Slovak Republic WT/TPR/S/7
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V. TRADE POLICIES AND PRACTICES BYSECTOR
(1) Overview
1. Thepurpose ofthischapter istoexamine theimpact oftheGovernment 'strade andrelated
policies onkeysectors oftheSlovak economy. Theeconomic progress being made isaresult ofthe
effective policymaking inseveral keypolicy areas.
2. Macroeconomic policies mayinteract withstructural policies byeither fostering aneconomic
environment inwhich growth islikely tobesectorally balanced orbycreating aclimate ofeconomic
instability inwhich sectoral adjustment pressures spark greater demands foractive industrial policy
andprotection fromimports. Thestability engendered bySlovak (and,earlier, Czechoslovak) monetary
andfiscal policy appears tohavebeenofparticular importance during atimeoffundamental internal
andexternal change; because theyseem tohavebeensectorally neutral there isnofurther discussion
ofthem inthischapter. Similarly, ifforeign exchange restrictions fundamentally influenced trade
patterns, theirsectoral implications could beimportant. Effective policymaking hasalsobeendisplayed
inSlovakia 'scontinuing progress insetting uptheinstitutions critical toaneffective market economy;
thisincludes thedefinition ofproperty rights, although theslowing paceoftheprivatization ofState
enterprises isbecoming aconcern.
3. Slovakia haslargely resisted anycallsforactive industrial policy. Neither domestic norexport
subsidies arewidespread. Taxincentives orexemptions aremostly applied horizontally. Thetariff
schedule istransparent andisnotexcessively complicated byconcessions orexceptions. Most industry
assistance isscheduled tobetemporary andseems genuinely tobeaddressed toward theindustrial
restructuring thattheauthorities feelisnecessary asaresult ofthecontinuing economic transition to
amarket economy.
4. 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. Thetemporary import surcharge applied onfinalgoods, which
normally arehighly processed, reinforces thispattern. Incombination, tariffs andthesurcharge provide
substantial import protection tohigher-level processing activities inmanufacturing. Industrial policies
areinplace inagriculture, intheformofguaranteed producer prices, export subsidies, credit subsidies
andthelike. Price regulation andexclusive supply relationships remain insome service andenergy
industries, suchastransport, telecommunications, andcoal. Stateenterprises inindustries considered
bytheGovernment tobestrategic willnotbeprivatized, leaving openthepossibility thattheymay
someday beusedasinstruments ofindustrial policy.
(2) Agriculture andPrimary Products
5. According totheauthorities, theguiding principle ofSlovakia 'sagricultural policy istoexploit
theeconomic potential ofagricultural landandother(including human) resources, while fullyrespecting
theenvironment andmaintaining theviability ofrural life.Within thiscontext, thefourbasic aims
ofagricultural policy are:(i)foodsecurity, (ii)economic stability andtheprovision ofadequate earningsWT/TPR/S/7
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inagriculture, andbalanced regional development, (iii)thepreservation ofsoilproductivity, and(iv)the
preservation ofagriculture inparticular regions ofthecountry forenvironmental andsocial reasons.1
6. Slovakia 'sagricultural production declined by32percentintheperiod 1989to1994, mainly
because ofasharp reduction inthesector 'sterms oftrade (Table V.1).2During thisperiod, nominal
producer prices increased by32percent,while input prices roseby135percent. Rapidly rising input
prices ledtodeclining input useintheagricultural sector thuscontributing tofalling output; the
authorities report thatfertilizer usefellby65percentfrom 1989 to1993 andthattheuseofother
inputs alsodeclined. Measured employment inthesector fellbynearly 60percentduring thisperiod.
Table V.1
Summary ofdevelopments intheagricultural sector, 1989-94
1989 1990 1991 1992 1993a1994a
Gross agricultural production (Sk$million 1989) 52,034 48,275 44,703 38,500 35,438 35,638
Share ofcrops (percent) 39.2 36.1 43.6 42.6 48.7 49.7
Share oflivestock (percent) 60.8 63.9 56.4 57.4 51.3 50.3
Agricultural input price index (1986=100) 99.4 103.9 176.6 186 219.9 234.0
Agricultural producer price index (1986=100) 125.1 127.8 129.9 136.7 152.9 165.0
Employment ('000) 360 301 243 229 179 155
a Preliminary data.
Source: Dataprovided bytheSlovak authorities.
7. Agriculture accounts forsome 7percentofGDP and10percentofemployment. Slovak
agricultural exports (SITC 0)in1994were4.5percentoftotalmerchandise exports, andagricultural
imports were 7.1percentoftotalmerchandise imports.
8. Themain crops orcropgroups, interms ofshares oftotalplanted area, arewheat, barley,
maize andoilseeds; thereissubstantial livestock production ofbeef,pigmeat, poultry anddairy. The
share oflivestock products ingross agricultural production fellfrom nearly 56percentin1989 to
50percentin1994. Thisdecline wasduetotheelimination ofsubsidies forlivestock production and
tolower demand forlivestock products. Leading agricultural andfoodexport products arecereals
andflour, dairyproducts, livecattle, cocoa andchocolate, andwine, beerandotheralcoholic beverages.
With theexception oflivecattle andbeer, these products arealsoimported insubstantial quantities.
9. Partly reflecting changes intherelative price ofdifferent foodgroups, consequent uponprice
deregulation, thecomposition offoodconsumption inSlovakia haschanged markedly, shifting away
from livestock products. Annual percapita consumption ofmeat declined from anaverage 84kg.
intheperiod 1988-1990 to66kg.intheperiod 1992-1994. Similarly, milkconsumption inthisperiod
dropped from115litres to90litres. Consumption offruitincreased from55to63kg.;thepercapita
consumption ofpotatoes andother vegetables hasnotchanged substantially.
1GovernmentoftheSlovakRepublic,MinistryofAgriculture,"TheConceptandPrinciplesofAgrarianPolicy,"
Bratislava, July1993.
2These figures partly reflect theeffects ofdrought in1993. Even by1992, however, output haddeclined
26percentfrom its1989 level.Slovak Republic WT/TPR/S/7
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(i) Agricultural policies
10. TheState isdirectly involved inSlovak agriculture inseveral ways, including thesetting of
interventionpricesandgrantingofexportsubsidiesforsomecommodities,theprovisionofconcessionary
loansandcreditguarantees,andvarioustradepolicyinstrumentssuchasm.f.n.tariffquotas(TablesIV.3
andIV.5),preferentialtariffquotas(TableIV.4),seasonaltariffs(TableIV.6),automaticexportlicensing
andautomatic import licensing, aswellasm.f.n. andpreferential tariffs.3Inaccord withSlovakia 's
commitments under theWTO Agreement onAgriculture, variable import levies onmany agricultural
products were replaced bytariffs inJanuary 1995.
(a) Import-related policies inagriculture
11. Slovakia 'stariffs onprimary agricultural products (ISIC 111)average 8.7percentbutrange
ashighas155percent(onsome potatoes) (Table AV.1). Allagricultural tariffs arebound andare
applied attheirbound rates, asaretariffs inallother sectors. Tariff preference margins thathave
beenimplemented todateunder Slovakia 'spreferential agreements arelow.Thesource withthelowest
average preferential tariff istheEuropean Union (EU), withan8.0percentaverage, representing
anaveragepreferencemarginof0.7percent.Preferentialtreatmenttoexportsfromdevelopingcountries
applies tosome 7.4percentofagricultural tariff lines(HS1-24) under Slovakia 'sGSPprogramme,
asmall share compared tothatinother sectors (Chapter IV(2)(i)(l) andTable IV.8).4
12. TariffquotaswereestablishedbySlovakiainJanuary1995forsome24productgroups,including
many meat anddairy products, under theminimum access commitments negotiated intheUruguay
Round (Chapter IV(2)(i)(g) andTable IV.3). Tariff preferences under preferential trade agreements
apply in17ofthese product groups, withratesusually below thein-quota m.f.n. tariff rate. In13of
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, flax,sugar andpotatoes (Table IV.5); these tariff quotas were
implemented asaresult ofshortages onthedomestic market and,under thecustoms union agreement,
required theapproval oftheCzech Republic. Inaddition, tariff preferences extended bySlovakia on
3Products thatrequire export licences when exported toanydestination include some liveanimals andmeat,
dairy products, animal products usedinpharmaceuticals, some cereals andoilseeds, sugar andmolasses, raw
hides andskins, andagricultural tractors (Annex B,Decree No.167of1994). Products subject toautomatic
import licensing requirements include many agriculture andfoodproducts andtobacco andmanufactured tobacco
substitutes (Annex A,PartII,Decree No.167of1994).
4Imports from theleast-developed developing countries enter dutyfree, while imports from other eligible
developing countries facetariffs equal tozero, halfofthem.f.n. rate, orthefullm.f.n. rate,depending onthe
tariff line.
5Thepractice ofreserving portions ofanm.f.n. tariff quota forcertain trading partners has,inanother context,
been raised asanissue intheWTO Committee onAgriculture.
6Anextreme example from Table IV.3isthatofrapeseed. Them.f.n. tariff rateis70.6percentwhile the
in-quota rateforthefirst2,683 tonnes is20.0percent. However, most ofthis(2,500 tonnes) isreserved for
Poland (WTO document G/AG/N/SVK/1, June 1995). Thepreferential tariff onrapeseed from Poland is70
percentofthem.f.n. tariff otherwise applicable, i.e.,in1995 imports ofrapeseed from Poland bearatariff
of14percentonthefirst2,500 tonnes andforanyfurther shipments within the2,683 tonne limit, and49.4
percentonanyadditional shipments.WT/TPR/S/7
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some 32products, including some dairy products, fruitandvegetables, meat products andcereals,
under thevarious preferential agreements aresubject totariff quotas (Table IV.4).7
13. Slovakia usesseasonal tariffs on13fruits andvegetables, including potatoes, tomatoes, grapes
andpears (Table IV.6). Seasonal tariffs arenormally attheirpeakduring theperiod inwhich the
domestic product isbeing marketed. While thepeaktariffonmostproducts covered byseasonal tariffs
averages some 15percent, thepeaktariff onsome potatoes is155percent. During other periods,
seasonal tariffs donotexceed 4.7percent.
14. Slovakia introduced amandatory foodandbeverage certification process in1994. According
totheauthorities, thisisaninterim arrangement pending thestrengthening ofliability andconsumer
protection lawinSlovakia (Chapter IV(2)(iv)(d)).
(b) TheState Fund forMarket Regulation: intervention purchases andexport subsidies
15. TheStateFund forMarket Regulation (SFMR) isapublic agency established asanindependent
economic body.8Itsucceeded theFederal Fund forMarket Regulation, which carried outidentical
functions andactivities, uponthedissolution oftheCzech andSlovak Federal Republic (CSFR). The
main purpose oftheSFMR istosupport andprovide forthesmooth adjustment ofmanufactured
agricultural products tochanging market conditions.9Since theSFMR doesnothaveamonopoly
position, private traders remain freetoexport orimport.
16. TheSFMR Council decides onthecommodities tobesubject toregulation andontheguaranteed
(minimum reference) prices atwhich theSFMR stands ready toarrange forthepurchase ofthe
commodity fromproducers.10TheSFMR doesnotperform thepurchasing itself, butcontracts with
traders tomake theactual intervention purchases andrequires thatthecommodities sopurchased be
stored untiltheirrelease isauthorized bytheSFMR. In1995, intervention prices areineffect for
wheat, livepigsanddairy products. Intervention prices inrealterms havedeclined substantially since
1991 (Table V.2). In1993 theSFMR arranged purchases ofSk$1.32billion, 95percentofthison
crops, largely maize, potatoes andsugar beet(Table V.3). Thevalue ofintervention purchases in
1994 wasSk$1.26billion.
7Thisincludes oneproduct, poultry meat, forwhich apreference isextended toexports from theUnited
States; onsome tariff lines themargin ofpreference isashighas28percent.
8TheSFMR wasestablished bytheActontheState Fund forMarket Regulation in1991. Itwasnotified
totheGATT inGATT document L/7374/Add.8, August 1994.
9WTO document G/STR/N/1/SVK (notification under Article XVII:4(a) onState trading), July1995.
10TheCouncil consists oftheDirector oftheSFMR andrepresentatives from theMinistries ofAgriculture,
Finance andEconomy, theAntimonopoly Office, theAgricultural andTrade Chamber, theAgricultural and
Foodstuff Chamber, theSlovak Consumers 'Union, andother bodies.Slovak Republic WT/TPR/S/7
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Table V.2
Guaranteed producer prices oftheState Fund forMarket Regulation, 1991-95
(Sk$pertonne, unless otherwise indicated)
1991 1992 1993 1994 1995
Wheat forfood 3,400 3,000 3,500 3,500 3,350
Wheat forfeed 3,400 3,000 3,000 3,000 n.a.
Barley n.a. n.a. 2,900 2,900 n.a.
Milk (Sk$perlitre) 5.4 5.4 5.4 6.7a
6.0b6.70
Bulls andheifers (Sk$perkg.) 35.4 28 28 31 n.a.
Pigs(Sk$perkg.) n.a. 32c25d27 33.45
n.a. Notapplicable.
a Grade I.
b Grade II.
c Beginning November 1992
d Beginning May1992.
Source: Dataprovided bytheSlovak authorities.
Table V.3
Intervention purchases andexport subsidies oftheSFMR, 1993-94
1993 Intervention purchases 1994 Intervention purchases
Tonnes Sk$million Tonnes Sk$million
Pigs 2,825 70.6 1,000 27
Wheat forfood 16,470 60.6 171,136 595.5
Wheat forfeed 2,450 6.8 29,720 71.7
Barley 138 0.4 99,950 337.6
Maize 100,000 355.8 8,660 ...
Potatoes 100,000 307.4 n.a. n.a.
Sugar 43,891 516.4 273,655 206.9
1993 Export subsidies 1994 Export subsidies
Tonnes Sk$million Tonnes Sk$million
Cattle 23,893 149.7 1,739 7.7
Pigs 1,450 7.2 n.a. n.a.
Poultry 1,438 18.5 150 2.9
Lambs 184.4 4.7 n.a. n.a.
Powdered milkanddairy products 16,240 230.2 14,118 217.4
Eggs 40.9million eggs 6.2 60 3.8
Apple concentrate n.a. n.a. ... 2.9
Canned meat n.a. n.a. ... 15.3
Malt n.a. n.a. ... 16.6
Honey 406 0.5 780 9.4
Sugar 9,523 8.3 n.a. n.a.
