RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG32/M/1
12 March 1998
(98-0998)
Committee on Regional Trade Agreements
Sixteenth Session
EXAMINATION OF THE INTERIM AGREEMENT BETWEEN SLOVENIA
AND THE EUROPEAN COMMUNITIES
Note on the Meeting of 18 February 1998
Chairman:  Mr. Claude Bouah-Kamon (Côte d'Ivoire)
1. The meeting was convened in WTO/AIR/769.
2. The Committee took up the examination of the Interim Agreement between Slovenia and the
European Communities (EC) under agenda item D.V of its Sixteenth Session.  The examination was
conducted on the basis of the Standard Format for Information on Regional Trade Agreements and
accordingly followed its layout. The following topics were discussed:
A. General Statements
B. Section I Background Information on the Agreement
I.1 Membership and dates of signature, ratification and entry into force
I.3 Coverage
I.4 Trade data
C. Section II Trade Provisions
II.1 Import restrictions
II.3 Rules of origin
II.4 Standards
II.5 Safeguards
II.6 Anti-dumping and countervailing measures
II.7 Subsidies and state-aid
II.8 Sector-specific provisions
A. General Statements
3. The Chairman noted that the Agreement being examined at that day's meeting had succeeded
a Cooperation Agreement between the same Parties, signed in 1993 and notified to the WTO in 1995,
at which time the negotiations for the conclusion of an interim agreement were already taking place.
4. The representative of the European Communities stated that the Agreement had been in force
since 1 January 1997 and that it had been notified slightly before that date.  Although the Standard
Format set out a great deal of information on the Agreement in a detailed manner, he would like to
highlight a number of general points.  First, it was essential to keep in mind the wider context of that
Agreement, which represented an early part of a wider association agreement, in the form of a Europe
Agreement (EA).  That Agreement and the corres ponding EA provided a clear orientation whereby
the accession of Slovenia to the EC was foreseen as the eventual end-point of the integration process.
The significance of the underlying economic and political relationship was important for theWT/REG32/M/1
Page 2
Committee to understand.  The Agreement was a free-trade area (FTA) in the fullest sense of
Article XXIV and was entirely in conformity with that Article.  The Agreement provided for a six-
year transition period, well within the 10 year tim e-frame provided for in the Understanding on the
Interpretation of Article XXIV of the GATT 1994 (the Understanding), and it had comprehensive
coverage, with liberalization of substantially all the trade, no sector being excluded.  That, togetherwith the short transition period, provided a good example of a high standard of conformity.  The
Parties had not provided as extensive trade data as they would have liked, but this was due to the fact
that the Agreement was not old enough.  More information would be provided once statistics covering
entire years would be available.
5. The representative of Slovenia stated that his country attached great importance to the
integration process to enter the European Union (EU), and that the Interim Agreement represented the
first stage of Slovenia's accession to the EU.
B. Background Information on the Agreement
6. The representative of the United States noted that the web of regional trade agreements
(RTAs) had expanded significantly in Europe, and even outside Europe.  Her delegation was always
supportive of the efforts of countries to broaden their trade relations to improve their economies and
the welfare of their peoples.  She was also mindful of the WTO rules which all should follow and theimportance of ensuring that RTAs were supportive of the multilateral trading system.  She had some
doubts on the consistency of some parts of the Agreement, in particular regarding coverage.  She
asked whether the Parties expected any changes in the trade part of the Agreement once the
corresponding EA would have been ratified, and whet her the latter also contained services provisions.
Responding to these questions, the representative of the European Communities stated that there
would be no changes in the trade provisions and that  services provisions included in the EA would be
notified once the EA entered into force.
7. Referring to the Parties' statement that substantially all trade was covered by the Agreement,
the representative of the United States stated that it was not entirely clear what was covered by the
Agreement, and how it was covered.  Some products  which appeared to be covered by the Agreement
were not actually going to be liberalized fully within the transition period, and there appeared to be no
concrete plan to do any more than that.  She hoped that the Parties could provide, as soon as possible,
statistics for 1996 that could show how much trade we nt to duty-free, how much trade was not subject
to any liberalization and how much trade was subject to some other type of concessions.
