Note: Advance written questions by WTO Members and replies provided by the Czech Republic to
these questions and to other questions raised during the meeting are reproduced in document
WT/TPR/M/89/Add.1.WORLD TRADE
ORGANIZATIONWT/TPR/M/89
29 November 2001
(01-6088)
Trade Policy Review Body
17 and 19 October 2001
TRADE POLICY REVIEW
CZECH REPUBLIC
Minutes of Meeting
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF
THE CZECH REPUBLIC 4
III. STATEMENT BY THE DISCUSSANT 7
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 11
V. REPLIES FROM THE REPRESENTATIVE OF THE CZECH REPUBLIC
AND ADDITIONAL COMMENTS 16
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 20WT/TPR/M/89
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of the Czech Republic was held on 17 and 19 October 2001.
The Chairperson welcomed the delegation of the Czech Republic headed by Mr. Mirolasv Somol,
Minister of Industry and Trade, and the discussant, H.E. Mr. Oguz Demiralp (Turkey).  As usual, the
discussant would speak in his personal capacity and, in accordance with established procedures, he
had made available in advance a broad outline of the themes he intended to raise (document
WT/TPR/D/68).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of the Czech Republic was contained
in document WT/TPR/G/89 and that of the Secretariat in document WT/TPR/S/89.  Copies of
advanced questions, submitted by Canada;  the European Union;  Hong Kong, China;  Japan;  the
Republic of Korea;  Norway;  Switzerland;  and the United States were transmitted to the delegationof the Czech Republic.  Replies provided by the delegation of the Czech Republic to these questions
are reproduced in WT/TPR/M/89/Add.1.WT/TPR/M/89
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE CZECH REPUBLIC
3. The representative of the Czech Republic said th at this second trade policy review (TPR) took
place at a crucial time, in a decisive phase of negotiations on accession to the European Union (EU),
the Czech Republic's highest priority, and of preparations for the forthcoming Session of the WTO
Ministerial Conference.  This constituted two chal lenges for the Czech Republic, which testified that
multilateralism and regionalism, if rooted in the same rules and principles, could and should be
mutually supportive and beneficial.
4. Since its last Trade Policy Review in 1996, the Czech Republic had pursued its transition
towards a functioning market economy, and had substantially changed the role of the State.
5. In the 1997-99 period, in order to redress macroeconomic imbalances and domestic economic
recession, the Czech authorities had adopted domestic corrective measures, including severe austerity
programmes.  Macroeconomic policy had been redefined to achieve economic stabilization, thus
laying a firm basis for sustained economic growt h.  As a result, GDP growth had resumed in the
second quarter of 1999; however, economic recovery had gained momentum only in 2000.  Data on
GDP for the first half of 2001 confirmed that the Czech economy had shifted to the growth path. In
the first two quarters of 2001, similarly as in 2000, demand GDP growth had reached 4%, and had
been driven predominantly by domestic demand.  The Czech Republic had accelerated domesticstructural reforms  to allow market forces to play a greater role in companies' and individuals'
decision-making.  Price deregulation had resumed, and would be completed in the near future.
6. The privatization process had picked up.  The State had been able to sell large parts of its
assets in the four remaining state-owned banks.  Privatization in the banking sector was completed
with the recent sale of the largest commercial bank.  In the telecommunications sector, privatization
had progressed with the sale of state shares in two major telecommunications companies.  In the
energy sector, the question was no longer whether to  privatize but rather how to reduce government
involvement and ensure effective functioning of companies, the backbone of the economy.  The
Czech authorities had also focused on improving the overall business climate and corporate
governance, while developing an economic environment supporting entrepreneurship, competition,
and investment.  In this context, the authorities had taken steps to simplify horizontal procedures on
technical requirements for products, conformity assessment, and public  health protection.  Efforts to
improve the business environment, including a set of incentives equally applied to foreign and
domestic investors, had helped to increase the at tractiveness of the Czech economy in the eyes of
foreign investors.  Fixed investment, accounting to around 30% of GDP, had been enhanced by
foreign direct investment and domestic production of investment goods.  In 2000, foreign direct
investment had remained strong, reaching an inflow of US$4,9 billion.
7. In spite of efforts to strengthen the enforcement of laws, the authorities and business operators
remained concerned about the efficiency of bankruptcy proceedings as well as remaining weaknesses
in the Czech judicial system, which hampered the timely restructuring of, and appropriate solutions
for, companies in difficulties. Concerns also pers isted in relation to imbalances in the Czech public
finances, a risk for short-term macroeconomic prospects.
8. Improved access for Czech goods and services was a precondition to ensure steady economic
growth, create investment and employment opportunities, increase sales potential for Czech
entrepreneurs, and allow economies of scale.  Foreign technologies and  industrial inputs played an
important role in the restructuring process and efficient resource allocation.  At the same time, imports
provided consumers with a larger choice of products and services at cheaper prices.WT/TPR/M/89
Page 5
9. In 2000, total goods exports had more than doubled their 1993 level of US$14.2 billion, to
reach US$29 billion, thus demonstrating the dynamism of Czech's trade.  Imports had risen even moremarkedly from US$14.8 billion in 1993 to US$32.3 bi llion in 2000.  While growing at a slower pace
than in the past, the reorientation of merchandise exports towards European countries had continued;
imports from Europe had decreased in favour  of overseas or non-European partners.
10. The expansion of trade was testimony that the Czech Republic had pursued an open and
liberal trade policy;  free trade had continued to be a cornerstone of its economic policy.  Import
tariffs on all products currently averaged about 6%, one of the lowest levels in the world.  The Czech
Republic did not apply any protectionist barriers and registered only few trade remedy measures,
which were consistent with WTO Agreements.  N on-tariff measures were applied only to address
legitimate environment, health, public morals and security-related concerns. The Czech Republic had
continued to implement its GSP scheme in favour of developing countries: imports from 48 leastdeveloped countries enjoyed duty-free and quota-free access to the Czech market, and had granted
preferential treatment in the form of reduced duties on a wide range of products originating in 87
other developing countries.
11. The exclusive application of ad valorem  duties had enhanced the transparency and
predictability of the Czech Republic trade regime.  All tariffs lines were bound, which also enhancedlegal certainty.  Publication of the Czech Integrated Tariff provided further transparency.  Information
by the authorities on bound tariff, applicable rates, and origin assessment was also provided, upon
request, by the Czech authorities.
12. Deregulation, liberalization and market opening had proved to be necessary albeit not
exclusive tools for effective functioning of a market economy.  The Czech Republic had further
strengthened its competition legislation, pr otecting producers and consumers against unfair
commercial practices.  Significant progress had also been made in channelling and monitoring stateaid;  pursuant to new legislation, which entered into force on 1 May 2000, all state aid had to be
reviewed by the Office for the Protection of Economic Competition.