Sunflower oil ... 2.2 n.a. n.a.
Starch 760 1.9 1,440 4.0
n.a. notapplicable.
... notavailable.
Source: Dataprovided bytheSlovak authorities.WT/TPR/S/7
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17. Totheextent thatstocks resulting from intervention purchases exceed theSFMR 'sdesired
levelofstocks, theSFMR mayuseexport subsidies toreduce stock levels. These subsidies arethe
difference between thedomestic purchasing price andtheexport price. In1993 theSFMR export
subsidies totalled Sk$431million, 97percentofwhich wasonlivestock products, particularly dairy
products andlivecattle (Table V.3). Thevalue ofexport subsidies in1994wasSk$280million and
thebudget for1995 isSk$164million. Slovakia, likeother developed country participants inthe
Uruguay Round, committed toreduce thevalue ofitsagricultural export subsidies by36percentand
thevolume ofitssubsidized exports by21percent. Thelargest baseoutlays, andthusthelargest
export subsidy value reduction commitments, areformilkpowder, other dairy products, andmalt;
these andother export subsidy reduction commitments arelisted inTable V.4.
Table V.4
Uruguay Round agricultural export subsidy reduction commitments
Outlays (Sk$million) Quantities ('000tonnes)
Base 1995 2000 Base 1995 2000
Beef 285 267.9 182.4 36 34.7 28.4
Pork 50 47.0 32.0 6 5.8 4.7
Poultry eggs, poultry products 179 168.3 114.6 14 13.5 11.0
Sheep meat 31 29.1 19.8 2 1.9 1.6
Milk powder 421 395.7 269.4 19 18.3 15.0
Other dairy products 378 355.3 241.9 9 8.7 7.1
Fruit, vegetables andtheirproducts 107 100.6 68.5 9 8.7 7.1
Seeds, hops 85 79.9 54.4 7 6.7 5.5
Vegetable oilfats 27 25.4 17.3 5 4.8 3.9
Sugars, sugar confectionary 80 75.2 51.2 5 4.8 3.9
Yeast 8 7.5 5.1 0.6 0.6 0.5
Beer 41 38.5 26.2 84a81.0a66.4a
Wine 60 56.4 38.4 11a10.6a8.7a
Spirits, beverages 98 92.1 62.7 64a61.8a50.6a
Starch 78 73.3 49.9 15 14.5 11.8
Malt 372 349.7 238.1 134 129.3 105.9
Cereal, flour products 288 270.7 184.3 138 133.2 109.0
a Million litres.
Source: WTO, Uruguay Round Schedule XCIII -Slovak Republic.
(c) TheState Support Fund: concessionary loans andcredit guarantees
18. Agricultural producers weresqueezed byrapidly increasing input prices andslowly increasing
output prices during the1989-to-1993 period. Asaresult ofthedeclining profitability ofthesector,
investment demand inagriculture dropped andcommercial lenders became unwilling tosupply credit
because oftheuncertain creditworthiness ofmany producers. Consequently, theshare ofeconomy-wide
gross fixed investment taking place inagriculture dropped from nearly 12.6percentin1989 to
4.4percentin1993, while economy-wide realinvestment fell10percentoverthesame period. In
response,theStateSupportFund(SSF)wasestablishedin1994tosupportrestructuringintheagricultural
sector byfacilitating investment. Thepriorities oftheSSFin1995 aretosupport modernization in
animal production (forexample, milking machinery) andintheharvesting ofcrops. TheSSFdoes
notdiscriminate between co-operatives andprivate farmers initsactivities.Slovak Republic WT/TPR/S/7
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19. TheSSFisheaded byaDirector, whoisappointed bytheMinister ofAgriculture ontheadvice
oftheSSFCouncil. TheSSFCouncil consists ofachairman andtenother members nominated by
theMinister ofFinance, theMinister forPrivatization ofNational Property, theSlovak Land Fund,
theChamber ofAgriculture andtheChamber ofForestry.11TheSSFhadabudget in1994 of
Sk$400million, entirely funded fromtheStatebudget. Itsbudget in1995isSk$1.5billion, including
Sk$100million fromtheStatebudget andotherfunds fromtheNational Property Fund, foreign credits,
andpayments onloans made inthepast.
20. TheSSFseeks tofacilitate investment intheagriculture sector through concessionary loans
andcredit guarantees, sometimes combining thetwo.Ofthe1995budget, Sk$500million isintended
forconcessionaryloans,Sk$400millionisneededforcreditguarantees,andSk$400millionisallocated
forreserves andadministrative costs. According totheauthorities, concessionary loans, serviced by
commercial banks, areextended attherateof15percent, while market interest ratesarecurrently
about 18percent. Concessionary loans areallocated onthebasis ofSSFpriorities, asnoted above,
andthecreditworthiness oftheapplicant; theloans require aminimum 30percentdown payment
onthepartofthedebtor. Credit guarantees allow debtors thatwould otherwise obtain loans onlyat
above-market rates instead toobtain them atmarket rates from commercial banks. They arethus
economically equivalent toacredit subsidy.
21. Slovakia ispreparing aFarm Credit Act,under which subsidised loans toprimary agriculture
andtheagro-food sector would beextended.
(d) Agricultural inputs
22. Prices foragricultural inputs usedbyboththeStateandnon-State agriculture sectors aremarket-
determined. Their decontrol in1990 and1991 ledtorapid price increases andaconsequent decline
inthequantities ofinputs demanded. Thereduced useofagricultural inputs, along withreduced labour
employment, caused output perhectare tofall,andthese declining yields werelargely responsible for
theoverall contraction ofagricultural output. Inaneffort tostabilize farmproduction, theGovernment
hassubsidized farmers 'purchases ofsome "yield-intensifying" inputs astemporary measures in
exceptional cases. When offered, subsidies mayequal asmuch as30percentofthemarket price of
theinput andallproducers areeligible toreceive them. In1994, subsidies ofSk$530million were
provided forthepurchase ofseeds.12
(e) Agricultural restructuring subsidies andother domestic support
23. TheGovernment hasmade subsidies available toproducers intheagriculture sector inorder
tohelpstabilize thesector andtocreate conditions foritsfurther development. Thebudget forsuch
subsidies wasSk$7.0billion in1993, Sk$7.1billion in1994, andwasexpected tototalSk$7.3billion
in1995 (Table V.5). In1993 more thanhalfofthese agricultural subsidies were directed atthe
restructuring offarming onmarginal landandatthepromotion ofafforestation andagro-tourism.
11ActNo.40/1994 ontheState Support Fund forAgriculture andFoodstuff Production.
12Data provided bytheauthorities.WT/TPR/S/7
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Table V.5
Agricultural restructuring subsidies, 1993-95
(Sk$million)
Activity orprogramme 1993 19941995
(planned)
Total budget allocated 7,000 7,143 7,260
Restructuring agricultural production insubmarginal areas 3,760 ... ...
Improvements inagro-food production 2,040 ... ...
Ecology andnewenergy sources 670 ... ...
Restructuring cattle production 380 ... ...
Research andextension programmes 150 ... ...
Restructuring theforestry industry 500 320 ...
Support forwater supply activities 300 200 ...
... Notavailable.
Source: OECD (1994), Agricultural Policies, Markets andTrade intheCEECs, NIS,Mongolia andChina, 1994; andSlovak authorities.
24. Agricultural research isperformed bytheResearch Institute ontheEconomics ofAgriculture
andFoodstuffs, located inBratislava. TheInstitute isa"State feeorganization" (theState paysfees
totheinstitute foritsservices) operating onfeesfromtheStatebudget andongrants designed tosupport
scientific andtechnical research.
25. Slovakia 'sbasetotalAggregate Measure ofSupport (AMS) resulting fromtheUruguay Round
isSk$12,675 million, which ithascommitted toreduce toSk$10,140 million by2000.13
(f) Tax-related measures inagriculture
26. Thevalue-added taxrateonagricultural production is6percent,compared tothe25percent
ratethatisgenerally applied. In1993, theincome taxonentrepreneurs whose income fromplantand
animal production represents more thanhalfoftheirtotalincome wasreduced from 40percentto
20percent. Petroleum products usedinagricultural production arenotsubject tothevalue added
andexcise taxes thatwould otherwise apply. Newagricultural businesses aregranted afive-year tax
exemption. Thelandtaxwasreduced in1993 from 1.25to0.75percentofthelandvalue, with
permanent grasslands taxed atalower rate. Private farmers whose main employment isfarming are
exempt, until1997, from thistaxonlandthathasbeenfarmed since 1993.
(ii) Privatization, landtenure, andagricultural restructuring
27. Restructuring oftheagriculture sector wassetinmotion in1991and1992bytheCSFR with
theadoption oftheLandLaw, theLarge Scale Privatization LawandtheTransformation Law.14Under
these laws, collective farms (which accounted forthree-quarters ofSlovak farm landinthe1980s)
were converted intoother types oftenure based onprivate ownership.
13WTO, Uruguay Round Schedule XCIII -Slovak Republic, PartIV.
14OECD (1994).Slovak Republic WT/TPR/S/7
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28. Thefarming sector inSlovakia consists ofco-operatives, Statefarms, andprivate farms. Each
ofthese landtenure sectors existed under thecentral planning system, buttheirsizes andrelative
importance havechanged inrecent years. While about 5percentofagricultural landwasprivately
farmed inthe1980s15,13.5percentoflandwasprivately farmed asof1994 and30percentofthe
totalvalueofagriculturalproductioniscurrentlyfromprivatefarms.Landnewlyheldbyprivatefarmers
wasformerly inState farms; theprivatization ofthese isscheduled tobecompleted in1995. State
farms comprised 22.8percentofagricultural landasof1994 andcontributed 15percentoftotal
agricultural production; many oftheremaining Statefarms areoriented toward agricultural research.
Former collective farms, which wereoften 5,000 to6,000 hectares insize,havebeensubdivided and
transformed intoshareholder cooperatives, usually consisting of500to1000hectares.16Cooperative
farms comprised 63.6 percentofagricultural landasof1995 andaccounted for48percentof
agricultural production.
29. Therestitution offarmlandtopre-1948 landowners under alawpassed inMay1991hasslowed
theprivatization andrestructuring process. Restitution claims arelimited to150hectares perperson
and,according totheauthorities, most claims areforsmall landamounts ofabout 5hectares. In
May1993 only150,000 hectares, 7percentofthetotalclaims, hadbeenreturned toowners, and
attheendof1993some 100,000 applications wereoutstanding. According totheauthorities, thepace
ofprivatization ofagricultural landslowed in1994asaresult ofashortage ofinvestment. TheSlovak
Land Fund isresponsible forpreparing andcompleting theprivatization ofagricultural enterprises
anditalsomanages State farms andforest land.
30. Changes inlandholding have hadanoticeable impact onthesize-distribution offarms
(Table V.6). Thenumber ofverylarge farms (exceeding 2,500 hectares) declined from302in1989
to195in1993 andthenumber ofsmall, medium andlarge farms allincreased; thenumber offarms
between 501and1,000 hectares, forexample, increased from only30in1989 to192in1993.
Table V.6
Distribution offarms, bysize,inSlovakia, 1989-94
YearFarm size(hectares)
under 500 501to1,000 1,001 to1,500 1,501 to2,000 2,001 to2,500 over2,500
1989 1 30 91 101 105 302
1990 7 44 113 116 118 282
1991 46 159 201 164 115 213
1992 55 186 212 168 115 210
1993 55 192 226 169 115 195
1994 108 264 564a221
a In1994 there were 564farms of1,001 to2,500 hectares.
Source: Dataprovided bytheSlovak authorities.
15TherightoflandownershipwasnotabolishedunderthecentralplanningsystemintheformerCzech oslovakia.
16Individual shareholders holddeed toaparticular plotoflandintheco-operative andarefreetoremove
thislandfrom theco-operative.WT/TPR/S/7
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31. According totheauthorities, private sector production shares varywidely bycommodity.
In1994onlysome 10percentofcereals andmilkwereproduced bytheprivate sector, butmore than
halfofpotatoes, fruitandvegetables were privately produced.
(iii) Agricultural commodities
(a) Crops
32. Crops production accounts forarising share ofthevalue ofagricultural production, withthis
share equal to50percentin1994, compared toanaverage of44percentduring theperiod 1988-1990.
Actual realproduction value, however, by1994haddeclined bymore than20percentfromits1985-
1989average (Table V.7). Thispartly reflected thesmaller landareabeing sown, buttheoverriding
cause wasa20percentreduction intherealvalue ofproduction perhectare overthisperiod. This
decrease inyields hasresulted fromrapidly increasing input prices andslowly increasing output prices
fortheagricultural sector asawhole, asdescribed above.
Table V.7
Developments inthecrop sector, 1985-94
Average
1985-891990 1991 1992 1993b1994b
Production valuea(Sk$million) 22,510 20,303 21,480 18,340 17,258 17,700
Area sown ('000hectares) 1,510c1,510 1,509 1,487 1,484 1,484
Realproduction value perhectare (1985-89 =100) 100 90.2 95.5 82.7 78 80
a Constant 1989 prices.
b Preliminary data.
c Average for1986-89.
Source: Statistical Office oftheSlovak Republic.
33. Wheat accounts forabout halfofthevalue ofcrops produced inSlovakia. Wheat production
in1994, equal tojustover2million tonnes, wasnearly equal totheaverage production during the
period 1985-89; although yields havedeclined, theareaplanted towheat hasrisensubstantially since
1992 (Table V.8). During 1993, intervention purchases ofwheat arranged bytheSFMR totalled
19,000 tonnes atacostofSk$61million; in1994, 201,000 tonnes were purchased, atacostof
Sk$667million. Slovakia produces predominantly common wheat.
