RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG117/M/1
18 December 2001
(01-6376)
Committee on Regional Trade Agreements
Thirtieth Session
EXAMINATION OF THE FREE TRADE AGREEMENT
BETWEEN EFTA AND THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA
Note on the Meeting of 26 September 2001
Chairman:  Mr. A.J. Dumont (Argentina)
1. The meeting was convened in document WTO/AIR/1618.
2. Under Agenda Item B.II of its Thirtieth Session, the Committee on Regional Trade
Agreements (CRTA) took up the examination of the Free Trade Agreement (FTA) between EFTA
and the Former Yugoslav Republic of Macedonia (FYROM).  The following topics were discussed:
A. General Remarks
B. Section I – Background Information on the Agreement
C. Section II – Trade Provisions
3. The Chairman noted that this was the first round of examination of the Free Trade Agreement
between EFTA and FYROM.  The notification of the Agreement had been distributed in document
WT/REG117/N1, and the te xt of the Agreement in documents WT/REG117/1 and Add.1.  He
proposed to organize the examination by first asking the Parties and other Members for general
comments and then turn to the specifics of  the Agreement, using the Standard Format
(WT/REG117/3) to guide the debate.  He recalled the terms of reference for the examination, adoptedon 14 March 2001 by the Council for Trade in Good s as contained in document WT/REG117/2 and
its Corrigendum:  "to examine, in light of the relevant provisions of the GATT 1994, the Free Trade
Area between the EFTA States and the Former Yugoslav Republic of Macedonia and to submit a
report to the Council for Trade in Goods." These te rms of reference applied in conjunction with the
following Understanding:  "It is understood that th e Understanding read out by the Chairman of the
Council for Trade in Goods under item 7 of the Ag enda of the meeting of the Council for Trade in
Goods on 20 February 1995, as contained in document WT/REG3/1, will apply mutatis mutandis to
the examination of the agreements.  It was also understood that, during the examination, due account
would be taken of the intrinsic differences between customs unions and free-trade areas."
A. G
ENERAL REMARKS
4. The representative of Norway, speaking on behalf of the EFTA States  and Macedonia ,
informed the Committee that the Agreement had been concluded on 19 June 2000 and was expected
to enter into force in the second half of 2001 foll owing the completion of the ratification procedure by
all Parties.  The Agreement and the bilateral agricultural arrangements were notified to the Council
for Trade in Goods on 11 December 2000 in accordance with GATT Article XXIV:7(a).  TheCommittee had been provided with background information on the Agreement in line with the
structure of the Standard Format, in document WT/REG117/3.  The information provided gave a
comprehensive overview of the Agreement and aimed at facilitating the task of the Committee.  TheWT/REG117/M/1
Page 2
Parties were prepared to give further clarifications and reply to any questions or comments the
Committee might have during the meeting or, if need be, further replies would be provided in writing
to questions submitted by Members in writing.  He stated that the agreement had to be seen against
the background of the EFTA States' policy in the Balkans.  The expansion of the EFTA network of
agreements in the Balkans was undertaken with a view of making a substantial contribution to thecommon European effort in bringing peace and stability to this region.  In this context the
EFTA States had concluded a FTA with Croatia on 21 June 2001, and had signed Declarations on
Cooperation with Albania in 1992 and with the Former Republic of Yugoslavia in 2000.  The
Agreement establishing a free-trade area in conformity with the definition set out in GATT
Article XXIV:8 was based on the same structure and had similar substantive provisions as the other
EFTA agreements concluded and examined by th e Committee in the past.  The Agreement covered
trade in industrial products, fish and other marine  products, and processed agricultural products.  The
bilateral agricultural arrangements introduced substantial liberalization of trade in basic agriculture
goods and formed part of the instruments creating the free-trade area.  The Agreement provided for
asymmetric treatment in favour of Macedonia by granting transitional periods for certain industrial
products of six and nine years, and for a few fish products of four and seven years.  The Agreement
provided for bilateral cumulation of origin between the Parties.  In addition, it contained provisions onstate monopolies, technical regulations, competition, public procurement and intellectual property
rights.  An evolutionary clause provided for the possibility of further developing the existing
provisions and extending them to areas not covered by the Agreement.  He indicated that the Standard
Format documentation circulated to Members also included EFTA-Macedonia trade statistics for the
year 2000 total trade figures, trade by selected commodities and trade coverage of the Agreement.The Parties were of the view that the Agreement was in compliance with the requirements and
provisions of GATT Article XXIV and the Understanding on the Interpretation of Article XXIV of
the GATT 1994 (the "Understanding");  it would be implemented in a WTO-consistent manner,
complementary to the multilateral trading system.  The Parties were prepared to play a constructive
role in the examination process and move it towards conclusions.