13. The Czech Republic had always promoted a multilateral, rules-based trading system, as
embodied by the GATT and the WTO, which provided an anchor for domestic trade policy
frameworks, reduced regulatory backpedalling, and played an important role in shaping economicpolicies consistently with the principles of a market economy.  Full and timely implementation of all
its commitments undertaken during the Uruguay Round testified to the importance the Czech
Republic attached to the WTO.  All reductions in tariff protection had been implemented on schedule,
with the remaining tariff cuts to be completed by 2004.  As a signatory to the Information Technology
Agreement (ITA), the Czech Republic had gradually phased out duties applied to ITA products with aview to eliminating them by 1 January 2002.
14. The Czech Republic had also met its commitments on domestic support and export subsidies
for agricultural products;  subsidies did not reach the levels allowed by the national schedule.  Most
domestic support had been applied to avoid interference with market forces, and to sustain the
unprecedented and painful process of transformation of the agriculture sector.  Few products hadbenefited from export subsidies.  Regarding textiles and clothing, the Czech Republic had undertaken
meaningful integration into the rules of the GATT 1994, covering 51.6% of total imports concerned;
it did not apply quantitative restrictions under the Agreement on Textiles and Clothing, and had not
resorted yet to the transitional safeguard mechanism.  In accordance with its schedule of specific
commitments, the Czech Republic had also liberalized market access in services.  It had participatedin subsequent negotiations on further liberalization of trade in basic telecommunications and financial
services, and made meaningful commitments under respective agreements.  As a result of a number of
unilateral measures, the actual level of market access in services was higher than that implied by itsWT/TPR/M/89
Page 6
WTO Schedule.  The Czech Republic had decided not to take advantage of arrangements for
economies in transition as set out in the TRIPS Agreement, and had successfully undergone reviewsof its legislation.  The Government Report for this TPR commented on further legislative and
operational steps taken to achieve higher standards of IPRs protection.
15. The Czech Republic believed that new WTO negotiations should not be limited to market
issues, but rather should encompass a strong and credible rule-making element, including new rules
concerning investment, competition, and the environment.  Upcoming negotiations should alsoaddress public concerns in relation to the functioning of the multilateral trading system.  The launch
of a new round enjoyed strong support by Mr. Vaclav Havel, President of the Czech Republic.
16. The Czech Republic had developed strong synergies between multilateral and regional
integration.  The WTO had maintained its strong relevance for the Czech Republic, in its regional
trade relations in general, and in its negotiations for accession to the EU in particular.  The
Czech Republic had shown a long-standing desire to deepen its relations with the EU.  The Europe
Agreement signed in 1992, which was aimed at establishing a free-trade zone and promoting mutual
cooperation in a wide range of areas, was a step in that direction.  In 1996, the Czech Republic had
submitted its application for EU membership.  Two years later, negotiations on terms of accession had
been opened.  The Czech Republic had concluded 19 of the 30 chapters, suggesting that progress hadbeen made in harmonizing its national legislation with the acquis communautaire .  The Czech
Republic expected negotiations to be concluded in 2002, and appreciated that the EU             
Goteborg Summit conclusions had agreed to the Czech Republic's participation, as a member, in the
European Parliament elections in 2004.  Although, it was premature to anticipate its impact, the Czech
Republic firmly believed that accession to the EU would be beneficial to third countries, and would
offer a range of new trading opportunities. The extension of high standard trade rules and procedures
would have positive effects on dealings of third-country operators.
17. The Czech Republic was a signatory to preferential agreements with the Slovak Republic and
other CEFTA countries (Bulgaria, Hungary, Poland, Ro mania, and Slovenia);  with the EFTA States;
and with Estonia, Latvia, Lithuania, Israel and Turkey. These agreements had proved to be useful
tools in restoring and/or developing economic tie s, while strengthening the multilateral trading
system. The Czech Republic had completed negotiations on a free-trade agreement with Croatia to beapplied on a provisional basis as of 1 January 2002.WT/TPR/M/89
Page 7
III. STATEMENT BY THE DISCUSSANT
(1) G LOBAL MACROECONOMIC  DEVELOPMENTS
18. The discussant stated that since the second quarter, prospects for 2001-02 had weakened, and
that downside risks had been further exacerbated by the recent terrorist attack in the United States.
Growth projections for almost all regions had been reduced.  GDP growth was slowing down in
almost all regions of the globe, accompanied by a decline in trade growth. In response, many
countries had eased macroeconomic policies, which together with gradual abatement of oil prices,should contribute to support activity and confidence in the period ahead.  As the downturn made the
world vulnerable to further unexpected developments, substantial uncertainties and risks persisted.
(2) R
ECENT DEVELOPMENTS IN THE CZECH ECONOMY AND CHALLENGES AHEAD
19. The Czech Republic was highly integrated into the world economy.  It had a functioning
market economy and should be able to cope with international competitive pressure and marketforces.  The Czech Republic was a member of the Organization for Economic Cooperation and
Development (OECD), and a candidate for EU member ship.  The process of accession to the EU had
been the driving force in the Czech economy, and in its integration into the world economy.  He asked
whether the Czech delegation could shed further light on the causes of the 1997-99 recession.
20. The recovery in the Czech Republic had begun in 1999.  In 2000, real GDP growth had
registered a moderate 3.1%.  Activity had remained strong in early 2001;  growth had been supported
by a revival of investment, reflecting strong fo reign direct investment (FDI) and sustained demand
from EU countries for Czech products.  However im ports, primarily of investment goods, had grown
even faster, generating a negative contribution from the external sector.
21. The expansion had not been entirely even.  Vibrant, export-oriented firms, with foreign
participation, were leading the recovery, benefiting from better organization and technology, and
access to credit and markets abroad.  They were the source of high export growth, and were graduallystrengthening the Czech economy's competitiveness.  At the same time, a large number of less
dynamic firms in the traditional enterprise sector needed restructuring, and continued to face losses
and overdue debt service.  He asked what kind of measures the Czech Government had taken to deal
with this category of firms.
22. He observed that in the absence of domestic inflationary pressures, the modest pickup of
inflation had been due mostly to external factors, namely rises in fuel and food prices.  Domestic price
pressures continued to be generally weak due to strong competition in the retail sector and moderate
wage demands.  Deteriorating terms of trade and strong imports of capital equipment had led to a
significant widening of trade and external current account deficits in 2000, largely financed by FDI
inflows.  The current account deficit expanded from 3% of GDP in 1999 to 4% in 2000, as the tradedeficit doubled to 6.6% of GDP, despite export volume growth of nearly 20%.  Higher oil costs were
estimated to have added about 1.5 percentage points of GDP to the import bill, while in volume terms,
imports of capital goods and intermediate products had grown strongly in 2000, with capital goods
imports growing even faster in the first four months of 2001.
