RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG54/4
24 June 1999
(99-2577)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN ISRAEL AND HUNGARY
Questions and Replies
This document reproduces questions addressed to the Parties and the responses submitted.
The questions and replies set out below are organized in accordance with documents WT/REG54/3.
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I. BACKGROUND INFORMATION ON THE AGREEMENT
4. Trade Data
The Parties to the Agreement have circulated  overall two-way trade data at the chapter
or section level for the last few years.  While this information is useful, unfortunately the
information does not respond to the request ma de by the Committee.  Committee members are
still unclear on the treatment of certain type s of products under the Agreement.  While the
Parties claim that all trade is covered by the Agreement, it appears that some products –
primarily agricultural – are not subject to tariff elimination and in fact may receive only tariff
preferences.  Committee members have requested, on several occasions, statistical information
that would show the amount/type of trade s ubject to varying treatment under the Agreement.
Similar data has been provided by the partie s to other agreements.  We are not prepared to
complete the factual review of this Agreement – or any other agreements - until satisfactory
trade data has been provided.  We note that while the Parties to the Agreement may consider
the meaning of the term "substantially all trade" to be a topic for the discussion on systemic
issues, the information we have requested has been provided by the parties in reviews of otheragreements.  Please provide the trade data that has been requested.
We welcome the trade statistics provided by the FTA Parties in the Standard Format
Report.  We would be grateful for clarification of what percentage of FTA trade between the
Parties (for each party):
For agricultural products (Chapters 1-24)- will have the duties/regulations eliminated?
- receives concessions (less than MFN but greater than zero duties and/or quotas)
or is excluded from FTA provisions?
For industrial products (Chapters 25-97)- will have the duties/regulations eliminated?WT/REG54/4
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- receives concessions (less than MFN but greater than zero duties and/or quotas)
or is excluded from FTA provisions?
See Annex.
II. TRADE PROVISIONS
1. Import Restrictions
Article 10 (Agriculture):  Is consideration being given to establishing free trade in
agriculture, or to extending existing provisions on agriculture and fisheries to cover moreproducts or to liberalise further (e.g., eliminating duties/quotas on products currently only listed
for concessions or currently exempt)?
The Parties have granted each other preferential market access possibilities under the
agreement for a number of agricultural and processed agricultural products and are determined tocover products that are currently exempt.  Further liberalization of trade is an important component of
the Agreement and will be reviewed within the framework of the Joint Committee meetings, in
accordance with Article 11.2 of Israel-Hungary Agreement.
5. Safeguards
Articles 25, 26, 27 and 29 (General Safeguar ds/Structural Adjustment/Re-export and
Serious Shortage/Safeguard Procedures):  Can the Parties explain whether there is any
difference in practice between the obligations under these Articles and the manner in which
they will operate, and the obligations of the Parties under the WTO?  Can the Parties confirm
that measures applied under these Articles will  be applied in a non-discriminatory manner
without prejudice to the interests of non-parties to this FTA?
Article 26 (Structural Adjustment):  This Article makes provision for exceptional
measures to be taken concerning infant industries, or sectors undergoing restructuring or facing
serious difficulties.  Have any structural adjustment measures been taken, and if so, on what
products?  How is it decided that exceptional measures can be taken?
As already mentioned during the examination of the Free Trade Agreement, this explicitly
provides that a Party taking emergency measures shall exclude from the action imports from the other
Party, unless these are a substantial cause of serious injury or threat thereof.  The aim of this provision
is to eliminate any possible unjustified factor, which may hamper the gradual elimination of tariffduties as well other restrictive measures.  This was done in light of GATT Article XXIV, which
provides for the removal of customs duties and other restrictive regulations of commerce (except,
when necessary, those permitted under Articles XI, XII, X III, XIV, XV and XX).  Therefore, it is the
view of the Parties that this is not inconsistent with Article XXIV.  Other RTAs have also similar
provisions in this regard.
In relation to safeguards measures to protect ne w industries, sectors being restructured or with
serious difficulties, these possible measures are of a limited duration and in any way could be taken
only until the expiration of the transitional period.  No such measures have been applied so far.