8. Referring to the Standard Format and the Parties' statement that all sectors were covered, the
representative of Japan noted that textiles products, coal and steel products and processed agricultural
products were dealt with separately in different Protocols.  He wondered whether the Agreement had
any exceptions, and if so, what they were.  He also requested that trade statistics be provided on the
shares of the sectors not covered.
9. The representative of Canada noted that the notification of the Agreement had been made
prior to its entry into force.  He was thankful for the details provided by the Parties in the Standard
Format.  Stating that the information contained in the Standard Format could be improved as regards
the coverage of the Agreement, he said that th e Committee had to look in greater detail at that
question.  In particular, information was needed on how much trade was actually covered by the
Agreement in terms of full liberalization, how much  trade was subject to preferential treatment and
how much trade was not covered by the Agreement.  In addition, in order to have a qualitative
assessment of the coverage, it would be useful to have some information about the coverage in termsof Harmonized System (HS) nomencl ature, which would indicate the extent to which tariff lines wereWT/REG32/M/1
Page 3
covered or a listing of tariff lines covered and not covered, perhaps by Chapter or heading levels.
This would help the Committee in making its assessment on the "substantially all trade" requirement.
10. The representative of New Zealand stated that he shared the points made by the
representatives of United States, Japan and Canada.  He thought that part of the ambiguity regarding
the scope and coverage of the Agreement was due to the fact that paragraph 2 of Section I.2 of
WT/REG32/2 seemed to be linked to the first paragraph of Section I.3.  The joint reading of these
paragraphs could lead some to think that the various sectors referred to in I.3 were in fact subject to
tariff reduction to zero, therefore being considered within the statement made under I.2 on
substantially all trade.  The breakdown proposed by the United States delegation would be helpful in
clarifying the situation.  If there were sectors in which the elimination of duties was not envisaged, he
would like to know how that compared  to Article XXIV:8(b) requirements.
11. The representative of Australia thanked the Parties for having submitted the Standard Format.
Her delegation was also seeking clarification on the meaning of the fact that some sectors were dealt
with differently, in terms of scope and coverage.  She was also interested in getting more statistics, in
particular the proportion of the trade between the Parties that was currently duty-free or which would
become duty-free by the time of the full implementation of the FTA and the proportion of trade that
was free of tariff quotas or quantitative restrictions or which would become free of these by the timeof the full implementation of the FTA.
12. Responding to the questions posed, the representative of the European Communities said that
some of the replies could be found on page 1 of the Standard Format.  With respect to the coverage,
he said that Section I.3, where it was stated that all sectors were covered, went on to explain how
some of these sectors were covered in more detail.  That was entirely consistent with Section I.2,which referred to the fact that all sectors, that is HS Chapters 1-97, were covered by the Agreement.
That made it clear that all sectors were covered by the Agreement.  Indeed, a number of Protocols,
which formed part of the Agreement, dealt with particular products in more detail.  Even if the
Protocols were separate from the Agreement, which was not the case, the distinction between FTAs
and free trade agreements, already discussed in the Committee, would enable the Parties to make thesame point.  As for the liberalization, substantially all the trade was liberalized to zero, while trade in
a few other products was not.  That was consistent with virtually every Agreement considered by the
Committee.  His delegation as others, had always argued that the requirements of Article XXIV:8(b),
in the case of an FTA, required the liberalization to  cover substantially all the trade, which was not the
same as all the trade.  The Agreement was thus in full conformity with Article XXIV, including
Article XXIV:8(b).  As said at the outset, more statistics would be provided.  He took note of the
United States' suggestion that these could be provided for a year before the Agreement was in force,and of the requested breakdown.  As for the points made by Australia, he noted that quantitative
restrictions had been abolished in trade between the Parties and said that he had taken note of the
request made concerning tariff-quotas.  In terms of both coverage and liberalization, the Agreement
was an excellent example and was the fruit of a learning process within the whole range of the EC's
EAs and free trade agreements.