23. FDI inflows continued to dominate the financial account.  Incoming FDI reached 9% of GDP
in 2000 following inflows of about 12% of GDP in 1999.  The Czech Republic had the best record in
the region in attracting FDI. In this regard, he asked what made the Czech Republic so attractive to
foreign direct investment.  Delays and uncertainty in the Czech judicial process, linked to the weak
enforcement of laws and regulations, were an important problem for foreign investors.  Given the
importance of FDI for its economy, there was little doubt that the Czech authorities would address thisWT/TPR/M/89
Page 8
issue. He nevertheless invited the Czech delegation to inform Members about steps taken in this
regard.
24. Monetary conditions had been broadly constant, with a decline in real interest rates offsetting
the appreciation of the koruna in real effective terms.  Market interest rates tracked the cut in the
policy rate.  In 2000, credit to households and to enterprises with wider foreign ownership had risen,
in contrast to declining credit to the traditional enterprise sector.  As privatization and the
restructuring process in the banking system was close to completion, modest credit growth wasexpected in 2001, with a further pickup thereafter.  In addition, ongoing efforts to strengthen creditor
rights should help banks to resume broad-based credit activities.  Fiscal policy had been expansionary.
In the context of initial recovery,  general government deficit had increased by nearly 1 percentage
point reaching 4.1% percent of GDP in 2000.
25. On the structural reform front, in less than a decade, the Czech Republic had been
transformed into a market-oriented and open economy.  Legislative reform had continued apace.  The
discussant attributed this progress to the EU ac cession process.  By April 2001, the Czech Republic
had closed 19 chapters, and was considered to be among the front runners towards EU accession.  In
this context, he asked the Czech delegation to update Members on progress in the accession process.
26. He noted that, with the privatization of the last major state-owned bank, the banking sector
would be largely foreign-owned.  Further privatizatio n in the next two years would be concentrated in
the telecom and energy sectors.  He asked whether the current situation on international markets
would affect this process and whether delays could be expected.
27. As a result of the restructuring process, corporate sector financial performance had begun to
improve, with the return on assets increasing significantly in the first half of 2000, while leverage
ratios had declined.  However, a large segment of the corporate sector continued to generate losses,
and remained highly indebted.  Bankruptcy proceedings had been initiated against some of theseenterprises, but progress remained slow.
28. He noted that a "Big Bang" plan had been proposed, foreseeing direct spending for
economically depressed regions, through construction of infrastructure, housing, restructuring of
state-owned mining and metallurgy enterprises, and h eavily indebted industrial firms.  Privatization
receipts were to be its ultimate funding source.  He hoped that this plan would work effectively, andsolicited more information about its progress.
(3) T
HE MULTILATERAL SYSTEM AND REGIONALISM
29. The Czech Republic remained highly integrated into the world economy. Merchandise trade
(exports and imports) amounted to 120% of GDP in 2000 (105% in 1994), and the ratio of foreign
investment to GDP was 5.3% (9% in 1999).  In this context, the Czech Republic granted MFNtreatment to all WTO Members, as to several other countries with which bilateral agreements had
been signed.  Since the creation of the WTO, the Czech Republic had continued to undertake major
commitments within the multilateral framework, including in basic telecommunications and financial
services.
30. The Czech Republic, like other Central and Eastern European countries, had concluded free
trade agreements with the EU and had continued to build up its network of preferential trade
agreements.  The discussant believed that these free-trade agreements should be seen as guarantors of
regional economic stability and predictability, and a step towards further trade liberalization.
However, given the large number of preferential trade agreements, the Czech Republic applied MFN
rates only to a limited share of Czech imports (in 1999, 78% of its total imports were from free-tradeWT/TPR/M/89
Page 9
agreement partners).  While preferential agreements had helped to further open the Czech market, he
noted that such agreements might distort trade and investment patterns as they involved differentpreference margins.  In light of the above, he invited the Czech Republic to provide information on
how their regional agreements were reconciled with its multilateral liberalization efforts.
(4) M
AIN TRADE POLICY MEASURES
31. The discussant recalled that trade liberalizati on had been an important element in the reform
agenda of the Czech Republic.  In 2001, the average Czech MFN tariff rate had been lowered to 6 %,while 30.5 % of all tariff lines were duty free.  With no specific, composite or other non-
ad valorem  rates, the Czech tariff system remained transparent.  All tariff lines were bound (almost all
at the applied MFN rates), fostering a predictable trading environment for business.  However, in
agriculture, some tariffs had been bound at high levels.  In 2001, although the Czech simple MNF
tariff average for agriculture products (WTO definition) was 13.4%, and seemed quite high comparedwith an average rate of 4.3% for non-agricultural goods, it showed a liberal agricultural trade regime
when compared with other transitions economies.  Referring to a question by Japan the likely rise in
the level of protection in agriculture due to EU membership, as the overall MFN tariff on agricultural
goods was higher in the EU than in the Czech Republic, he asked what the  Czech Republic thought
about the effects of EU membership on its agricultural imports.  He noted that this was a problematicissue for all EU candidates.
32. While evaluating industrial tariffs, it was also notable that only 1% of tariff lines had duties
above 15%, and that 13.4% were duty free.  Tariff escalation was obvious on raw, semi-manufactured
and finished products: 0.9%, 4.2% and 4.9%, respectively.  However, this escalation almost tripled for
the textile and clothing sector.
33. He noted that the Czech import regime had relatively few non-tariff barriers.  A non-
automatic license continued to apply, inter alia,  to sugar, coal, explosives, and firearms.  He asked
how the Czech authorities used a non-automatic licensing system with volume for monitoring
purposes.  In preparation for accession, the Czech Republic was currently harmonizing its standards
and technical regulations with the EU's.  In this regard, several laws had been enacted, simplifying the
testing and standardization process.  The Czech Republic had also concluded mutual recognition
agreements for conformity assessments with several countries.  Government procurement legislationhad been amended, thus providing enhanced transparency.  However, in some instances the system
still discriminated against foreign firms.  Competition rules and intellectual property rights legislation
had also been strengthened.  The Czech Republic had recently enacted legislation on anti-dumping,
countervailing and safeguard measures.  During the period 1987-99, the share of the Czech Republic
in anti-dumping investigations was 0.1 %.  However, it was yet to be seen whether theCzech Republic would be an active user of contingency measures.  He hoped not.
34. In recent years, competition in the banking sector had increased, the regulatory framework
improved, and bank privatization accelerated.  Deficiencies in the banking sector had been among
factors behind the 1997 recession, while imprude nt lending by state-owned banks had helped
enterprises to postpone restructuring.  The unreformed enterprise sector was also a result of stateinvolvement through indirect ownership (state-own ed banks owned investment funds, which in turn
owned enterprises).  Weaknesses in regulation and supervision of capital market institutions would
prevent the build-up of strong governance structures and faster enterprise restructuring. In this respect,
it would be useful for the Czech delegation to discuss the utility of a revitalization agency.  A number
of bank and capital market reforms had also been implemented with the aim of harmonizing Czechlaw and regulations with those of the EU.  In particular, the central bank had strengthened regulatory
framework for bank supervision, moved towards a consolidated supervision, incorporated market risk
into the capital adequacy requirement, tightened provisioning requirements, and revoked a number ofWT/TPR/M/89
Page 10
bank licences.  The deficiencies in the banking sector were also addressed through privatization.
