RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG11/M/3
WT/REG33/M/3WT/REG41/M/3
WT/REG42/M/3
16 June 1998
(98-2438)
Committee on Regional Trade Agreements
Seventeenth Session
EXAMINATION OF THE CENTRAL EUROPEAN FREE TRADE AGREEMENT
(THE CZECH REPUBLIC, HUNGARY, POLAND, ROMANIA, THE SLOVAK REPUBLIC
AND SLOVENIA) AND THE FREE TRADE AGREEMENTS BETWEEN THE
CZECH REPUBLIC AND BULGARIA, THE SLOVAK REPUBLIC AND BULGARIA,
AND SLOVENIA AND BULGARIA
Note on the Meeting of 7 May 1998
Chairman:  Mr. Jean-Marie Noirfalisse (Belgium)
1. The Committee on Regional Trade Agreements (CRTA) took up items C.VII-X of the
Agenda for its Seventeenth Session, as found in Airgram WTO/AIR/831.  Discussions were organized
as follows:
A. General Statements
B. Section I Background Information on the Agreement
I.3 Scope
I.4 Trade data
C. Section II Trade Provisions
II.3 Rules of originII.5 Safeguards
A. General Statements
2. The Chairman proposed that the Committee examine the Central European Free Trade
Agreement (CEFTA) together with the related Fr ee Trade Agreements between the Czech Republic
and Bulgaria, the Slovak Republic and Bulgaria, and Slovenia and Bulgaria, given their similar
structure.  He requested that Members indicate in their interventions whether their comments related
to a specific agreement or to all four.  He reminded the Committee that this was the third round ofexamination of these four Agreements.  Summary records of the second round of examination, held
during the Committee's Sixteenth Session in February, had been distributed as documents
WT/REG11/M/2,  WT/REG 33/M/2, WT/REG41/M/2 and WT/REG42/M /2 respectively.  At the last
meeting there had been a number of outstanding questions which Members had submitted in writing
and to which the Parties had since responded.  These questions and replies were to be found indocuments WT/REG11/9/Add.1 for the CEFTA Ag reement and in documents WT/REG33/4/Add.1,
WT/REG41/4/Add.1 and WT/R EG42/4/Add.1 for Bulgaria's three bilateral agreements.  He suggested
that the Committee use these documents to guide the day's debate.  He drew the Committee's attention
to the additional statistical data which had been made available by the CEFTA Parties immediately
prior to the meeting.WT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 2
3. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties,
expressed his appreciation for the degree of interest displayed by Members in the course of the
CEFTA examination.  This was the third round of ex amination of this Agreement and he hoped that it
would be the last.  Although the CEFTA had been si gned prior to the formation of the WTO, it had
been implemented in a WTO-consistent manner and it was the Parties' view that their Agreement was
in conformity with GATT Article XXIV. He asked Members to bear in mind that the CEFTA Parties
had repeatedly demonstrated their interest in bringing the examination to a successful conclusion.
They had made an effort to provide Members with comprehensive and consolidated information,
including the Standard Format, to which they had attached statistics demonstrating the positive impact
of the CEFTA Agreement.  Further statistical data had been provided.  The Parties had responded
with close attention to the questions raised by CRTA Members, although in some instances, they wereof the view that the questions went beyond what was required in a conformity test under
Article XXIV of the GATT 1994 and/or fell under the discussion of systemic issues.  With
transparency in mind, however, the Parties had tried to explain and to provide evidence that the
CEFTA Agreement did not raise obstacles to thir d countries.  The CEFTA Parties were ready to
contribute fully to the day's meeting.  They had provided additional figures split into three separate
categories: imports under zero tariffs, imports under less than MFN rates, and imports under MFN
rates.
B. Background Information on the Agreement
4. The representative of the United States said that, while he appreciated the efforts made by the
Parties to provide Members with detailed trade stat istics, this information was not yet complete.  In
particular, his delegation's question on trade statistics, which it considered the most important, had
only been circulated immediately prior to the meetin g.  Statistics for Poland had not been included in
the replies and certain other questions had not been answered.  He did not want to imply that the
Parties had tried to avoid answering factual questions, but to make reference to the debate on systemic
issues in this context was not an appropriate way to proceed.  His delegation's request was legitimate
and the requested information was comparable to the kind of data provided in the examination of the
North American Free Trade Agreement (NAFTA).  He suggested that the best way to proceed might
be to postpone the examination until Members had been given complete answers to the questions
already raised.  He welcomed the statement just made by the CEFTA representative that the Partieswere willing to provide further figures on trade statistics, but he thought it would be better use of the
Committee's time to proceed once that information had been made available.