13. The representative of the United States stated that it was difficult to appreciate whether
substantially all the trade was covered in the absen ce of the requested statistics.  Referring to the
remark that the Agreement was the fruit of a learning process, she noted that while this Agreement's
form was different from similar EC agreements, its substance in terms of what was formally part of
the Agreement's framework, was the same. She saw no evidence in Article XXIV that allowed forpreferences short of going to zero, and she invited th e Parties to the Agreement to react to this.  She
requested additional information on the agreement on wine and spirits being negotiated between the
Parties.  Noting that it might be a systemic question, she hoped that the Parties could provide statistics
showing the portion of each Party's external trade which was conducted with preferential partners.WT/REG32/M/1
Page 4
14. The representative of Canada stated that the Committee had to assess what the coverage of the
Agreement was, which, in terms of Article XXIV:8, had to mean the elimination of duties and other
restrictive regulations of commerce in intra-trade.  However, it was quite clear that, at least for
HS Chapters 1-24, there was no mention of the elimination of duties and charges and, while
quantitative restrictions were mentioned, they were treated separately.  He wanted to assess morespecifically the nature of that treatment, and he jo ined the United States delegation in its request for
information on  what sort of preferential treatment was granted, which tariff lines it applied to and
how that could be justified under Article XXIV:8.  As for the statistics, while data relating to the
period following the entry into force of the Agreement would be useful in assessing whether there had
been any changes in the trade pattern, other years would suffice for the coverage assessment.  That
had been the typical approach used in the examination of other agreements.  A broader assessment of
the trade impact of the liberali zation would come only with time.
15. The representative of Hungary thanked the Parties for the material provided, including the
statistics.  His delegation was of the view that, since no sector was left out, it was irrelevant whether
some sectors were treated in the Agreement itself, or in Protocols, Annexes or separate agreements.  It
was his delegation's firm view that nowhere in Article XXIV:8(b) was it in any way forbidden to grant
preferential treatment to certain products at a level less than the m.f.n. rate but more than zero.Article XXIV:8(b) talked about elimination of duties on substantially all the trade, and if there were
some duties which were decreased but not to zero, it did not mean that that was not in compliance
with Article XXIV:8(b).
16. Responding to the comments made, the representative of the European Communities said that
the reply on the prospective agreement on wine and spirits would be provided subsequently, in written
form and in greater detail.  As for statistics, he said that it was possible to draw some limited and
preliminary, but fairly useful, conclusions from table 2 of the Standard Format, which showed the
proportion of agricultural trade duty-free which wo uld support the basic claim about reduction to zero
of tariffs on substantially all the trade.  Regarding the question on whether preferences within a free
trade agreement short of full elimination could be justified or not, it was important to define the scopeof the question.  He would argue that that question could arise only with respect to Article XXIV:8
and not with respect to the obligations under Article XXIV:5.  His delegation had consistently argued
for decades that it was perfectly possible to form a free trade agreement consistent with
Article XXIV:8(b) with preferences contained within the agreement short of elimination.  He would
go so far as to suggest that that amounted to a sort of consistent subsequent practice within the
broader rules of interpretation on international law, which would support the argument made.  It was
important to separate two important points:  first,  the examined Agreement aimed at reduction to zero
of tariffs on substantially all trade between the Parties, so although interesting, the question did not
necessarily apply to that case.  So far as this question in general was concerned, his delegation's view
was different from that of others, and the Committee should address that point in a different context,
as that had been a consistent practice not only by the EC but also by many other Members of the
Committee.
17. Noting the creative reply made, the representative of the United States said that she could not
agree with it.  Her understanding of the statement made by the representative of the EC was that the
issue of preferences between zero and the m.f.n. rate was not relevant to the test of whether the
Agreement eliminated duties and other regulations of commerce on substantially all  trade, and she
could agree that that was a separate question.  Her understanding of what was said was that this wasnot an Article XXIV issue, but rather an Article I violation.