5. The representative of Hungary welcomed the Agreement, which, in his view, would
contribute to the stability of the region and to the trade and economic development of Macedonia.  He
expressed appreciation of the fact that the Ag reement took into consideration the specific
circumstances of Macedonia and was convinced that during the transition period it would favour the
healthy growth of trade between the Parties concer ned.  He considered that the Parties had provided
the necessary information and statistical data for the evaluation and review of the Agreement.  He was
also convinced that the Agreement was in line with the letter and spirit of Article XXIV.
6. The representative of the European Communities expressed support for the efforts made by
the EFTA States and FYROM in concluding the Agreement, particularly with reference to the efforts
made by parties in the region to bring stability and create a firmer base for economic development.
He referred to the agreement concluded between th e EC and FYROM and in particular to the name of
that agreement – stabilization and association agreement – to emphasize  the politica l and economic
context in which these agreements had come about.  He considered that the EFTA-FYROM
Agreement would also contribute to the positive economic and political development of the region.
He showed appreciation for the information provided by the Parties to the Agreement in the Standard
Format document and for the statistical information that had been presented.  He considered the
Agreement as meeting the relevant test of GATT Article XXIV although he indicated that he mighthave questions on particular points of detail.
B. S
ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENT
7. The representative of Australia expressed concern about the coverage of the agricultural
sector in the Agreement.  Referring to the Standard Format he remarked that the Parties had entered
into separate bilateral agreements covering agricultural products.  He recalled the representative ofWT/REG117/M/1
Page 3
Norway mentioning in his introduction that the bila teral arrangements had been notified and that they
were an integral part of the Agreement.  He noted, however, that the text of the bilateral arrangements
had not been submitted to the Committee and was wondering whether the Parties could make these
available to the Committee.  He also asked the Parties to comment on their choice to conclude
separate agreements on industrial and agricultural products since, if taken individually, these wouldnot meet the definition of "substantially all the trade".  With respect to the trade data provided by the
Parties in Annex II (WT/REG117/3) he expressed do ubts about how tariff preferences could apply for
the year 2000 given that the Agreement was only expected to come into force in the second half of
2001.  He asked the Parties to clarify whether those figures refered to the value of preferences that
would have applied had the Agreement been in force in 2000.  He noted that if that was the case then
more than 10 per cent of total regional trade before the entry into force of the Agreement would be
excluded.
8. The representative of Norway replied that, to his knowledge, the texts of the agricultural
arrangements had been transmitted to the Secretariat for consultation.  He added that in case they had
not been sent they would immediately be transmitted.  With regards to coverage, he was of the
opinion that the free-trade area covered substantially all the trade, including agriculture, and referred
to the statistics provided in the Standard Format which indicated that almost 90 per cent of the tradebetween EFTA and Macedonia was covered.  Concerning the practice of negotiating bilateral
arrangements in the agricultural sector, he explained that this was due to the fact that the EFTA States
did not share agricultural policies.  With respect to trade data, he confirmed the Australian delegate's
observation that the trade statistics reflected what would have been the situation if the Agreement had
entered into force by the date foreseen.  However, he reiterated that the almost 90 per cent coveragementioned earlier fully satisfied in his opinion the "substantially all the trade" criterion.
9. The representative of Hungary stated that his delegation was of the opinion that agriculture
was covered by the Agreement.  He added that GATT Article XXIV did not specify in which form
specific sectors had to be included in the FTA and that, with respect to that Agreement, what really
mattered was that the Agreement, the Notification, and the Standard Format clearly stipulated that theagricultural bilateral arrangements were an integral part of the FTA, thus constituting the conditions
which made possible to meet the "substantially all the trade" criterion.
10. The representative of the United States noted that the Agreement covered industrial products,
fish and marine products, and other processed ag ricultural products, and wondered whether forest
products were also covered.  Turning to the trade data, he remarked that in the annexes to the
Standard Format import statistics for the EFTA St ates had been provided, but not for FYROM, and
asked the Parties when the Committee could expect to receive those statistics.
11. The representative of Norway replied that, with regards to the question on sector coverage, he
would try to come up with an answer during the cour se of the meeting or in writing.  Turning to the
question on trade data, he indicated that the first table in the Annex to the Standard Format showed
total trade – imports and exports – between the Parties.  With respect to the third table of the Annex,
he pointed out that in addition to statistics on imports of Iceland, Norway, and Switzerland fromMacedonia, it also included statistics on exports from the same EFTA States to Macedonia, which in
his understanding represented the same as Macedonia' imports from the three EFTA states.
