RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG55/2
16 April 1999
(99-1511)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN CROATIA AND SLOVENIA
Communication from the Parties
The following communication has been received from the Permanent Mission of the Republic
of Slovenia with the request that it be distributed to WTO Members.
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I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Date of Signature, Ratification and Entry into Force
The Free Trade Agreement (FTA) between the Republic of Slovenia and the Republic of
Croatia was signed on 12 December 1997 in Zagreb, Croatia.  Due to the lengthy procedure for theratification of agreements, a provision was included in the Agreement that allows the Parties to apply
it on a provisional basis from 1 January 1998.  The Agreement has not entered into force yet.
2. Type of Agreement
The agreement that was concluded between the Republic of Slovenia and the Republic of
Croatia is a Free Trade Agreement.  The Agreement was concluded with the aim of allowing Parties
to participate actively in the process of economic integration in Europe and to co-operate in seekingways and means to strengthen this process.
The primary objective of the Agreement is to establish a free-trade area in a transitional
period ending on 1 January 2001, in accordance with the provisions of the Agreement and in
conformity with those of the GATT 1994, in particular Article XXIV, and the Agreement Establishingthe WTO.  The full plans for the reduction of customs duties and other tariff barriers to trade to zero
on substantially all the trade between the Parties are contained in the relevant Articles, Annexes and
Protocols of the Agreement (see Annex 1).
3. Scope and Product Coverage
The FTA covers trade in industrial products (H S Chapters 25 - 97, with the exception of the
products listed in Annex 1) and agricultural products (Protocol 2, including the products listed in
Annex 1).  The Agreement also contains provisions, inter alia , on state aid, state monopolies,
competition, government procurement, intellectual property rights and dumping.  The Parties have
also expressed their readiness to discuss the extension of the scope of the Agreement to the areas notcurrently covered (evolutionary clause).WT/REG55/2
Page 2
The products excluded from the coverage of Chapter I (Industrial products) of the Agreement
listed in Annex 1 are products falling within Chapters 1 to 24 ("agricultural products") in the
nomenclature preceding the Harmonised Descript ion and Coding System  (HS), but which were
transferred, at the time of its introduction, into HS Chapters 25 to 97 ("industrial products").  These
products listed in Annex 1 are thus products which are excluded from the application of provisions ofthe Agreement relating to industrial products.  However, the products are covered by the provisions
relating to agricultural products in Articles 11, 12, 13, 14 and 15.  The Republic of Slovenia applies a
similar system in its relations with the European Community.
The following summary indicates products which are covered by, or excluded from, the
Agreement:
(i) All products falling within H.S. Chapters 25 to 97 are covered.
(ii) The products contained in Protocol 2 (agricultural products) are covered.The trade coverage of the products covered by the Agreement under review and agricultural
arrangements, which also form a part of the instruments creating the free-trade area, is presented in
detail in Annex 2 to this note.
Products falling within Chapters 25 to 97 of the HS account for 86 per cent of imports of all
products originating in Croatia being imported in Slovenia, and for 89 per cent of imports of allproducts originating in Slovenia being imported in Croatia
Products falling within Chapters 1 to 24 of the HS for which the  customs duties have been
decreased within the limits of quotas since 1 January 1998 account for 10 per cent of imports of all
products originating in Croatia being imported in Slovenia and for 68 per cent of imports ofagricultural products originating in Croatia being imported in Slovenia (see Annex 2).
Products falling within Chapters 1 to 24 of the HS for which the MFN rate of duty is applied
account for 4 per cent of imports of all products originating in Croatia being imported in Slovenia and
for 32 per cent of imports of agricultural products originating in Croatia being imported in Slovenia
(see Annex 2).
Products falling within Chapters 1 to 24 of the HS for which the customs duties have been
decreased within the limits of quotas since 1 January 1998 account for 8 per cent of imports of all
products originating in Slovenia being imported in Croatia and for 75 per cent of imports of
agricultural products originating in Slovenia being imported in Croatia.
Products falling within Chapters 1 to 24 of the HS for which the MFN rate of duty is applied
account for 3 per cent of imports of all products originating in Slovenia being imported in Croatia and
for 25 per cent of imports of agricultural products originating in Slovenia being imported in Croatia.