18. The representative of the European Communities denied having said that.  He was grateful for
the United States' admission that the Agreement did indeed appear to reduce to zero tariffs on
substantially all trade.  He did not admit anything else, except to make the general statement that, so
far as the provision of preferences within a free trade agreement short of full elimination wasWT/REG32/M/1
Page 5
concerned, there was a body of consistent subsequent practice within the WTO embracing Members
well beyond the EC and its partners, which suggested that their interpretation was a reasonable one
shared by at least a broad, if not a general, community of opinion.  That would give them a good deal
of comfort in responding to that question now and in any subsequent systemic debate.
19. The representative of the United States said that she had not said that substantially all trade
was covered by the Agreement.  That question remained to be resolved.  While she found interesting
the comment on the accepted body of opinion, she noted that in the WTO tariff preferences they were
either given through a waiver or through cer tain provisions of the Enabling Clause.
20. Though acknowledging that it might not be an easy task, the representative of Japan requested
that the Parties provide statistics or views on the trade-creation effects of the Agreement.  The
representative of Australia also asked whether any studies had been made on the trade-creation/trade-
diversion effects of the Agreement.  Responding to these questions, the representative of the
European Communities said that such studies did not exist.  Trade creation/trade diversion did not
provide a legitimate basis for judging whether the Agreement was in conformity with the provisionsof Article XXIV.  Further, it was extremely difficult to undertake such an exercise on a useful basis,
because it would involve in effect knowing how the world would have looked like without the
Agreement.  While the economic consequences of an agreement were interesting from a policy pointof view, they were not relevant for the question of conformity.  The representative of Japan said his
delegation considered Article XXIV:4 a discipline, and it was in that context that such informationwas being requested.
21. The representative of the European Communities said that his delegation's view on
Article XXIV:4 was well known.  That provision did not support arguments based on an obligation to
create trade, which suggested some sort of commanded trade.  The key word in the discussion was
"facilitate", which could only mean allow or permit, rather than mandate, arrange or ensure.  It was
wrong to seek to read into Article XXIV:4 what would amount to a retrospective test of  the economic
consequences of agreements, particularly when it was impossible to know what the world would have
looked like if they did not exist.  His delegation co ntinued to be of the view that the purpose of trade
policy in general should be a positive and wealth creating one, but the Committee was engaged in the
examination of the Agreement vis-à-vis  the rules as they stood.  While he thought all Members shared
the wider policy objective, he did not think that it was right to inject the broader economic and indeed
almost social policy objective of wealth-creating effects into what was simply a negotiated framework
of rules, rights and obligations.  That remained a profoundly unsatisfactory way to seek to conduct the
examination process.  The representative of Japan said that, while he knew that the EC and most of
the countries it had agreements with did not have a command economy, consumers inside RTAs were
affected by the framework, in the sense that it would become easier and less expensive to buy
products from inside the area.
22. The Chairman noted that the representative of the EC promised to reply in writing to some of
the questions posed.
C. Trade Provisions
23. The representative of the United States requested the Parties to provide a brief description of
the concessions that had been exchanged on agricultural products, which were contained in
Annexes VI and VII.  She had also noted that quantitative restrictions and "measures having
equivalent effect" had been abolished, and she wondered what were the latter.  The representative of
Canada requested the Parties to provide an indication of what the exceptions listed in Annex I were.
Regarding consistency with Article XXIV:5(b), the representative of Japan asked whether the Parties
had increased duties or other regulations of commerce vis-à-vis  third countries and whether theyWT/REG32/M/1
Page 6
would do that in the future.  Referring to the provisions on agricultural products in Article 15 and
Annex VI of the Agreement, the representative of  New Zealand asked whet her Annex VI contained
tariff reductions.
