WORLD TRADE  
ORGANIZATION  RESTRICTED  
 WT/REG22/M/2  
4 December 1997  
 (97-5324)  
  Committee on Regional Trade Agreements   
 
 
 
EXAMINATION OF THE CUSTOMS UNION BETWEEN  
THE EUROPEAN COMMUNITIES AND TURKEY  
Note on the Meeting of 1 October 1997  
Chairman:  H.E. Mr. Miguel J. Berthet (Uruguay)  
 
1. The Committee on Regional Trade Agreements resumed the examination of the European 
Communities -Turkey Customs Union under Agenda Item D -I of its Thirteenth Session, as found in 
WTO/AIR/684.  The following topics wer e discussed:  
A. Status of the General Incidence Calculations for the EC -Turkey Customs Union  
B. General Statements  
C. Specific Comments or Questions  
 
A. Status of the General Incidence Calculations for the EC -Turkey Customs Union  
2. Before beginning debate , the Chairman  informed the Committee of the status of calculations 
of weighted tariff averages for the EC -Turkey Customs Union.  The Parties to the Agreement had 
been in contact with the Secretariat, and the data was nearly complete for the Secretariat to  proceed 
with the calculations.  Once all the information had been received and the calculations made, the 
Committee would allocate some time at a future meeting to discuss the results.  
 
B. General Statements  
3. The Chairman  recalled that prior to the firs t round of examination of the EC -Turkey Customs 
Union at the Committee's Seventh Session, the Parties had submitted information on their Agreement 
according to the Standard Format for Information on Regional Trade Agreements.  That information 
was circulat ed in document WT/REG22/5.  Subsequent to that first round, two documents containing 
additional questions and replies had been circulated, appearing as documents WT/REG22/6 and 
WT/REG22/6/Add.1.  The layout of those supplementary documents followed that of  the Standard 
Format, for ease of reference.  Those three documents were to form a basis for the Committee's 
discussion during the current round of examination.  
4. The representative of Turkey  said his delegation welcomed the opportunity to continue the 
examination of the EC -Turkey Customs Union.  During the first round of examination, both Parties 
had stated that their Customs Union was entirely consistent with their obligations under the WTO.  
While many delegations had shared this view, others had mainta ined that the Agreement failed to 
meet the criteria of Article XXIV because trade in agricultural products was not immediately covered.  
The Parties had responded that those products were covered by the Customs Union and that their free 
circulation remaine d one of the essential objectives of their Association Agreement.  The Parties had WT/REG22/M/2  
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 also indicated that they expected these objectives to be reached gradually, as foreseen in a side 
agreement.  During that first round of examination, the Parties had foresha dowed the forthcoming 
conclusion of negotiations between the two Parties, which would constitute an important step towards 
liberalization of trade in agricultural products.  Those negotiations were concluded some months after 
that meeting, and they had ind eed led to substantial liberalization in bilateral trade in agricultural 
products.  Once the Agreement were fully implemented, about 90 per cent of reciprocal trade in 
agricultural products would benefit from preferential treatment, and about 70 per cent f rom duty -free 
access.  Consequently, and bearing in mind that trade in agricultural products in any case accounted 
for less than seven per cent of total trade between the Parties, the Parties were of the view that any 
hesitations which some Members had had  with respect to the consistency of the Customs Union with 
Article XXIV:8(a)(i) could be dispelled.  Since the Committee began its examination of the EC -
Turkey Customs Union, Turkey had continued in its efforts toward harmonizing its foreign trade 
policy w ith that of the European Union.  As announced at meetings of the CRTA and the Council for 
Trade in Goods, in 1996 Turkey had concluded a Free Trade Agreement with Israel which had entered 
into force on 1 May 1997, after ratification by the appropriate auth orities of both Parties.  The 
required notification would be made to the WTO shortly, and the CRTA in due course would have the 
opportunity to examine that Agreement, as well.  Similar agreements had been signed with Romania, 
Hungary, Estonia, and Lithuani a; they were expected to enter into force shortly, after being duly 
ratified.  Others had been initialled with Latvia and the Czech and Slovak Republics.  Negotiations 
with a view to concluding free trade agreements had been initiated with Poland, Bulgaria  and 
Slovenia.  Initial contacts had been held with Tunisia, Morocco and Egypt, with a view to concluding 
such agreements with those countries, as well.  
5.  The representative of Turkey  continued, saying that on the domestic front Turkey had 
continued its efforts at harmonizing its legislation, policies and practices with those of the EC in areas 
where this was required for the smooth functioning of a customs union.  The most noteworthy 
development since the Committee had begun its examination of the Custom s Union was the fact that 
the Turkish Competition Authority had become operational in March 1997.  This authority had been 
entrusted with the implementation of Turkey's competition law, based on the relevant articles of the 
Treaty of Rome and its secondary  legislation.  His delegation believed that, as this authority would 
become fully functional, the resort by either Party to trade defense instruments such as anti -dumping 
measures would become redundant.  Another important development in the area of harmon ization had 
been the adoption by the Turkey -EU Association Council earlier this year of a Decision which listed 
the instruments whose incorporation into the Turkish legal order would permit the total removal of 
technical barriers to trade between the two p arties.  He also noted in this context that Turkey had 
made on 1 January 1997 the first alignment to the EC's Common External Tariff (CET) of products 
subject to a higher duty during a transitional period of five years, in accordance with Decision 2/95 of 
the Turkey -EU Association Council which had been notified to the WTO.  This alignment which had 
taken the form of a 10 per cent reduction in duties would be followed by further annual reductions 
until such time as the margin between the duty levels of Turk ey and those of the CET had completely 
disappeared for these products.  It went without saying that the adoption by Turkey of the EC's CET, 
as well as of the EC's preferential trade policy, would be of great benefit to third countries.  This was 
already th e case.  Overall imports rose by more than nine per cent in 1996, after the completion of the 
Customs Union.  Figures for the first five months of 1997 indicated that third country imports were 
increasing faster than those from the EC.  Imports from those countries had increased by 12.5 per cent 
during this period, whereas those from the EC had only risen by 5.3 per cent.  This confirmed that the 
share of EC imports in Turkey's trade was falling to its traditional level after having risen somewhat 
following  the completion of the Customs Union.  The Parties believed that this situation demonstrated 
the validity of the argument that their Customs Union was perfectly consistent with Article XXIV:4 of 
GATT in that it had not raised barriers to trade from third c ountries, but had lowered them instead.  