Privatization of three large state-owned banks had taken place, and only one state-owned commercialbank remained;  this was slated for privatization in the second half of 2001.
35. The discussant turned to the liberalization of the telecommunication market.  The telecom
monopoly company had been partly privatized and, most recently, additional operators were allowed
to provide international and long-distance services.  National and foreign investors were allowed to
operate on an equal footing.  Transport and services were also being liberalized.  He also underlinedthat the Czech Republic had recently promulgated a competition law containing the main principles of
the EU rules on anti-trust, merger control and abuse of dominant position.  The law covered goods
and services, and applied both to private and public sectors.  He solicited comments on positive
effects of competition rules on the Czech economy, and noted the gradual and steady strengthening of
protection of intellectual property rights.  He recalled that the Czech Republic was a party to mainWIPO agreements, and that it would soon accede to European Patent Convention.  Referring to the
Secretariat Report, he stated that in spite of laws for the protection of intellectual property towards
intellectual standards, enforcement of IPRs had lagged.  A new law provided for tough criminal
sanctions in this respect.  However, the Czech courts had not yet imposed sanctions in practice.  He
wondered whether the Czech delegation could clarify this point.
36. In conclusion, the discussant expressed confidence that unless external conditions created
obstacles, progress in economic recovery made by the Czech Republic would continue. As a result of
structural reforms, the Czech Republic was well set to pursue further liberalization at the global level,
while successfully advancing towards EU accession.WT/TPR/M/89
Page 11
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
37. The representative of Switzerland noted that, in spite of its economic difficulties, the
Czech Republic had pursued reforms towards establishing a functioning market economy, and made
remarkable progress in the privatization of its banking sector.  Liberalization of the foreign investment
regime had also led to increased foreign direct investment.  Switzerland encouraged the
Czech Republic to continue its efforts towards liberalization, acknowledged the Czech Republic's
active participation in the WTO, and appreciated its position in favour of a new and comprehensive
round of multilateral trade negotiations.  The Czech Republic's participation in preferential tradeagreements, including with the EFTA States, would contribute positively to regional integration as
well as to the multilateral trading system.
38. The representative of the European Union appreciated the Czech Republic's efforts towards
integration into Europe and to the world economy, inter alia , through liberalization of trade.  The
Czech Republic was in the first wave of candidate countries for accession to the EU.  He recalled that
negotiations on 19 chapters had been provisionally concluded.  The EU expected to completeaccession negotiations by end of 2002.
39. The Europe Agreement, in force since February 1995, laid down rules and regulations in the
areas of trade, economic, business, and financial relations.  This agreement was aimed atprogressively establishing free-trade in goods, on a reciprocal but asymmetric manner, with the EU
liberalizing  more rapidly.  Special arrangements we re foreseen for trade in services and agriculture.
The Europe Agreement included provisions under which the Czech Republic would align its
legislation on intellectual property, competition and public procurement with the EU's.  In
February 2001, the EU and the Czech Republic had moved to the second stage of implementation of
the Europe Agreement.  This was a sign that the Czech Republic had further liberalized its legislation
on capital movement.  As a result, Czech economic and trade policies were progressively convergingwith the EU's, the market economy had made its mark, and competitiveness in its internal market hadmostly been achieved.
40. The geographic distribution of trade in goods had continued to move away from the former
Soviet Union towards Western Europe.  The EU was by far the main destination for Czech exports
and the main supplier of Czech imports.  In 2000, almost 69% of total goods exports from the
Czech Republic (€23.8 billion) had gone to the EU, an increase of nearly 13% over 1999.  Exportgrowth was primarily driven by manufacturing industries, in particular machinery and automotive
products.  Around 62% of all Czech imports originated in the EU.
41. With regard to agriculture, the agreement on reciprocal concessions with the Czech Republic
entered into force in July 2000 on an autonomous basis, pending the conclusion of an Additional
Protocol to the Europe agreement. As a result, a pproximately 54% of the traditional EU agricultural
imports from the Czech Republic were duty-free, while 29% of the EU agricultural exports to theCzech Republic were exempted from duties.
42. Upon accession, the Czech Republic would align it s tariffs to the EU's. Through the adoption
of the "Act on some measures on export or impor t of goods and on licensing procedures", based on
the Uruguay Round Agreements, the Czech Republic had made a step forward in that direction, while
fulfilling its WTO commitments. The Czech Republic continued its efforts to conform its national
legislation to the acquis communautaire,  including the EU's common trade policy, and coordinating
policies at the multilateral level.  The EU welcomed the Czech Republic's support for a broad round
of trade negotiations at Doha.
43. Referring to the Secretariat Report, the representative did not agree that the Czech Republic's
accession to the EU could result in net trade diversion for third countries.  He recalled that historicalWT/TPR/M/89
Page 12
evidence showed the contrary.  The creation of the Customs Union and single market, and subsequent
enlargement of the EU had been accompanied in the past by reductions in trade barriers on amultilateral basis.
44. With regard to agriculture, he did not agree that EU membership would imply an increase in
the level of protection in agriculture, as the EU enlargement process was taking place in compliance
with WTO commitments on agriculture, and with Article XXIV of the GATT 1994.  Furthermore, the
entry into force, in July 2001, of the Protocol to the Europe Agreement on European Conformity
Assessment (PECA), would actually improved mark et access for third countries.  Regarding the
Czech Government's position on the new round, the EU asked for confirmation with regard to the
Czech Republic's support for negotiations on transparency in government procurement.
45. The representative of Canada applauded the Czech Republic's domestic reforms and trade and
investment liberalization.  Canada was, however, concerned with the prospect of the Czech Republic
having to raise barriers to trade in agriculture as a result of accession to the EU.  Canada encouraged
the Czech Republic to continue its efforts towards strengthening  intellectual property rights, while
welcoming the fact that it had not invoked special transitional provisions under the TRIPS Agreement.
Liberalization of the investment regime, including in transport and telecommunications, had increasedforeign direct investment, which had financed the current account deficit.  In Canada's view, further
liberalization in passenger rail and bus services could be an alternative to government financial
support.  Canada also welcomed recent reforms in the banking sector, including more stringent
treatment of bank supervision, of market risks and provision requirements, the revocation of certain
bank licences, and the privatization of banks.  Canada solicited information on privatization of the laststate-owned bank, and encouraged the Czech Republic to improve its Bankruptcy Law.
46. The representative of Hong Kong, China appreciated the Czech Republic's efforts towards
trade liberalization, and its support for a new round of trade negotiations. Hong Kong, China
welcomed the recent efforts made to strengthen the regulatory framework in the banking sector,
including the abolition of the economic need test under the licensing procedure, and the introduction
of national treatment for investors. Hong Kong, Ch ina encouraged the Czech Republic to further open
its banking sector to foreign investment.
