofinsurance firms operating intheCzech Republic increased
to24in1994 and35in1995, compared tojustonefirmin1990. However, theCzech Insurance
Company (CIC) held77percentofthemarket in1995. TheCICisaformer State enterprise that
wasprivatized in1991. Thecomposition ofitsownership inearly 1996 was: theNational Property
Fund (State), 27percent; domestic banks, 57percent; andother shareholders, 16percent. Foreign
insurance companies were allowed toenter theCzech market beginning in1993.
105. Thesupply ofcompulsory third-party motor liability insurance isreserved fortheCIC, which
inthisinstanceisregulatedbytheMOF.54Theprovisionof(mandatory)liabilityinsuranceforemployers
against injury oroccupational disease isrestricted tothree companies. Following thesubstantial
privatization ofhealth services in1993, private health insurance iscompulsory andisprovided bysome
20health insurance companies.
106. TheCzech Republic requires thatacommercial presence beestablished inorder toprovide
thefollowing types ofinsurance: lifeinsurance forpermanent Czech residents, property insurance
ofpropertyonCzechterritory,andliabilityinsurancecoveringtheactionsofnaturalandjuridicalpersons
onCzech territory.55These types ofinsurance maynotbepurchased abroad. Theestablishment of
54Thisisreported intheCzech Republic 'sGATS Schedule. According totheSchedule "exclusive service
suppliers actinamanner consistent withobligations under Article IIoftheGATS andspecific commitments."
55Commer cialpresencerequirementsforthesupplyofairandmaritimetransportinsurance,partoftheoriginal
Czech Republic Schedule, were eliminated 1995. Requirements that(i)amajority ofthemanagement board
ofaninsurancecompanybedomiciledintheCzech Republic,andthat(ii)financialresourcesofspecificinsurance
funds ofinsurance operators derived frominsuring orreinsuring policy holders withCzech residence bedeposited
(continued...)Czech Republic WT/TPR/S/12
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commercial presence requires theauthorization oftheInsurance Supervisory Authority oftheMOF,
according totheprovisions oftheInsurance Act. Thefinancial resources ofaninsurance company 's
technical reserves (which replaced theformer specific insurance funds in1994) mustbedeposited in
resident banks.
(b) Banking
107. Thereorganization oftheCzech Republic 'sbanking system began in1990, when theonlybanks
operatingintheCzechRepublicweresevenpublicinstitutions.Thereorganizationhasledtothecreation
ofagrowing network ofcommercial banks, with59banks operating intheCzech Republic bythe
endof1995.ThisfigureincludesoneState-ownedspecializedbank,17whollyCzech-ownedcommercial
banks, 14commercial banks withpartial foreign equity participation, 11wholly foreign-owned
commercial banks, tenforeign bankbranches andsixpartly foreign-owned building andloanssocieties.56
According totheauthorities, mostofthese banks areuniversal commercial banks thatofferavariety
ofproducts andservices, although theState-owned bankandbuildings andloans societies offeramore
limited range ofservices; thelarger banks havesubsidiaries thatoperate investment andprivatization
funds. Theprivatization ofmost banks hasbeenconducted through thevoucher method (Chapter
IV(5)(i)), buttheState, through theNational Property Fund, stillholds some 35to45percentofthe
assets ofmajor banks. InAugust 1995 itwasdecided toaccelerate theprivatization ofthese banks,
butthedetails hadnotbeendetermined bytheendof1995.
108. Foreign banks maybeestablished onlyasjoint-stock companies. Bothdomestic andforeign
banks require theauthorization oftheCzech National Bank (CNB), inco-operation withtheMOF,
toestablish acommercial presence intheCzech Republic intheformofabranch, subsidiary ornew
enterprise. Preliminary consent oftheCNB isrequired forforeign persons toparticipate inexisting
banks intheCzech Republic. There arenoother limitations onforeign ownership inCzech banks.
While notincluded initsoriginal GATS Schedule ofSpecific Commitments, inmid-1995 the
Czech Republic accepted anobligation toprovide m.f.n. treatment tofinancial service suppliers from
WTO Member countries.57
109. TheCNB hasprimary responsibility fortheprudential oversight ofthebanking system. It
publishesandmakesavailabletherulesgoverningprudentialbankingpractices,coveringcapitaladequacy,
credit riskexposure, liquidity andtheregulation offoreign exchange positions.