5. The representative of Canada said that his delegation shared some of the concerns just made
by the United States representative.  During the Committee's last Session in February, the Chairman
had asked that Members submit their written questions promptly and his delegation had done so.  The
replies had been received by Members about ten days before the meeting; more precise information,
which was at the heart of trade statistics, had just been received that morning.  While appreciative of
the effort made by the Parties to submit these data, the late submission had not given Members
sufficient time to study them.  His delegation had submitted two written questions, the second ofwhich did not appear in the document.  He had asked the CEFTA Parties to provide an estimate of the
proportion of tariff lines in the Parties' national tariffs which would be subject to full elimination of
duties under the Agreement; they had not responded to this question.  Some of the replies were still at
a fairly general level and his delegation had hoped that, in a second or third examination round, the
information provided would go beyond generalities.  For example, the reply given on rules of originstated that rules of origin were an instrument designed to establish whether a product qualified for
preferential treatment.  This did not provide the detailed information requested.  What was required
was a detailed indication of what the rules of origin were, how they were applied and whatWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 3
methodology was used.  He asked the Chairman for guidance as to the best way to proceed with the
examination.
6. The Chairman said that his ambition was that the Committee move forward and not stagnate
in its work.  He did not want to lose momentum.  There were some outstanding issues; statistics was
key, and the rules of origin, referred to by the Canadian representative, had to be addressed.  He
suggested that Members continue with their review of the replies submitted by the Parties and identify
where additional information was required.
7. The representative of Australia said that her delegation shared many of the views expressed
by other delegations.  While grateful for the information provided, particularly the most recent
statistics, her capital would need time to analyse them.  She did not think it realistic to consider
concluding the examination in today's meeting.
8. The representative of Japan said his delegation shared the concerns already raised by others.
His delegation had submitted written questions within the deadline, but the quality of the answers
provided by the Parties was not sufficient.  For example, the question on trade statistics, including
trade creation effects, had not been answered appropr iately and the answer to the question on rules of
origin was only six lines.  His delegation was interested in the content of the new rules of origin cited
by the Parties in their reply, at least in summary form.  Likewise, the answer to the questions on
general safeguards was only two lines.  Given the extent of the information still to be provided, he didnot think it likely that the examination could be completed in today's meeting.
9. The representative of New Zealand shared the concerns already expressed about the need for
additional information.  The information provided ju st prior to the day's meeting was more detailed
than that provided on page two of the replies, but it still did not address the degree of detail (i.e. abreakdown of agricultural trade) that had been envisaged in the questions.  His delegation shared the
view that the Parties would have to provide further details.  The spokesman for CEFTA had indicated
that further information might be available soon and it would be useful if he would indicate when this
might be and what it might entail.
10. The representative of the European Communities said that his delegation had hoped that the
Committee was near the end of its process of collecting information on these Agreements, but from
the comments made thus far it was clear that this hope was misplaced.
11. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, said that
the Parties had made considerable efforts to provide statistics in the annexes and protocols.  As far as
the work order was concerned, the Parties welcomed the Chairman's proposal to discuss the repliespoint-by-point.
12. The representative of Poland apologized to the Committee for not submitting statistical data,
which was due to technical reasons.  He stressed that his delegation would provide the Committee
with the data as soon as possible.
13. The Chairman suggested that the Committee continue with the examination and proceed point
by point, given that the CEFTA Parties had said they could give further information during the course
of the meeting.
14. The representative of United States replied that his delegation's questions would be the same
as those which remained outstanding from the previous round of examination and he asked if he
should reiterate these questions or whether they would be automatically reflected in the minutes.  In
response to the Polish representative's comment, he  said he was appreciative of the technical problemsWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 4
involved in producing the information requested and it had not been his intention to single out Poland
with respect to the provision of information.