47. The representative of Japan remarked that, while the general level of tariffs was low,
throughout the EU accession process tariffs on some products had been, and would be further,
increased.  This was the case for tariffs on televisions, which had increased from 2.2% to 13.2%, and
were due to increase to 14% after accession to the EU;  this was true also for agricultural products.
Japan asked how accession to the EU would further affect tariffs on imported goods.  Delays in the
operation and management of customs procedures, and a lack of unified interpretation of customs
regulations among regional Customs Offices had made Czech customs regulations opaque andunpredictable.  Although the Customs Act provided for the right to appeal against a Customs Office
decision, it did not provide for a higher administrative body for appeal.  As a result, decisions by the
Customs Office had to be implemented even if they were considered to be wrong.  The representative
suggested that the Czech Republic should take measures to resolve the situation.  Concerning
negotiations on agriculture, Japan shared the Czech Republic's understanding that balance between
trade and non-trade concerns should be ensured, and that diverse conditions of each country's
agriculture should be recognized, thus providing appropriate flexibility.
48. The representative of the United States welcomed efforts made by the Czech Republic
towards market economy, and recalled that in the 1990s, the United States, through the "U.S. Support
for Eastern European Democracy" (SEED) programme, had provided technical assistance in the areas
of privatization and enterprise restructuring, securities markets, banking, and professional training.
Recent legislation on procurement, conflict of interest, non-profit organizations, and bankruptcy
amendments was a further step towards economic growth.  Timely implementation of theWT/TPR/M/89
Page 13
WTO Agreements by the Czech Republic had been a tool to support structural changes, strengthen its
economy, improve its competitiveness and increased living standards.  The representative welcomedthe Czech Republic's participation to the Basic Telecommunication Agreement and to the Agreement
on Financial Services, and encouraged the Czech Republic to further liberalize trade in services. The
United States looked forward to the eliminatio n of Czech tariffs under the ITA, commended the
Czech Republic's initiative to extend the list of pharmaceutical products subject to elimination of
tariffs, and welcomed its intention to accede to the Agreement on Government Procurement (GPA)and the Agreement in Trade in Civil Aircraft.
49. The representative indicated that a new round of multilateral trade negotiations was a
prerequisite for further participation in the multilateral trading system of developing countries and
economies in transition. In this respect, she recalled the importance of technical assistance: the United
States had spent more than US$1.3 billion, US$7.24 million of which in Central and Eastern Europe,
in trade-related capacity building in developing and transitional economies.
50. The weaknesses in the Czech dispute resolution system persisted, and overburdened
commercial courts hampered the business environment.  The United States encouraged the Czech
Republic to improve its court system, while urging imposition of tough criminal sanctions forinfringement of intellectual property rights.  EU membership was likely to raise the level of protection
in agriculture.  This was a matter of concern to the U.S. delegation.  The representative solicited
additional information on subsidies, state aid, new export policy, rules of origin, and tariffexemptions.
51. The representative of Korea welcomed the Czech Republic's support for the launch of a new
and comprehensive round of trade negotiations.  As a result of the Europe Agreement, the
Czech Republic had applied preferential tariff rates to products originating from the EU, namely on
automobile and electronics, Korea's main export items.  The representative noted that the differencebetween the MFN and preferential rate on these items were large and requested that theCzech Republic reduce the MFN rates promptly.
52. The representative of Norway recalled that the Czech Republic's participation in regional
arrangements supplemented its commitment to the multilateral trading system.  The Czech Republic
had become a signatory to the ITA and to the GATS protocols on financial and telecommunication
services;  these areas were important to Norwegian commercial interests.  Norway welcomed thesesteps.  Observer status of the Czech Republic to the GPA, together with its draft law, due to enter into
force from 1 January 2002 and currently under consideration by the Parliament, were also positive
steps towards transparency and regulatory discipline.  Norway asked whether the Czech Republic
could provide information on when it intended to become a signatory to the Agreement on
Government Procurement.
53. The representative of India acknowledged efforts made towards trade liberalization, while
encouraging the Czech Republic to expand its trade with developing countries.  Excessive use of
preferential trading agreements by the Czech Republic was a matter of concern to India;  the CzechRepublic had to ensure full compatibility with WTO rules.  India also solicited comments on the slow
functioning of commercial courts and the weak enforcement system, which hampered business.
Noting that the difference between agricultural tari ff rates and non-agricultural rates was large, the
representative requested that the Czech Republic addressed this issue in the on-going WTO mandated
negotiations on agriculture.  India agreed that no service sector and no mode of supply should a prioribe excluded from negotiations.  Autonomous liberalization by developing countries should be
recognized in the mandated negotiations on services, and additional protection provided for
geographical indications to products other than wines and spirits.  Import duties on the unit price of
certain textile and garment categories acted as a barrier to Indian textiles exports.  India solicited
details on the levy of the import duty under the unit-price method, and requested its review.  India didWT/TPR/M/89
Page 14
not share the Czech Republic's view that the response to the existing challenges was the launch of a
comprehensive multilateral trade round.
54. The representative of Australia noted that if the forecasted annual growth rate of around 3.5%
for 2001 was met, the Czech Republic would be performing better than most industrialized
economies.  However, the latest OECD report on the Czech Republic had pointed out the
expansionary nature of its Government's fiscal policy, particularly in relation to the relatively high
public sector deficit.  The Czech Republic was a leading foreign investment destinations in Central
and Eastern Europe.  It had demonstrated the positive role that foreign direct investment could play ininvigorating national economies, through the transfer of intangible assets, knowledge, skills, and new
ideas. However, transparency and non-discrimination had to be ensured.  Australia trusted that the
Czech Republic would maintain its commitments in this regard.  Australia hoped that the
Czech Republic would more fully recognize the benefits of free trade in agriculture and apply that
experience in the WTO context;  and welcomed its support for a new comprehensive round of tradenegotiations.
55. The representative of Brazil noted that in spite of a low average MFN tariff rate and a highly
transparent and predictable tariff structure, the Czech Republic applied a relatively high level of tariff
protection on agricultural goods.  Brazil requested information on expected effects of the  acquis
communautaire  on the Czech Republic's tariff and non-tariff protection in the agriculture sector.
Brazil asked whether the Czech Republic planned to relax non-automatic import licensing measureson sugar, and sought more details on export subsidies on some agricultural products.
56. The representative of the Slovak Republic acknowledged the Czech Republic's open trade
regime, encompassing only few non-tariff barriers, its timely implementation of WTO commitments,
including in financial and telecom services, and its participation in regional initiatives.
