WORLD TRADE
ORGANIZATIONWT/REG128/3
6 March 2003
(03-1289)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN HUNGARY AND ESTONIA
Communication from the Parties
I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership, Date of Signature, Ratification and Entry into Force
Date of Signature: 4 November 1998 in  Budapest (the Republic of Hungary)
Ratification: 16 December 1998 (the Republic of Hungary);
17 January 2001 (the Republic of Estonia)
Provisional Application: 1 January 1999Entry into Force: 1 March 2001
2. Type of Agreement
Type of Agreement: Free-trade area
Plan and Schedule: The objective of the Agreement is to establish a free-trade
area in conformity with the definition set out in Article
XXIV:8(b) of the GATT 1994 and with the Understanding
on the Interpretation of Article XXIV of the GATT (1994).
3. Scope
The provisions of the Free Trade Agreement between the Republic of Hungary and the
Republic of Estonia (hereinafter the Agreement) are applied to products originating in the Parties to
the Agreement and falling within Chapters 1 to 97 of the Harmonised Commodity Description and
Coding System (HS).  The Agreement envisages the elimination of duties and other barriers to trade
in respect of substantially all the trade between the Parties in accordance with the requirement of
Article XXIV of the GATT 1994.
The Agreement also contains provisions on state aid, state monopolies, competition,
intellectual property rights and public procurement.
4. Trade Data
See Annex.WT/REG128/3
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II. TRADE PROVISIONS
1. Import Restrictions
1.1 Duties and Charges
Pursuant to Article 4 of the Agreement, the basic duty, to which the successive reductions of
customs duties set out in the Agreement are applied, is the Most Favoured Nation rate of duty in force
on 1 January 1998.  However, if after entry into force of the Agreement, any tariff reduction is applied
on an erga omnes  basis, such reduced duties shall replace the basic duties.
In accordance with Articles 3 and 5 of the Agreement, the Parties to the Agreement shall
introduce no new customs duty on imports or charge havi ng equivalent effect as well as no duties of a
fiscal nature.
The existing customs duties on imports of industrial products and all charges having
equivalent effect were abolished between the Parties to the Agreement on 1 March 2001
(provisionally applied from 1 January 1999), except for products included in Annex II. The customs
duties and all charges having equivalent effect on imports of products listed in Annex II were to beabolished on the date of entry into force of the Agreement. Concessions on agricultural products are
contained in Annex V. In accordance with Article 10 the Parties grant each other the following
concessions:
− Hungary shall grant preferential treatment to the agricultural products originating in
Estonia listed in Annex V of the Agreement from 1 March 2001 (provisionally
applied from 1 January 1999);
− No customs duties are applied in Estonia to products originating in Hungary from
1 March 2001 (provisionally applied from 1 January 1999).
1.2 Quantitative Restrictions
Pursuant to Article 7 of the Agreement, the Parties to the Agreement shall introduce no new
quantitative restrictions on imports or measures having equivalent effect. All existing quantitative
restrictions and measures having equivalent effect on imports of products originating in the Parties
were abolished on the date of entry into force of the Agreement, except those listed in Annex III,which were to be progressively abolished by 31 December 2000 the latest.
1.3 Common External Tariff
The Agreement does not envisage the establishment of a Common External Tariff.
2. Export Restrictions
2.1 Duties and Charges
Export duties and charges are governed by the provisions of Article 6 of the Agreement.  The
Parties to the Agreement shall introduce no new customs duty on exports or charge having an
equivalent effect.
The existing duties and charges on exports were abolished on the date of entry into force of
the Agreement.WT/REG128/3
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2.2 Quantitative Restrictions
In accordance with Article 8 of the Agreement,  the Parties to the Agreement shall introduce
no new quantitative restrictions on exports and measure having equivalent effect.  All existing
quantitative restrictions and measures having equivalent effect on exports of products originating inthe Parties were abolished on the date of entry into  force of the Agreement, except those that might be
required for the administration of international obligations and listed in Annex IV to the Agreement.
3. Rules of Origin
Rules of origin of goods and related methods of administrative co-operation are specified in
Article 14 and in the Protocol to the Agreement, which is integral part of it.  In the Protocol, the
principles and rules for a definition of the concept of “originating products”, proof of origin, a rule of“drawback and exemption”, territorial requirements, arrangements for administrative co-operation and
other provisions are laid down.
The Parties to the Agreement apply the concept of the Pan-European cumulation.
The implementation of this new origin network has two major consequences.  Firstly, semi-
finished products originating in any country of the system and which are further processed or
assembled in other partner country may always be considered as originating products.  Secondly,
originating products can be traded between any of the countries involved in the system.