The FTA covers substantially all the trade between the Republic of Slovenia and the Republic
of Croatia in products originating in these territories.
4. Trade Data
See country specific table in Annex 3 to this note on development of trade between Slovenia
and Croatia.  In addition, compiled economic and trade indicators of the Slovenia and Croatia areprovided in Annex 4 to this note.WT/REG55/2
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II. TRADE PROVISIONS
Industrial Products
1. Import Restrictions
1.1 Duties and charges
Customs duties on imports are reduced in accordance with the provisions laid down in
Protocol 1 to the Agreement.  The Protocol 1 cont ains Annexes A, B, C, D and E. Annexes A and B
determine the reduction of customs duties applied in Croatia for products originating in Slovenia,
whereas Annexes C, D and E determine the reduction of customs duties applied in Slovenia for
products originating in Croatia.  The product coverage differs depending on the industrial structure ofeach country.  The final date of the elimination of duties for  products listed in Annexes A, B, C, D
and E is 1 January 2001.  For the products not listed in Annexes A, B, C, D and E the customs duties
were abolished on 1 January 1998.
All charges having an effect equivalent to customs duties on imports were abolished on
1 January 1998.
The provisions concerning the prohibition and abolition of customs duties on imports also
apply to customs duties of a fiscal nature.
1.2. Quantitative Restrictions
The provisions on quantitative restrictions (QRs) on imports in the FTA apply to all products
covered by the Agreement, as specified in Article 2 of the Agreement.
The QRs on imports were abolished by both Parties on 1 January 1998.
2. Export Restrictions
2.1. Duties and charges
All duties on exports and charges having equivalent effect were abolished on 1 January 1998.
2.2. Quantitative restrictions
The provisions on quantitative export restrictions in the FTA apply to all products covered by
the Agreement, as specified in Article 2 of the Agreement.
The QRs on exports were abolished by the Republic of Slovenia on 1 January 1998.  The
Republic of Croatia will abolish them at the latest by 1 January 2001.
3. Rules of Origin and Co-operation in Customs Administration
The provisions on rules of origin laid in the Protocol 3 to the Agreement are conceived for the
purpose of the Agreement.  These rules are harmonised with the rules of origin applied in a number of
FTAs within Europe.  However, these rules do not have provisions on diagonal cumulation of origin
and provisions on prohibition of drawback of, or exemption from, customs duties.  Thus, the Parties
do not apply the concept of the Pan-European cumulation.WT/REG55/2
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4. Standards
4.1. Technical barriers to trade
The rights and obligations of the Parties relating to technical barriers to trade are governed by
the WTO Agreement on Technical Barriers to Trade.
The Parties shall co-operate and exchange information in the field of standardisation,
metrology, conformity, assessment and accreditati on with the aim of reducing technical barriers to
trade.  In order to eliminate technical barriers and effectively implement the Agreement, the Parties
may on the basis of agreement conclude an agreement on mutual recognition of test reports,
certificates of conformity and other documents directly or indirectly related to conformity assessment
of the products which are the subject of the goods exchange between the Parties with the regulationseffective in the importing country.
4.2. Sanitary and phytosanitary measuresThe Parties apply their regulations in veterinary, plant health and health matters, in particular
in the exchange of information on infectious diseases of domestic animals, quarantine diseases, plant
pests and weed, as well as in the adjustment of similar documents in the exchange and transport of
goods, taking into account that the Agreement on co-operation in the field of veterinary medicine has
already been signed in Zagreb on 13 September 1995.
They apply their regulations in a non-discriminatory fashion and shall not introduce any new
measures that have the effect of unduly obstructing trade.
5. Safeguards
The following emergency measures and other safeguard mechanisms applicable to intra-trade
are provided for in the Agreement:
- Specific safeguardsGiven the particular sensitivity of the agricultural markets, if imports of products originating
in a Party, which are the subject to concessions granted under the Agreement, cause serious
disturbance to the markets of the other Party, the Party concerned shall enter into consultations
immediately to find an appropriate solution.  Pending such solution, the Party concerned may take
measures it deems necessary.  Such measures cannot be applied toward  third counties.