(iv) Health-related andsocial services
110. Health-related andsocial services account forsome 8percentofGDP. Privatization inthe
health services sector wasbegun in1993, somewhat laterthaninmany other sectors. Theapproach
55(...continued)
inaresident financial institution, were alsoeliminated atthattime, along with thereciprocity-based m.f.n.
exemption fortheestablishment ofcommercial presence intheareas ofinsurance, banking, securities, andother
financial services.
56ForeigncapitalamongCzech bankscomesmostlyfromGermanyandAustria,withtheUnitedStates,France,
Italy andtheNetherlands alsohaving substantial shares.
57TheCzech Republic alsoextended thesectoral coverage ofbanking andother financial services, forGATS
purposes, toinclude asset management, theprovision andtransfer offinancial information, advisory services,
andauxiliary financial services.WT/TPR/S/12 Trade Policy Review
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forthissector waslaidoutin1992andearly 1993, when 723health service facilities tobeprivatized
werespecified. Thevoucher method wasrarely usedintheprivatization ofhealth-related services;
instead, the"direct-sale" method wascommonly used, withapreference sometimes given topersons
already employed bythehealth service facility. Bytheendof1994, theNational Property Fund had
completed contracts forthesaleof394facilities, justoverhalfofallthose scheduled tobeprivatized.
Once privatized, these facilities arerequired tousetheprivatized property forhealth carepurposes
foratleasttenyears, while thestructure andrange ofhealth careservices havebeenstipulated for
the179ofthese facilities deemed toholdalocalmonopoly position intheirgeographic area.
111. Prices forhealth-related products andservices areregulated bytheMinistry ofFinance (MOF).
Forproducts thatareproduced inlarge quantities, amaximum price isusually specified. Revenue
from privatization isusedtosubsidize interest onloans fortheprivatization ofhealth carefacilities
(except pharmacies). "Health" loans aregranted atinterest ratessome sixpercentage points below
thecommercial rate,andforaneight-year termrather thanthefour-year termcommon inCzech
commercial lending. Concessionary loans weregranted in151ofthe394salesfinalized bytheend
of1994.
112. TheCzech Republic hasmade nospecific commitments inthehealth services areaunder the
GATS.
(v) Tourism
113. TheCzechtouristindustryhasgrownrapidlyinrecentyears,particularlyasjudgedbyitsforeign
exchange receipts. Theaverage annual growth inforeign exchange earnings fromtourism wassome
36percentfrom1990to1994.Duringthisperiod,foreigntourismreceiptsaveragedUS$1,156million.
The1994 balance onforeign tourism wassome US$250 million.
114. Tourism wasamong thefirstsectors intheCzech economy tobeprivatized andtheauthorities
believe thatthesuccess ofthisprocess illustrated theusefulness ofprivatization andhelped develop
support forprivatization inother sectors. By1994, privatization inthesector wasnearly complete,
with41co-operatives and15State-owned enterprises outofatotalofsome 48,000 registered units.
Some 5,000 private travel agencies areinoperation (about 800ofwhich operate year-round), compared
tofiveState-owned orco-operative agencies before 1990.
115. TheStatepromotes tourism through theCzech Tourist Agency, founded in1993. According
totheauthorities, there arenorestrictions onforeign investment inthesector. Thetourism sector
isintegraltotheState'spolicytopromotesmallandmedium-sizedenterprises,usingtheCzechMorovian
Guarantee andDevelopment Bank.
116. IntheUruguay Round, theCzech Republic undertook several specific commitments ontourism
andtravel-related services under theGATS. Itbound itself nottolimit market access ornational
treatment fortwomodes ofsupply: consumption abroad andcommercial presence. However, the
Czech Republic leftthecross-border supply oftravel agents 'andtouroperators 'services unbound
initsSchedule.58Italsomaintains theright tolimitmarket access forthecommercial presence of
travel agencies andtouroperators byusing aneconomic needs testbased onapopulation criterion.
58Anexample ofthecross-border supply ofthese services might betheprovision ofpre-travel services such
astravel information oradvice andthemaking ofreservations. TheCzech Schedule notes thatacommitment
onthecross-border supply oftourist guides services isnotfeasible.Czech Republic WT/TPR/S/12
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Although theCzech Republic made ahorizontal commitment toallow thetemporary presence ofnatural
persons incertain jobcategories, thereisnocommitment inthespecific areaoftourist guide services;
theauthorities report thatlegislation inthisareaisnotyetcomplete.