12. The representative of the European Communities said that given the particular economic and
political circumstances in FYROM it was questionable how representative the statistics presented in
the Standard Format were for drawing any given conclusions about the Agreement underconsideration.  He referred, as indicative of the possible distortions in what could be considered
longer term trends, to the very sharp variations in terms of percentage trade between the year 2000
and 1999 appearing in trade figures contained in Table 2 of the Standard Format - total two way trade
between EFTA partners and FYROM.  It seemed ther efore difficult to draw conclusions with regardsWT/REG117/M/1
Page 4
to the coverage of the Agreement in strict percentage terms.  Recalling that the Committee had
considered that on occasions statistics were to be tempered with other relevant considerations, he
observed that the examination of the EFTA-FYROM Agreement was one of those occasions.
13. The representative of Hungary remarked that import and export statistics were available and
appreciated the fact that the EFTA States had provided export statistics in addition to import statistics.
In light of the special circumstances of the region and the country concerned, it was no surprise that
Macedonia was not able at that moment in time to provide a detailed breakdown of import and export
statistics.
14. The representative of the United States observed that export statistics could not be considered
the same as import statistics, in particular when the data varied so dramatically, since even in a typical
context import statistics tended to be much more accurate.  As a result of the comments heard, he
expressed concern about the way the information contained in Annex I of the Standard Format hadbeen derived.  He asked for confirmation of his understanding that the total trade figure was not an
addition of import statistics but was based solely on EFTA information.
15. The representative of Norway acknowledged that only EFTA statistical sources had been
used.  He appreciated the intervention made by Hungarian delegation and stressed that there should be
a considerable amount of understanding for the situation of a country like Macedonia and its capacityto produce statistical data.  He added that it was in light of those considerations that they had deemed
more fruitful to use EFTA.
C. S
ECTION II - T RADE PROVISIONS
16. Citing Article 4.2, Section II of the Agreement, the representative of Canada sought
confirmation from the Parties that at the end of the phase out period of nine years all trade and all
goods potentially traded between the Parties, apart from agriculture, would be duty free.  In Table 1
on page nine of the Annex to the Standard Format, she had noticed that no trade was reported under
chapters 79, 80 and 81 and there was no indication of whether or not duty free status would be
accorded to those goods in the future.  The representative of Norway confirmed that, after the
nine years phase out period, all trade in industrial goods and fisheries products would be duty free.
17. Citing the final paragraph in Section II, Article 3 of the Standard Format (Rules of Origin),
the representative of the United States asked the Parties for clarification on whether the pan-European
cumulation regime applied to the Agreement.  Given that the EFTA States were members of thepan-European regime, he wondered whether impor ts coming, for instance, from the EC could be
considered as EFTA-originating for purposes of qualifying as originating under that particular
Agreement which only involved FYROM and the EFTA parties.  Also, since agricultural provisions
were separately negotiated between the EFTA St ates and FYROM, he wondered whether there was
cumulation in that context, for example whether there could be cumulation on agricultural products
between Switzerland and Norway for products going into FYROM.
18. Both questions posed by the United States delegate received a negative response from the
representative of Norway.  Firstly, he clarified that since Macedonia was not yet part of the pan-
European system, the cumulation was strictly bilateral and materials coming from other European
countries into the EFTA States were not included in the bilateral cumulation of the Agreement.  As to
the second question, his response was limited to a negative statement.  Seeking clarification on the
meaning of the latter reply, the representative of the United States asked whether a product partly
originating in Switzerland and partly originating in  Norway would not be combined for purposes of
origin.  The Chairman remarked that it could also  mean that there were no combined agricultural
products between Norway and Switzerland, which seem ed to him to be reasonably normal given the
special nature of agricultural products.  Responding to that comment, the representative of theWT/REG117/M/1
Page 5
United States pointed out that Switzerland had a large agricultural processing enterprise very capable
of processing products coming from Norway, such as fisheries and other agricultural products, which
could theoretically be combined for purposes of origination.  It was because of those special
circumstances that he considered the question worth posing.  The representative of Norway, after
consulting the delegation of Switzerland, reiterated his negative answer and said that he had not much
more add to that.  The Chairman remarked that su ch negative answers were inconclusive and was of
the opinion that the point would perhaps be more easily clarified through an exchange of written
communications.
19. The Chairman noted that this first round of examination of the FTA between the EFTA States
and FYROM had allowed the Committee to clarify a number of questions, although others were still
pending.  He invited those delegations wishing to ask additional questions to forward them to the
Secretariat by 12 October, at the latest, and the Pa rties to submit their replies in writing as soon as
possible and no later than 30 November, to allow th e Secretariat to produce a new document in time for
the next meeting of the CRTA
20. The Committee took note of the comments made.
__________