15. The Chairman said that Members should reiterate those questions to which they had not yet
received a satisfactory response.  Replying to a question by the representative of Japan on whether
there would be another meeting to deal with the CEFTA at the next Session of the Committee, the
Chairman said that this could not be pre-judged.
16. The representative of the United States said that he was working under the assumption that
there would be another round of examination, given that a number of delegations had alreadyindicated that the information provided by the Parties was not yet sufficient to complete the factualpart of the examination.  His delegation expected the Parties to provide further information, most of it
in written form.  It was his view that it woul d be impossible for this to be the last round of
examination and he suggested that the next meeting take place after the Parties had supplied written
responses to outstanding questions.
17. The representative of the Czech Republic, speaking of behalf of the CEFTA Parties, reiterated
the Parties' view that the Agreement was in full conformity with GATT Article XXIV.  The Parties
had provided further information in addition to the statistics in the Standard Format, as a gesture of
goodwill.  Some delegations had requested a breakdown of agricultural and industrial products and,
while Parties were willing to provide this as an additional transparency element, they considered it
extraneous information.  Each CEFTA Party would provide the Committee with the information it
considered relevant for further discussion.  He emphasised that it was the Parties' view that
Article XXIV:8 covered concessions in the form of zero tariffs and those at less than MFN rates.  As
far as the Czech Republic was concerned, taking into account the trade in 1997, the value of imports
of industrial goods from CEFTA Parties was US$3 ,335 million, of which 99.35 per cent was at zero
import duties. Imports of industrial goods at reduced duties, i.e. less than the MFN rate but greater
than zero, accounted for 0.65 per cent.  There was no item which was not subject to concessions.  As
far as agricultural products were concerned, total imports from CEFTA Parties were US$310 million
in 1997, of which 65.58 per cent was at zero import duty, 30.39 per cent was at less than MFN but
greater than zero, and 4.03 per cent was without concessions.  Based on this additional information, it
was the CEFTA Parties' view that the Agreement was in conformity with Article XXIV.  The
representative of Hungary said that for the sake of  transparency he would provide certain additional
figures.  Of the total imports from CEFTA countries, 98.2 per cent was at preferential rates, which
included zero import duties and reduced duties.  One hundred per cent of industrial products and
71 per cent of agricultural products were covered by preferential trade.  The representative of the
Slovak Republic said that total imports in 1997 from CEFTA countries were US$2.967 billion.
Imports at zero import duties were US$542 million which represented 91 per cent of trade with
CEFTA countries, once the trade with the Czech Republic was taken into account. One hundred per
cent of trade with the Czech Republic was at zero import duties.  Imports at reduced import duties
were US$34.7 million or 5.8 per cent.  Imports not subject to concessions were US$17.3 million
which represented 2.9 per cent of trade with CEFTA Parties.  The representative of Romania said that
total Romanian imports from CEFTA Parties were relatively lower than those of other partners.  In
1997 total imports from CEFTA Parties were US$641 million of which more than 95 per cent was at
preferential rates, if industrial and agricultural products were taken as a whole.  His delegation would
provide a breakdown of industrial and agricultural goods, even though, strictly speaking, this was not
necessary pursuant to Article XXIV.  Imports of industrial products represented 86 per cent of total
imports from CEFTA Parties in 1997, of which 99.81 per cent was covered by preferences.  As hisCEFTA partners had already pointed out, preferences were taken to mean those at zero import duties
and at reduced duties.  As regards agricultural imports, total imports from CEFTA Parties were
US$89.8 million or 14 per cent of trade.  Of this, 70.4 per cent was at preferential rates.  The
representative of Slovenia said that in 1997 the total value of Slovenian imports from CEFTA partnersWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 5
was US$688 million, of which US$567 million were industrial products representing 83 per cent of
total imports.  Of these, 99.8 per cent was at a zero import level and by 1 January 2001, 100 per cent
would be at zero.  Imports of agricultural produc ts were US$120 million or 17 per cent of total
imports.  Of these, 62 per cent was at preferential rates.