- General safeguards
Where any product is being imported in such increased quantities and under such conditions
as to cause or threaten to cause serious injury to domestic producers of like or directly competitive
products in the territory of the importing Party, or serious disturbances in any related sector of the
economy or difficulties which could bring about serious deterioration in the economic situation of a
region, the Party concerned may take appropriate measures under the conditions and in accordancewith the procedure laid down in Article on Procedure for the application of safeguard measures to the
Agreement.  Such measures cannot be applied toward third counties.
- Structural adjustment
The measures under the provisions applying to structural adjustment may concern infant
industries or sectors undergoing restructuring or facing serious difficulties, particularly where theseWT/REG55/2
Page 5
difficulties might lead to important social problems.  The maximum coverage of trade represented by
products on which structural adjustment measures may be applied is defined in the relevant Article.
Such measures cannot be applied toward third counties.  The measures may not be applied after
1 January 2001.
No measures can be introduced against third countries on the basis of Articles on Specific
Safeguards, General Safeguards or Structural adjustment to the Agreement, since the FTA does not
alter the Parties’ respective rights vis-a-vis  third countries under the GATT 1994.
- Re-export and serious shortageAny export restrictions introduced under these provisions shall be applied in the sense of the
requirements of Article XI of the GATT 1994 unless they are based on Article XX.
- Balance of payments difficultiesThe Parties endeavour to avoid the imposition of restrictive measures including measures
relating to imports for balance of payments purposes.
Where one of the Parties is in serious balance of payments difficulties, or under imminent
threat thereof, the Party concerned may, in accordance with the relevant provisions of the GATT 1994
adopt restrictive measures, including measures related to imports, which shall be of limited durationand may not go beyond what is necessary to remedy the balance of payments situation.  The measures
shall be progressively relaxed as balance of payments conditions improve and they shall be eliminated
when conditions no longer justify their maintenance.  The Party concerned shall inform the other
Party forthwith of their introduction and, whenever practicable, of a schedule for their removal.
Any measures for balance-of-payments purposes shall be applied in accordance with the
provisions of the GATT 1994 in particularly the Understanding on Balance-of-Payments Provisions
of GATT 1994.
6. Anti-dumping
The Parties may only take anti-dumping measures in accordance with the Agreement on
Implementation of Article VI of the GATT 1994.  The Agreement contains provisions for theprocedures for the application of safeguard measures which are applicable to anti-dumping measures.
7. State Aid and Countervailing Measures
Any actions taken in accordance with the state aid provisions of the FTA will be in
accordance with the relevant provisions of the WTO.  The Parties ensure transparency in the area ofstate aid by reporting annually to each other on the total amount and the distribution of the aid given
and provide the information on aid schemes and on particular individual cases of state aid.  Any Party
can introduce, if it considers that a particular practice is incompatible with the Agreement’s
provisions, appropriate countervailing measures in conformity with WTO.
8. Sector-Specific Provisions
Agricultural products
The Agreement reduces, within the limits of annual tariff quotas, the  MFN rate of duty on a
number of agricultural products, thereby providing better access conditions for those products.  Theconcessions are granted in Protocol 2 to the Agreement.  There are two Annexes attached toWT/REG55/2
Page 6
Protocol 2: Annex A and B. Anne x A contains concessions granted by Croatia to imports of products
originating in Slovenia.  Annex B contains concessions granted by Slovenia to imports of products
originating in Croatia.
Without prejudice to the concessions granted in Protocol 2, the provisions of Chapter II
(agricultural products) shall not restrict in any way the pursuance of the respective agricultural
policies of the Parties or taking of any measure under such policies, including the implementation of
the results of the Uruguay Round Agreements.
Furthermore, the Parties shall examine the possibilities of granting each other further
concessions, taking into account the role of agriculture in their economies; the development of trade
in agricultural products between them; the particular sensitivity of the agricultural products; the rulesof their agricultural policies; and respecting provisions of the Agreement establishing the WTO.