6. The representative of Turkey  then said that the Parties had submitted to the Secretariat the 
data necessary for the calculation of the change in the general incidence of duties which had occurred  WT/REG22/M/2  
 Page 3 
 
 
 after the complet ion of the Customs Union.  The required elaboration was presently being made by 
the Secretariat.  The Parties believed that this calculation would confirm that, on the whole, the 
average Turkish tariff had fallen from 18 per cent to around 5 per cent.  Thu s, it would have been 
demonstrated that duties imposed after the completion of the Customs Union were not higher than 
those in force prior to its formation and that consequently the requirements of Article XXIV:5 had 
been fulfilled.  
7. Turning to the futur e, the representative of Turkey  then said he wished to draw attention to 
the "Communication on the further development of relations with Turkey", which the EU 
Commission had issued on 15 July 1997, at the request of the Council.  While this document 
addres sed a wide range of issues, some of those grouped under the heading "consolidation of the 
Customs Union" were particularly relevant to the examination being carried out by this Committee, in 
that they called for the continuation of "moves already made towa rds free movement of agricultural 
products" and the initiation of a process of negotiations aimed at "the progressive liberalization of 
services between the EU and Turkey".  The objective of the negotiations would be to conclude a 
preferential agreement wh ich would conform with Article V of the GATS.  As indicated in the 
Communication, this would require such an agreement to include "substantially all sectors" and 
"cover all aspects of trade in services".  While this communication had yet to be adopted by t he 
Council of the Union, the Parties had noted the early demonstrations of political will in its favour and 
remained confident that it would be implemented in full.  He then said that the brief explanation on 
the progress made by the Customs Union since it s completion at the beginning of last year, as well as 
the prospects for its future development, confirmed the point which Turkey, the EC and other 
delegations had made when the Committee began the examination, namely that the Customs Union 
fully conformed  with the spirit and letter of Article XXIV.  It had led to the liberalization of trade 
among the Parties in all sectors, and it had brought a lowering of barriers between Turkey and third 
countries and a considerable increase in Turkey's trade volume with  the outside world.  In the light of 
the evidence submitted, the Parties expected that the Committee would conclude that their Customs 
Union satisfied the requirements of Article XXIV.  
8. The representative of the European Communities  said his delegation, too, welcomed the 
opportunity to continue the examination of the EC -Turkey Customs Union.  Information had been 
circulated in response to questions submitted since the first round of examination, and the Secretariat 
was now in a position to proceed with th e calculation of the general incidence of duties required under 
Article  XXIV:5.  While no regional integration agreement was ever simple or easy, this was a 
straightforward example of a customs union being implemented in accordance with the requirements 
and provisions of Article XXIV.  He recalled the point made during the first round of examination 
that it was important to look at the various components of the Customs Union, including 
Decision  1/95, Decision 2/95 and the transitional free trade agreement i n products covered by the 
European Coal and Steel Community Treaty, as a single package.  As the Turkish delegation had 
noted in its introductory statement, progress had continued to be made in a number of fields, 
furthering the process of liberalization a nd further consolidating the establishment of the Customs 
Union.  Reference had been made to the conclusion of an agreement for even further liberalization of 
bilateral trade in agricultural products.  On agriculture, statistics were encouraging and positi ve.  Once 
the agreement were fully implemented (and even in advance of the formal adoption of it, aspects of it 
were being implemented), and once the transitional arrangements provided for in Decision 2/95 and 
with respect to coal and steel products were c ompleted, the Parties would be in a position where 96.5 
per cent of overall trade would be duty free.  So, once the transitional arrangements on industrial 
goods had been completed, the agreements that the Parties already had in place with respect to 
agric ulture would contribute to a total duty -free figure of 96.5 per cent.  That was a conservative 
estimate, since it did not take account of circumstances where exports from the EC to Turkey might 
benefit from Turkish MFN duties set at zero.  Regarding the Tu rkish textiles restrictions discussed last 
round, his delegation was circulating a non -paper with detailed information.  It was an important 
element of further transparency for the Committee to understand the full scope of what had been done WT/REG22/M/2  
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 and the method ology which had been used.  The starting point had been the arithmetic average of 
imports into Turkey from the third party concerned in the relevant category of product from 1992 -94.  