18. The representative of Bulgaria stressed that his delegation's view on the systemic matter of
"substantially all the trade" was the same as that of the CEFTA Parties.  He was however ready to
give a breakdown of agricultural and industrial imports for the three relevant FTAs.  As regards the
Bulgaria-Czech Republic FTA, the share of imports of industrial goods excepted from zero import
duty treatment was insignificant at 0.06 per cent.  Of imports of agricultural products, 46.71 per cent
was currently subject to better than MFN treatmen t but less than full elimination of tariffs.  This
represented 1.72 per cent of total imports from the Czech Republic.  For the Bulgaria-Slovak Republic
FTA, only 0.3 per cent of industrial products was not subject to duty-free rates, and for agricultural
products 51.26 per cent was subject to better than MFN treatment but less than full elimination of
tariffs which, however, was only 3.38 per cent of total imports from the Slovak Republic.  As regards
the Bulgaria-Slovenia FTA, all imports of industrial products from Slovenia qualified for duty-freetreatment.  Of agricultural goods, 8.55 per cent was subject to better than MFN treatment but less than
full elimination of tariffs; this represented 0.24 per cent of total imports.  It was his delegation's view
that these figures confirmed that the Agreements conformed with Article XXIV:8.  The representative
of the Czech Republic said he wanted to complete the picture as regards the Bulgaria-Czech Republic
FTA.  The total value of Czech imports of industrial goods from Bulgaria was US$19.9 million of
which 100 per cent was at zero import duty.  In agricultural products, the value of imports was
US$2.1 million of which 33.34 per cent was at zero tariff duty, 61.9 per cent at reduced import duties
and 4.76 per cent was not subject to concessions.  The representative of the Slovak Republic said that
as far as the Bulgaria-Slovak Republic FTA was concerned, total imports in 1997 from Bulgaria wereUS$7.4 million of which industrial products at zero import duties accounted for US$6.4 million, andimports of agricultural products at zero import duties were US$0.068 million.  The total value of
imports from Bulgaria at zero import duties wa s US$6.4 million, which represented 86.45 per cent of
trade.
19. In reference to the comments made by delegations on the length of replies provided by the
Parties, the representative of Czech Republic, speaking on behalf of the CEFTA Parties, said that
quality should not be measured against quantity.  As regards the trade creation effects mentioned by
the representatives of New Zealand and Japan, the CEFTA Parties were of the view that they had
provided the Committee with an avalanche of statistical information which had exhausted this matter.
20. The Chairman said that while the CEFTA Parties' presentation had demonstrated an attempt
to provide information and answer questions, it was difficult to listen to the enumeration of statistics.
In order to simplify the Committee's work, it would help if Members could be as comprehensive as
possible from scratch.  He suggested that the Parties provide the statistics in writing so that the
Secretariat could integrate them in the statistics already provided by the Parties that morning.
21. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, said that
while the Parties were all in favour of the simplification of procedures, they were reluctant to go
beyond the standard.  They were of the view that the statistics provided orally should be fully
reflected in the minutes of the meeting, but went beyond the framework of what was required.
22. The representative of Australia thanked the CEFTA Parties and Bulgaria for the information
provided.  She had mentioned earlier that her capital would need to reflect on these figures, partly
because her delegation had a different view as to the kind of duties which were included under the
definition of elimination of duties.  Article XXIV:5(c) and the Understanding on the Interpretation of
Article XXIV of the GATT 1994 stated that an interim agreement should include a plan and scheduleWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 6
for the formation of an FTA within a reasonable period of time not to exceed ten years, except in
exceptional cases which required a full explanation.   Article XXIV:8(b) stated that a free-trade area
should be understood to mean a grouping in which duties and other restrictive regulations of
commerce had been eliminated on "substantially all the trade" between the parties.  In the absence of aplan or schedule which stated that the ultimate goal of the Parties was to eliminate barriers to zero, her
delegation would conclude that this was not the intention.  Only the proportion of trade for which
barriers had been eliminated could be considered part of "substantially all the trade".  If, for example,
50 per cent of duties in a free-trade area were eliminated and another 25 per cent were reduced, but
with no stated intention that the reduced duties would be eliminated, only 50 per cent would be
considered relevant in terms of the requirement of elimination of duties on "substantially all the
trade".