57. The representative of Hungary commended the Czech Republic for its economic and
institutional reforms, resulting in its full integrat ion into the multilateral trading system.  The 1997
stabilization package had restored macroeconomic balance, and the 1999 economic programme had
created a sound basis for long-term sustained growth and economic development.  Hungary believed
that multilateral and WTO-consistent regional and bilateral initiatives could be mutually supportive,
and that preferential trade agreements did not distort trade and investment patterns.  Therefore, the
enlargement of the EU would benefit not only c oncerned parties but also third countries.  Upon
accession, implementation of the Community Common Customs Tariffs would result in a substantial
reduction of average tariff levels.  Legal harmonization, i.e. the introduction of the  acquis
communautaire  would bring more liberal and transparent rules at national level.  Furthermore, a
uniform regulatory system, and non-discriminatory application of the European regulations would
improve market-access possibilities for non-European suppliers.  EU commitments under the GATSwould be applied by acceding countries, thus improving the trading environment for third parties. The
Czech Republic's active support for the launch of a new and comprehensive round of trade
negotiations, including, inter alia , non-agricultural products, trade facilitation, investment,
competition, and environment demonstrated its co mmitment to the multilateral trading system.  In
general, the Representative argued that the accession of the Czech Republic to the EU should not
come as a point of concern of the review and that its consequences should not be subject to
speculations.  The accession process was, in any case, consistent with WTO rules.
58. The representative of Malaysia enquired about measures the Czech Republic envisaged to
ensure sustained economic recovery in the present global environment.  Malaysia encouraged the
Czech Republic to look towards markets in Asia and in ASEAN members.  She sought information on
the Czech Republic's economic recovery and the strong increase in foreign direct investment.Malaysia welcomed the statement that EU membership would not adversely affect third countries.WT/TPR/M/89
Page 15
59. The representative of Poland acknowledged the Czech Republic's economic development, and
its contribution to the preparation of the next round of trade negotiations.  Poland believed that the
accession negotiations to the EU would be concluded promptly, and was, like the Czech Republic, infavour of a new round of multilateral trade negotiations.
60. The representative of Romania recalled that the Czech Republic had undertaken commitments
under the Services Protocols, including basic telecommunications and financial services.
The Czech Republic had also included a large number services sectors in its list of specific
commitments, including banking, insurance, audiovisual, communication, and transport services. Henoted that the Czech Republic had implemented its WTO commitments in a timely manner. Romania
welcomed the fact that the Czech Republic had resisted any temptation to resort to protectionist
measures during the recession, building its recovery on market-oriented WTO consistent measures.
61. The representative of Lithuania acknowledged the Czech Republic's liberal trade regime,
recalled the active participation of the Czech Republic in WTO work, including in the preparation of
the upcoming WTO Ministerial Conference.  The Czech Republic applied non-automatic licensing on
a few products, such as coal and products of coal, and sugar and isoglucose, for the protection of
domestic industries.  In Lithuania's view, quantitative restrictions, or equivalent measures, were notcompatible with a liberal trade system, even when applied in the framework of preferential
agreements.  The Czech Republic had introduced two safeguard measures, initiated safeguard
investigations, and applied one provisional measure.  These investigations and measures were the
result of pressure from specific sectors of the economy rather than from a systemic position of the
Czech authorities.  Lithuania urged the Czech Republic to ensure that the introduction of new tradepolicy measures would have a minimal trade distor tive effect.  Export promotion of buses were
neither regulated by the WTO Agreements nor by any other international act, however, Lithuania
hoped that Czech institutions would refrain from these practices in the future.
62. The representative of Uruguay asked the Czech Republic to provide information on the
impact of EU membership on level of protection in the agriculture sector.
63. The representative of Bulgaria welcomed the Czech Republic's economic recovery, and its
transparent trade and investment regime, as well as its active participation in the WTO and in the
preparation of the WTO Ministerial Conference.
64. The representative of the Secretariat (C. Bonnekamp) informed Members that the Annual
Report by the Director-General on the "Overview of Developments in the International Trading
Environment" would be distributed to Members, as a restricted document, by 22 October 2001, issued
as a publication (under embargo until 9 November 2001) on 2 November 2001, and be the object of apress conference at the WTO Ministerial Conference on 9 November 2001. It is expected that thereport would be discussed in the TPRB some time next year.
65. To respond to requests by delegations, Trade Policy Review publications would be freely
available on the Internet.
66. He reported on the schedule of remaining Trade Policy Reviews for 2001, and on reviews
planned for 2002 (Guatemala, Pakistan, Malawi, Mexico, Slovenia, Haiti, India, Venezuela,
Barbados, the European Union, Mauritania, Australia, Dominican Republic, Zambia, Japan, SouthAfrica, and Hong Kong, China)
1.
                                                     
1 In chronological order.WT/TPR/M/89
Page 16
V. REPLIES FROM THE REPRESENTATIVE OF THE CZECH REPUBLIC AND 
ADDITIONAL COMMENTS
67. The Chairperson invited the representative of the Czech Republic to focus his responses on
three main themes: (i) economic environment;  (ii) trade policies and measures;  and (iii) sectoral
policies and measures.
(1) E CONOMIC ENVIRONMENT
68. The representative of the Czech Republic stated that substantial progress had been made to
strengthen the Czech regulatory environment.  The 1997-99 economic recession had resulted from
macro- and micro-economic factors combined with internal and external factors, i.e. inefficient
ownership and management structures, slowdown in  the restructuring and privatization of large
enterprises and state-owned banks, and imperfections in capital and financial markets.  The
appreciation of the Czech currency, due to an unchanged nominal exchange rate, the inflationdifferential with market economies, and the increasing labour costs in manufacturing and agriculture
had weakened the competitiveness of Czech companies and led to external financial disturbances.
69. Investment promotion, including through the pr omotion of an appropriate legal framework
and political stability, were important policy objectives for the Czech Republic.  Benefits of the
existing incentive package, which was applied equally to domestic and foreign investors, outweighedcosts, in particular due to the positive impact of investment, restructuring of the economy, access to
modern technologies, and job creation.  In early 2001, the Czech authorities had launched the "Big
Bang" programme, aimed at boosting economic growth through investment incentives, industrial
zones development, export promotion, trade facilitation, restructuring of selected industries, and
development of small and medium enterprises.  The Czech Republic was aware of weaknesses in
dispute resolution and in the enforcement of law;  ef forts had been made to tackle this issue, through
appropriate legislation and concrete actions, including updating of enforcement laws.
70. Regarding privatization, the process had gained momentum in recent months and some key
companies, including services, had been sold to new owners.  The most tangible results were in the
banking sector, where liberalization had almost been completed.  Conditions for privatization had also
been established in the telecommunications sector, and privatization of strategic enterprises in sectors
such as energy, gas and petrochemical companies had been revived.
71. He added that cooperation with the Slovak Republic in the areas of, inter alia , state aid,
agricultural policies, and export subsidies, did not necessarily imply common external positions vis-à-
vis third countries.