With regard to territorial requirements, the principle of territoriality is established and the
terms related to direct transport and exhibitions, as well as the prohibition of drawback of, or
exemption from, customs duties, are set out in the Protocol.
In the area of proof of origin, the document EUR 1 is used as a movement certificate in trade
between the Parties to the Agreement.  The a rrangements for administrative co-operation cover inter
alia, mutual assistance, verification of proofs of origin, dispute settlement, penalties and free zones.
4. Standards
4.1 Technical Barriers to Trade
The Agreement does not contain any specific provision relating to technical barriers
to trade.
4.2 Sanitary and Phytosanitary Measures
Article 13 of the Agreement contains provisions on veterinary, health and phytosanitary
measures.  The veterino-sanitary and phytosanitary measures and the work of the veterinary services
will be in accordance with the Office International des Epizooties Codex and other international
conventions in this field.  The Parties to the Agreement also commit themselves to apply their
regulations in sanitary and phytosanitary matters in a non-discriminatory fashion and not to introduce
any new measure that has the effect of unduly obstructing trade.
5. Safeguards
Each Party to the Agreement can apply safeguard measures on the conditions and in
conformity with the procedures specified in the Agreement.  These safeguard measures cover general
safeguards (Article 25), structural adjustment (Art icle 26), re-export and serious shortage (Article 27),
balance-of-payment difficulties (Article 30) and special safeguard measures in agricultural sector
(Article 12).WT/REG128/3
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Article 29 of the Agreement provides for a procedure for the application of safeguard
measures, which foresees consultations within a Joint Committee with a view of solving any
differences and finding a mutually acceptable solution.  The safeguard measures taken shall be the
subject of periodic consultations within the Joint Committee with a view to their relaxation as soon aspossible, or abolition when conditions no longer justify their maintenance.
6. Anti-Dumping and Countervailing Measures
As contained in Article 24 of the Agreement, the application of anti-dumping measures has to
be in accordance with Article VI of the General Agreement on Tariffs and Trade, as well as with the
conditions and provisions laid down in Article 29 of the Agreement.
7. Subsidies and State-aid
7.1 State-aid
As provided for in Article 21 of the Agreem ent, the Parties to the Agreement adopted an
obligation to avoid any aid granted by a State Part y to the Agreement, or through state resources in
any form whatever, which distorts or threatens to distort competition by favouring certain
undertakings or the production of certain goods.  The agricultural products are excluded from the
above mentioned provisions.
If a Party to the Agreement considers that a particular practice is incompatible with the
provisions of the Agreement or such practice causes or threatens to cause a serious prejudice to the
interest of that Party or material injury to its domestic industry, the concerned Party may take
appropriate measures under the conditions of and in accordance with the provisions of Article 29 of
the Agreement.  Such appropriate measures may only be taken in conformity with the procedures and
under the conditions of the WTO and any other relevant instruments negotiated under its auspiceswhich are applicable between the Parties.
7.2 State Monopolies
Article 18 of the Agreement contains an obligation for the Parties to adjust progressively any
state monopoly of commercial character so as to  ensure that by 1 July 1999, no discrimination
regarding the conditions under which goods are procured and marketed exists between nationals ofthe Parties.
7.3 Rules of Competition concerning Undertakings
Article 20 sets out the rules of competition concerning undertakings.  The following are
incompatible with the proper functioning of the Agreement insofar as they may affect trade between
the Parties:
− all agreements between undertakings, decisions by associations of undertakings and
concerted practices between undertakings which have as their object or effect the
prevention, restriction or distortion of competition,
− abuse by one or more undertakings of a dominant position in the territories of the
Parties as a whole or in substantial part thereof.
These provisions shall apply to the activities of all undertakings including public undertakings
and undertakings to which the Parties grant special or exclusive rights.  Undertakings entrusted withthe operation of services of general economic interest or having the character of a revenue-producingWT/REG128/3
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monopoly, shall be subject to these provisions in so far as the application of these provisions does not
obstruct the performance, in law or in fact, of the particular public tasks assigned to them.
With regard to agricultural products these provisions shall not apply to such agreements,
decisions and practices which form an integral part of a national market organisation.
If a Party considers that a given practice is incompatible with the provisions of the Agreement
in the field of rules of competition and if such practice causes or threatens to cause serious prejudice
to the interest of that Party or material injury to its domestic industry, it may take appropriate
measures under the conditions and in accordance with the procedure set out in Article 29 of the
Agreement.
7.4 Public Procurement
In Article 22 of the Agreement, the Part ies to the Agreement commit themselves to
progressively develop their respective regulations  for public procurement with a view to grant
suppliers of the other Party access to contract award procedures on their respective publicprocurement markets. The Parties shall endeavour to accede to the relevant Agreements negotiated
under the auspices of the General Agreement on Tariffs and Trade 1994 and the Agreement
establishing the World Trade Organization.