However, another way to compute this was to base the figure on total EC imports from the relevant 
category, multiplied by the basket threshold contained in the bilateral textile agreement that had been 
in force between the third party and the EC in 1994, and then multiplied by the percentage share of 
the Turkish gross domestic  product (GDP) in the GDP of the EC -15.  The higher of these two figures 
(i.e. the arithmetic average of imports into Turkey from the Member concerned for the relevant 
category in the period 1992 -94, or that second computation) was then complemented by the  growth 
rates for 1994 and 1995 contained in the relevant bilateral agreement, to determine the new 
appropriate level.  While that sounded complicated, one point should be borne in mind in interpreting 
the data:  two options had been used methodologically,  and third countries received the benefit of the 
higher number.  
9. The representative of the European Communities  continued, expressing the hope of the 
Parties that the day's examination would provide a final opportunity for factual issues to be raised and  
addressed.  The Parties welcomed the opportunity for the Committee to establish and settle any 
outstanding points which needed to be cleared up, and they hoped the Committee would be able to 
finish the factual part of the examination.  
10. The representati ve of Canada  apologized for his delegation's lack of active participation at the 
last round of examination of this Agreement.  Customs unions were subject to important obligations 
under Article XXIV, in particular in paragraphs 5(a) and 8(a), as well as in  the Understanding on the 
Interpretation of Article XXIV of GATT 1994 (the Understanding).  When the Committee looked at 
the Agreement in light of these particular tests, it seemed less straightforward than it had been 
portrayed.  The record from the first  round of examination indicated that several issues were 
troublesome in terms of compliance with the various WTO provisions.  First, regarding the 
introduction of the CET, it might be that in general the CET had led to some improvement or 
liberalization on  an MFN basis, but there had been movements in the opposite direction for some 
tariff lines and renegotiations for these tariff lines were required under Article XXIV:6.  Notification 
of the Agreement had been made subsequent to its entry into force, while  it was clear under the 
Understanding that the notification and the submission of information should have taken place, and 
negotiations should have started, before the Agreement's entry into force.  Also, there had been some 
changes in applied rates that m ight be detrimental to third -country trade.  Another point heavily 
documented in the minutes of the first round of examination concerned the issue of selective 
liberalization.  It had been said that the exclusion of a certain important sector or a segment of that 
sector was not a proper way of entering into a preferential trade agreement under Article XXIV, since 
this could exacerbate the degree of protection that was now granted to these non -liberalized sectors.  
Another well -documented point was the quest ion of selective harmonization of measures governing 
trade from third countries, which was also troublesome in terms of compliance with Article XXIV.  In 
general, his delegation found that this Agreement, like many others concluded by the EC, fell short of  
the standards that Members should aim for in terms of compliance with Article XXIV.  That being 
said, his delegation supported the liberalization efforts that Turkey had undertaken, which represented 
a positive step.  His delegation hoped that the other i nitiatives taken recently by Turkey for continuing 
the process of liberalization at the regional level would not be to the detriment of MFN liberalization.  
11. The representative of Hong Kong, China  recalled that during the first round of examination of 
the Agreement, her delegation had asked about Turkey's automatic extension of EC quantitative 
restrictions on textiles.  Her delegation noted that additional information had been put forth today, but 
the reply given so far was not satisfying, and her delegat ion had strong reservations over the 
coherence of such extension with WTO provisions, in particular Article XXIV.  Her delegation had 
been persuaded, however, to agree to see the matter treated in the systemic context.  However, almost 
one year after this matter had first been raised, her delegation saw no sign of substantive deliberations.  
This concern was reinforced by the realization during the Committee's discussions earlier this Session  WT/REG22/M/2  
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 that there was also a lack of will even to attend to reporting ob ligations.  Therefore her delegation 
wished to make it clear at this stage that its concerns remained to be addressed, either as part of the 
examination process or as a systemic issue.  Her delegation certainly wished to support the 
Committee's work and ha d always taken positive positions to that end; but the Committee's work 
could only be successful if progress were achieved on all fronts, in a balanced manner.  
12. The representative of the United States  said that the discussion during the first round of 
examination of this Agreement had been thorough and that concerns were well reflected in the 
minutes.  He asked the Parties to explain the changes that had taken place in the Agreement itself 
since the first round of examination.  In particular, his delegat ion would appreciate information 
regarding the following questions:  Had provisions been substantially changed?  Had liberalization 
commitments been changed?  Had firm liberalization commitments/time -lines been agreed for sectors 
that had not yet been full y liberalized?  What plans did the Parties have to present a single schedule of 
concessions in the WTO?  How had the Parties treated their agricultural, budgetary and access 
commitments?  Reading through the minutes of the last round, his delegation had fo und numerous 
comments by the EC delegation to the effect that Article XXIV required it to have a single market, 
thus justifying the introduction or adoption of certain restrictive, discriminatory measures, be they 
textile quotas, safeguards or other parts of EC law, by the new customs union partner.  In other 
statements in those same minutes, the EC delegation had asserted the opposite argument, that a single 
market was not really required for everything, and that thus a particular measure or practice did n ot 
have to be assumed by the new customs union partner.  This appeared to be a case of the EC's "having 
its cake and eating it, too", where the EC was asserting that there needed to be a single market, but 
that common policies needed to be introduced only with respect to those measures that were easiest to 
apply in that market.  The Parties had seemingly applied this rationale only in those cases where it 
benefited them and disadvantaged third parties, and they had chosen not to apply the rationale when it 
was not convenient or advantageous.  Finally, with reference to paragraph 28 of WT/REG22/M/1, he 
said that a period of twenty -two years to reach a still incomplete customs union did seem to be a long 
time.  