34. Slovakia 'simport tariff ondurum wheat is6.6percent,andisbeing reduced to3.0percent
by1January 2000asaresult ofUruguay Round commitments. Unlimited quantities ofimports from
theEuropean Union mayenter dutyfree. Them.f.n. tariffs onother types ofwheat range from24.4
to29.3percent,andaretofalltoarange of21.2to25.5percentby2000; there arenopreferences
applied. Slovakia doesnotextend GSPbenefits toimports ofeither durum orother wheat from
developing countries.17
17Imports fromleast-developed developing countries receive duty-free GSPtreatment inallproduct categories
(Chapter IV(2)(i)(l)).Slovak Republic WT/TPR/S/7
Page 85
Table V.8
Production andtrade ofwheat, 1985-94
Average
1985-891990 1991 1992 1993 1994
Production ('000tonnes) 2,120 2,083 2,124 1,697 1,528 2,145
Yield (tonnes perhectare) 5.2 5 5.2 4.8 3.9 4.8
Area sown ('000hectares) 409 417 407 354 397 443
Guaranteed producer pricea(Sk$pertonne) n.a. n.a. 3,400 3,000 3,000b3,500b
Netexports ('000tonnes) 53.3c-3.4 174.8 204.6 -134.1 100
a Asof1January.
b Aseparate price forfeedwheat wasintroduced forthe1993 cropyearandsetatSk$3,000 for1993 and1994.
c Figure for1989 only.
Source: Statistical Office oftheSlovak Republic.
35. Slovakia hasaUruguay Round commitment toreduce export subsidies oncereals andflour
products.18Thebaseoutlay levelforthisproduct group isSk$288 million, withacommitment not
toexceed Sk$184.3 million by2000. Thebasequantity is138,000 tonnes, nottoexceed 109,000
tonnes by2000. Noexport subsidies were paidonthese products during 1993 or1994.
36. Percapita consumption ofpotatoes hasbeenincreasing inSlovakia, perhaps linked tothedecline
inconsumer incomes, andpotatoes form animportant partofthetypical Slovak diet(Table V.9).
Production, however, hasdeclined fromitsaverage levelduring thelate1980s andin1994, asaresult
ofdrought, dropped sharply. Slovakia imports about 20percentofitsdomestic potato consumption.
Table V.9
Production andtrade ofpotatoes, 1986-94
Average
1986-891990 1991 1992 1993 1994
Production ('000tonnes) 840 788 669 658 825 500
Percapita consumption (kg) 75 86 91 78 83 86
Guaranteed producer price (Sk$pertonne) n.a. n.a. 3,100 n.a. 3,000bn.a.
Netexports ('000tonnes) -230a-180 -280 -195 -23 -198
n.a. Notapplicable.
a Figure for1989 only.
b During theperiod 18-30 November foravolume of100,000 tonnes.
Source: Statistical Office oftheSlovak Republic.
37. Thetariffonpotato imports is155percent. Under itsUruguay Round commitments, Slovakia
isreducing thistariff to100percentby2000andhasintroduced anm.f.n. tariff quota, withimports
atthereduced tariff rateof50percentlimited to9,200 tonnes (Table IV.3). Preferences aregiven
to1,000 tonnes ofimports from theEU(which aresubject toatariff ofeither 9or10percent,
18This commitment refers toHS1001-1005, 1101-1105, 1902 and1905.WT/TPR/S/7
Page 86Trade Policy Review
depending onthetariff lineunder which theyenter) andto2,000 tonnes ofimports from Hungary
(atatariff equal to70percentofthein-quota m.f.n. rate,i.e.,35percent). Slovakia reserves these
quantities forthepreferential suppliers, andonlytheremaining 6,200 tonnes ofthem.f.n. tariffquota
areopentonon-preferential suppliers.19Seasonal tariffs areapplied, withazerodutyineffect from
1January until15Mayanda10percentdutyineffect from 16Mayuntil30June.
38. Asaresult ofthedecreased production in1994andaconsequent domestic shortage, Slovakia
applied atemporary tariff quota lasting forseveral months andending inDecember 1994. Thetariff
onpotato imports wasreduced tozerofor110,000 tonnes ofimports fromallsources during thisperiod.
Aslowseasonal tariffs areineffect during thefirstsixmonths ofthecalendar year,itwasnotnecessary
tocontinue thisspecial tariff quota into1995. Bythetimehightariffs again tookeffect inJuly1995,
production hadreturned tonormal levels andthespecial tariffquota wasnotrenewed. Thistemporary
tariff quota made useofaprovision intheCzech-Slovak customs union agreement thatallows either
party, withtheagreement oftheother, totemporarily reduce tariffs forapre-determined quantity of
imports ofaproduct inshort supply (Chapter IV(2)(i)(g)).20
(b) Livestock products
39. Thepercapita consumption ofmost livestock products under theprevious central-planning
régime washighincomparison withother economies ofsimilar income levels. Price decontrol and
other market reforms ledtosubstantially higher consumer prices forthese products while, atthesame
time, abroader range ofalternative foods became available toconsumers. Asaresult, percapita
consumption ofmeat declined 23percentfrom thelate1980s to1994; butter consumption fell
38percentandfluidmilkconsumption wasdown by30percent(Table V.10). Thefallinthequantity
ofmeatdemanded isreflected ina36percentcontraction intherealvalue ofdomestic output from
1985-89 to1994.
40. Tariffs onimports oflivestock products areamong thehighest ofallproducts inSlovakia.
Thesimple average ofm.f.n. tariffs forliveanimals (HS01)is19.5percent.21Tariffs onmeatproducts
(ISIC 3111) average 29.9percentandthose ondairy products (ISIC 3112) average 27.4percent.
Slovakia established several tariff quotas under theWTO Agreement onAgriculture, including inthe
areas ofbovine meat; swine; poultry meat; butter; andyogurt (Table IV.3). Portions ofsome m.f.n.
tariffquotas arereserved forpreferential suppliers, withmore thanone-third ofthem.f.n. tariffquota
being reserved insome cases (sheep andsheep meat; dried meatandedible meatoffal; andmilkand
cream). Comparatively fewtariffpreferences aregranted andGSPtreatment isgiven toasmall share
19WTO document G/AG/N/SVK/1, June 1995.
20Theother customs union member does notnecessarily change itstariff.
21Theaverage tariff of19.5percent, 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" toeach tariff 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.Slovak Republic WT/TPR/S/7
Page 87
oftariff linesincomparison toother industries (Table IV.8).22Where preferences exist, thevolume
ofimports isoften restricted bypreferential tariff quotas (Table IV.4).23
Table V.10
Developments inthelivestock sector, 1985-94
Average
1985-891990 1991 1992 1993 1994
Production value (Sk$million, 1989) 28,068 27,973 23,223 20,160 18,180 17,938
Cattle forslaughter 5,777 58,899 5,802 4,817 4,772 3,468
Pigsforslaugher 7,170 7,513 6,568 6,264 5,884 5,808
Milk 8,933 8,640 6,869 5,988 5,465 5,196
Percapita consumption (kg)
Meat (excluding fish) 81a84 77 70 65 62
Butter 6.9a6.4 6.3 4.6 4.1 4.3
Milk 121a108 99 96 88 85
Exports
Livecattle (US$ million) ... ... ... ... 43.3 23.2
Dairy products (US$ million) ... ... ... ... 47.6 36.8
Beefandveal('000tonnes) ... ... 74.6 25 23.5 5.0
Imports
Dairy products (US$ million) ... ... ... ... 48.6 24.3
n.a. Notavailable.
a Average for1986-89.
Source: Statistical Office oftheSlovak Republic.
(3) Mining, Quarrying andEnergy
41. Many ofSlovakia 'skeyindustries, suchasironandsteel, arehighly energy-intensive. Slovakia,
however,produceslittleofitsownenergy,andsome90percentofprimaryenergysourcesareimported.
Theability ofmany manufacturing industries tocompete oninternational markets thusdepends on
theiraccess toforeign energy supplies atcompetitive prices.
42. Governmentpricecontrolscontinuetobeappliedequallytoimportedanddomesticallyproduced
coal. Theauthorities donotforesee theliberalization ofcoalprices inthenearfuture. Most other
energyproductsarealsoprice-controlled,alwayswithequaltreatmentofdomesticandimportedproducts.
With respect toelectric power andgas,prices arecontrolled forhousehold consumption while prices
forindustrial users arenegotiated withtheproviders. Prices ofalloilproducts arecontrolled, with
theexception ofgasoline andpetroleum, forwhich onlyprice ceilings areinforce.
22Forexample, theaverage preferential tariffs onmeat products range from 26.1percentforSlovenia (an
average preference margin of3.8percent) to29.9percent(nopreferences) forEFTA. Theaverage preferential
tariffsondairyproductsrangefrom22.3percent(apreferencemarginof5.1percent)fortheEUto27.4percent
forEFTA andRomania (Table AV.1).
23Livestock products onwhich there arepreferential tariff quotas include butter, cheese andmeat ofswine.WT/TPR/S/7
Page 88Trade Policy Review
43. According totheauthorities, enterprises thatprovide energy andgas,which areconsidered
tobestrategic sectors, arenotscheduled forprivatization (Chapter IV(5)(i)).24
(i) Themining andquarrying sector
44. Themining andquarrying sector (ISIC 2)inSlovakia accounts forabout 1percentofGDP
and1percentofemployment. Imports ofmining products, however, comprised some 14percent
oftotalmerchandise imports in1994, andmake upabout three quarters ofdomestic consumption.
45. Tariffsarelowthroughoutthesector.Them.f.n.tariffsaverage0.3percentandnorateexceeds
5percent(Table AV.1). Under Slovakia 'spreferential tradeagreements, tariffpreferences aregiven
onimports ofabroad range ofproducts within thesector, butwithconsistently lowm.f.n. tariffs these
preferences areunlikely tohavecaused much trade diversion. Theimport surcharge applies onlyto
theproducts oftwosmall industries (ISIC 2903, saltmining, and2909, mining andquarrying, n.e.s.)
andeventheimports ofproducts inthese categories arealmost always exempted.
46. However, Slovakia hasnon-automatic import licensing requirements inplace oncoalinorder
toprotect thedomestic brown coalindustry butalso,according totheauthorities, forenvironmental
reasons. Thismayhaveasubstantial trade-restricting effect. Imports oflignite, aproduct ofbrown
coal, arelimited to500,000 tonnes annually andthisamount is,according totheauthorities, below
demand. Thecriteria involved ingranting import licences forcoalareprice, sulphur content (for
environmental reasons) andwhether thecountry ofexport hasexisting financial claims onSlovakia.
According totheauthorities, themaximum quantities setforblack coalexceed domestic demand and
there isnodomestic production ofblack coal.25Coalforcokeislimited to2.8million tonnes and
black coalforenergy production islimited to2.4million tonnes annually (Table IV.9).
47. In1994, theStatesubsidized coalmining firms'losses arising fromtheproduction ofcertain
types ofbrown coalforpublic sector use; thesubsidies totalled Sk$125 million. Similar subsidies
arebeing made in1995andareforecast tototalSk$110million. According totheauthorities, there
isnoother State assistance totheindustry.
48. Todate,tenenterprises havebeenprivatized inthecoalmining industry. Coupon privatization
wasusedinthecaseoffourenterprises thatwere, intotal, valued atSk$228million, while six
enterprises, valued atSk$2,058 million, wereprivatized bystandard methods.26Some 15enterprises,
valued atSk$7,224 million, remain tobeprivatized.
(ii) Primary energy sources
49. In1992 domestic annual coalconsumption wasequal to10.2million tonnes, while domestic
production was3.7million tonnes. Theauthorities expect consumption todecline to6.8million tonnes
24TheSlovak Cabinet, inJune1995, barred thesaleofanyshares of30strategic companies, including those
intheenergy andpetroleum sectors (Bureau ofNational Affairs, "Privatization: Slovak Government Announces
Plans toEndPrivatization Using Vouchers," Eastern Europe Reporter, 3July1995).
25Inthisregard, itshould benoted thatthenon-automatic import licensing lististhesame asthatofthe
Czech Republic.
26Standard methods include direct sales andmanagement buy-outs.Slovak Republic WT/TPR/S/7
Page 89
by2000andto5.5million tonnes by2010. Domestic production isexpected tobeconstant, andcoal
imports arethusexpected todecline.27
50. Natural gasaccounted foronequarter ofSlovakia 'sprimary energy consumption in1992.
Theauthorities expect thisshare torisetosome 35percentby2010 asaresult ofrapid increases in
demand fromhouseholds, service industries andsmall-scale manufacturing. Asof1992, 96percent
ofSlovakia 'snatural gasconsumption wasimported from theformer Soviet Union.
51. Slovakia imports virtually allofitscrude oilfrom former Soviet Union countries. Ajoint
stock company, Slovnaft, istheonlycrude oilrefiner nowoperating inSlovakia, although according
totheauthorities entry intothissector isnotrestricted andtheimportation ofrefined crude oilproducts
isnotrestricted.ThepurchaseofBenzinol,aState-ownedgasolinedistributor,bySlovnaftwasapproved
bytheSlovak Antimonopoly Office inMay1995. Thecombined national share ingasoline distribution
ofthetwoenterprises isexpected toequal 80percent.28
52. Electricity consumption dropped bysome 10percentfrom 1989 to1992, withdeclines of
over30percentinelectricity usebyindustrial enterprises andof20percentinagricultural useresulting
from theeconomic contraction butalsofrom more efficient useofelectricity. During thisperiod,
however, electricity usebyhouseholds increased bysome 10percent, toaccount for18percentof
totalelectricity use.There arethreemajor means ofelectricity generation usedinSlovakia: thermal,
which accounts forsome 40percentofthetotal, nuclear (50percent) andhydro (10percent). In
1993 some 5percentofelectricity wasimported.
(4) Manufacturing (Table AV.1)
53. Manufacturing activity hasdropped sharply since thestartoftheeconomic transition, butthe
sector continues toplayacentral rôleintheSlovak economy. Trade policy hasanimportant bearing
onthisrôle. Theoutput ofmanufacturing industries in1993 waslessthanhalftheiroutput in1989
(Table V.11).29Thissevere contraction began withthecollapse ofexport markets toformer Council
forMutual Economic Assistance (CMEA) partners andwasintensified bythegeneral lossofpurchasing
power inthese countries astheythemselves wentintoeconomic transition, andbytheinitial stages
oftheconversion ofarmament industries. Industrial contraction wasparticularly greatinthose Slovak
industries thatexported mainly toother CMEA countries, including some textile, clothing andleather
industries,machineryandequipment,transportequipment,andindustrieslinkedtoarmamentproduction.
27Slovak Republic Ministry ofEconomy, "The Slovak Republic 'sEnergy Concept Until theYear 2005,"
June 1993.
28Bureau ofNational Affairs, "Slovak Refiners willhave Dominance inGasoline Filling Station Sector,"
Eastern Europe Reporter, 3July1995.