(vi) Transport
117. Theabrupt changes inmerchandise trade patterns andother fundamental changes thathave
occurred intheCzech economy since thestartoftheeconomic transformation process havehada
substantial effect ontransport needs. While thetransport infrastructure wasconceived andbuiltto
meettheneeds ofCMEA trade, inrecent years much oftheCzech Republic 'stradehasshifted toward
markets inwestern Europe andother established market economies (Chapter I(3)). Thishasledto
asubstantial redirection oftransport flows, which tookplace atatimeofdeclining freight transport
activity. From 1989 to1994, totalfreight traffic fell33percent, to715billion tonnes, hitting its
lowest levelin1993. Average shipment distances increased overthisperiod, however, andtotalfreight
traffic performance fellbyonly11percentduring thisperiod, to54,000 billion ton-kilometres, having
beenincreasing since 1992. In1989, 71percentoftotalfreight traffic performance wasbyrail,
14percentbypublic roadfreight and12percentbyprivate roadfreight. By1994 theshare ofrail
hadfallen to43percentwhile public andprivate roadfreight increased to36percentand19percent.
Major investments areunderway fortheimprovement oftheroadandrailnetwork andtheexpansion
oftheroadnetwork.
118. TheCzech Republic 'slocation isadvantageous withregard tonatural gastransit. Most (some
50billion cubic metres) ofthegasthatflows from theformer Soviet Union tocentral andwestern
Europe passes through theCzech Republic. While theauthorities consider natural gaspipeline fees
confidential, itisbelieved thatthesefeescontribute substantially totheCzech Republic 'sservices trade
balance andoverall external position.
119. Mostofthetransportindustrycontinuestobehighlyregulated,withGovernmentpriceregulation
administered bytheMinistry ofFinance andthesometimes dominant participation ofState-owned
enterprises. However, according totheauthorities, recent legislation onroadandrailtransport have
substantially liberalized these areas.
120. IntheUruguay Round, theCzech Republic made fewcommitments regarding thetransportation
sector (Annex V.1). IthasthreeArticle IIm.f.n. exemptions fortransport services, applying tointernal
waterways, railandroadtransport.WT/TPR/S/12 Trade Policy Review
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Annex V.1
TheCzech Republic 'sSpecific Commitments under theGATS59
(a) Business services60
121. TheCzech Republic hasagreed nottolimitthecross-border supply orconsumption abroad
ofmostprofessional services, bothwithregard tonational treatment andmarket access.61Regulatory
requirementsexistforthecommercialpresenceofforeignsuppliersofmostprofessionalservices,usually
intheform ofacceptance intherelevant Czech professional association.62Thepractice ofnational
lawintheCzech Republic, forexample, requires thatthepractitioner beaccepted bytheCzech Bar
Association.
122. TheCzech Republic hascommitted nottolimitthecross-border supply, consumption abroad
orcommercial presence ofcomputer andrelated services.
123. Asaresult ofbindings entered intobytheCzech Republic, research anddevelopment services
onsocial sciences andhumanities havenolimitations oncross-border supply, consumption abroad
orcommercial presence. Similar bindings havenotbeentaken innatural sciences andinterdisciplinary
services.
124. TheCzech Republic hasnospecific commitments regarding realestate services.
125. TheCzech Republic hasundertaken nottolimitthecross-border supply andconsumption abroad
ofrental andleasing services ofvessels, private motor carsandvehicles forthetransport ofgoods.
However, therightofforeign providers ofthese services toestablish acommercial presence isnot
bound. Inmost other business services (such asadvertising andconsulting), cross-border supply,
consumption abroad andcommercial presence arebound without limitations onmarket access ornational
treatment.63
59Unless otherwise noted, thepresence ofnatural persons isunbound except asindicated inthehorizontal
commitments (Chapter V(5)(i)).
60Consisting ofprofessional services (legal, accounting, architectural, engineering, medical, etc.); computer
andrelated services; research anddevelopment services; realestate services; rental services without operators;
andother business services.
61Exceptions arethecross-border supply ofmedical, dental andveterinary services, which areunbound.
62Theprovision ofauditing services byjuridical persons, however, requires thataminimum of60percent
ofthecapital oftheenterprise bereserved forCzech citizens.