13. The representative of Japan  said his delegatio n was encouraged by the statement by the EC 
delegation regarding the increase of trade with third countries and would appreciate receiving that 
statement, along with the relevant statistics, in written form.  It also fully supported the statement by 
the de legation of Canada and agreed with most of what had been said by the delegation of Hong 
Kong, China.  It would thus welcome a report regarding any modifications or changes.  
14. The representative of India  said his delegation, too, shared the concern raised  by the 
delegation of Hong Kong, China regarding the automatic extension of EC quantitative restrictions on 
textiles by Turkey.  Notwithstanding the Parties' intention to harmonize their legislation in the future, 
his delegation was of the view that the im position of quantitative restrictions by Turkey was not 
consistent with the provisions of Article XXIV, particularly since this measure led to a more trade 
restrictive regime.  While the transparency of the non -paper which had been circulated was welcome, 
the content was disconcerting.  In relation to the use of the higher figure obtained through the two 
methods of calculation, his delegation wished to point out that even the higher of the figures would 
have to be seen in the context of the situation existi ng earlier; if there had been no quantitative 
restrictions in place earlier, then even the higher of the figures would need to be re -examined.  
15. The representative of the European Communities  thanked delegations for making precise 
points.  Regarding the point by the Canadian delegation, he agreed that customs unions needed to 
meet the requirements of Article XXIV:5(a) and 8(a).  The test in paragraph 5(a) particularly related 
to the general incidence of duties, which was the calculation already mentioned and which by its 
nature could be treated factually once the results were available.  The Parties were of the view that 
their Agreement fully met the requirements set out in Article XXIV:8(a).  Criticism at this stage 
needed to be precise, as implementation  of the Customs Union was far advanced.  As he had said in WT/REG22/M/2  
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 his opening intervention, questions of transition and of further liberalization taken were increasingly 
at the margin.  Regarding the point by the Canadian delegation on Article XXIV:6 and the late  
notification, this problem had been encountered with EC Enlargement, as well, and it reflected the 
fact that, contrary to the expectations of the drafters of Article XXIV, the adoption of a CET by the 
Parties to this Customs Union as well as by the Partie s to the new EC Customs Union in the context of 
Enlargement had taken place in large measure without a transition period; the fact that the CET had 
been put in place quickly had raised problems of getting all of the events in the right order.  It was 
difficult to accept criticism for having a transition period that was too long on the one hand and too 
short on the other; there was an almost systemic difficulty which arose when the CET was 
implemented quickly.  The question of applied rates was also a matter  discussed in other 
examinations, and the views of all Members were well known; this, too, should be considered in the 
wider systemic debate.  The argument on selective liberalization and the exclusion of segments of 
particular sectors needed to be seen in  the context of the explanation provided during this meeting, 
regarding further liberalization being put in place, for example in the agricultural sector.  This did not 
seem to amount to a significant criticism from the point of view of the obligations of the Parties to the 
Customs Union under Article XXIV.  Even now, without taking into account the Parties' 
commitments to further liberalization, the arrangements in place under this Customs Union compared 
well with agreements entered into by other WTO Membe rs.  There was little reason to be concerned 
over the Parties' commitment to continuing the process of liberalization.  Again, the Parties contended 
that the Agreement already fully met the test under Article XXIV:8(a).  The wider arguments which 
the deleg ations of India and Hong Kong, China had raised on textiles had led to the proper inclusion 
of this issue on the list of systemic issues.  It seemed that the discussion which the Committee had had 
earlier this Session on the reporting obligation was not re levant to the fundamental question of rights 
and obligations at issue in this examination; the EC delegation had not demonstrated any lack of will 
to attend to reporting obligations.  The delegate of India had said the transparency with respect to 
textiles  was disconcerting; this also needed to be put in a practical context, as none of the quotas had 
been filled.  This seemed to validate the methodological point that third countries had fundamentally 
benefited from the exercise.  As the Hong Kong, China del egation had noted, the question of how this 
fit into the rights and obligations was a question to be taken up in the systemic debate.  But in the 
meantime, the Parties could assert that in practical terms no harm had been done.  He would respond 
to points raised by the United States delegation later.  
16. The representative of Hungary  said it did not seem appropriate to continue discussions on 
systemic issues at this meeting, at the expense of the Parties to the Agreement under examination.  
This Agreement d id not warrant different treatment from other agreements examined in the 
Committee.  His delegation was of the view that the Customs Union was in conformity with the 
requirements of Article  XXIV.  
17. The representative of Turkey  replied to the point by the  Indian delegate regarding the degree 
of restrictiveness of Turkey's trade policy with respect to textiles, noting that the system which 
prevailed in Turkey with respect to the import of textiles and clothing products prior to the completion 
of the Customs  Union had not been less restrictive than the country's current system.  The protection 
rate for products in HS Chapters 50 -63 had been roughly 35 per cent prior to the completion of the 
Customs Union.  Since then, Turkey had been applying a much lower tar iff, that of the CET.  
Therefore, protection had fallen to about one third of what it had been before the completion of the 
Customs Union.  Restrictions that had been imposed as a consequence of the Customs Union, 
regarding which the Parties had circulated  information during the meeting, had not led to a limitation 
of access to Turkey's market.  On the contrary, the opposite had happened.  As the EC delegate had 
explained, these quotas had not been filled, and imports of textiles and clothing products from third 
countries had increased since the conclusion of the Customs Union.  This was another sign that the 
system being applied now was more liberal than the system that had been in effect before.  