29Data for1993 indicate thatmanufacturing accounted forsome 26percentofGDP. However, there is
notime series onGDP formanufacturing, which iscombined withother industrial sectors inavailable data.WT/TPR/S/7
Page 90Trade Policy Review
Table V.11
Production bymanufacturing industries (ISIC 3),1989-94
Share of
manufacturing
output, 1993
(Percent)1989 1990 1991 1992 1993 1994a
Index ofindustrial production (1988=100)
Manufacturing Sk$406 bn. 99.7 95.5 70.9 59.8 48.7 ...
Food products, beverages andtobacco 17.9 101.8 102.4 85.2 68.5 51.5 ...
Textiles andtextile products 5.3 102.5 103.3 64.8 58.2 47.7 49.8
Leather andleather products 2.1 101.6 102.1 60.1 49.0 35.6 ...
Wood andwood products 1.8 101.6 95.7 71.0 57.6 46.8 ...
Pulp, paper &paper products; publishing &printing 5.5 103.4 105.0 91.3 88.3 77.4 ...
Coke, refined petroleum products andnuclear fuel 9.2 99.2 80.7 74.4 63.4 36.6 44.5
Chemicals, chemical products andman-made fibres 9.2 101.2 96.3 63.0 62.9 59.3 63.0
Rubber andplastic products 3.8 101.4 101.1 74.7 72.0 65.3 ...
Other non-metallic mineral products (inc.glass) 4.9 101.9 96.0 66.1 61.8 56.5 ...
Basic metals andfabricated metal products 19.0 101.2 101.0 81.1 76.6 73.2 ...
Machinery andequipment, n.e.s. 8.5 89.1 85.2 53.7 35.0 26.6 ...
Electrical andoptical equipment 5.3 103.9 99.1 63.5 48.8 43.6 ...
Transport equipment 4.6 102.6 95.3 63.0 44.6 36.6 ...
Manufacturing, n.e.s. 2.8 104.8 104.1 71.9 68.0 58.4 ...
... Notavailable.
a Preliminary data.
Note: Based onoutput ofindustrial enterprises with25ormore employees.
Source: WTO Secretariat calculations based ondataprovided bytheStatistical Office oftheSlovak Republic.
54. Thecontractioninmanufacturingalsowasexacerbatedbytheearlyeffectsofeconomictransition
inSlovakia itself. Theloosening ofimport restrictions, forexample, forced Slovak manufacturers,
many ofthem newly privatized, tofacegreater import competition justastheywere responding to
thelossofexport markets. However, trade liberalization, foreign exchange liberalization, price
decontrols, andother reforms created opportunity aswellasadjustment pressures. By1994,
manufacturing exports hadexpanded andwereamajor contributing factor toSlovakia 'sstrong economic
growth.
55. Slovakia 'simport policies formanufactured products are,withtheimportant exception offood
manufactures, relatively liberal. Them.f.n. tariffs onmanufactured products average (onanunweighted
basis) 8.3percentacross thesector, butlessthan6percentwhen food, beverage andtobacco products
areexcluded. Tariffs onmanufactures are,however, highly escalatory; theyaverage 1.5percent
onproducts atthelowest stage ofprocessing, 6.0percentonsemi-processed manufactures and
10.0percentonfullyprocessed manufactured imports. Thetemporary 10percentimport surcharge
isapplied ononlyabout 15percentofmanufacturing imports, implying anaverage applied surchargeSlovak Republic WT/TPR/S/7
Page 91
rateonimported manufactures of1.5percent.30However, since thesurcharge isapplied primarily
onhighly processed goods, itsexistence exacerbates tariff escalation.
56. Margins oftariff preference forimported manufactured products resulting from Slovakia 's
preferential trade agreements aregreater thanthose foragricultural ormining products. Theaverage
preferential tariff onimported manufactures from theEU,forexample, is5.5percent, anaverage
preference margin of2.8percentage points (Table AV.1). Nevertheless, because m.f.n. tariffs are
moderate andbecause preferential agreements areinplace withSlovakia 'smajor tradepartners, these
preferences arenotlikely tocause substantial changes inthesources from which Slovakia imports;
noristhislikely tochange aslarger preference margins areimplemented overthenextseveral years
(Chapter IV(2)(iii)).
(i) Food products, beverages andtobacco (ISIC 31)
57. Slovakia 'sfoodprocessing, beverages andtobacco industry accounted forsome 18percent
ofmanufacturing output in1993. Realoutput intheindustry fellby48percentduring theperiod 1988
to1993. Among thelargest declines inrealoutput within thesector were meatprocessing, witha
decline of57percent, andbutter (56percent), while much smaller ornodeclines tookplace insugar
refining (9percent), beer(16percent)wheat flour(16percent)anddistilling andspirits (nochange).
Slovakia isanetimporter oftheproducts ofthissector, with1994 imports equal toUS$417 million
andexportsequaltoUS$283million;in1994theseproductsaccountedfor4.4percentofmanufacturing
exports and7.7percentofmanufacturing imports (Table V.12).
58. Thesector isthemostheavily protected intheeconomy (Table AV.1). M.f.n. import tariffs
average 19.1percent, more thantriple theaverage tariff of5.8percentintherestoftheeconomy.
Tariffs areparticularly highinmeat processing (ISIC 3111), where theyaverage 29.9percentand
range upto232.7 percent; indairy products (ISIC 3112), witha27.4percentaverage; insugar
refining (ISIC 3118), a50.3percentaverage; indistilling andspirits (ISIC 3131), a45.7percent
average; andinwine (ISIC 3132), a70.1percentaverage. Inaddition tothem.f.n. tariffs, the
temporary import surcharge isapplied on44percentoftheimports ofproducts inthesector, arelatively
highshare, andtheapplied rateofthesurcharge averages 4.4percent.31When theimport surcharge
isincluded, average m.f.n. tariff protection inthefoodproducts, beverages andtobacco sector equals
23.5percent, almost fourtimes theaverage tariff of6.4percentinallother sectors. Tariffs inthe
sector arealsohighly escalatory, averaging 1.1percentforgoods inthelowest stage ofprocessing,
19.2percentforsemi-processed goods, and22.7percentforfullyprocessed goods (Table V.13).
59. Tariffpreferencesdonotappeartooffermuchrelieffromthishighprotection.Whilepreferential
tariffratesacross alltarifflinesaverage about halfofm.f.n. rates, inmostfoodprocessing, beverages
andtobacco industries average preference margins (onasimple average basis) aresmall. Forexample,
theaverage preference margin forimports ofproducts inthese industries fromtheEUis1.9percent
(Table AV.1).
30Theauthorities expect thatthesurcharge willbeeliminated bymid-1996 unless there isasubstantial
deterioration inSlovakia 'sbalance ofpayments position.
31Across allmerchandise imports thesurcharge averages 1.3percent, based onsurcharge revenue data.
Outside offood, beverages andtobacco, thesurcharge averages only0.7percent.WT/TPR/S/7
Page 92Trade Policy Review
Table V.12
Shares ofmanufacturing value added, exports andimports, byindustry, 1993 and1994
Share of
manufacturing value
added, 1993aShare of
manufacturing
exports, 1994Share of
manufacturing
imports, 1994
Manufacturing Sk$80.5 billion US$6,494 million US$5,423 million
Food products, beverages andtobacco 13.5 4.4 7.7
Textiles andapparel 9.3 8.6 5.0
Leather, leather products andfootwear ... 2.1 0.9
Wood andwood products ... 4.6 1.1
Pulp, paper &paper products; publishing &printing 5.9 4.7 3.4
Coke, refined petroleum products andnuclear fuel 4.9 5.1 9.6
Chemicals, chemical products andman-made fibres 9.2 13.6 17.4
Rubber andplastic products ... 3.8 2.0
Other non-metallic mineral products (inc.glass) ... 4.7 2.0
Basic metals andfabricated metal products 12.4 24.0 11.3
Machinery andequipment, n.e.s. 12.2 7.5 17.1
Electrical andoptical equipmentb... 6.4 13.4
Transport equipment 4.4 8.9 7.0
Manufacturing, n.e.s. ... 1.7 2.2
... Notavailable.
a Preliminary.
b Trade dataforthiscategory includes professional andscientific equipment, which in1994 accounted foronequarter ofimports.
Note: Based onoutput ofindustrial enterprises with25ormore employees.
Source: WTO Secretariat calculations based ondataprovided bytheStatistical Office oftheSlovak Republic.
Table V.13
Tariff escalation andtrade infoodmanufacturing
(PercentandUS$million)
SectorLevel of
processingAverage m.f.n.
tariff (percent)Surcharge
(percent)Imports
(US$ million)Exports
(US$ million)
Food, beverages andtobacco Low 1.1
4.4a55.2 40.2
Medium 19.2 20.2 9.5
High 22.7 341.1 233.8
Food products Low 0.1
3.9a37.2 30.3
Medium 13.7 19.6 8.9
High 17.4 209.6 149.4
Other foodproducts andanimal feeds Low 7.4
3.1a18.0 9.8
Medium 60.0 0.6 0.5
High 12.7 44.9 9.6
Beverages High 56.6 5.5 50.3 48.1
Manufactured tobacco High 38.8 9.0 36.2 26.7
a Average forproducts atallprocessing levels inthesector.
Note: Levels ofprocessing areasdefined bytheWTO Secretariat.
Source: WTO Secretariat calculations based ondataprovided bytheSlovak authorities.Slovak Republic WT/TPR/S/7
Page 93
60. Current preferences aresubstantial, however, forproducts ofthedistilling andspirits industry
(ISIC 3131). Them.f.n. tariffs average 45.7percent,butpreferential tariffs average 19percentfor
imports fromtheEU,12.8percentforEFTA, and33percentforHungary andPoland. Most imports
oftheproducts ofthisindustry come from theCEFTA partners, theCzech Republic, Hungary and
Poland.
61. Althoughnostudiesareavailableontheeffectiveprotectionforthemanufactureoffoodproducts,
beverages andtobacco, thehighnominal protection ofthesector combined withtherelatively low
protection ofother sectors (implying thatcostsofintermediate inputs arenotgreatly distorted) suggests
thateffective protection isprobably veryhigh. Theimpact ofsustained higheffective protection is
topulllarger amounts ofproductive resources -primarily labour andcapital -intothesector thanis
economically efficient.
(ii) Textiles andclothing
62. Textiles andclothing (ISIC 321and322)account forsome 9percentofmanufacturing value
added and9percentofmanufacturing exports (Table V.12). Until1990thesector 'soutput washeavily
directed toward CMEA partners, withsome 90percentofexports -equal tonearly halfoftotal
production -soldtotheSoviet Union. Thus, withthedropineconomic activity inCMEA countries,
thesector contracted sharply beginning in1991, andin1993 thetotaloutput ofthesector wasless
thanhalfits1990peak(Table V.11); employment intheindustry dropped from70,000 toabout 45,000
during thisperiod. Production increased 4.4percentin1994despite acontinued decline inemployment
of4.1percent. Exports towestern markets havebegun toexpand afteraperiod ofdecline thatthe
authorities believe wascaused bythedissolution oftheCSFR andtheresulting necessity, forSlovak
producers, offinding newtradecontacts, andperhaps byprivatization andother adjustment pressures.
Netexports oftextiles wereUS$142 million in1994andnetexports ofclothing wereUS$143 million,
together equivalent to2.2percentofGDP. According totheauthorities, theState hasnotprovided
financial support forstructural adjustment inthissector.
63. Slovakia 'sm.f.n. import tariffs average 7.3percentfortextiles and10.5percentforclothing.
Tariffs ontextile goods average 0.2percentinthelowest level ofprocessing, 6.4percenton
semi-processed textiles and9.6percentonfullyprocessed textiles (Table V.14). Asallclothing is
considered fullyprocessed, thehigher tariffs onclothing combined withthetariffescalation intextiles
implies anevenstronger pattern oftariffescalation when textiles andclothing areconsidered asasingle
sector. Tariff escalation isalsoreinforced bythetemporary import surcharge, ineffect since early
1994, which isapplied atarateof10percentonfinalgoods. Including theimport surcharge, tariffs
onclothing average 17.5percent.32
32AlthoughallclothingisconsideredtobefullyprocessedforthepurposesoftheWTOSecretariatclassification
ofstages ofprocessing, some 30percentofthevalue ofclothing imports wereexempt from theimport surcharge,
leading toa7.0percentaverage surcharge rateforclothing. Including theimport surcharge, tariffs ontextiles
average 10.0 percent. Surcharge averages fortextiles bystage ofprocessing arenotavailable but,because
thesurcharge isapplied onfinalgoods, which arenormally fully processed, thistoowould exacerbate thetariff
escalation already inplace under them.f.n. tariff structure.WT/TPR/S/7
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Table V.14
Tariff escalation andtrade intextiles andclothing
(PercentandUS$million)
Sector Level ofprocessingAverage m.f.n. tariff
(percent)Surcharge
(percent)Imports
(US$ million)Exports
(US$ million)
Textiles Low 0.2
3.4a5.8 3.4
Medium 6.4 139.6 262.8
High 9.6 80.3 102
Clothing High 10.5 7 47.3 190.6
a Average forproducts inthetextiles sector.
Source: WTO Secretariat calculations based ondataprovided bytheSlovak authorities.
64. Slovakia offers substantial tariff preferences fortextiles andclothing tosome ofitstrading
partners under preferential arrangements; these preferences mitigate theimport protection described
above. Compared totheaverage m.f.n. tariff fortextiles of7.3percent, textile imports from the
EU,EFTA andPoland faceaverage tariffs of3.9percent; preference margins forimports from
Hungary andRomania aresomewhat smaller butimports fromSlovenia faceanaverage tariff ofonly
0.5percent(Table AV.1).33Inclothing, where theaverage m.f.n. tariff is10.5percent, imports
fromtheEUandEFTA faceaverage tariffs of7.3percent; theaverages faced byimports fromHungary
(9percent), Poland (7.5percent) andRomania (7.7percent) aresomewhat higher. Thetariff rate
onallclothing imports fromSlovenia iszero.34Preferential ratesarescheduled todecline further during
thenextfewyears. Slovakia offers preferences under itsGSPscheme onmany textiles products but
onfewclothing products (Table IV.8).