The arrangements concluded within the framework of the FTA contribute to the development
of closer integration between the economies of the Parties to the free-trade area, without raising
barriers to trade of the other WTO Members’ with the Parties to this area.
9. Other
Customs administration co-operation
The provisions on mutual assistance in customs matters laid in the Protocol 4 to the
Agreement are conceived for the purpose of the Agreement.  The main goal of Protocol 4 is that the
Parties shall assist each other in ensuring that customs legislation is correctly applied, in particular by
the prevention, detection and investigation of contraventions of this legislation.
III. GENERAL PROVISIONS
1. Exceptions and Reservations
- General exceptions
The Agreement shall not preclude prohibitions or restrictions on imports, exports or goods in
transit justified on grounds of public morality, public policy or public security; the protection of
health and life of humans, animals or plants and environment; the protection of treasures of culture;the protection of intellectual property or rules relating to gold or silver or the conservation of
exhaustible natural resources, if such measures are made effective in conjunction with restrictions on
domestic production or consumption.  Such prohibitio ns or restrictions shall not, however, constitute a
means of arbitrary discrimination or a disguised restriction on trade between the Parties.
- Security exceptions
Nothing in the Agreement shall prevent a Party from taking any measure which it considers
necessary to prevent the disclosure of information contrary to its essential security interests; for the
protection of its essential security interests or for the implementation of international obligations ornational policies relating to the traffic in arms, ammunition and implements of war, provided that such
measures do not impair the conditions of competition in respect of products not intended for
specifically military purposes, and to such traffic in other goods, materials and services as is carried
on directly or indirectly for the purpose of supp lying a military establishment; or relating to the
non-proliferation of biological a nd chemical weapons, nuclear weapons or other nuclear explosive
devices; or taken in time of war or other serious international tension.WT/REG55/2
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IV. OTHER
1. Internal Taxation
There are no measures or practices of an internal fiscal nature applied by the Parties, implying
directly or indirectly discrimination against the products of the Parties.  Examples of direct taxation
one can mention are income tax or corporate tax, whereas turnover tax and value added tax areexamples of indirect taxation.
2. State Monopolies
The provisions on state monopolies ensure that procurement or marketing of products by any
state monopolies of commercial nature, as defined in the Article of the Agreement also include
monopolies delegated by the Parties to others.  The Parties will adjust progressively any state
monopoly of a commercial character so as to ensure that by the end of the transitional period nodiscrimination regarding the conditions under which goods are procured and marketed exist between
nationals of the Parties.
3. Payments
The Agreement provides freedom of payments relating to trade and transfer of such payments
to the territory of the Party where the creditor resides.  They include a commitment to refrain from
any exchange or administrative restrictions on grant, repayment or acceptance of credits covering
commercial transactions.  The Parties have reserved the right to apply exchange restrictions connected
with the granting or taking up of short and medium term credits to the extent permitted according to
their status under the IMF. Such restrictions shall be applied on a non-discriminatory basis.
4. Government Procurement
The Parties shall progressively adjust their respective rules, conditions and practices for
government procurement with a view to grant suppliers of the other Party by 1 January  2001 at the
latest, access to contract award procedures on their respective government procurement marketsaccording to the provisions of the WTO Agreement on Government Procurement.
5. Protection of Intellectual Property
The Parties shall grant and ensure the protection of intellectual property rights on a
non-discriminatory basis, including measures for granting  and enforcing such rights.  The protection
shall be gradually improved on a level corresponding to the substantive standards of the multilateral
agreements which are specified in Annex III by 1 January 2001 at the latest.  The term intellectualproperty protection is defined in the Agreement.
6. Evolutionary Clause
A future deepening and extension of the coverage of the Agreement, as provided for by this
provision, may be defined by the Parties.