  WT/REG22/M/2  
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 C. Specific Comments or Questions  
18. The representative of Australia  referred to the replies to questions on import restrictions in 
WT/REG22/6/Add.1.  The answer to question 1 said:  "There is no intention on Turkey's part to 
modify or withdraw the tariff concessions specified in Schedule XXXVII, except some which  need to 
be harmonized with the Common Customs Tariff of the European Union as a result of its Agreement 
with the EU."  This was an interesting reply, given that his delegation had asked at the previous round 
of examination for information on any of Turkey 's tariff lines which would be subject to higher rates 
of customs duties as a result of the application of Article 13 of the Agreement.  Today the Turkish 
delegate had said there would be no increases, but the written response indicated that there could be  
some increases.  Also, the reply to question 2, which referred to any adjustments to EC tariff quota 
arrangements, said that there would be no adjustments to tariff quota arrangements that would affect 
third parties.  Had there been any adjustments at all  to EC tariff quotas to take account of Turkish 
imports?  He perhaps was talking about the same thing, but clarification would be helpful.  It would 
also be useful to have information on which tariff items were previously subject to a tariff but would 
now be imported under tariff quotas.  
19. The representative of Canada  wished to pick up on some of the points made by the 
representative of Australia.  In that same document, the reply to question 1 stated that the Parties 
could "confirm that Turkey reduced mo st its applied tariff rates..."  Could the Parties provide detailed 
information on tariff lines that had increased following the entry into force of the CET, in particular 
whether the tariff increase had been made for tariff lines for which there was no im mediate 
introduction of the CET but rather a transition period to move to the CET?  His delegation had faced a 
particular instance where the applied tariff had been increased on an MFN basis, thereby increasing 
the margin of preference for the Parties to t he Agreement, and where at the same time that particular 
tariff line had been excluded from the application of the CET on the day of entry into force and 
instead was subject to a transition period.  This seemed to suggest that there had been a conscious 
modulation of the entry into force of the CET in that particular instance to grant preferential treatment 
to suppliers of the EC during a transition period.  This was a source of concern.  His delegation was 
also eager to learn what would happen when the CET  would be implemented by Turkey on these 
particular tariff lines; if there were tariff rate quotas currently applied by the EC, would there be any 
adjustment in the size to account for imports coming into Turkey?  This was in line with question 2 in 
that d ocument, but his delegation's concerns related to areas beyond agriculture.  In other words, was 
the reply to question 2 applicable to non -agricultural products?  
20. The representative of Japan  said that quantitative restrictions were basically inconsisten t with 
the object of the WTO, though there was some latitude for having them.  The delegate of Turkey had 
said that quotas had not yet been filled; it remained true, however, that new quantitative restrictions 
had been introduced.  In the last round of exa mination, the EC had said that as long as the Parties did 
not on the whole raise barriers, they could raise barriers in specific areas.  This seemed inconsistent 
with Article  XXIV:5, and indeed inconsistent with the aim and object of the WTO.  His delegati on 
would like to associate itself with the point made by the Hong Kong, China delegation regarding the 
automatic extension of anti -dumping duties, safeguard measures and countervailing duties.  Could the 
Parties confirm that in the future they would not au tomatically extend these measures without 
individual investigations, and that they would apply these measures only in accordance with specific 
WTO Agreements, for example the Agreement on the Implementation of Article VI of GATT 1994?  
21. The representativ e of Ecuador  wished to refer to a point analyzed by the delegations of 
Australia and Canada.  He had gone through the documentation in search of additional information on 
agricultural trade, in particular with regard to Section V, Articles 17 -23 of the Par ties' Agreement.  It 
was not clear what the scope or intentions behind these provisions were.  In particular, Article 20, 
paragraph  1 stated that both Turkey as well as the EC could apply agricultural components; was the 
application of agricultural compone nts aimed at trade with third parties, or was it aimed only at trade WT/REG22/M/2  
Page 8 
 
 
 between the two Parties?  His delegation requested further explanation with regard to Article 18 on 
agricultural components.  The documentation did not clearly indicate how the mechanism of an 
agricultural component was compatible with WTO provisions.  
22. The representative of Australia  said he had a similar question.  During the last round of 
examination, there had been interesting discussion on the agricultural component of the Agreement .  
A careful reading of the Articles dealing with the agricultural component indicated that this applied 
only to products originating in non -preferential third countries; it would be helpful to have a listing of 
those preferential third countries that were  exempt from this arrangement.  Section V referred to 
various annexes which outlined how the agricultural component would be calculated; had these been 
made available to the Secretariat?  Moving beyond the agricultural component, he said that his 
delegatio n continued to have concerns about the exclusion of agricultural products from the Customs 
Union arrangement.  His delegation had been pleased to learn that day that the negotiations on 
agriculture which had been due to finish last year had ended, and it w as pleased to hear the assurances 
by the Parties that the amount of agricultural trade that would eventually be duty free was going to 
increase.  It would be useful to have an indication of the time -frame of when the results of these 
negotiations would be implemented; this was a crucial issue in the Committee's consideration of the 
Agreement's conformity with Article XXIV.  As was often said in examinations, liberalization did not 
necessarily mean the removal of barriers to trade.  It would be helpful if th e Parties would provide 
information on those measures of the EC's Common Agricultural Policy (CAP) that would be adopted 
by Turkey, and an indication of when.  Article 25 of Decision 1/95 required Turkey to adopt some 
measures of the CAP.  The Committee ha d had some discussion of this during the first examination 
round; but it still was not clear which particular features of the CAP Turkey had adopted so far or 
would adopt in the near future to allow the free movement of agricultural goods.  It would be use ful to 
have some clarification of how Turkey's existing domestic support and export subsidy commitments 
would relate to its (presumed) eventual adoption of the CAP.  How would Turkey treat a product in a 
situation where that product was excluded from the c overage of the Customs Union while Turkey had 
product -specific domestic support and export subsidies on it?  Finally, if the CAP covered assistance 
to a product excluded from the Customs Union, would Turkey implement the CAP on that product?  