65. Exports ofsome Slovak textiles andclothing products arerestricted bybilateral agreements
negotiated under theauspices oftheMultifibre Arrangement (MFA) andunder theEurope Agreement
withtheEuropean Union (EU).35TheMFA quotas areapplied intrade withCanada, Norway and
theUnited States (Table V.15). Asaresult oftheWTO Agreement onTextiles andClothing, the
ratesofgrowth ineffect attheendof1994serve asthebasegrowth rateforthese quotas. Intheinitial
three years ofthetransition, thebasegrowth ratesarebeing increased by16percent,sothataquota
thatwould havegrown atanannual rateof1percentwill,during 1995, 1996 and1997, increase at
anannual rateof1.16percent. Inmany cases, theAgreement alsoleadstoconsiderably moreflexibility
forexporting countries interms ofadministering thequotas; Article 2.16oftheAgreement removes
limitationsontheexportingcountry'sflexibilitytocombineunusedquotasfromearlieryears(carryover),
quotas from different product groups (swing), andfuture quotas (carry forward).36
33In1994, nearly 90percentofSlovak imports oftextiles products were imported from countries withwhich
Slovakia hasapreferential agreement (including theCzech Republic).
34Some 70percentofclothing imports in1994 were from partner countries withwhich Slovakia hasa
preferential arrangement.
35Although thecriteria fortheinternal allocation oftextile export quotas arenotpublished, according tothe
authorities theallocations arebased ontraditional trade flows andexport prices, andsome quotas arereserved
fornewexporters.
36ThequotasareadministeredbytheMinistryofEconomy,andexportlicencesarerequiredfortheexportation
ofthese products totherestricted markets.Slovak Republic WT/TPR/S/7
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Table V.15
Slovakia 'stextiles andclothing export restrictions under theMFA
Importer Product description1994
restraint
level (pcs.)GrowthaSwingbCO/CFcCombined flexibilityd
1994 1995
Canada Men'swoven suitsand
ensembles71,212 (4.0)
4.647.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Trousers, overalls andshorts 208,998 (6.0)
6.967.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Combed wool &wool blend
fabric86,655 kg. (3.0)
3.487.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Cotton terry towelling toilet
andkitchen linen5,805 kg. (6.0)
6.967.0 CO+CF=10.0
CF=5.015.0 n.a.
(27.0)
Norway Jackets, blazers, etc.ofwool,
cotton orman-made fibres66,950 (3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
Trousers, slacks, jeans, etc. 154,500 (3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
Bedlinen 30,900 kg. (3.0)
3.483.0 CO+CF=10.0
CF=5.0n.a.
(13.0)n.a.
(23.0)
United
StatesWool woven fabric 394,003 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 ofwool11,005 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
coats16,622 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 suits 91,934 (1.0)
1.167.0 CO+CF=11.0
CO=11.0
CF=7.0n.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).
66. Slovak exports oftextiles andclothing totheEUarecovered byProtocol 1oftheInterim
Agreement, which entered intoforce inMarch 1992.37Tariffs onEUimports oftextiles andclothing
products arebeing reduced andaretobeeliminated byJanuary 1998. Tariffs oncertain categories
ofgoods reimported intotheEUfollowing processing ormanufacturing (outward-processing trade,
37Anearlier agreement hadbeenineffect prior tothatdate. TheInterim Agreement alsocovers EUexports
toSlovakia ofthese products.WT/TPR/S/7
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orOPT) inSlovakia wereeliminated in1992. Quantitative restrictions onSlovak exports totheEU
haveexisted atleastsince 1987and,aspartoftheInterim Agreement, thetwoParties haveundertaken
tonegotiate anewprotocol onquantitative arrangements; thisAdditional Protocol istoleadtothe
elimination ofquantitative barriers bytheendof1997. Also, asaresult oftheaccession ofAustria,
Finland andSweden totheEUatthebeginning of1995, Slovakia negotiated anaverage 27percent
increase inquotas fordirect exports andanaverage 10percentincrease inOPTquotas.
(iii) Chemicals
67. Slovakia 'schemicals industry (ISIC 351,352,355and356)accounted for9percentofboth
manufacturing value added andmanufacturing output in1993 (Tables V.11 andV.12).38Trade is
important tothesector, withchemicals exports andimports accounting fornearly 14and17percent,
respectively, ofSlovakia 'smanufacturing exports andimports in1994; overhalfoftheindustry 's
production istypically exported.39Output oftheindustry hadcontracted byover40percentfrom
1988to1993, owing largely tothesevere contraction ofexports toCMEA countries, which previously
werethedestination ofsome 60to80percentofSlovak chemicals exports. In1994output expanded
by12.5percentandexports roseby26percent.40Therefining, petrochemicals andbasic plastics
industries wereresponsible formuch ofthisexpansion: output inthese industries wasup22percent
andexports increased 43percentover1993.
68. Tariffs onchemicals imports arefairly low(Table AV.1). 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.41Most products inthesector
areforindustrial useandthusareexempt fromthetemporary 10percentimport surcharge: theaverage
surcharge rateonproducts throughout thesector is0.7percent. However, inhousehold chemicals
(ISIC 3523) suchassoaps, cleaning agents andperfumes, theaverage surcharge rateis7.1percent;
thisexceeds theaverage m.f.n. tariff forthese products, which is6.9percent. Inchemicals, asin
theother sectors examined inthissection, theimport surcharge tends toreinforce thetariff escalation
present inthem.f.n tariff régime. Itthusmagnifies theeffective protection already provided tothe
manufacture ofhighly processed goods bythecombination ofmoderate-sized tariffs onhighly processed
goods andlowtariffs ontheinputs usedintheirmanufacture.
69. Substantial tariffpreferences areinplace forSlovakia 'spartners inpreferential arrangements.
These preferences lead, inmostcases, toatleastahalving ofm.f.n. tariffs forimports ofchemical
38Thisdefinition oftheindustry excludes petroleum refining (ISIC 353)andthemanufacture ofmiscellaneous
petroleum andcoalproducts (ISIC 354).
39Exports accounted for52.7percentofallSlovak chemicals production in1993, afigure thatroseto55.0
percentin1994 andto59.1 percentinthefirstquarter of1995.
40Production andexport figures cited hereinclude petroleum refining.
41Therates onindustrial chemicals aretypical ofthetariff escalation inthesector; theaverage tariff on
industrialchemicalsatthefirststageofprocessingis4.4percent,risingto4.6percentforsemi-processedproducts
and6.2percentforfully processed products.Slovak Republic WT/TPR/S/7
Page 97
products fromtheEU,EFTA, Hungary andPoland, Romania andSlovenia.42Because oftherelatively
rapid implementation ofthefree-trade agreement withSlovenia, imports fromSlovenia facethelowest
average tariff. Thesmallest preference margins tendtobethose forimports from Romania.
70. Privatization ofenterprises inthechemicals industry isplanned tobethelargest partofthe
second wave ofprivatization (Chapter IV(5)(i)). Innearly allcases privatization wastobeimplemented
bystandard methods, suchasmanagement buy-outs orother forms ofmanagement involvement, rather
thanbyvouchers, evenbefore voucher privatization wasabandoned inmid-1995.
71. Theauthorities anticipate thatannual growth inchemicals exports willbebetween 4percent
and7percent, while theoutput ofchemicals willrisebesome 3to5percentayearfrom 1995 to
1998. Theexpansion ofoutput would come largely fromincreased labour productivity of6to7percent
ayearresulting fromexpanded capacity. According totheauthorities, aplanforgovernment policy
towardtheindustrywasforwardedtotheGovernmentbytheMinistryofEconomyinJuly1995.Among
theconcerns istheupgrading oftesting andquality standards intheindustry tothose oftheEU.
(iv) Basic metals andfabricated metal products
72. Thebasicmetals andfabricated metal products industry (ISIC 37andISIC381)hasbeenamong
thestrongest performing ofallSlovak industries. Although theindustry wasbuiltunder theprevious
central planning régime withtheintention ofexporting toother CMEA countries, itscontraction in
theearly phase ofeconomic transformation waslesssevere thanthatendured bymostother Slovak
industries, andtheindustry hadastabilizing rôleintheSlovak economy during theearly 1990s. At
itslowpoint in1993, industry output haddeclined by27percentfromits1988level, while theoutput
ofother manufacturing industries contracted during thisperiod bysome 57percent(Table V.11).43
Thislargely reflected theindustry 'ssuccess inrapidly reorienting exports fromitstraditional markets
(including thedomestic steel-using industries) towestern Europe andAsia. Products oftheindustry
accounted for24percentofmanufacturing exports in1994 (Table V.12).
73. Thelossofdomestic demand, owing tothecontraction ofsteel-using industries suchas
armaments, ledSlovak steelmakers toseeknewmarkets, andtheirsuccess isrecorded inthelarge
increases insteelexports.44Thegreatest increases inexport sales ofrolled material were toAsian
markets, particularly Thailand andChina. Intotal, exports ofrolled material todestinations outside
Europe andtheformer Soviet Union increased fromanegligible share oftotalsectoral exports in1990
to55percentin1992 andwere50percentin1994. Theshare ofrolled material exports destined
fortheEUdropped during thisperiod from62percentto28percentin1992and20percentin1994.
TheEUshare ofsteelpipes andtubes increased markedly from 1990 to1992, however, asexports
tothecountries oftheformer Soviet Union shrank. Total exports ofsteelproducts were equal to
Sk$30.9billion in1994, outofatotalproduction value ofSk$39.4billion.
42Itshould benoted thatthesurcharge stillapplies, asitdoes toimports from theCzech Republic, from
which allproducts otherwise enter duty-free.
43Additional dataindicate thatbetween 1989 and1993 there were large reductions intheproduction ofsteel
tubes (54percent) andferroalloys (37percent), while theproduction ofrolled materials didnotdecline.
44In1989 only37percentofrolled material and47percentofpipes, theprincipal products, were exported,
while in1994 exports comprised 78percentand75percentoftheproduction ofthese products. Most exports
comprised production thathadpreviously been marketed domestically.WT/TPR/S/7
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74. Theearly privatization ofenterprises mayhavecontributed tothisindustry 'srecent success.
Allformer Stateenterprises intheindustry wereprivatized aspartofthefirstwave oftheCzech and
Slovak Federal Republic (CSFR) coupon privatization scheme beginning in1992. Some 85percent
oftheindustry hadbeenprivatized by1994and,according totheauthorities, privatization intheindustry
hasbeencompleted. Bymid-1994, anaverage ofsome 65percentoftheownership ofSlovakia 's
threemajor steelmakers wasinthehands ofstockholders whohadacquired theshares through vouchers,
while nearly 15percentofshares weretemporarily controlled bytheNational Property Fund, 3percent
bytheRestitution Fund, and17percentbyother holders.45
75. Slovakia produces several types ofsteelproduct andhasthefollowing annual production
capacities (inthousands oftons): rawsteel(4,940), rolled material (3,740), hot-rolled seamless steel
tubes (180), cold-drawn seamless precise tubes (85), large-diameter welded steeltubes (110) and
ferroalloys (170).46In1993production ofrawsteelequalled some 4million tons,while theproduction
ofrolled material was3.4million tonnes andtheoutput ofrawironwas3.2million tonnes (Table V.16).
Slovakia hasnotdeveloped acapacity forlarge-length rolled andalloysteel-based products, andimports
these products mostly fromtheCzech Republic. NordoesSlovakia itselfhavemany ofthekeyinputs
formaking iron,steelandother basic metals; ithasfound itprofitable inthisrespect tocontinue its
relationship withformer CMEA countries forthepurchase ofkeyinputs. Ironoreistypically purchased
fromUkraine47,coalandmanganese oreareimported fromRussia, metallurgic cokefromtheCzech
Republic, chrome orefrom Kazakhstan, andbauxite from Hungary.
76. Slovakia 'smarket forimports ofbasicmetals andfabricated metal products isrelatively open.48
Them.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. tariff protection, withatariff average of8.9percent, isonmetal furniture andfixtures
(ISIC 3812). Reductions fromm.f.n. tariffs aregranted topartners withwhich Slovakia haspreferential
arrangements, withpreference margins usually equal tosome 2to3percentage points. Imports from
thesepartners comprised some 90percentofthetotalimports ofproducts inthissector. Nopreferences
under theGSPareoffered forironandsteelproducts (Table IV.8).49
45Slovak Republic Ministry ofEconomy, "The Steel Industry intheSlovak Republic," June 1994.
46Data provided bytheauthorities.
47Thecompletion ofaplant tomake ironorepellets atKrivoi Rog, Ukraine, from nearby low-grade iron
oreisstilluncertain. Itscompletion, andsubstitution fortheexisting obsolete andheavily polluting pellet plants,
would helptoensure thesupply ofrelatively cheap ironoretotheSlovak industry. (Robinson, "Ukrainian Supply
Line," Financial Times, 16December 1994.) According totheauthorities, thegovernments involved areworking
onthearrangement offinancing fortheproject.
48Imports accounted for29percentofdomestic consumption ofrolled materials, 64percentofsteelpipes,
and53percentoftheconsumption ofother steel products in1994.
49Goods from least-developed developing countries always receive duty-free treatment, withtheexception
ofthesurcharge (Chapter IV(2)(i)(l)).Slovak Republic WT/TPR/S/7
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Table V.16
Production andexports ofprincipal steelproducts, 1989-94
('000tonnes andpercent)
Units 1989 1990 1991 1992 1993 1994
Crude steelproduction '000tonnes 4,741 4,779 4,161 3,818 3,950 4,100
Rolled material production '000tonnes 3,228 3,241 3,065 3,288 3,434 3,570
Ofwhich: exported Percent 36.9 37.8 58.8 62.9 83.6 77.7
Share ofexports:
European Union Percent n.a. 62 n.a. 28 23 20
Other Europe (excl. former USSR) Percent n.a. 35 n.a. 14 23 27
Countries offormer USSR Percent n.a. 3 n.a. 3 3 3
Near andFarEast(incl. China) Percent n.a. 0 n.a. 43 41 38
Others Percent n.a. 0 n.a. 12 10 12
Steel pipes andtubes production '000tonnes 296 289 209 193 137 160
Ofwhich: exported Percent 48.3 48.4 57.9 73.6 78.1 75.5
Share ofexports:
European Union Percent ... 6 ... 41 27 34
Other Europe (excl. former USSR) Percent ... 9 ... 18 66 59
Countries offormer USSR Percent ... 80 ... 37 3 3
Near andFarEast(incl. China) Percent ... 3 ... 2 2 2
Others Percent ... 2 ... 2 2 2
Ferroalloys production '000tonnes 166 169 161 122 104 148
Ofwhich: exported Percent 13.8 16.8 56.5 34.8 59.5 65
... Notavailable.