8. Sector-Specific Provisions
With the exception of agriculture, the Agreement does not contain any specific provisions
applicable to trade between the Parties to the Agreement in individual sectors.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and Reservations
The Agreement includes provisions regarding general and security exceptions (Articles 16
and 17).  The Parties to the Agreement may prohibit or restrict their imports, exports or goods in
transit justified on the grounds of public morality, public policy or public security; the protection of
human, animal or plant life or health; the protection of national treasures possessing artistic, historic
or archaeological value; 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 withrestrictions on domestic production or consumption.  Such prohibitions or restrictions must not be a
means of arbitrary discrimination or a disguised restriction on trade between the Parties.
For the reasons of security each Party to the Agreement may take any appropriate measures,
which it considers necessary, in order to prevent disc losure of information contrary to its essential
security interests and to protect its essential security interests or to implement its international
obligations or its national policies.
2. Accession
There is no provision in the Agreement that allows other countries to accede to the
Agreement.
3. Dispute Settlement Procedures
The provisions regarding the dispute settlement are not contained in the Agreement.WT/REG128/3
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4. Relation with Other Trade Agreements
As contained in Article 34 of the Agreemen t, the Agreement applies to trade relations
between the Republic of Hungary and the Republic of Estonia.  It does not prevent the maintenance or
establishment of customs unions, free-trade areas or arrangements for frontier trade to the extent that
they do not negatively affect the trade between the Parties and, in particular, the provisionsconcerning rules of origin provided for by the Agreement.
The Agreement does not contain any provision which establishes any specific relation with
other bilateral, plurilateral and/or multilateral trade arrangements.  However, in the preamble to the
Agreement as well as in other Articles, a reference to the GATT 1994 and the WTO is made.
5. Institutional Framework
In accordance with Article 32 of the Agreemen t, the Joint Committee of the representatives of
the Parties to the Agreement is established in which each Party shall be represented.
The Joint Committee is responsible for the administration of the Agreement and ensures its
proper implementation.  The Joint Committee may take  decisions in the cases provided for in the
Agreement.  On other matters, it may make recommendations.  The Joint Committee shall keep under
review the possibility of further removal of the obstacles to trade between the Parties.
In respect of the procedures of the Joint Committee referred to in Article 33, the Joint
Committee meets whenever necessary but at least once a year, and acts by common agreement.  EachParty to the Agreement may request that a meetin g of Joint Committee be held.  The Joint Committee
may decide to set up such subcommittees and working groups as it considers necessary to assist it in
accomplishing its tasks.
For the purpose of the Agreement, the Joint Committee shall adopt its rules of procedure
which, inter alia , contain provisions for convening meetings and for the designation of the Chairman
and the term of office.
IV. OTHER
The Agreement covers trade in goods; trade in serv ices is not subject to the provisions of the
Agreement. Article 31 of the Agreement contains an  evolutionary clause providing for the possibility
of extending the coverage of the Agreement to new fields.WT/REG128/3
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ANNEX
Estonia – Imports from Hungary, 1998-2001
(USD)
H.S. Year
Chapter 1998 1999 2000 2001
2 135,184 782,828 966,539 1,262,181
4 213,117 141,716 209,370 60,584
5 - - - 27,284
6 20,885 21,543 7,718 2205
7 205,245 345,556 424,662 524,582
8 448,284 445,871 542,231 608,141
9 22,261 15,703 14,947 7,333
10 - 6,640 - 81,900