He was aware that, depending on the answer to the question on the time -frame for the implementation 
of the agricultural agreement between Turkey and the EC, some of the questions might be 
hypothetical.  
23. The representative of the European Communities  began by respond ing to concerns expressed 
by the delegations of the United States and Japan.  He said the provisions of the Customs Union had 
not been substantially changed since the first round of examination, which meant also that the 
provisions in 1/95 with respect to anti-dumping had not been changed.  As to whether the Parties were 
prepared to make an undertaking with regard to future arrangements on anti -dumping or anti -dumping 
investigations, he said this was not open to the Parties to do right now.  The Parties ope rated this 
arrangement and their individual arrangements in conformity with WTO obligations.  Regarding 
whether liberalization commitments had been changed, he reiterated that some negotiations on 
agriculture to extend further the scope and depth of libera lization had been concluded, and this had led 
to firm liberalization commitments which would enter into force on 1 January 1998.  As to the Parties' 
plans to present a single schedule of concessions in the WTO, he said the Parties had no such plans.  
In te rms of agricultural budgetary and access commitments, there was no change to the schedule of 
either Party.  The United States had cast doubt on arguments by the Parties regarding the operation of 
the wider compass of economic integration between the EC and  Turkey within and under the 
framework of the Customs Union in its final stage; the Parties saw themselves as conforming with 
Article XXIV.  The arrangements and agreements entered into by the Parties under the framework of 
Decision 1/95 included commitmen ts on harmonization of legislation and of wider economic 
arrangements in fields such as state aids, standards, competition policy and intellectual property, all of 
which added an important qualitative dimension to the Customs Union, which underpinned its 
objectives, ambitions and effects; these did not substitute for the statistical picture, which stood on its  WT/REG22/M/2  
 Page 9 
 
 
 merits in any case.  It should be noted that Article XXIV was silent on these particular points.  Also, 
the retrospective economic effects did not fo rm part of the Article XXIV test, but it was important to 
look at the full compass of economic integration arrangements brought about through Decision 1/95 
and the wider ambition of the EC -Turkey mutual bilateral economic relationship, to provide a 
qualita tive dimension to the examination.  The discussion on anti -dumping and safeguard questions 
needed to be put in that context.  The process of wider economic integration and harmonization 
proceeded at a pace which varied depending on the particular issue, th e particular exercise, the 
particular legislative framework and the particular economic significance of the measures being 
considered.  It was natural that harmonization proceeded faster in some areas than in others, so the 
ambitions the two Parties had wi th respect to their mutual economic relationship could not be brought 
to fruition in a single step.  This point also related to the question by the United States delegation on 
the implementation of measures that were easiest to put into the market.  
24. The representative of the European Communities  continued, saying the questions posed by 
the delegation of Canada related to the responses in WT/REG22/6/Add.1.  His delegation considered 
these responses to be adequate.  Decision 2/95 was self -explanatory, and,  as the delegate of Turkey 
had said, Turkey's tariff reduction commitments contained in that Decision were already being 
implemented.  The factual answers to questions about applied tariff rates could be found in the 
material provided to the Secretariat; i n consulting that material, the relevant tariff -line information 
could be obtained.  The Japanese delegation had raised a question which was essentially of a systemic 
nature, concerning the aims and objectives of the WTO Agreements in relation, in particul ar, to 
quantitative restrictions.  Discussion on this should take place in the systemic context.  His 
delegation's approach was that shared by the delegation of Hong Kong, as reflected in its statement 
earlier.  Taking up the questions raised by the delega tion of Australia, he responded to the question 
relating to a time -frame for achieving free movement of agricultural products, repeating that the 
results of the recently concluded negotiations would enter into force on 1 January 1998, and that some 
aspects  of that agreement were already being implemented by the Parties on an autonomous basis.  As 
to which of Turkey's tariff lines would be subject to higher rates of duty as a result of the application 
of Article 13 of Decision  1/95, the answer could be found  in the detailed tariff information which the 
Secretariat now had.  The delegation of Australia had also asked if there had been adjustments in EC 
tariff quotas to take account of Turkish imports and, if so, what had been the basis on which tariff 
quota vo lumes had been set; to this the EC representative responded that there had been no such 
adjustments.  Regarding the question on which tariff items had previously been subject to a tariff but 
would now be imported under tariff quotas on a line -by-line basis  with quotas for each line, he said 
his delegation had understood this question to refer to quotas in respect of third countries; as he had 
indicated, there had been no change in the EC quota, and the schedule for Turkey also remained 
unchanged, with the o nly arrangements in force being of a surveillance nature, in any case.  The 
Parties would respond in writing to questions raised by the delegations of Australia and Ecuador 
regarding the agriculture component outlined in Articles 18 -22 of Section V of Deci sion 1/95.  Copies 
of Annexes 2, 3, 4 and 5 to Decision 1/95 outlining the calculation of the agricultural component 
would be available through the Secretariat.  In response to the four questions regarding the CAP, he 
said the provisions of Decision 1/95 r equiring Turkey to adopt measures of the CAP remained a 
fundamental objective of the Agreement; the Turkish authorities were preparing to take some 
preliminary steps regarding this shared obligation.  His delegation did not at this stage have the 
detailed information requested, though this was not relevant to the tests in Article XXIV.  Finally, 
documentation showing protection rates in 1993 -96 should now be available through the Secretariat.  