63However, theright toestablish acommercial presence isunbound forconsulting services incidental to
agriculture;thisprovisioninthespecificcommitmentsoverridesthehorizontalcommitmentregardingcommer cial
presence.Czech Republic WT/TPR/S/12
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(b) Communication services64
126. TheCzech Republic hasundertaken nospecific commitments regarding postal services or
audiovisual services.65Thecross-border supply ofcourier services isrestricted andunbound inthe
Schedule, buttheconsumption abroad andrighttoestablish acommercial presence toprovide these
services isbound withnolimitations.
127. TheCzechRepublichasmadespecificcommitmentsintelecommunicationsforfacsimileservices
andsome value-added services suchaselectronic mail, voice mailanddatabaseretrieval. Inthese
areas,ithasagreednottolimitmarketaccessornationaltreatmentofcross-bordersupplyorconsumption
abroad,ornationaltreatmentforforeignprovidersestablishedintheCzechRepublic.Therearelicensing
requirements and,forfacsimile services, alimitation onownership.
(c) Construction andrelated engineering services66
128. TheCzech Republic hasundertaken nottolimittheconsumption abroad oftheservices ofmost
construction sub-sectors, buthasnofurther specific commitments. Thehorizontal commitments on
therighttoestablish acommercial presence donotapply inthissector.
(d) Distribution services67
129. With theexception ofcommission agents 'services, theCzech Republic made substantive
commitments intheareaofdistribution services. Cross-border supply, consumption abroad and
commercial presence havebeenbound withnolimitations forwholesale trade andfranchising, and
formail-order retail services.68
(e) Educational services
130. TheCzech Republic hasundertaken bindings nottolimitmarket access ornational treatment
ofthecross-border supply orconsumption abroad ofeducational services. Commercial presence (in
theformofaneducational institution) maybeestablished ifauthorization fromthecompetent authorities
isobtained andtheteaching complies withqualification andmaterial requirements. Czech citizens
must comprise amajority ofthemembers oftheinstitution 'sboard.
64Includes postal services, courier services andtelecommunications.
65TheCzech Republic hasm.f.n. exemptions regarding audiovisual services, asnoted inTable V.24.
66These consist ofconstruction work forbuildings, construction work forcivilengineering, installation and
assembly ofprefabricated construction, building completion andfinishing work, andother construction services.
67Distribution services consist ofcommission agents 'services; wholesale trade; retailing; franchising; and
other distribution services.
68Thebinding oncross-border supply ofmail-order retail, which doesnotapply toother retail, isonlyfor
market access. There isabinding (with nolimitations) regarding national treatment ofthecross-border supply
ofretail services (including mail-order); thisisoneofthefewdifferences between theCzech Schedule andthe
Slovak Schedule.WT/TPR/S/12 Trade Policy Review
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(f) Environmental services69
131. Rights toconsume abroad, andtoestablish acommercial presence toprovide, environmental
services arefullybound withnolimitations. However, theCzech Republic hasmade nocommitment
onthecross-border supply ofthese services.
(g) Financial services70
132. Thecross-border supply ofseveral types ofinsurance intheCzech Republic requires thatthe
supplier haveacommercial presence intheCzech Republic. Thisapplies to:(i)lifeinsurance for
persons permanently resident intheCzech Republic; (ii)theinsurance ofproperty ontheterritory
oftheCzech Republic; and(iii)liability insurance forlosses caused bynatural andjuridical persons
onCzech territory. There arenoother market access limitations forcross-border supply andthere
arenonational treatment limitations. Theinsurance types maynotbepurchased abroad; thisisthe
onlymarket access limitation toconsumption abroad andthere arenonational treatment limitations.
LicensingbytheCNBisrequiredtoestablishacommercialpresence,andforeignnationalsmayestablish
aninsurance company intheCzech Republic either byforming ajoint-stock company orbyconducting
business through asubsidiary witharegistered office intheCzech Republic under theconditions of
theLawonInsurance.71National treatment ofcommercial presence isnotlimited.