23. The representative of Canada made a general observation in response to the comments made
by the CEFTA Parties.  If he had understood them correctly, they had suggested that the
substantially-all-the-trade requirement was a simple numerical or arithmetical matter.  But both the
CRTA's past record of activity and the GATT working parties' reports had clearly showed that therewas not yet an agreed interpretation of the meaning of "substantially all the trade" and, in particular, it
was well recognised that it might not necessarily be limited to a numerical exercise.  The qualitative
assessment was also important.  His delegation would have great difficulty accepting the inference
that the test of "substantially all the trade" was automatically satisfied because the Parties had arrived
at a certain number.  This had never been the case in the past and it was his delegation's view that theCommittee was not in a position to agree that a simple numerical estimate provided sufficient
interpretation to the term "substantially all the trade".  His second point was in reference to the Parties'
view that the information already provided was su fficient to assess compliance with Article XXIV.
This was quite the opposite of what was stated in Article XXIV:7, which contained an explicit
obligation on the Parties to submit information that Members deemed necessary to make anassessment.  It was up to the questioning Member to assess whether the replies were satisfactory, not
for the Parties to assess the validity of the questions.  With these introductory comments made, he
thanked the Parties for the information provided and ur ged them to put it in a written form so that it
could be communicated in an accurate manner to capitals.  This would facilitate the Committee's
work.  He had noted a difference in the degree of detail provided by the CEFTA Parties and while the
information provided by the representative of the Czech Republic was detailed in the exact manner
suggested in the question submitted to the Parties, the same degree of detail had not been followed byall others.  He encouraged all CEFTA Parties to submit their data in the same manner as that of the
representative of the Czech Republic, i.e. a breakdown between industrial and agricultural products,
showing total imports subject to zero tariffs, tota l imports subject to reduced import duties, and total
imports not covered by any reduction in the MFN rate.  Had this information been provided by the
CEFTA Parties prior to the day's meeting, the Committee would have gone a long way in moving thisexamination forward.
24. The representative of the United States supported the observations made by the Australian
representative on Article XXIV:8(b) provisions dealing with the elimination of duties.  The only
reasonable interpretation was that elimination meant zero import duties, i.e. no duties whatsoever.  Hecommended the representative of the Czech Repu blic, not only for providing the information
requested in this context, but for presenting it in an understandable form.  The information provided
by the representative of the Slovak Republic had not been quite so clear and he urged the Parties to
present the information in writing.  He agreed wi th the comment made by the Canadian representative
regarding the qualitative aspect of "substantially all the trade" as this was related to the question onthe breakdown of agricultural products.  When both the qualitative and quantitative aspects of
"substantially all the trade" were looked at, the tariff line question came into consideration and he
asked the CEFTA Parties to supplement the written table with an additional column in which the
number of tariff lines for both agricultural and industrial products were stated separately in terms ofWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 7
those at zero import duties, at less than MFN rates but greater than zero, and at MFN rates.  He was
impressed with the duty elimination in all countrie s with respect to industrial goods and this would
clearly narrow the focus of his delegation's subseque nt questions to agricultural goods.  It would be
necessary for Members to examine the information once it was made available and follow up withfurther questions.  Had this information been provided along with the statistics prior to the beginning
of the meeting, this might have reduced the need for some unnecessary rhetoric.
25. The representative of Japan said he appreciated the information provided by the
CEFTA Parties.  In the documentation the Parties ha d stated their view that the examination of the
trade creation effects of free trade agreements did not belong under the conformity test of
Article XIV:5(b).  He wanted to register his delegation's viewpoint that trade creation effects wererelevant.  Article XXIV:7(a) stated that Parties should make information regarding the proposed area
available and Article XXIV:4 stated that the purpose of the free-trade area was to facilitate trade
between Parties and not raise barriers to the trade of third countries.  So, in the light of
Articles XXIV:4 and XXIV:7(a) his delegation considered that trade creation effects were relevant
and appropriate information to be provided to the CR TA.  He disagreed with the Parties' view that the
provision of this information was not an obligation.  He supported the previous speaker's view that the
substantially-all-the-trade test was important.  Finally, he requested statistics on the specific items not
covered by the Agreement.