72. The Czech Republic stood ready to work clos ely with Members who had reservations or
disagreed with the agenda of a future round of trade negotiations, and confirmed that it was seeking  abroad mandate to negotiate agreement on transparency in government procurement.  In addition, the
Czech Republic would consider the idea of launching negotiations to strengthen and clarify anti-
dumping rules.  The Czech Republic had registered considerable progress in aligning its tariffs, trade-
related legislation, technical standards and norms with the EU's.  Preferential agreements with other
free-trade/custom-union partners had proved to be beneficial also to third countries.  Therepresentative was of the view that technical assi stance should focus on trade capacity-building of
developing, least developed, and transitional economies, and be result-oriented.  The Czech Republic
stood ready to work closely with the United States to promote WTO trade-related technical assistance
and capacity-building.WT/TPR/M/89
Page 17
73. The discussant believed that the Czech experience in coping with the economic recession
would be useful to other Members.
74. The representative of Slovenia noted that empirical evidence did not support fears regarding
potential trade-distortive effects resulting from accession to the EU.  On the contrary, Slovenia
believed that, as a result, trade with third countries would increase.  The Europe Agreement
represented an important  step towards further trade liberalization.
75. The representative of the Czech Republic referred to details provided in his delegation's
written replies on the efforts to improve the judicial system.
(2) T RADE POLICIES AND MEASURES
76. The representative of the Czech Republic stated that it was premature to foresee effects on
agricultural imports resulting from accession to the EU, and noted that the results of the WTO
negotiations on agriculture, currently under way, would be an important factor in this respect.  The
Czech Republic did not expect any major negative consequences on agricultural trade with third
countries, which on the contrary, would benefit from the extension of implementation of the EU
Common Agricultural Policy.
77. In light of its low average MFN rate and overall market openness, the Czech Republic
disagreed that a gap existed between tariffs imposed on EU products compared with those originating
from third countries.  Therefore, the Czech Republic did not intend to take any autonomous
liberalization measures, but stood ready, in the cont ext of a new round of negotiations and on the basis
of reciprocity, to further reduce its tariffs.  He added that bound rates on information technology
products were to be introduced as of 1 January 2002.
78. Regarding customs procedures, the representative indicated that the Ministry of Finance – the
General Directorate of Customs – instructed Cu stoms Directorates and Customs Offices on how to
interpreter customs regulations.  The right to appeal was guaranteed in cases where a declarantdisagreed with a Customs Office's decision.  Pursua nt to paragraph 6 of Article 104 of the Czech
Customs Act, a declarant might appeal a decision within one month from the day after its receipt.  The
declarant submitted an appeal, through the Customs Office, to a higher body, which might revoke the
original decision.  If not fully granted or rejected, the decision in question would be subject to a final
decision by the Customs Directorate.  He referred to written replies regarding other rather technicalaspects of the Czech customs procedures.
79. Regarding import licensing, the first-come, first-served method of non-automatic import
licensing administration was not applied to any of the few products subject to quantitative restrictions.
In this regard, typographical errors in Table AIII.3 of the Secretariat Report, had given the impression
that the Czech Republic applied non-automatic im port licences with volume limits for monitoring
purposes.  This was not the case.
80. Regarding contingency measures, the representative responded that the Czech Republic
would act in conformity with its trade policy objectives, and consistently with the rules of the
multilateral trading regime.
81. On recent TBT/SPS legislative harmonization with the EU, he said that the PECA was  part of
the Europe Agreement.  It was aimed at facilitating  trade through the elimination of technical barriers,
and enhancing harmonization with the acquis communautaire .  The Czech Republic believed that
third countries would benefit from high quality technical regulations as well as from effective
implementation.  In addition, harmonization of the Czech Republic's technical regulations with theWT/TPR/M/89
Page 18
EU's had already simplified dealings for third parties.  He also stated that pursuant to the Agreement
on Sanitary and Phytosanitary Measures, any import bans by the Czech Republic would be based onscientific criteria.
82. On government procurement, the representative confirmed the Czech Republic's objective to
join the GPA by the time of its accession to the EU;  request for observer status in the respective
Committee was a step in that direction.  A new law on government procurement was to be discussed
by the Parliament in the near future.
83. On export policy and assistance measures, he indicated that the Czech Republic's export
assistance measures were in strict compliance with its commitments under the WTO.  He referred to
written replies (WT/TPR/M/89/Add.1) on criteria, eligibility and incentives offered by the free
customs zones.
84. On the issue of compulsory licensing, the Czech Republic's legislation provided that, in the
case of a product, a non-working patent would not occur when a patentee made, offered, put on the
market, used the patented product, imported or stocked a product, or disposed of such a product in
another manner. In the case of a process, a non-working patent would not occur when the patentee
used or offered the use of the patented process concerned.  The patentee could also conclude a
licensing contract.  No compulsory license  had been granted so far in the Czech Republic.
85. Regarding Article 39.3 of the TRIPS Agreement, according to Czech legislation, data
submitted in the framework of the registration procedure of a medicament must not be disclosed to
other people without the authorization of the applicant for registration.  Data regarding effective
substance of product submitted by the applicant for registration could not be disclosed without the
consent of the applicant.
86. On the question of the European Patent Convention, the Czech Republic had observer status
in the Administrative Council of the European Patent Organization.  In May 2001, the CzechGovernment had approved the proposal, at present under consideration by the Parliament, to accede to
the European Patent Convention as from July 2002.
87. On the issue of enforcement of laws, the le gal framework (1999-2000), provided for increased
possibilities to act against infringement of IPRs under both civil and administrative procedures.  The
number of cases testified to the positive trend in enforcement of IPRs in the Czech Republic.Statistics proved that Czech laws were operational, and that sanctions for infringement of IPRs were
imposed.  In order to encourage Czech courts to impose tough criminal sanctions for infringement of
IPRs, the authorities had organized seminars, workshops, and training courses to raise awareness with
respect to protection and enforcement of IPRs.
88. The discussant shared the Czech Republic's view that the level of protection in the agriculture
sector resulting from accession to the EU would largely depend on the outcome of the WTO
negotiations on agriculture, and noted that EU enlarg ement would also result in trade volume growth.
89. The representative of Japan asked for further clarifications on customs procedures, namely on
the higher competent authority for appeal, whether such an authority was part of the Customs Office,
or if an external entity existed.
90. The representative of Canada stated that his country shared the U.S. concerns with regard to
PECA.  Canada saw the introduction of rules of origin and conformity assessment agreements as
negating some of benefits resulting from the EU-C anada agreement.  Canada also encouraged the
Czech Republic to become a signatory of the GPA.WT/TPR/M/89
Page 19
91. The representative of the United States solicited further information on the incentives
provided in the customs free zones.
92. The representative of Hungary recalled that as the accession process was still under way, it
was premature to debate its hypothetical conseque nces.  In Hungary's view, the Europe Agreement,
the only relevant agreement at present, was in c onformity with Article XXIV and the Understanding
on the Interpretation of Article XXIV of the GATT 1994, and with Article V of the GATS.