The Parties had taken note of the views expressed by the Austral ian delegation on preferential 
liberalization.  
25. The Chairman  clarified that the written responses would be circulated to all delegations in 
document form.  WT/REG22/M/2  
Page 10 
 
 
 26. The representative of the United States  said his delegation had a follow -up question on the 
recently concluded negotiations on agriculture.  The EC explanation seemed to indicate that the 
Parties would begin implementing parts of the agreement on 1 January 1998; but the question 
regarding time -lines also was meant to ask when full liberalization wo uld occur for agriculture, i.e. 
was there an end date involved?  
27. The representative of Australia  associated his delegation with the question put forth by the 
United States representative.  Also, in response to the question on which of Turkey's tariff li nes would 
be subject to higher rates of customs duty, the EC delegate had said this information was already 
available; where, more specifically, could this information be found?  The Parties had said that there 
would be no upwards adjustments of Turkey's t ariff lines except for some instances of harmonization; 
his delegation would appreciate it if the Parties would be more precise.  He also requested further 
clarification regarding tariff rate quotas; the EC response seemed to indicate that none of Turkey's  
tariff items would be subject to tariff rate quota arrangements, and he wished to know if this was 
indeed the case.  He understood what the EC delegate had said about there being no obligation to 
provide information on Turkey's gradual adoption of the CAP , but in the spirit of transparency, it 
would be helpful if the Parties provided some information, perhaps in writing; if the Parties did not 
have any particular plans in this respect, that itself would be of interest to Members.  
28. The representative of Ecuador  thanked the Parties for indicating that they would supply 
written information responding to questions.  The information should address his question regarding 
the consistency of the agricultural component mechanism with WTO provisions.  
29. The repre sentative of Canada  said the reply given had not been addressed to his question.  
Behind his question lay concern for newsprint products.  After the entry into force of the Customs 
Union, the applied tariff on that product had gone up in Turkey, while at t he same time there had been 
a transition period pertaining to that product for moving to the CET; that product was also subject to a 
duty-free tariff rate quota within the EC, so there was an obvious issue here where the implementation 
of the Customs Union  had meant that the EC suppliers of newsprint in the Turkish market maintained 
the same access, whereas for MFN suppliers there had been an increase in the applied rate and no 
recourse possible because of the transition period embodied in the implementatio n of the CET.  This 
also raised an issue of the size of the EC duty -free tariff rate quota pertaining to newsprint; if the 
Parties were to move to a CET on the first day of implementation, to maintain the same degree of 
access, the size of the tariff rate quota would have had to be adjusted to take into account the new 
participant to the Customs Union.  This had been done, so this was a case where barriers to imports 
from third countries had been increased, contrary to what was envisaged under Article XXIV: 4.  This 
merited further attention.  He would be happy to pursue the matter bilaterally, but the point of 
principle should also be made that  through the implementation of a CET there might be some 
increase in applied rates which negatively affected the tr ade of third parties.  
30. The representative of the European Communities  thanked the Canadian representative for 
specifying the product and the issue.  Because this was a complicated issue, his delegation would take 
up the matter bilaterally with the Canad ian delegation to clarify the situation they were referring to 
and to look at an appropriate way to respond.  He requested the question in written form.  Regarding 
the time -frames point, he noted that the latest agreement within the context of the Customs Union on 
further agricultural liberalization, which would enter into force on 1 January 1998, was neither the 
beginning nor the end of that exercise, but rather was an important step.  As his delegation had said 
during the last round of examination, there had already been substantial liberalization of agricultural 
trade between the two Parties.  A further step had been taken, which the Parties believed was 
significant and materially improved the Customs Union from an Article XXIV point of view, taking 
into account the fact that it already met the requirements.  It was not the end, because it did not 
amount to the point where there would be full free trade in agricultural products; in any event, his 
delegation did not consider this to be part of the Article X XIV test.  Both sides were committed to  WT/REG22/M/2  
 Page 11 
 
 
 taking this liberalization forward.  The answer he had provided to the Australian delegation on the 
CAP question, in which he had said that the adoption by Turkey of some measures of the CAP 
remained a fundamental ob jective of both Parties and their Agreement, was an indication of the wider 
context within which this particular stage in agricultural liberalization needed to be put.  His 
delegation would respond in writing to the request for clarification regarding data  on applied tariffs 
which had been increased, as well as to the additional questions regarding the CAP.  
31. In response to the questions posed by the representative of Ecuador, the representative of 
Turkey  said that the agricultural component used in the c alculation of protection for processed 
agricultural products did not exceed the commitments Turkey had made in the WTO.  Regarding trade 
data and statistics, document WT/REG22/3 spelled out the pre -Customs Union tariff rates; this data 
had been submitted m ore than a year ago, and since then the Parties had received no further inquiries.  