26. The representative of New Zealand said that like others, he appreciated the information
provided by the CEFTA Parties and thought it would be useful to have this presented in a consistent
format.  In this regard, it was useful to underline the point made by the representatives of Australia
and the United States that the elimination of tariffs had to be the focus, given the clear requirement of
Article XXIV:8(b) to eliminate tariffs.  He said th at the issue here was the format of the information
provided by the Parties.  Some of the CEFTA Parties had made a separation between instances wheretariffs had been eliminated, and other instances where a simple preferential trade regime was in place.
A number of delegations had made it clear that this separation was important in the statistics provided
by the CEFTA Parties.  It had not been his intention to focus on what might constitute a difference of
view regarding the requirement of Article XXIV:8(b), because the Committee was still in the
information-gathering phase of its work.  It was the format of the data presented that the Committee
should focus on.  He supported the Canadian representative's earlier request for data on the tariff-line
coverage at zero import duties, preferential duty rates and MFN rates as this would be a usefulcomplement to the Committee's work.
27. The representative of Australia supported the Canadian representative's position on the issue
of the qualitative and quantitative definitions of "substantially all the trade".  Secondly, she supported
the Japanese representative's comment on the relevance of data on trade creation effects.  Both tradecreation and trade diversion effects were important and useful in making an assessment of whether
barriers had been raised to third parties.  Given the complexity of other regulations of commerce, in
particular rules of origin, it would be instructiv e to look at actual flows of trade in this area.
28. The representative of the European Communities commented on the direction that the
discussion was taking.  It seemed to him that the CEFTA Parties had made considerable efforts to
provide information, yet for every piece they had made available, Members had requested more.  He
wondered where this might stop.  His second point was that the Committee would not solve the more
general issues during the review of these Agreements.  These were being dealt with under a different
agenda item and, while he saw no problem with de legations recording their views on the meaning or
interpretation they attached to particular provisions, they should be aware that his delegation had
different views.  The requests for data on trade creation effects went a long way beyond what was
needed to determine compatibility with the pr ovisions of Article XXIV; while they might be
interesting, they were not actually necessary.  Similarly, Members needed to bring a degree of realismWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 8
to bear in what they asked of the Parties to an examination and what they expected of themselves,
given the disagreement on some of the more general issues.  Perhaps this issue could be taken up by
the Committee under a different agenda item in the next day's meeting.  Given his own delegation's
involvement in arrangements of this type, he was well aware of the difficulty in producing statisticaldata and Members should acknowledge the CEFTA Parties' considerable efforts in producing them.
29. The representative of Switzerland supported the comments of the European Communities
representative, especially with regard to the trade creation statistics.  He had never personally seen
any precise statistics on trade creation within an FTA and he did not think such a calculation was
possible.  His delegation welcomed the transparency shown by the CEFTA Parties and the detailed
information provided on the coverage.  It seemed to him that some of the requests for precisestatistical information, including the requests for data on trade creation effects, went beyond what was
foreseen in the Standard Format.  If the Committee agreed to change the Standard Format, this would
make the whole procedure simpler and easier, but this was an issue which should be discussed in a
more general framework.
30. The representative of Korea said he would not repeat the long discussion of trade creation
versus trade diversion, but he asked if the CEFTA Parties would submit statistical data regarding
imports and exports from third countries both before and after the establishment of the CEFTA, in
terms of agricultural and industrial products.  He agreed that this statistical data was not clearly
required under the GATT, but it was very important in order to assess whether the CEFTA had raisedbarriers to the trade of other Members.
31. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, said he
did not want to enter into a systemic debate which he thought should be distinct from the examination
process.  While he respected the views of other Members, the CEFTA Parties held a different view.Although the Canadian representative had expressed the view that only one dimension of
"substantially all the trade" had been addressed, it was the Parties' opinion that, based on the statistical
data provided, the criterion of "substantially all the trade" had been met.  This did not prejudge
anything about the systemic discussion.  The same, of course, could be extended to the views
expressed by the Australian representative and others of what constituted "substantially all the trade".