Regarding Re-export & Serious Shortage, the Parties wish to refer to the last sentence of
Articles 27 in the Agreement which states as follows:   “The measures shall be non-discriminatory and
be eliminated when conditions no longer justify their maintenance”.WT/REG54/4
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With regard to Safeguards Procedures, the purpose of this Article is to provide for a
consultation process, in accordance with the letter and the spirit of the WTO.
Article 30 (Balance-of-Payments – BOP – Measures):  Will BOP measures under this
Article be applied in a non-discriminatory manner and without prejudice to the interests ofnon-parties to this Agreement?
BOP measures, in case needed, will be applied in non-discriminatory manner in accordance
with the conditions laid down in WTO rules.
7. Subsidies and State-Aid
7.2 State monopolies
Article 17 (State Monopolies):  Which products are currently subject to state
monopolies?  This Article suggests that state monopolies might currently discriminate in their
commercial decisions – can the Parties confir m that such monopolies operate in a manner
consistent with GATT Article XVII in their purchase from and sales to third countries?
The aim of the provision on state monopolies is to stress that any state monopoly of a
commercial character should act in a manner consistent with the principles of non-discrimination.  As
to products subject to state trading and consistency with GATT Article XVII, please refer to theParties’ notifications, which have been notified to the Committee on State Trading Enterprises.WT/REG54/4
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ANNEX
Imports of Hungary from Israel, 1995-1997,
by different duty levels according to the Agreement
1995
Agricultural products Industrial products Total imports Duty
rate 1,000 US$ % 1,000 US$ % 1,000 US$ %
0% 65.7 1.0 40,360.6 100.0 40,426.3 85.2
Less than MFN 4,220.1 59.6 - - 4,220.1 8.9
MFN 2,793.4 39.4 - - 2,793.4 5.9
All 8,079.2  100.0 40,360.6  100.0 48,439.8  100.0
1996
Agricultural products Industrial products Total imports Duty
rate 1,000 US$ % 1,000 US$ % 1,000 US$ %
0% 67.4 1.2 43,754.7 100.0 43,822.1 88.7
Less than MFN 3,610.7 63.9 - - 3,610.7 7.3
MFN 1,971.8 34.9 - - 1,971.8 4.0
All 6,649.9  100.0 43,754.7  100.0 50,404.6  100.0
1997
Agricultural products Industrial products Total imports Duty
rate 1,000 US$ % 1,000 US$ % 1,000 US$ %
0% 19.5 0.4 38,724.7 100.0 38,744.2 87.3
Less than MFN 3,636.1 64.5 - - 3,636.1 8.2
MFN 1,979.5 35.1 - - 1,979.5 4.5
All 6,635.1  100.0 38,724.7  100.0 45,359.8  100.0
Imports of Israel from Hungary, 1995-1997,
by different duty levels according to the Agreement
1995
Agricultural products Industrial products Total imports Duty
rate US$ % US$ % US$ %
0% 9,013,415 84.0 37,466,016 100.0 46,479,431 96.4
Less than MFN 314,093 2.9 - - 314,093 0.7
MFN 1,407,310 13.1 - - 1,407,310 2.9
All 10,734,818  100.0 37,466,016  100.0 48,200,834  100.0
1996
Agricultural products Industrial products Total imports Duty
rate US$ % US$ % US$ %
0% 4,937,457 88.3 6,751,120 100.0 11,688,577 94.7
Less than MFN 75,466 1.3 - - 75,466 0.6
MFN 579,399 10.4 - - 579,399 4.7
All 5,592,322  100.0 6,751,120  100.0 12,343,442  100.0
1997
Agricultural products Industrial products Total imports Duty
rate US$ % US$ % US$ %
0% 3,961,162 78.5 6,851,868 100.0 10,813,030 90.9
Less than MFN 184,523 3.7 - - 184,523 1.6
MFN 902,061 17.8 - - 902,061 7.5
All 5,047,746  100.0 6,851,868  100.0 11,899,614  100.0
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