Source: Slovak Republic Ministry ofEconomy, "The Steel Industry intheSlovak Republic", June1994.
77. Excluding thetemporary import surcharge, tariffs onproducts fromthese industries risefrom
anaverage of0.4percentonproducts inthefirststageofprocessing to4.5percentonsemi-processed
products and6.0percentonfullyprocessed products. Protection ofdomestic manufacturing offinal
consumer goods, suchasmetal furniture andfixtures (ISIC 3812), andcutlery, handtoolsandgeneral
hardware (ISIC 3811), issubstantially increased bythe10percenttemporary import surcharge.50
Because thesurcharge isnormally applied onlyonfullyprocessed goods, ittends toexacerbate tariff
escalation.
78. Trade inscrap iron,other thanwiththeCzech Republic, issubject tolicensing requirements,
which areadministered bytheMinistry ofEconomy.51Anannual export quota of150,000 tonnes
wassetfor1994 and1995, withexports within thisamount subject tothelicence requirement.
According totheauthorities, theexport quota isinplace because ofalackofdomestic production.52
50Average surcharge ratesareequal to3.9percentand4.9percent, respectively, onimports oftheproducts
ofthese industries.
51Ministry ofEconomy Regulation No.315/1993; Decree No.560/1991 anditssubsequent amendments:
Decree Nos. 315/1993, 167/1994 and17/1995. Import licences forscrap ironaregranted automatically.
52Thelimit of150,000 tonnes corresponds totheamount ofwaste from domestic consumption; according
totheauthorities, Slovakia lacks thetechnology torecycle thiswaste andencourages itsexportation toavoid
environmental damage.WT/TPR/S/7
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Thetransit andinternational tradeofironscrap isregulated bytheSlovak lawonwastes, which stipulates
thatalicence from theMinistry oftheEnvironment isneeded toimport orhaulironscrap.
79. TheEUapplies tariffquotas onimports ofseveral steelproducts fromSlovakia.53These tariff
quotas, which wereintroduced in1993tosubstitute forsafeguard measures taken in1992, arescheduled
tobeapplied through theendof1995.54According toaSlovak producer, Slovakia might notincrease
itsexports totheEUfollowing theremoval ofthequotas, however, sothatitcan"preserve agood
long-term relationship" withtheEU.55While notrestricted bytariffquotas, Slovak exports ofwelded
tubes andwirerodaresubject totheduties applicable under theterms oftheAssociation Agreement
andtoadditional duties of25to30percent. Ananti-dumping investigation concerning Slovak exports
ofbutt-welded tubeorpipefittings hadnotbeencompleted bytheEUasofearly 1995.56According
totheauthorities, thearrangement ontariff quotas withtheEUisSlovakia 'sonlybilateral agreement
onsteeltrade.
80. Asaresult ofananti-dumping action byArgentina, Slovak exports ofcold-rolled sheet are
subject toapreventive minimum export price ofUS$396.90 pertonforexports tothatcountry, as
ofearly 1995.57
81. According totheauthorities, therearenospecial programmes regarding industrial restructuring
oftheSlovak ironandsteelindustry. InJanuary 1994, theGovernment promised support tothe
restructuring process onlythrough itsassistance inattracting foreign investment intotheindustry.
However, itrecommended thattheNational Property Fund offer direct financial aidfrom itsown
resources (from theproceeds ofprivatization) tohelpsettle environment-related debts.58Inaddition,
restructuring projects valued atSk$19.5billion overtheperiod 1993-2000 havebeenproposed.59
Loan guarantees concerning asteelplantandanaluminium plantwereextended bytheStateinorder,
according totheauthorities, tohelpsettle environment-related debtsandforenvironmental protection.60
53Covered products arehot-rolled coils, cold-rolled sheets, hot-rolled strips, cutlengths andseamless tubes.
54SeeWTO (1995), which includes information onthequota levels.
55Mr.Peter Hrinko, chairman ofthelargest Slovak steelmaker, quoted intheFinancial Times, 16December
1994. Thefullquote isasfollows: "Even without quotas wewould notincrease oursales toexisting EUmarkets
in1995 because wewant topreserve agood longterm relationship withEUcustomers andkeep ourshare of
other markets too."
56WTO document G/ADP/N/2/EEC, March 1995.
57WTO document G/ADP/N/2/ARG, April 1995.
58Inall,environment-related projects havebeenproposed fortheindustry thatwould costSk$5.2 billion over
theperiod 1993-2000 (Slovak Republic Ministry ofEconomy, "The Steel Industry intheSlovak Republic",
Table 30,June 1994).
59Slovak Republic, Ministry ofEconomy, "The Steel Industry intheSlovak Republic", Table 29,June1994.
Thelargest ofthese projects istheupgrading ofthesteelworks atKosice, which wasfunded atSk$1.1 billion
in1994 andSk$1 billion in1995 andwasproposed fortotalfunding ofSk$8.2 billion from 1993 to1997.
60Decree No.127/1995 onState guarantees.Slovak Republic WT/TPR/S/7
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(v) Other manufacturing industries
82. Other important manufacturing industries ofparticular interest, either because oftheirtrade
policies, theirsize,ortheirshares inSlovak trade, arewood, wood products andfurniture (ISIC 33);
paper andpaper products (ISIC 34); non-electrical machinery (ISIC 382); electrical machinery
(ISIC 383); andtransport equipment (ISIC 384)(Table V.11; Table V.12; Table AV.1).
83. Thewood, wood products andfurniture industry accounted for2percentofmanufacturing
output in1993. According totheauthorities, nearly allthewood andotherresources usedintheindustry
arepurchased domestically. Ledbyexports ofwood millproducts andfurniture, theindustry 'sexports
totalled US$300 million in1994, nearly 5percentofallmanufacturing exports. While domestic sales
havebeensomewhat stagnant because oflowconstruction activity (andthishascontinued into1995),
exports havesuccessfully beenredirected fromtheformer Soviet Union (towhich theyequalled some
Sk$2billion annually inthelate1980s) toward western Europe. Exports ofrawandsawnwood require
anexport licence from theMinistry ofEconomy.61Tariffs onimports ofwood, wood products and
furniture average 5.1percentanddonotexceed 12.1percent.62ForSlovakia 'spartners inpreferential
agreements, preference margins effectively reduce these tariffs tosome 1to2percent, depending
onthepartner. Theaverage applied rateofthetemporary import surcharge is4.8percent.
84. Thepaper andpaper products industry, including printing andpublishing, accounted for
6percentofmanufacturing output and6percentofmanufacturing value added in1993. Products
oftheindustry comprised 5percentofexports and3percentofimports ofthemanufacturing sector
in1994; pulp, paper andpaperboard made upsome threefifths oftheexports. Likethewood products
industry,paperandpaperproductsmanufacturingreliesheavily,accordingtotheauthorities,ondomestic
resources foritskeyinputs. Imports ofwaste andscrap ofpaper andpaperboard aresubject tonon-
automatic import licensing, withtheannual limitsetat150,000 tonnes (Table IV.9); according to
theauthorities, thislicensing requirement isinplace forenvironmental reasons.63M.f.n. import tariffs
average 9.1percentonpaper products and5.5percentonprinting andpublishing products;64for
Slovakia 'spartners inpreferential tradeagreements, preference margins effectively reduce thesetariffs
byabout half. Theaverage applied rateofthetemporary import surcharge is1.2percent.
85. Themanufacturing ofnon-electrical machinery comprised some 12percentofthevalue added
andnearly 9percentoftheoutput ofthemanufacturing industry in1993, andtrade oftheproducts
ofthisindustry (including computers) accounted for17percentofallmanufacturing imports andnearly
61For1995, thelimit issetat500,000 cubic metres ofrawwood and600,000 cubic metres ofsawn wood
(information provided bytheSlovak authorities).
62Tariffs increase from 0.6percentforproducts inthefirststage ofprocessing to3.4percentforsemi-
processed products and7.0percentforfully processed products.
63Importsofcontainersandboxesofpaperandpaperboardaresubjecttom.f.n.tariffsaveraging14.0percent,
andtheaverage applied rateoftheimport surcharge forthese products isequal to4.0percent.
64There issome escalation inthem.f.n. tariffs forpaper products, which risefrom 5.7percentforproducts
inthefirststage ofprocessing to9.5percentforsemi-processed products and9.6percentforfully processed
products.AllprintingandpublishingproductsareconsideredtobefullyprocessedproductsintheWTOSecretariat
classification scheme; theaverage tariff onprinting andpublishing products islower thanthose atallprocessing
stages ofpaper products. Thus theaverage tariffs forallpaper, printing andpublishing products are5.7percent
forproducts atthefirststage ofprocessing, 9.5percentforsemi-processed products and7.8percentforfully
processed products.WT/TPR/S/7
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8percentofallmanufacturing exports in1994.65Imports ofrefrigerators, freezers andrelated
equipment, andsome heatpumps, aresubject tonon-automatic import licensing, withtheannual limit
setat40,000 pieces (Table IV.9). According totheauthorities, thislicensing requirement isinplace
forenvironmental reasons soasnottoallow theimportation ofobsolescent technical devices with
materials damaging totheearth'sozone layer; however, theuseofmandatory standards orsome other
policy maybemoreappropriate. Theaverage m.f.n. tarifffortheproducts ofthisindustry is5percent,
andratesdonotexceed 12percent.ForSlovakia 'spartners inpreferential tradeagreements, preference
margins effectively reduce these tariffs bymore thanhalf: theaverage rateonimports from theEU
(which account fornearly halfofallimports) is1.8percent,equal tothatonimports fromtheEFTA
States, andtheaverage rateonimports from Slovenia is0.1percent.66Theaverage applied rateof
thetemporary import surcharge is0.6percent.
86. Electrical equipment andprofessional andscientific equipment manufacturing accounted for
5percentofmanufacturingoutputin1993,whiletradeinelectricalequipmenttogetherwithprofessional
andscientificequipmentcomprised13percentofmanufacturingimportsand6percentofmanufacturing
exports.67M.f.n. tariffs average 5.5percentforelectrical machinery and4.0percentforprofessional
andscientificequipment.68ForimportsfromSlovakia'spartnersinpreferentialarrangementstheaverage
tariff isabout halfthem.f.n. average; theaverage ratesonimports from theEU(which account for
twofifths ofallimports) are2.2percentforelectrical machinery and1percentforprofessional and
scientific equipment, equal tothose onimports fromtheEFTA States, andtheaverage ratesonimports
fromSlovenia are0.5percentand0.3percent,respectively. Theaverage applied rateofthetemporary
import surcharge is1.7percentforelectrical machinery and0.4percentforprofessional andscientific
equipment.
87. Theshares ofmanufacturing value added andmanufacturing output accounted forbytransport
equipment in1993wereeachabout 4.5percent. Trade intheproducts ofthesector comprised some
9percentofmanufacturingexportsand7percentofmanufacturingimportsin1994,withthreequarters
oftheimports andnearly three fifths oftheexports consisting ofmotor vehicles andtheirparts.69
M.f.n. tariffs onproducts throughout theindustry average 7.7percent, buttariffs onmotor vehicle
65About onefifthoftheimports inthiscategory areautomatic dataprocessing machines. Some twofifths
ofimports andthree fifths ofexports inthecategory areofnon-electrical machinery andequipment, n.e.s.;
themain imported products areairandliquid pumps, centrifuges, andvalves forpipes andtanks. Themain
exported products areballorroller bearings, laundry (washing) machines, andpumps andother machinery for
cooling andairconditioning. Nearly alloftheremaining imports ofproducts inthiscategory consist ofmetal
andwood working machinery andspecial industrial machinery.
66Allproducts ofthisindustry areconsidered tobefully processed intheWTO Secretariat classification,
saveforthose thatenter under onetariff line; thusnomeasure oftariff escalation isavailable.
67Industrial datapresented inthisparagraph refer toonlyelectrical andoptical equipment. Inthetrade and
tariffdata,opticalequipmentisincludedasacomponentofprofessionalandscientificequipment.Radio,television
andcommunicationsequipment,medicalequipment,measurementinstruments,andregulatinginstrumentsaccount
forsubstantial amounts oftheimports. Medical equipment andinstruments tomeasure thesupply ofliquids
andgases comprise thelargest shares ofexports.
68Allproducts ofthisindustry areconsidered tobefully processed intheWTO Secretariat classification.
Thus nomeasure oftariff escalation isavailable.
69Personalautomobilesmakeupaboutonethirdoftheimportsofalltransportequipment.Partsandaccessories
formotor vehicles comprise some onequarter oftheexports, andpersonal automobiles oneseventh.Slovak Republic WT/TPR/S/7
Page 103
manufactures average 9.5percent. ForSlovakia 'spartners inpreferential tradeagreements, preference
margins reduce them.f.n. ratebyabout half; theaverage rateonimports fromtheEU(which account
foronethirdofallimports) is3.7percent,equal tothose onimports fromtheEFTA States, andthe
average ratesonimports fromHungary andSlovenia are1.2percentand0.3percent,respectively.
Theaverage applied rateofthetemporary import surcharge is2.0percent.
(5) Services
88. Theshare ofservices inSlovakia 'sGDPhasrisensteadily inrecent years toreach 57percent
in1994.70Services tradehasanimportant rôleintheexternal accounts. Revenues fromservices exports
weretheequivalent of18percentofGDP in1994; theservices trade balance wastheequivalent of
5.2percentofGDP andcomprised nearly alloftheoverall current account balance of5.7percent
ofGDP (Table I.2).
89. TheGeneral Agreement onTrade inServices (GATS) requires thatWTO Members grantm.f.n.
treatment toservices andservice suppliers ofother Members (Article II).However, itallows measures
inconsistent withGATS Article IItobemaintained provided theymeettheconditions oftheAnnex
onArticle IIExemptions andarelisted intheMember 'sschedule. Slovakia hassixlisted measures
infiveservice sectors: audiovisual services, water transport, railtransport, roadtransport, andfinancial
services (Table V.17). These exemptions areclaimed foranyfuture agreements aswellasforexisting
agreements, andareclaimed foranindefinite period.71
70Under theoldnational income accounting methodology, theshare ofmarket andnon-market services (at
current prices) increased from 30percentin1980 to34percentin1991. With theintroduction in1992 of
themethodology normally usedinmarket economies, theshare wasequal to49percent, androseto57percent
in1994.