As far as the issue providing information on tariff -line level was concerned, the Parties had submitted
sufficient information.  They did not see the necessity and justification for providing further data.  Hesuggested that the figures which had been presented by the Parties be reflected in the minutes since
they were not connected with the Standard Format.  The Parties intended to raise this issue under the
debate on systemic issues.  If the Committee decided that the Standard Format should include a
certain breakdown of information, then the CEFTA Parties would provide this, as would other RTA
parties.  As far as quantitative restrictions were concerned, he suggested that Members refer to thedocumentation, as there had been prior discussion of this topic in previous examination rounds.
32. The representative of Canada said that many delegations had requested that the information
provided orally in the day's meeting be distributed in a written format.  There was a difference
between having this information presented in the minutes of the meeting or having it included in atable where it would become part of the complete record.  His delegation would have great difficulty
in accepting that the information was only to be provided in the minutes of the meeting and he
emphasized the need to have a common set of data in order to make an assessment.  The
representative of the United States supported this statement.
33. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, said that
perhaps there had been a misunderstanding.  The Parties did not reject the idea that the information
should be in document form, but they would like to  see it presented as an informal document.  This
information should be seen as the Parties' expression of additional value-added transparency, but notWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 9
as an official document, as this was a problem which had not yet been resolved satisfactorily for
everyone.
34. The representative of Canada reiterated that the provision of answers or additional
information requested by Members in the context of examinations of RTAs was a process which
generated a lot of transparency of relevance to the Organization.  It had never been the case that
information had not been provided.  If the Committee was to complete its task of examination, the
information presented by the Parties should be part of the record of the examination.  He reiterated his
delegation's request that the information provided orally be provided as a separate document,
complementary to document WT/REG33/4.Add.1.  Once the Committee had this document, it could
proceed further.  Without it, it could not.
35. In response, the representative of the Czech Republic, speaking on behalf of the CEFTA
Parties, repeated the Parties' offer to provide the information in writing, as an informal contribution.
If this was not acceptable, the CEFTA Parties would like to see the examination process stopped;
Members could revert to it once a consensus on this matter had been reached.
36. The representative of Canada said that the fact that some information would not be provided
as part of the formal record of the Committee's deliberations constituted a precedent in the context of
an examination and he would need to consult his capital about the CEFTA Parties' position.  Given
that this was a fundamental issue, his delegation would need to reflect on it and would not be able tocontinue with the examination until it was resolved.
37. The representative of Australia said she did not usually cover the CRTA and wondered if she
could have advice on a factual question.  She was aw are of the long-standing disagreements over the
requirements of Article XXIV and that a systemic process was underway.  She wondered what hadhappened in previous instances where parties under examination had held a view of the requirements
that differed from others: had information been circulated as normal?
38. The representative of the United States said that his delegation could answer this question,
given that the factual examination of the NAFTA was complete.  Over 600 questions had been posed
by CRTA Members in the course of the NAFTA examination, all of which had been answered.  There
was one instance where a series of questions had been answered late, and the NAFTA parties hadcome under considerable criticism over this delay.  In addition, there had been many questions which
the NAFTA Parties had considered to be systemic in  nature, particularly involving rules of origin.
Forty questions alone had been answered on rules of  origin.  It was clear from the NAFTA example
that if Members asked questions they should be answered.  This had been the way the Committee had
proceeded in all examinations to date.  Given th e volume of questions in the NAFTA context, his
delegation was sympathetic to the burden this placed upon parties and had tried to limit its questions
to those which were most pertinent to the discussion.  He did not consider that any question posed in
this round of examination was outside the scope a nd if Parties were able to decide for themselves
which answers were relevant from their perspective, he would need to consult his capital for further
guidance before proceeding with this examination.
39. The representative of New Zealand said that, while ultimately it was up to the parties to
decide what information they would provide, it would obviously have a bearing on the Committee's
report.  It was not possible to pre-determine the number of questions that might arise in any
examination, as answers to questions provided by the parties might in themselves generate further
questions.  The Parties had stated in document WT/REG11/9/Add.1 that the Agreement provided for
"the complete elimination of an overwhelming number of tariffs covering by far substantially all the
trade between the Parties".  If the Parties asserted certain things they must be willing to back up those
assertions with appropriate information that would assist Members to produce the sort of report thatWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 10
the Parties would want.  If this information was not provided, Members would not reach the desired
result and the report would be rather cryptic to say the least.