7. Validity and Termination
The Agreement was concluded for an indefinite period of time.  Each Party may terminate the
Agreement by a written notification to the other Party.  The termination shall cease to bind six months
after the date on which the notification was received by the other Party.WT/REG55/2
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ANNEX 1
Summary of the Structure of the Agreem ent, including Annexes and Protocols
Preamble
Objectives Article 1
Chapter I (Industrial Products)
Scope Article 2 and Annex I (Industrial
products that counts as agricultural)
Basic duties Article 3
Customs duties on imports Article 4 and Protocol 1Charges equivalent to customs duties Article 5Fiscal duties Article 6Customs duties and equivalent charges on exports Article 7QR on imports and measures having equivalent effect Article 8
QR on exports and measures having equivalent effect Article 9 and Annex II
Technical regulation Article 10
Chapter II (Agricultural Products)
Scope Article 11 and Annex IExchange of concessions Article 12 and Protocol 2
Concessions and agricultural policies Article 13
Specific safeguards Article 14Sanitary and phytosanitary measures Article 15
Chapter III (General Provisions)
Rules of origin and co-operation in customs administration Article 16 and Protocols 3 and 4
Internal taxation Article 17General exceptions Article 18Security exceptions Article 19State monopolies Article 20Payments Article 21
Rules of competition concerning undertakings Article 22
State aid Article 23Government procurement Article 24Protection of intellectual property Article 25 and Annex IIIDumping Article 26General safeguards Article 27
Structural Adjustment Article 28
Re-export and serious shortage Article 29Fulfilment of obligations Article 30Procedure for application of safeguard measures Article 31Balance of payments difficulties Article 32Evolutionary cause Article 33
The Joint Committee Article 34
Procedures of the JC Article 35Services and investment Article 36Customs unions, free-trade areas and frontier trade Article 37Annexes, Protocols and Amendments Article 38
Entry into force Article 39
Provisional application Article 40Validity and withdrawal Article 41WT/REG55/2
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ANNEX 2
Imports from Croatia to Slovenia
(Thousands of US dollars)
Imports 1998
(Jan-Apr)%
Agricultural products 29,823 14
Not covered by FTA 9,670 4
Annex B 20,153 10
Industrial products 187,860 86
Neither C, D or E
(tariffs abolished)149,144 68
Annex C 5,554 2
Annex D 7,692 4
Annex E 25,470 12
TOTAL 217,683 100
FTA is applied provisionally from 1 January 1998.
Total Imports At Zero
Customs DutyBetween Zero and MFN MFN
Value % Value % Value % Value %
1998
(Jan-Apr)217,683 100 149,144 69 58,870 27 9,670 4
Imports from Slovenia to Croatia
(Thousands of US dollars)
Imports 1998
(Jan-Apr)%
Agricultural products 39,870 11
Not covered by FTA 9,795 3
Annex A 30,075 8
Industrial Products 312,743 89
Neither A or B
(tariffs abolished)229,999 65
Annex A 76,345 22
Annex B 6,399 2
TOTAL 352,613 100
Total Import At Zero
Customs DutyBetween Zero
and MFNMFN
Value % Value % Value % Value %
1998
(Jan-Apr)352,613 100 229,999 65 112,819 32 9,795 3WT/REG55/2
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ANNEX 3-A
Slovenian Trade with Croatia
(Thousands of US dollars)
1997 1997
(Jan-Aug)1998
(Jan-Aug)1998/97
(Jan-Aug)
Import 465,492 308,718 284,509 92.2
Export 837,307 537,594 545,973 101.6
Source:  Official statistical bulletin, February and October 1998
Croatian Trade with Slovenia
(Thousands of US dollars)
1997 1997
(Jan-Aug)1998
(Jan-Aug)1998/97
(Jan-Aug)
Import 755,524 486,543 476,258 97.9
Export 505,517 355,897 286,448 80.5
Source:  Central Bureau of Statistics
ANNEX 3 - B
Trade between Slovenia and Croatia by HS Chapters
(Thousands of US dollars)
H.S.