71Theduration ofsuchexemptions, inprinciple, should notexceed tenyears andshallbesubject tonegotiation
insubsequent trade-liberalizing rounds.WT/TPR/S/7
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Table V.17
Summary ofSlovakia '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
Slovak 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 inSlovakia and
between thecountries 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, andoutofSlovakia tothe
country concerned.Allcountries withwhich
agreements areorwill
beinforce.Indefinite Integrity ofroad
infrastructure;
environment;
regulation oftraffic
rights.
Financial servicesaReciprocity (authorization toestablish
commercial presence orconduct new
activities maybedenied when Slovak
suppliers aredenied suchtreatment in
thecountry oforigin oftheservice
supplier concerned).Allcountries concerned. Indefinite Toobtain equal
market access for
Slovak service
suppliers.
a Slovakia intends toremove thereciprocity condition after theadoption otitsnew ActonBanks (WTO document
GATS/EL/77/Suppl.1).
Note: TheAnnex onArticle IIExemptions totheGATS stipulates thatallm.f.n. exemptions granted formore thanfiveyears shall
bereviewed bytheCouncil forTrade inServices bytheendof1999.
Source: GATS document GATS/EL/77, April 1994.
90. According totheauthorities, Slovakia isnotaparty toanyagreements ontrade inservices
other thanthatunder theWTO. However, itspreferential agreements withtheCzech Republic, the
EUandtheEFTA States include provisions regarding trade inservices (Chapter IV(2)(iii)).72
72Article 27oftheCustoms Union Agreement between Slovakia andtheCzech Republic states that"Trade
inservices between thecontracting parties (CPs) shall befreeonthedateofentry intoforce ofthisAgreement
andnorestrictive measures shall beintroduced inthistrade thereafter" andArticle 28states that"...theCPs
shall grant tonationals oftheother CPthetreatment equal tothatgranted toitsownnationals. TheCPsmay
conclude separate agreements containing details onindividual sectors ofservices."Slovak Republic WT/TPR/S/7
Page 105
(i) Commitments under theGATS
91. Beyond negotiating andbringing intoforce theGATS, theUruguay Round actually led,on
thepartofmany countries, tosubstantial specific commitments tobind, orliberalize andbind, certain
trade-restrictive policies within theGATS framework (Articles XVIandXVII). These commitments,
foundintheMember's"ScheduleofSpecificCommitments",areintwoforms:horizontalcommitments,
which apply toallsectors covered bytheGATS unless specifically noted otherwise, andspecific
commitments, which apply onlytothespecific sector orsub-sector indicated. Eachhorizontal orspecific
commitment isbased ononeofthefourmodes ofsupply identified intheGATS: (i)cross-border
supply; (ii)consumption abroad; (iii)commercial presence; and(iv)presence ofnatural persons.
92. Slovakia actively participated intheUruguay Round services negotiations tobind, orliberalize
andbind, trade-restrictive policies. Itshorizontal commitments, likethose ofmost other countries,
arefewinnumber (Table V.18). Importantly, however, Slovakia agreed: nottolimitmarket access
to,orthenational treatment of,commercial presence, other thanthesimple requirement forresidence
permits73;nottolimit theacquisition ofrealestate, other thanland, fortheestablishment ofa
commercial presence; andtoallow thetemporary presence offoreign natural persons insome job
categories (specialists, senior executives andsalesrepresentatives) andtooffernational treatment to
these natural persons.
Table V.18
Summary ofSlovakia 'shorizontal commitments onmarket access andnational treatment inservices
Sector or
sub-sectorCross-border supplyConsumption
abroadCommercial presencePresence ofnatural
persons
Current
paymentsaMA-Foreign
exchange restrictionsMA-Nocommitments
NT--Nocommitments
Capital
paymentsaMA-Foreign
exchange authorizationMA-Nocommitments
NT--Nocommitments
Commercial
presenceMA-Nocommitments
NT--NocommitmentsMA-Nolimitations
NT--Resid. permit reqd.MA-Nocommitments
NT--Nocommitments
Acquisition
ofreal
estateMA-Nocommitments
NT--NocommitmentsMA-Nolimitations, except land.
NT--Acquisition byforeign entities onlybythe
establishment ofSlovak legal entities orjointventures.
Acquisition oflandissubject toauthorization.
Presence of
natural
personsMA-Nocommitments
NT--NocommitmentsMA-Nocommitments
NT--NocommitmentsMA-Unbound, except
thatpersons inseveral
categories (senior
executives, specialists,
etc.)areauthorized
temporary presence.
NT--Nolimitations
forthecategories
offered under Market
Access.
a Provided fortransparency reasons.
MA- market access.
NT-- national treatment.
Note: Entries thatarecentered under twocolumn headings apply tobothmodes ofsupply.
Source: GATS document GATS/EL/77, April 1994.
73Some exceptions tothishorizontal commitment aremade under thespecific commitments.WT/TPR/S/7
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93. Slovakia hasmade arelatively largenumber ofspecific commitments.74These aresummarized
inAppendix V.1,where theyareorganized according totheServices Sectoral Classification List
(SSCL).75
(ii) Tourism
94. Slovakia 'stourism industry hasgrown rapidly inrecent years, particularly asjudged byits
foreign exchange receipts. Theaverage annual growth inforeign exchange earnings from tourism
wassome 50percentfrom 1990 to1994. By1994, foreign tourism receipts wereUS$568 million,
equal toonequarter ofallexternal services receipts.76The1994 balance onforeign tourism of
US$284 million comprised twofifths ofthecurrent account surplus.
95. Most tourism-related enterprises wereprivatized during thesmall-scale privatization, which
waslargely complete byJuly1992. However, nodatawereavailable ontourism-related privatization.
96. ForeigninvestmentinSlovaktourismisencouraged.TheSlovakNationalAgencyforInvestment
andDevelopment(SNAZIR)maintainsadatabaseoftourisminvestmentopportunities,whiletheMinistry
ofEconomy andMinistry ofPrivatization both provide information andassistance ontourism
investments.
97. DuringtheUruguayRound,Slovakiaundertookseveralspecificcommitmentsregardingtourism
andtravel-related services under theGATS. Itbound itself nottolimit market access ornational
treatment fortwomodes ofsupply: consumption abroad andcommercial presence. However, Slovakia
leftthecross-border supply oftravel agents 'andtouroperators 'services unbound initsSchedule.77
According totheauthorities, thisdecision isrelated toaproject, onwhich Swiss tourism professionals
areco-operating, toestablish anetwork ofTourist Information Centres along Slovak borders. Although
Slovakia made ahorizontal commitment toallow thetemporary presence ofnatural persons incertain
jobcategories, inthespecific areaoftourist guide services there isnocommitment; theauthorities
report thatlegislation inthisareaisnotyetcomplete.
74These areidentical tothose oftheCzech Republic, except forthefollowing: Slovakia hasahorizontal
commitment regarding commercial presence while theCzech Republic does not; theCzech Republic hasa
horizontal commitment nottointroduce anymarket access limitations regarding commercial presence forthe
acquisitionofrealestate,whileSlovakiahasahorizontalcommitmentnottointroduceanymarketaccesslimitations
forcommercial presence orthemovement ofnatural persons regarding theacquisition ofrealestate, except for
land; while theCzech Republic hascommitted nottolimit national treatment ofthecross-border supply of
retailingservices,Slovakiahasnosuchspecificcommitment;regardingmarketaccessforthecommer cialpresence
oftravel agencies andtouroperators, Slovakia hascommitted itself tonolimitations while theCzech Republic
hasreserved theright touseaneconomic needs testbased onapopulation criterion.
75TheSSCL islisted inGATT Uruguay Round document MTN/GNS/W/120.
76Data provided bytheSlovak authorities.
77Anexample ofthecross-border supply ofthese services might betheprovision ofpre-travel services such
astravel information oradvice andthemaking ofreservations.Slovak Republic WT/TPR/S/7
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(iii) Financial services
98. Preliminary dataindicate thattheshare ofallfinancial services inSlovakia 'sGDP in1993
was7percent.78
(a) Insurance andinsurance-related activities
99. CertaininsuranceservicesinSlovakiaaresubjecttostatutorymonopolies.TheSlovakInsurance
Company isthesolesupplier ofcompulsory third-part liability insurance, compulsory airtransport
insurance, andliability insurance foremployers against injury oroccupational disease. TheGeneral
Health Company monopoly onbasichealth insurance wasabolished atthestartof1995butthecompany
continues toholdamonopoly overpension fundschemes.79
100. Slovakia requires thatacommercial presence beestablished inorder toprovide many types
ofinsurance, suchasthatforlife,property, liability andsome modes oftransport; suchtypes of
insurance maynotbepurchased abroad. Theestablishment ofcommercial presence requires licensing
bythecompetent Slovak authorities. Thefinancial resources ofinsurance funds must bedeposited
inaresident bankinSlovakia andmaynotbetransferred abroad.
(b) Banking
101. Thereorganization ofSlovakia 'sbanking system began in1990, when theonlybanks operating
inSlovakia weretwopublic institutions. Thereorganization hasledtothecreation ofagrowing network
ofcommercial banks, with27banks operating inSlovakia attheendof1994, including tenbranches
offoreign banks andafurther tenwithforeign participation.80
102. TwoState-owned banks remain. Privatization ofState-owned banking enterprises began with
thefirstwave ofcoupon privatization in1991 and1992 andisexpected tobecompleted withthe
privatization oftheSlovak Savings Bankin1996, leaving theStateinownership onlyoftwospecialized
banks.
103. Foreign banks maybeestablished onlyasjointstock companies. Bothdomestic andforeign
banks require theauthorization oftheNational BankofSlovakia (NBS), inagreement withtheMinistry
ofFinance, toestablish acommercial presence inSlovakia. Similar authorization isrequired forforeign
banks toestablish branches inSlovakia orforforeign banks toparticipate inalready established banks.
Slovakia doesnotnecessarily provide m.f.n. treatment tofinancial service suppliers when theircountry
oforigin doesnotreciprocate (Appendix V.1).
78Data provide bytheSlovak Statistical Office.
79These monopolies arereported inSlovakia 'sGATS Schedule. According totheSchedule, "These exclusive
service suppliers actinamanner consistent with obligations under Article IIoftheGATS andspecific
commitments."
80MostbranchesofforeignbanksareCzech -basedbanksthatwereoperatinginSlovakiapriortothedissolution
oftheCSFR. Inbanks withforeign participation, theforeign-owned share ranges from complete ownership
tounder 5percent. Austrian banks have thegreatest share ofthisforeign participation, followed byRussia,
Germany, France andtheCzech Republic. Banking andinsurance together accounted for11percentofthe
totalforeign capital stock inSlovakia attheendof1994 (Table III.1).WT/TPR/S/7
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104. TheNBShasprimary responsibility fortheprudential oversight ofthebanking system. It
publishesandmakesavailabletherulesgoverningprudentialbankingpractices,coveringcapitaladequacy,
credit riskexposure, liquidity andtheregulation offoreign exchange positions. TheNBSmaydecide,
under certain conditions, toexempt abranch ofaforeign bankfromitscapital adequacy requirements.
Thebranch maythenbereleased fromtheregulations regarding foreign exchange positions, ifsimilar
regulations apply tothebankasawhole initscountry oforigin andthebank'sorganization allows
ittomonitor foreign exchange positions arising from those transactions concluded bythebranch.
(iv) Telecommunications
105. Inresponsetogrowingdemand,from1989to1993thenumberofmaintelephonelinesincreased
by33percentwhile thenumber ofdatacustomers more thandoubled. Inaddition, thenumber of
telefax customers nearly doubled each yearfrom 1991 to1993.81Bottlenecks inthesupply of
telecommunication services, andtheimportance ofthesupply ofthese services toother industries in
theeconomy, caused theGovernment toexamine measures bothforamore efficient useoftheexisting
telecommunications network andtheexpansion ofthenetwork anditsservices. Apolicy proposal
drafted byexperts inJune 1990 ledtotheadoption ofthe"Principles ofState policy ofthe
Slovak Republic intheareaofinformatization" inMay1991andsubsequently tothepassage ofadecree
tobegin theimplementation ofsome measures inJune1992. Some ofthekeystepstaken include the
separation ofState administration from economic activity, theseparation ofregulatory andoperator
functions and,insome areas, demonopolization andliberalization.82
106. AState-owned monopoly (Slovak Telecom) operates thetelecommunications network
infrastructure andthesetting upofthisinfrastructure. According totheauthorities, Slovak Telecom
istobetransformed intoajoint-stock company, wholly owned bytheState, by1998 atthelatest;83
theenterprise istobeprivatized sometime after1998, andatthattimeforeign equity participation
isexpected tobeallowed. Slovak Telecom has"preliminary exclusivity" forpublic voice telephone
until1998, including local, long-distance andinternational telephone; telegraph; theresale ofleased
circuit capacity connected tothepublic network; andoutside payphones.84TheMinistry ofFinance
hasthefinalauthority forregulating Slovak Telecom pricing and,forthispurpose, accepts theadvice
oftheMinistry ofTransport, Telecommunications andPublic Works85,which isotherwise responsible
fortheregulation ofbasic telecommunications services.86Slovak Telecom isrequired tomake public
81Institute ofEconomics, Slovak Academy ofSciences, "Analysis oftheInformation andTelecommunication
Infrastructure anditsSignificance fortheProcess ofTransformation inSlovakia", June 1994.
82Thecurrent Slovak legal basis inthissector istheTelecommunications Act,No.96/1993, andtheexecutive
decrees toit.Asofmid-1995, anewtelecommunications lawwasunder preparation. TheGovernment 'smain
policy objectives regarding thetelecommunications sector arespelled outinthedocument "Concept of
telecommunications development until theyear2000", adopted inAugust 1993.
83Theauthorities have indicated thatthismaybedone sooner, perhaps by1996.
84Theliberalization ofpublic voice telephony, following EUrecommendations, istotakeplace in2000 to
2002. Other services aretobeliberalized bytheendof1996.
85Theauthorities areconsidering aproposal thatwould leadtotheapplication offormula pricing (considering
inflation andcosts) asthebasic regulatory method forprice regulation.