24. The representative of the European Communities said that replies to questions concerning
agricultural products could be found in Section II.8( c) of the Standard Format.  The question posed by
Canada appeared to concern a classification exercise, which included a small number of industrial
products, particularly albumins.  He would verify this and reply if this was not the case.  He requested
the representative of New Zealand to clarify his question.  In reply to the question posed by the
representative of Japan, he said that for the EC that Agreement did not require any increase in duties.
The representative of Slovenia said that his country had not increased any duty.
25. The representative of New Zealand said that the question which referred to agricultural
products and any other products where there appeared to be no intention to eliminate duties concernedwhether there would be progressive liberalization short of complete elimination of duties.  In essence,
he wanted to know whether the regimes established in agriculture and some other areas would change
as the Agreement progressed.  The representative of the European Communities replied that
paragraph 5 of Article 15 provided a narrow answer to that question.  However, he recalled thebroader political context of the relationship between the Parties, with the eventual accession ofSlovenia to the EC by definition involving the complete liberalization of agricultural trade.
26. The representative of the United States said that Section II.8 indicated that the EC had opened
tariff-rate quotas for Slovenia which entailed tariff reductions from the m.f.n. rate. She wanted to
know whether that scheme applied to items in which the EC had tariffs only and, if not, how that
would apply to items where they had minimum or current access levels.  The representative of theEuropean Communities said that his delegation would reply to that question in writing.
27. The representative of the United States requested that additional information concerning the
cumulation of rules of origin be provided by the Pa rties.  As for the reference made in the Standard
Format to the European Economic Area, she noted that this Agreement had neither been notified nor
reviewed.  More information on it could be give n in the biennial report of the EC or in the
examination of other agreements if any issue arose.
28. The representative of Japan requested that more information, in a summary form for the
Committee and in more detail for other fora, be provided on the rules of origin.  If before the
formation of the FTA there had been a drawback rule, he would like to have more details on the prior
drawback system in order to assess whether the Parties had raised barriers with respect to rules of
origin.  As regards the European Economic Area, the representative of the European Communities
stated that all its notification obligations had been discharged.  As for the request by the Japanese
delegation, he proposed that the delegation wait until the general information on cumulation was
circulated and, if doubts remained, the Committee could revert to that question in a more global way.
The representative of Japan accepted that suggestion.
29. The representative of the United States asked whether the EA would require Slovenia to adopt
a number of the EC's regulations.  She could think of a case recently litigated where certain sanitaryand phytosanitary measures maintained by the Community were found inconsistent with WTO
obligations. The representative of the European  Communities said that the EA contained a
longer-term obligation for harmonization of legislati on as part of the wider accession process, but he
would not speculate with respect to its timing and content.  Such process did not provide for the
adoption of any particular measures in any particular time-frame.
30. The representative of Japan said that his understanding was that there were different types of
safeguard measures for trade among the Parties, and that the conditions attached to these also differedWT/REG32/M/1
Page 7
from conditions for imposing safeguard measures against third countries.  Stressing his view that
safeguard measures should be applied in a non-discriminatory manner, to Parties and non-Parties
alike, he asked the reasons for those differences to be explained. The representative of the
United States said that Section II:5(b) discussed the generic safeguard, while Section II:5(f) referred
to something seemingly different for agriculture, pe rhaps with a lower floor to invoke measures.  She
wondered whether the Parties could explain what the differences between the measures in 5(b)
and 5(f) were and how the processes might work.
31. The representative of the European Communities stated that he did not necessarily accept the
Japanese assumption that safeguard measures had to be applied in a non-discriminatory way.  The
Committee had had long debates on the fact that Arti cle XIX was not referred to in Article XXIV:8.
The safeguard mechanism was a bilateral arrangement among the Parties, clearly not affecting either
Party's operation of other safeguard arrangements under the relevant WTO rules.  There was aseparate arrangement for Slovenia on infant-industries, as well as a sector-specific provision relating
to agricultural markets when the importation of a product which was subject to concessions under the
Agreement gave rise to serious disturbances.  The broader context for those differences was the fact
that the Agreement dealt separately, in terms of  how it handled liberalization, with industrial and
agricultural products.  The general point to bear in mind was that these were clearly bilateralsafeguard arrangements in the framework of the Agreement, and that they were not adverse to the
interests of other WTO Members.