ChapterThe Republic of Slovenia
Total imports from CroatiaThe Republic of Croatia
Total imports from Slovenia
1997 1998
(Jan-Aug)1997 1998
(Jan-Aug)
1 12 4 187 30
2 1,160 537 2,138 1,290
3 2,018 931 217 41
4 3,701 1,771 13,182 6,568
51 8 6 1 8 1
6 59 21 409 136
7 388,881 105 246 251
8 859,121 5 1,251 1,322
9 177,862 34 913 323
10 2,119 2,705 928 391
11 321 145 1,199 520
12 309 125 2,167 1,177
13 266 61 158 51
14 17 25 299 87
15 6,744 3,337 5,712 2,924
16 4,390 2,342 10,420 5,599
17 1,475 681 1,699 670
18 3,379 1,578 725 305
19 8,980 4,340 5,624 2,765
20 1,097 541 9,954 3,832
21 9,063 4,754 13,651 5,302
22 2,351 1,053 6,430 5,452
23 7,027 4,390 1,681 835
24 4,341 269 3 0
25 4,523 1,667 4,624 2,508
26 207 77 387 320
27 130,663 43,379 3,862 4,829WT/REG55/2
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H.S.
ChapterThe Republic of Slovenia
Total imports from CroatiaThe Republic of Croatia
Total imports from Slovenia
1997 1998
(Jan-Aug)1997 1998
(Jan-Aug)
28 5,710 2,536 18,555 4,858
29 784 420 3,369 4,613
30 25,329 12,115 53,946 25,488
31 25,590 16,483 431 275
32 2,085 971 16,161 8,185
33 796 478 11,283 5,988
34 1,081 564 4,179 3,250
35 250 140 3,543 1,777
36 183 84 909 437
37 155 65 1,352 730
38 4,029 2,310 8,805 3,271
39 24,688 10,394 32,367 16,153
40 1,920 969 22,873 8,095
41 7,308 3,096 751 557
42 167 102 1,044 271
43 35 478 54 10
44 18,844 10,433 43,550 19,371
45 3 13 57
46 96 64 17 6
47 1,739 853 872 262
48 15,454 7,696 49,617 24,674
49 7,366 3,806 3,651 4,563
50 32 6
51 338 27 1,969 640
52 2,294 1,453 3,974 1,934
53 41 107 39
54 437 236 4,899 1,514
55 793 378 3,646 1,886
56 138 36 2,465 1,677
57 13 9 105 50
58 81 64 928 354
59 269 315 1,793 751
60 647 175 3,303 628
61 4,708 2,800 3,986 2,911
62 7,854 4,169 12,645 6,895
63 867 670 2,512 3,163
64 3,515 819 9,021 3,489
65 15 19 302 27
66 66 38 64 61
67 4 59 20
68 1,678 992 11,854 6,764
69 1,175 1,164 4,996 2,288
70 8,968 3,793 4,737 2,445
71 148 126 634 348
72 8,078 3,899 13,445 5,478
73 11,759 6,694 27,614 10,841
74 2,204 1,683 1,606 670
75 4 176 132
76 5,441 2,582 8,652 3,879
77 859 318
78 470 259 508 237
79 82 1 23 5
80 277 13 54 1
81 145 3,606 1,990
82 1,105 568 11,769 5,044
83 1,274 806 100,656 40,083WT/REG55/2
Page 12
H.S.
ChapterThe Republic of Slovenia
Total imports from CroatiaThe Republic of Croatia
Total imports from Slovenia
1997 1998
(Jan-Aug)1997 1998
(Jan-Aug)
84 13,041 7,280 53,640 23,044
85 24,792 11,888 188 110
86 126 46 26,523 15,329
87 12,848 10,339 18 9
88 5,258 1,761
89 142 31 21,030 6,620
90 3,598 2,091 1,751 479
91 6 18 1
92 3 14 21 28
93 6 26,780 16,983
94 3,204 2,332 2,347 777
95 223 57 1,129 467
96 2,270 1,259 24 1
97 40 3 8,371 3,011
TOTAL 465,492 217,684 755,524 352,613WT/REG55/2
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ANNEX 4
Basic Data for 1997
Slovenia
Population 1,982.265
GDP in millions of US Dollars 18.858*
GDP per capita, in US Dollars 9,471*
Land area (sq.km) 20.253
Imports in millions of US Dollars 9,178.7
Exports in millions of US Dollars 8,407.1
Trade balance in millions of US Dollars -771.6
          Source:  Monthly Bulletin of Bank of Slovenia, April 1998
           *Data available only for year 1996
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