86Among itsfunctions isthedetermination oftheregulatory status ofanynewservices thatmaybecome
available.Slovak Republic WT/TPR/S/7
Page 109
telephone andtelegraph services available tothegeneral public, toprovide Slovakia withappropriate
basic telecommunications services andtoincrease thedensity ofmain telephone lines.87
107. Atemporary exclusive supply arrangement formobile anddatatransmissions isineffect until
April 1996 withEurotel, which nowoperates ananalog mobile network. In1996, twotenders are
expected tobeletforadigital mobile network. Theexclusive rights forpaging services arecurrently
reserved forajointventure between theformer Administration ofRadiocommunication Bratislava
andTéléDiffusion deFrance ,while atender forasecond public paging operator isexpected tobe
offered before 1April 1996. Plans fortheliberalization ofother value-added services havenotyet
been decided;88however, international tenders areexpected tobeinvited forallliberalized
telecommunications services. According totheauthorities, therearenogeneral restrictions onforeign
companies thatwishtoprovide telecommunications services intheSlovak Republic, noraretherecases
ofdifferential treatment. However, registration and,insome cases, licensing bytheMinistry of
Transport, Telecommunications andPublic Works isrequired. Where these requirements exist, they
areapplied equally todomestic firms.
108. Theprovision ofsome services havebeenliberalized andareopentoentry, subject onlyto
licensing. These include facsimile services, private leased circuit services notconnected tothepublic
network, satellite services notconnected tothepublic network, andaudiotext andvideotext.
109. Slovakia made specific commitments regarding facsimile services andvalue-added services
intheGATS during theUruguay Round. These commitments aredescribed inAppendix V.1.
(v) Transport
110. Theabrupt changes inmerchandise trade patterns andother fundamental changes thathave
occurred intheSlovak economy since thestartoftheeconomic transformation process havehada
dramatic effect onSlovakia 'stransport needs. While thetransport infrastructure wasconceived and
builttomeettheneeds ofCMEA trade, inrecent years much ofSlovakia 'strade hasshifted toward
markets inwestern Europe andother established market economies (Chapter I(3)). Thishasnotonly
redirected transport flows, buthasbegun tobring about changes inmodes oftransportation, notably
fromrailtoward roadandmultimodal transport.89Theauthorities recognize thatanefficient andmodern
transport sector isextremely important totheeconomic transition andforcontinued economic growth,
particularly given Slovakia 'scentral location withregard tomany European transit networks.90Plans
fortheimprovement ofSlovakia 'stransportation structure include thebuilding ofanetwork offreight
airports, railroad track andequipment modernization, thefurther development ofriver transport on
theDanube andVahrivers, andthedevelopment ofamodern highway system forconnection to
international multimodal transport corridors, following theresults ofthe1994Pan-European Transport
Conference.
87Attheendof1994 thisequalled 18.8 per100inhabitants (data provided bytheauthorities).
88These include electronic mail, voice mail, on-line information anddatabaseretrieval, electronic data
interchange, enhanced/value-added facsimile services, code andprotocol conversion, andon-line information
and/or dataprocessing (including transaction processing).
89Thevolume ofrailtraffic fellby37percentfrom 1989 to1992.
90Slovak National Agency forForeign Investment andDevelopment, "Transport andTelecommunications,"
News forInvestors, No.5,1994.WT/TPR/S/7
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111. Slovakia 'slocation isespecially advantageous withregard tonatural gastransit. Nearly all
ofthegasthatflows from theformer Soviet Union tocentral andwestern Europe passes through
Slovakia. Thenatural gaspipeline generates transit feesofsome US$500 million ayear, equivalent
toabout 4percentofGDP. These feescontribute greatly toSlovakia 'sservices trade balance and
overall external position.
112. Mostofthetransportindustrycontinuestobehighlyregulated,withGovernmentpriceregulation
administered bytheMinistry ofFinance andthesometimes dominant participation ofState-owned
enterprises. Theroadfreight transport industry, spurred onbythederegulation ofitstariffs andby
increased demand from thegrowing trading relationships withwestern Europe, hasexpanded, and
private carriers haveamarket share inexcess of50percent.91Thewater transport andairtransport
industries havealsobeenprivatized, andfourSlovak companies areactive inairtransport.92According
totheauthorities, railandinternal waterways transport areconsidered tobestrategic sectors andare
nottobeprivatized.
113. IntheUruguay Round, Slovakia made fewcommitments regarding thetransportation sector,
andthehorizontal commitment oncommercial presence isnotapplied tothesector (Appendix V.1).
Italsohasthree Article IIm.f.n. exemptions fortransport services, applying tointernal waterway,
railandroadtransport.
91Antimonopoly Office oftheSlovak Republic, Annual Report, 1994. Road freight transport forState
enterprises istobeprivatized in1996. Theissue oftheprivatization ofroadpassenger transport hadnotbeen
resolved asofAugust 1995.
92According totheauthorities, foreigners mayestablish Slovak companies tooperate domestic airtransport
routes. Slovakia hasbilateral agreements ineffect onlanding rights.Slovak Republic WT/TPR/S/7
Page 111
Annex V.1
Slovakia 'sSpecific Commitments under theGATS93
(a) Business services94
114. Slovakia hasagreed nottolimit thecross-border supply orconsumption abroad ofmost
professional services, both with regard tonational treatment andmarket access.95Regulatory
requirementsexistforthecommercialpresenceofforeignsuppliersofmostprofessionalservices,usually
intheform ofacceptance intherelevant Slovak professional association.96Thepractice ofnational
lawinSlovakia, forexample, requires thatthepractitioner beaccepted bytheSlovak BarAssociation.
115. Slovakia hascommitted nottolimitthecross-border supply, consumption abroad orcommercial
presence ofcomputer andrelated services.
116. Asaresult ofbindings entered intobySlovakia, research anddevelopment services onsocial
sciences andhumanities havenolimitations oncross-border supply, consumption abroad orcommercial
presence. Similar bindings havenotbeentaken innatural sciences andinterdisciplinary services.
117. Slovakia hasnospecific commitments regarding realestate services.
118. Slovakia hasundertaken nottolimitthecross-border supply andconsumption abroad ofrental
andleasing services ofvessels, private motor carsandvehicles forthetransport ofgoods. However,
therightofforeign providers ofthese services toestablish acommercial presence isnotbound. In
mostother business services (such asadvertising andconsulting), cross-border supply, consumption
abroad andcommercial presence arebound without limitations onmarket access ornational treatment.97
(b) Communication services98
119. Slovakia hasundertaken nospecific commitments regarding postal services oraudiovisual
services.99Thecross-border supply ofcourier services isrestricted andunbound intheSchedule, but
93Unless otherwise noted, thepresence ofnatural persons isunbound except asindicated inthehorizontal
commitments (Chapter V(6)(i)).
94Consisting ofprofessional services (legal, accounting, architectural, engineering, medical, etc.); computer
andrelated services; research anddevelopment services; realestate services; rental services without operators;
andother business services.
95Exceptions arethecross-border supply ofmedical, dental andveterinary services, which areunbound.
96Theprovision ofauditing services byjuridical persons, however, requires thataminimum of60percent
ofthecapital oftheenterprise bereserved forSlovak citizens.
97However, theright toestablish acommercial presence isunbound forconsulting services incidental to
agriculture;thisprovisioninthespecificcommitmentsoverridesthehorizontalcommitmentregardingcommer cial
presence.
98Includes postal services, courier services andtelecommunications.
99Slovakia hasm.f.n. exemptions regarding audiovisual services, asnoted inTable V.17.WT/TPR/S/7
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theconsumption abroad andrighttoestablish acommercial presence toprovide theseservices isbound
withnolimitations.
120. Slovakia hasmade specific commitments intelecommunications forfacsimile services andsome
value-added services suchaselectronic mail, voice mailanddatabaseretrieval. Inthese areas, ithas
agreed nottolimitmarket access ornational treatment ofcross-border supply orconsumption abroad,
ornational treatment forforeign providers established inSlovakia. There arelicensing requirements
and,forfacsimile services, alimitation onownership.
(c) Construction andrelated engineering services100
121. Slovakia hasundertaken nottolimittheconsumption abroad oftheservices ofmostconstruction
sub-sectors, buthasnofurther specific commitments. Thehorizontal commitments ontheright to
establish acommercial presence donotapply inthissector.
(d) Distribution services101
122. With theexception ofcommission agents 'services, Slovakia made substantive commitments
intheareaofdistribution services. Cross-border supply, consumption abroad andcommercial presence
havebeenbound withnolimitations forwholesale trade andfranchising, andformailorder retail
services.102
(e) Educational services
123. Slovakia hasundertaken bindings nottolimitmarket access ornational treatment ofthecross-
border supply orconsumption abroad ofeducational services. Commercial presence (intheform of
aneducational institution) maybeestablished ifauthorization fromthecompetent authorities isobtained
andtheteaching complies withqualification andmaterial requirements. Slovak citizens mustcomprise
amajority ofthemembers oftheinstitution 'sboard.
(f) Environmental services103
124. Rights toconsume abroad, andtoestablish acommercial presence toprovide, environmental
services arefullybound withnolimitations. However, Slovakia hasmade nocommitment onthecross-
border supply ofthese services.
100These consist ofconstruction work forbuildings, construction work forcivilengineering, installation
andassemblyofpre-fabricatedconstruction,buildingcompletionandfinishingwork,andotherconstructionservices.
101Distribution services consist ofcommission agents 'services; wholesale trade; retailing; franchising; and
other distribution services.
102Thebinding oncross-border supply ofmail-order retail, which doesnotapply toother retail, isonlyfor
market access. According toSlovakia 'sschedule, there isnobinding regarding national treatment ofthecross-
border supply ofretail services; thisisoneofthefewdifferences between theSlovak Schedule andtheCzech
Schedule.
103Environmental services include sewage disposal; refuse disposal; andsanitation services.Slovak Republic WT/TPR/S/7
Page 113
(g) Financial services104
125. Thecross-border supply ofseveral types ofinsurance inSlovakia requires thatthesupplier
haveacommercial presence inSlovakia. Thisapplies to:(i)lifeinsurance forpersons permanently
resident inSlovakia; (ii)theinsurance ofproperty ontheterritory ofSlovakia; (iii)insurance covering
theairandmaritime transport ofgoods; and(iv)liability insurance forlosses caused bynatural and
juridical persons onSlovak territory. There arenoother market access limitations forcross-border
supply andthere arenonational treatment limitations. Theinsurance types (i),(ii),and(iv)above
maynotbepurchased abroad; thisistheonlymarket access limitation toconsumption abroad and
therearenonational treatment limitations. Licensing bytheNBSisrequired toestablish acommercial
presence, andforeign nationals mayestablish aninsurance company inSlovakia either byforming
ajoint-stock company orbyconducting business through asubsidiary witharegistered office inSlovakia
under theconditions oftheLawonInsurance.105National treatment ofcommercial presence islimited
onlybytherequirement thatamajority ofaninsurance company 'smanagement board bedomiciled
inSlovakia.
126. Slovakia 'sspecific commitments inbanking andother financial services areseparated intotwo
sub-sectors. Thefirstsub-sector concerns primarily commercial banking activities.106Market access
forthecross-border supply andconsumption abroad ofthese services islimited inthefollowing ways:
(i)deposit services areconfined tobanks; (ii)trade inforeign exchange assets islimited todomestic
banks, branches offoreign banks, andpersons possessing aforeign exchange licence; (iii)only
authorized banks andbranches offoreign banks mayeffect non-cash cross-border payments; (iv)foreign
exchange licences issued bytheNational Bank ofSlovakia (NBS) arerequired fortheopening ofa
foreign account byaSlovak resident other thanabank, foreffecting capital payments abroad, for
obtaining credit from aforeign exchange non-resident, andforexporting orimporting currency and
securities denominated intheSlovak currency; and(v)foreign exchange assets mustbedeposited with
anauthorized domestic bankorbranch ofaforeign bank. There arenonational treatment limitations
ofcross-border supply orconsumption abroad noted intheschedule. Commercial presence maybe
limited, andcurrently is,byrequirements thatbanking services beprovided onlybybanks authorized
bytheNBS(inagreement withtheMinistry ofFinance); thatprivate banks beestablished onlyas
joint-stock companies; andthatforeign banks mayestablish branches inSlovakia orparticipate through
theircapital share inestablished banks onlywithNBSauthorization. Slovak citizens mustcomprise
atleastonethirdoftheBoard ofDirectors ofbanks.
104Many forms ofinsurance arerequired tobepurchased through monopoly suppliers; these arediscussed
inChapter V(6)(iii). Financial services includes insurance andinsurance-related services; andbanking andother
financial services.
105Some specific licensing requirements arelisted inSlovakia 'sSchedule.
106Thisincludes theacceptance ofdeposits; lending; payments andmoney transmission; financial guarantees
andcommitments; andtrading (including money market instruments, foreign exchange, andexchange rateand
interest rateinstruments).WT/TPR/S/7
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127. Thesecondsub-sectorcoversmostotherfinancialservices.107Slovakiahasnottakenanybindings
withregard tothecross-border supply ofthese services. Consumption abroad, however, isfreeof
anymarket 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
128. Slovakia hasmade nospecific commitments inthisarea.
(i) Tourism andtravel-related services108
129. There arenolimitations onmarket access ornational treatment withregard totourism and
travel-related services forconsumption abroad orcommercial presence.109Thecross-border supply
ofservices oftravel agencies andtouroperators isunbound intheSchedule. Thepresence ofnatural
persons toprovide tourist guide services isunbound, superseding thehorizontal commitment regarding
thepresence ofnatural persons.
(j) Recreational, cultural andsporting services
130. Slovakia hasmade nospecific commitments inthisarea.
(k) Transport services110
131. Slovakia hasaccepted acommitment oninternal waterways transport forconsumption abroad,
which isbound without limitations. Commercial presence forthisareaisunbound, superseding the
horizontal commitment. Commercial presence fortheprovision ofaircraft repair andmaintenance
requires thatthecorporate seatbelocated inSlovakia. Theonlyspecific commitments inothertransport
service areas(aircraft, railtransport androadtransport) regard theconsumption abroad ofmaintenance
andrepair services.
107Included 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.
108This includes hotels andrestaurants; travel agencies andtouroperators; andtourist guides services.
109Thisisoneofthefewareas 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.
110Thisincludes maritime; internal waterways; air;space; rail; road; pipeline; andservices auxiliary
toallmodes oftransport.