11 312,471 335,407 350,156 207,195
12 67,117 20,729 22,307 48,142
13 - 322 - -
14 445 - - -
15 151,295 57,976 66,656 54,858
16 293,567 900,102 1,348,512 1,006,927
17 54,909 160,826 95,058 68,419
18 58,716 141,974 532,999 604,966
19 718,865 858,142 724,785 507,347
20 2,465,208 3,169,409 2,371,866 2,901,328
21 218,218 276,434 213,551 198,561
22 2,303,784 1,723,324 1,306,422 1,460,397
23 39,847 225,459 739,473 1,562,579
25 2,637 1,877 190 24,262
27 3,437 3,270 2,813 8,238
28 537 5,734 1,067 508
29 21,555 20,705 4,367 108,707
30 1,392,526 956,441 429,995 1,064,212
31 133 213 - -
32 19,068 63,941 121,009 101,680
33 386,048 39,969 131,201 430,391
34 - 9,761 184,765 599,215
35 58,904 87,340 126,678 112,285
36 19,150 1,865 11,623 1,038
37 - 188 3,872 2,546
38 84,113 21,947 23,573 45,976
39 1,060,061 625,500 515,455 560,503
40 628,000 322,288 483,533 560,305
41 13,623 2,677 - 4,621
42 139,895 89,562 108,138 111,995
43 - - 495 204
44 21,653 105,501 245,745 334,019
45 - 544 - -WT/REG128/3
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H.S. Year
Chapter 1998 1999 2000 2001
48 2,984,955 1,831,164 1,206,950 1,469,565
49 87,665 42,432 66,242 175,752
50 - - 6,613 8,474
51 216 - - 133
52 21,955 - 75 38,421
54 59,166 306,529 516,066 618,862
55 24,867 60,609 43,261 51,881
56 55,604 69,981 43,942 65,193
57 7,607 13,860 8,985 4,057
58 564 61 248 5,500
59 82,160 10,703 8,522 2,052
60 1,077 4,810 221 1,144
61 231,492 215,528 301,947 308,141
62 59,275 121,941 163,933 331,517
63 153,484 159,043 154,037 119,843
64 45,660 40,071 166,577 182,391
65 443 258 122 2,882
66 - - 125 128
67 - - - 36
68 21,187 59,233 51,798 2,116
69 81,610 206,778 87,816 46,308
70 297 3,614 2,970 17,753
71 - - - 247
72 139,207 281,994 394,767 283,155
73 24,062 80,137 36,069 367,420
74 818 977 413 566
75 - - - 740
76 143,230 852,091 1,535,014 1,548,963
80 - 3,657 - 404
82 6,946 7,626 7,904 12,069
83 178,655 41,270 13,934 52,180
84 1,401,194 863,551 1,044,536 1,661,342
85 2,245,288 2,798,893 4,696,557 20,194,743
86 79,274 301,709 409,391 44,893
87 331,344 1,266,869 174,871 405,519
88 184 792 - 1,606
90 521,463 842,412 96,537 176,141
91 264 149 453
93 26,262 13,663 2,848 2,045
94 181,128 117,499 255,523 299,035
95 108,202 8,060 235,595 266,224
96 14,830 57,335 137,882 186,362
Total 20,902,391 22,674,435 24,204,210 44,221,890WT/REG128/3
Page 9
Hungary – Imports from Estonia, 1998-2001
(USD)
H.S. Year
Chapter 1998 1999 2000 2001
3 - - 21,228 36,631
4 - 62,142 - -
5 26,104 49,175 34,222 28,025
16 28,991 171,622 65,817 197,768
22 - - - 138
27 - 2,002 - 23,533
28 - - - 5,335
30 - 1,111 - -
32 - 254 19,810 78,999
34 - - - 2,757
38 - 235 - 67
39 1,251 10,646 32,616 109,981
40 880 744 7,706 1,505
41 - - 50 -
42 232 15 - 666
43 - - - 47,195
44 260,006 763,477 989,738 1,497,803
48 1,308 101 13,233 6,686
49 40 361 276 2,897
52 49,330 58,461 98,608 424,241
54 - - - 224
55 - 532 13 9,768
56 - 71,610 88,670 121
57 - - 663 2,612
58 - 6,189 - 45
59 14,400 15,120 16,520 230,313
61 8,286 11,590 9,551 4,241
62 3,086 3,089 11,667 18,232
63 13,512 6,497 8,798 42,804
64 32,894 52,220 56,614 32,821
65 - 404 363 706
70 275 421 621 438
73 33,284 804 25,150 13,369
74 - 382 - -
76 - 888 - 18,165
82 - - 6,579 1,302
83 75 1,009 722 624
84 87,584 4,553,572 805,424 509,742
85 6,555,657 568,279 5,819,512 14,545,559
87 309,304 420,964 719,286 704,926
90 51,141 113,177 8,199,682 595,142
94 480,653 722,226 685,861 731,999
95 67,084 112,835 64,721 22,897
96 1 951 78,187 59,701
97 - - - 54,484
Total 8,025,378 7,783,105 17,881,908 20,064,462WT/REG128/3
Page 10
Imports of Estonia from Hungary, 2001
by Different Duty Levels According to the Agreement
Agricultural products Industrial products
Duty Rate
USD % USD %
0% 11,194,929 100 33,026,961 100
Less than MFN  0 0 0 0
MFN  0 0 0 0
Total: 11,194,929 100 33,026,961 100
Total imports: 44,221,890
Imports of Hungary from Estonia, 2001,
by Different Duty Levels According to the Agreement
Agricultural products Industrial products
Duty Rate
USD % USD %
0% 0 0 19,801,900 100
Less than MFN 234,467.9 89,3 0 0
MFN 28,094.1 10,7 0 0
Total: 262,562.0 100 19,801,900 100
Total imports: 20,064,462
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