Therefore, third parties' interests had been taken pr operly into account.  In this respect, she recalled
that Article XXIV of the GATT clearly recognized free-trade agreements, thus the application of
higher MFN duties to certain countries could be considered neither as inconsistent with the GATT
1994 nor with the principles of the multilateral trading system.  Hungary disagreed with the assertion
that acceding countries applied discriminatory tariffs vis-à-vis  third countries, and underlined that the
integration process was consistent with the WTO rules,  thus taking into account third parties' interests.
93. The representative of the Czech Republic stated that if the complainant was not satisfied with
the results of the procedure within the Customs Office, a normal legal procedure could be initiated.
The Czech Republic considered PECA as a neutral agreement vis-à-vis  third countries, and believed
that only positive effects would result therefrom.  Detailed information would be provided at a later
stage with regard to incentives in customs free zones.
(3) S ECTORAL POLICIES AND MEASURES
94. The representative of the Czech Republic confirmed that the export subsidy on potato starch
was provided in accordance with its country's commitments under the Uruguay Round Schedule.  In
this respect, notifications had been submitted to the Committee on Agriculture.
95. On financial services, he indicated that foreign financial operators could enjoy further market
openness, while Czech consumers benefited from a larger choice of financial products.  The recent
acquisition of the largest Czech bank by a foreign bank had marked the completion of privatizationand the integration into the world system of the Czech banking sector.  An appropriate domestic
regulatory framework would bring better governan ce, and improve the structure and functioning of
the banking sector, while satisfying both businesses and individuals.  On telecommunications, he
hoped that, in spite of the unfavourable international environment, the sale of the national company
could be finalized successfully.  Regarding tourism, the Czech authorities attached importance totourism development;  as a result, existing incentives were open, under certain conditions, to tourism
entrepreneurs from all over the world.
96. The discussant commended the Czech Republic's liberalization of financial markets, and
welcomed  privatization in the banking sector and telecommunications, as well as incentives for
foreign investors in the tourism sector.WT/TPR/M/89
Page 20
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
97. This Review, the second of the Czech Republic's trade policies and practices, has been a real
success. Through an open and informative discussion with the Czech delegation, we have all been
able to gain a better understanding of the trade and trade-related policies and practices in place, and a
fuller appreciation of their impact on the multilateral trading system.  We have had a very productive
dialogue on recent economic reform in the Czech Republic, and the role that trade liberalization
played.  The Czech economy was viewed by most Members as now being a functioning marketeconomy.  Members were able to obtain useful information about recent and planned changes in trade
measures, in particular with regard to the ongoing negotiations for accession to the European Union.
98. Members congratulated the Czech Government for its continued support of, and active role in,
the WTO.  The Czech Republic has undertaken important commitments in the multilateral system,
and has expanded on them since the previous Review of its trade policies in 1996.  Membersappreciated the Czech Republic's overall commitment to liberal trade and investment policies.  Many
Members also welcomed the Czech support for launching an expanded negotiating agenda at the
4
th Ministerial Conference.
99. All delegations welcomed the Czech economic recovery, assisted by structural change
encompassing domestic reform and trade and investment liberalization.  Some Members noted thatthe fiscal situation was fragile and that a further deterioration could pose a threat to macroeconomic
stability.  Members appreciated the efforts made by  the Czech Republic in adapting its institutional
and economic environment to the requirements of a modern market-oriented economy.  Members
acknowledged the impressive results of the Czech transition process, including the ongoing
privatization of state-owned enterprises, which has played a significant role in attracting foreign
investment.  Members noted the importance the auth orities placed on investment promotion, and on
related plans to move forward on restructuring and privatization.
100. Many Members noted that preparations for EU accession provided a strong anchor to the
reform process.  In this sense, they commented fa vourably on the Czech priority target of accession to
the EU, which would create the opportunity for further reform as the Czech Republic increasingly
harmonized its policies with EU requirements.  Some Members raised concerns about the real impact
on trade opportunities for non-EU countries, in particular for agricultural goods, resulting fromaccession.  The relatively large number of preferential trade agreements to which the Czech Republic
is party was noted, as was the fact that this resulted in a small share of its trade being conducted on an
MFN basis.  Members appreciated the close Czech economic and trade relations with the Slovak
Republic, while recognizing that this did not imply common external positions in all areas.  Members
also took note of the Czech determination to ensu re consistency between its regional trade objectives
and its participation in, and ambitions for, the multilateral trading system.
101. Members appreciated that the Czech tariff regime is transparent and predictable, and that
average rates were relatively low.  Nevertheless, some Members noted that Czech preferential rates
were well below MFN levels.  Members invited the Czech Republic to reduce the gap between
preferential and MFN tariffs.  They also commented on the wide tariff disparities, including tariffpeaks, tariff escalation, and the use of concessions and exemptions.  The advantages of simplifying
the tariff structure by reducing the high number of different MFN and preferential rates was
highlighted.  Members welcomed the fact that only relatively few non-tariff barriers existed.
102. On sectoral policies, Members focused mainly on agriculture and services.  Some noted that
the average tariff on agriculture is relatively high compared with that on non-agricultural goods.Clarification was sought on the existing system of assistance to the agriculture sector.  A number of
Members asked about the envisaged evolution of agricultural policies, in particular given theWT/TPR/M/89
Page 21
prospects for accession to the EU.  Members welcomed the fact that competition in the banking sector
had increased in recent years, and referred to measures to improve the efficiency of the bankingsector.  They sought information on plans for furt her privatization in the telecommunication sector.
103. Members also sought additional details in a number of specific areas, including:
• customs procedures;
• non-automatic import licensing;
• technical regulations and standards, and conformity testing procedures;
• contingency measures;
• government procurement;
• export policy and assistance;
• free-trade zones;
• protection of intellectual property rights, and enforcement;
• investment regime and incentives;
• the overall system of state aid, including specific aid to economically depressed regions;
• public enterprise restructuring and further privatization plans;
• bankruptcy legislation and practice;
• commercial courts system, and transparency of the legal framework;  and
• technical assistance experience in the context of transition economies.
104. The Czech delegation gave written and oral replies to questions posed, and undertook to send
more detailed replies to some of them.  The replies helped clarify and bring a better understanding of
the Czech trade and trade policy measures currently in force.
105. In conclusion, I think we can all congratulate the Czech Republic for its continuing efforts to
liberalize its economy and its further integration into the multilateral system, something that is
already well under way.  Members were very appreciative of the Czech Republic's successful
economic transformation, and for the success in overcoming the 1997-99 recession.  Current policies
have resulted in a transparent, predictable, and open trade regime, which has proven to be an
important factor behind the increase in trade and investment, and has sustained GDP growth.
Members encouraged the Czech Republic to continue on this path.  Members also encouraged theCzech Republic to preserve its active interest in the multilateral trading system and to consolidate in
the multilateral framework its regional liberalization measures.  This would benefit not only the Czech
long-term economic interest but also the overall multilateral trading system.  The Czech Republic,
being a relatively small country dependent on export markets, has much to gain from full participation
in the multilateral trading system.
__________