133. TheCzechRepublic'sspecificcommitmentsinbankingandotherfinancialservicesareseparated
intotwosub-sectors. Thefirstsub-sector concerns primarily commercial banking activities.72Market
access forthecross-border supply andconsumption abroad ofthese services islimited inthefollowing
ways: (i)deposit services areconfined tobanks; (ii)trade inforeign exchange assets islimited to
domestic banks, branches offoreign banks, andpersons possessing aforeign exchange licence; (iii)only
authorized banks andbranches offoreign banks mayeffect non-cash cross-border payments; and
(iv)aforeign exchange licence issued bytheCNB isrequired for:theopening ofaforeign account
byaCzech resident, withexceptions (stipulated intheForeign Exchange Act)forfinancial credits,
guarantees byaCzech resident, andthepurchase offoreign securities; foreffecting capital payments
abroad; forobtaining credit from aforeign exchange non-resident; andforexporting orimporting
currency andsecurities denominated intheCzech currency. There arenonational treatment limitations
ofcross-border supply orconsumption abroad noted intheschedule. Commercial presence maybe
limited, andcurrently is,byrequirements thatbanking services beprovided onlybybanks authorized
bytheCNB (inagreement withtheMinistry ofFinance); thatprivate banks beestablished onlyas
joint-stockcompanies;andthatforeignbanksmayestablishbranchesintheCzechRepublicorparticipate
through theircapital share inestablished banks onlywithCNB authorization.
69Environmental services include sewage disposal; refuse disposal; andsanitation services.
70Many forms ofinsurance arerequired tobepurchased through monopoly suppliers; these arediscussed
inChapter V(5)(iii). Financial services include insurance andinsurance-related services; andbanking andother
financial services.
71Some specific licensing requirements arelisted intheCzech Republic 'sSchedule.
72Thisincludes theacceptance ofdeposits; lending; payments andmoney transmission; financial guarantees
andcommitments; andtrading (including money market instruments, foreign exchange, andexchange rateand
interest rateinstruments).Czech Republic WT/TPR/S/12
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134. Thesecond sub-sector covers most other financial services.73theCzech Republic hasnot
undertaken anybindings withregard tothecross-border supply oftheseservices. Consumption abroad,
however, isfreeofanymarket access ornational treatment limitations, andthere arenonational
treatment limitations oncommercial presence. Authorization bytheMinistry ofFinance isrequired
forthepublic trading ofsecurities, andforstockbrokers andsecurity dealers.
(h) Health-related andsocial services
135. TheCzech Republic hasmade nospecific commitments inthisarea.
(i) Tourism andtravel-related services74
136. There arenolimitations onmarket access ornational treatment withregard totourism and
travel-related services forconsumption abroad orcommercial presence, except thataneconomic needs
testmaybeapplied totheestablishment ofacommercial presence.75Thecross-border supply ofservices
oftravel agencies andtouroperators isunbound intheSchedule. Thepresence ofnatural persons
toprovidetouristguideservicesisunbound,overridingthehorizontalcommitmentregardingthepresence
ofnatural persons.
(j) Recreational, cultural andsporting services
137. TheCzech Republic hasmade nospecific commitments inthisarea.
(k) Transport services76
138. TheCzechRepublichasacceptedacommitmentoninternalwaterwaystransportforconsumption
abroad, which isbound without limitations. Commercial presence forthisareaisunbound, superseding
thehorizontal commitment. Commercial presence fortheprovision ofaircraft repair andmaintenance
requires thatthecorporate seatbelocated intheCzech Republic. Theonlyspecific commitments in
other transport service areas (aircraft, railtransport androadtransport) regard theconsumption abroad
ofmaintenance andrepair services.
73Included aretheparticipation inissues ofallsecurities; asset management; andsettlement andclearing
services forfinancial assets. There arenospecific commitments regarding money brokering; advisory andother
auxiliary financial services onactivities suchascredit references, portfolio andinvestment research, acquisitions
andcorporatestrategy;andtheprovisionandtransferoffinancialinformation,dataprocessingandrelatedsoftware
byproviders ofother financial services.
74This includes hotels andrestaurants; travel agencies andtouroperators; andtourist guides services.
75Thisisoneofthefewareas where theSlovak Schedule andtheCzech Schedule differ. TheSlovak Schedule
listsnomarket access limitation forthecommercial presence oftravel agencies andtouroperators, while the
Czech Schedule notes thataneconomic needs testbased onapopulation criterion maybeused.
76This includes maritime; internal waterways; air;space; rail; road; pipeline; andservices auxiliary
toallmodes oftransport.