32. The representative of Japan said that his question was not of a systemic nature, but rather
factual.  The wording of the provisions was not clea r.  He sensed a difference of treatment, and he was
looking for a factual reply.  The representative of the European Communities reiterated that the
variations from the general m.f.n. safeguard were Slovenia's infant-industries provision and the
separate agricultural safeguards, which dealt with circumstances where products subject to
concessions under the Agreement caused serious disturbances, and the fact that the Party concerned
could take measures pending a solution.  However, these differences did not adversely affect third
parties.
33. The representative of the United States asked what was meant by the statement in
Section II.6(c) that a clear preference was given to price undertakings.  The representative of Japan
sought confirmation from the Parties that they would not automatically apply the anti-dumping
measures taken by the other Party.  Responding to these questions, the representative of the European
Communities said that the Parties favoured the use of price undertakings to resolve dumping
problems.  Noting that the Japanese question referred rather to customs unions, he stressed that the
Communities operated its anti-dumping regime in entire conformity with its obligations.  Therepresentative of Slovenia  said that his country's Office for the Protection of Competition did not
contemplate taking any automatic action based on what was done by the EC.
34. Noting that agriculture and fisheries were exempted from the Agreement's provisions on
subsidies and state-aid, the representative of the United States  wondered whether there were no rules
for those sectors or whether they were subject to other rules.  She further developed the question by
noting that throughout the Agreement everything  concerning agriculture was special and that
exceptions were provided to fisheries.  She ar gued that, in the context of Article XXIV, the
Committee was trying to make an assessment of what was covered by the Agreement, what the rules
were, and what measures applied to what sectors;  in that context, the treatment of agriculture
remained unclear.
35. The representative of the European Communities stated that the question was not directly
relating to Article XXIV, and that the information provided was sufficient.  It was important to recall
the wider context of this Agreement.  Against that background, he was reluctant to provide more
information unless a particular point relating to Article XXIV needed to be explored in greater detail.WT/REG32/M/1
Page 8
The representative of the United States said that she wanted simply to know whether there existed
other rules for agriculture which were not contained in the Agreement.  It seemed to her that there
were, and she would like to have a response.  The representative of the European Communities said
that the Standard Format provided the reply, although in an opposite way.  The restrictions on publicaid were those which were set out.  Otherwise, each Party conformed with its wider obligations.  Therepresentative of the United States requested confirmation that there were special rules for the
industrial sector but that for the other sectors there were basically international obligations.  Therepresentative of the European Communities confirmed this understanding.
36. The representative of the United States asked whether there was a terminal date for the
reduction of Slovenia's customs duties on textiles, contained in Annex IIa and IIb.  She requested that
some information be given on the content of the Additional Protocol dealing with textiles.  Her
delegation had shown consistently in previous examinations of association agreements strongconcerns with preferential trade regimes applied in agriculture.  She wondered how this regime
applied as from 1998, as the Standard Format referred only to measures up to 1997.  She also
requested that an explanation be given on how the gr anting of tariff quotas for fisheries worked.  The
representative of the European Communities said that Slovenia's terminal date was 2001.  He noted
that the Annexes and Protocols to the Agreement, which had been made available, would reply to
some of the United States' questions.  The replies to the question concerning agriculture would be
provided in written form.
37. Responding to a question posed by the representative of Japan, a representative of the
Secretariat stated that copies of the Annexes and Protocols were available from the Development
Division.  Following a suggestion made by the representative of Japan that these be summarized by
the Parties or the Secretariat, the Chairman stated that these documents were too big to be summarized
and the representative of the European Communities stated that the Standard Format did provide such
a summary.
38. The Chairman concluded the meeting by requesting Members of the Committee to submit
outstanding written questions by the end of February, so as to allow the Parties to the Agreement to
provide written replies by the end of March.  A subsequent examination meeting would be held
in May.
__________