32.  The representative of Japan  requested that questions and replies that were exchanged 
bilaterally be included in the documentation for the examination.  His delegation w as especially 
interested in the Canadian point regarding the raising of the CET.  
33. The representative of Ecuador  said he had listened carefully to the response by the 
representative of Turkey, and it seemed that the facts indicated that the agricultural component did 
contribute to a modification of the tariff which the Parties might impose on an agricultural product 
coming from a third country; this was why he had questioned whether this agricultural component 
was in line with the Parties obligations unde r the WTO.  The calculation of the agricultural 
component represented a hike in the tariff for third parties, and it seemed this was the intent.  His 
delegation would appreciate more detailed information as to the compatibility of this agricultural 
compone nt with the WTO.  
34. The representative of the European Communities  said his delegation would provide a 
detailed, written response to questions from the delegation of Ecuador.  He asserted that the 
Agreement was entirely consistent with the Parties' WTO ob ligations, and that the actual position of 
third countries trading with the Customs Union was not affected.  
35. The representative of Australia  said that the situation with regard to agriculture remained 
unclear.  He understood the response that the recent ly concluded negotiations between the EC and 
Turkey for the liberalization of agricultural trade were not the end of the process; but what he did not 
understand was whether there was a clear commitment that there would be free trade in agriculture 
between the Parties.  Article 25 of the Agreement said that "Turkey shall adjust its policy in such a 
way as to adopt the common agricultural policy measures required to establish freedom of movement 
of agricultural products."  That seemed clear enough, but Articl e 26 said that "the Community and 
Turkey shall progressively improve on a mutually advantageous basis the preferential arrangements 
which they grant each other for their trade in agricultural products."  Article 27 then said: "The 
Association Council shall  adopt the provisions necessary to achieve the free movement of agricultural 
products between the Community and Turkey once it has established that Turkey has adopted the 
common agricultural policy measures referred to in Article  25(1)."  It seemed this we nt around in a 
circle, where it said that there would be freedom of movement of agricultural products when the 
relevant provisions of the CAP had been adopted, and then that the relevant provisions of the CAP 
would be adopted to achieve free movement of ag ricultural products.  Was there a commitment in this 
Customs Union Agreement to free trade in agricultural products?  Was there a clear commitment that 
Turkey would adopt the CAP?  He was not arguing that to do so was part of the test of Article XXIV, 
but rather he was simply asking about the extent to which the Customs Union would result in free 
trade in a particular sector.  
36. The representative of Turkey  said that Article 24, paragraph 1 was clear.  It reiterated the 
long-standing, fundamental objective  of the Parties' association, i.e. the free movement of agricultural WT/REG22/M/2  
Page 12 
 
 
 products.  Meanwhile, Turkey would proceed to adopt gradually the CAP, with implementation of the 
relevant measures of the CAP being one of the conditions of the achievement of free movem ent of 
these products.  Until such a situation was reached, Turkey and the EC would progressively improve 
market access in these products.  This was what was being done.  As explained by the EC 
representative, the nature of the agreement which would enter into force on 1 January 1998 was to 
provide improved and preferential access for a number of agricultural products in the two Parties' 
respective markets.  This was an interim step on the way towards achieving the free movement of 
agricultural products.  
37. The representative of the European Communities  said the matter was simpler than it 
appeared.  He had said in response to the first question by the United States delegation that the 
provisions of Decision 1/95 had not been changed substantially, and the r elevant chapter had not been 
changed at all.  As his Turkish colleague had said, the language was straightforward:  an objective, as 
well as certain important steps which Turkey had to take, were established.  The Association Council 
would then assess prog ress in this respect.  Article 26 provided for steps to be taken along the way to 
take advantage of developments on both sides to push liberalization as far as the Parties could in the 
circumstances prevailing.  The chapter was self -explanatory as a statem ent of both sides' objective and 
as the means by which they intended to achieve it.  
38. The representative of Ecuador  said he noted with other delegates that the question of trade in 
agriculture required further study.  The information that delegations wou ld be receiving from the 
Parties would be very helpful and would need careful analysis.  He wanted to be sure that, in the 
agricultural field, Members were not going to be adopting at any stage something that would 
constitute a sort of authorization for on e of the Parties to move to new tariff levels held by the other 
Party to the detriment of third -party interests.  Such a raising of tariff levels by a Party through the 
mechanism set forth in Section V of the Agreement was a major concern of delegations.  Because this 
issue, along with the management of tariff rate quotas, repeatedly had given rise to concerns, his 
delegation would appreciate further information on these subjects.  
39. The Chairman  said the Committee had scrutinized issues.  The Secretariat would prepare a 
document gathering all the questions and replies, and this document would be distributed to all 
delegations as an addendum to the document under study during the day's examination.  The 
Committee had made an exhaustive examination of the in formation found in the relevant documents 
and of the information provided orally by the Parties.  All delegations had had the opportunity to 
submit written questions throughout the course of the examination.  The remaining information to be 
gathered was th e general incidence calculations, as noted at the start of the day's meeting; the 
Secretariat was working on this matter, and once its calculations were complete, the results would be 
circulated to Members.  The Committee could then set aside part of a fut ure formal meeting to discuss 
the documentation and to have any necessary points reflected in the summary records.  He proposed 
that the Committee request the Secretariat to begin drafting the conclusions so that relevant 
consultations could commence at th e appropriate time.  
40. The Committee took note  of the comments made.