40. The representative of Japan said that the Standard Format was a guideline which the
Committee had taken note of it, but not formally agreed.  If Members requested additional
information relevant to Article XXIV or GATS Ar ticle V they had the right to do so.  The CEFTA
Parties had said that it was up to them to decide what information they should provide.  He was
unaware of other parties saying this.  The NAFTA examination was a good example; his delegation
had raised a number of questions to which the Parties had replied.  He added that he would need to
consult his capital regarding the Parties' proposed subm ission of information in an informal nature.  If
the Parties provided the information formally, even if they considered that this went beyond theStandard Format, this would not prejudge the interpretation of Article XXIV.  One example was trade
creation effects.  All countries were facing a proliferation of regional trade agreements and the
multilateral trading system could be damaged if transparency was compromised.
41. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, raised
three points.  Firstly, the Parties had already provided a considerable quantity of statistical data and to
say that they were unwilling to submit information was not a correct assessment.  Secondly, the
Committee had debated the Standard Format for at least two years and it was a rule on which the
Parties should be guided.  The CEFTA Parties considered that it had relevance and was not something
which should be undermined in this context.  Thir dly, he suggested that the Committee continue with
its examination, given the Parties' willingness to pr oceed with discussion on other points.  This would
be more productive than stopping the whole process.
42. The Chairman proposed that the Committee hold an informal meeting on the CEFTA to
discuss the statistical issue and he encouraged bilateral discussions between Members.  He suggested
that Members continue the examination with discussion of the remaining points.
C. Trade Provisions
43. The representative of Canada asked that the reply on rules of origin be expanded somewhat.
He would like to see a description of the rules th emselves, how they were applied, what method was
used, and how they were administered.  This would be helpful in understanding their application in
the context of this particular Agreement.
44. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties,
summarized the rules of origin.  He said that the notification of the pan-European system of
cumulation of origin would be made to the Committ ee on Rules of Origin in the near future.  The
application of pan-European cumulation of origin was based on uniform principles valid for all
signatories and to the whole territory to which the system applied.  From the beginning of 1997, these
new rules of origin had been applied in a number of free trade agreements within Europe, creating a
European-wide network.  This network linked mo re than 30 countries: the member states of the
European Communities; the countries of central and eastern Europe including the Baltic states; and
Andorra and San Marino, through special legal instruments.  The framework of existing FTAs or
Association or Europe Agreements would remain un changed; only the rules of origin protocols would
be replaced with the pan-European cumulation provisions.  There were two major consequences of
this change: first, semi-finished products originating in any country of the system, and thoseprocessed or assembled in any other partner country, would be considered as originating products;
secondly, originating products could be traded between any of the countries involved in this system.
Prior to the introduction of this system, trade in originating products had been seriously limited.  The
CEFTA Parties, as well as other users of the pan-European system, were of the view that significantWT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 11
advantages would be reported for products and traders, both inside and outside the pan-European
cumulation area.  First of all, customs procedures would be simpler than in the past since once the
product had been conferred European origin there w ould be no need to verify it again.  This would
give firms established in Europe, including fore ign-owned firms, more freedom in using input
material or deciding in which country to invest.  With regard to third-country materials, the new rules
were more flexible due to the fact that they provided  for a general tolerance rule as well as alternative
processing rules, thereby allowing more input of third-country materials.  The non-drawback rule was
contained in the CEFTA Agreement, as well as in other agreements in the region, but it had been
derogated temporarily until the system of pan-European cumulation entered into force.  Until
31 December 1998, the non-drawback rule would be applied only partially.  This meant that a
customs duty of 5 per cent would be retained in resp ect of products falling within HS Chapters 25-49
and 64-97 or such lower rate as was in force in the country of origin.  Similarly, a 10 per cent rate
would be retained in respect of pr oducts falling within HS Chapters 50-63 or at the level of the rate in
force in the respective country.  The CEFTA Parties would provide further details on the system either
in this Committee or through individual notifications to the Committee on Rules of Origin.
45. The representative of Japan said he expected that the contents of the notification would be
technical and his delegation would appreciate a summary.
46. The representative of the European Communities said that his delegation was also involved in
the preparatory work of this notification and that he would ensure that the notification was submitted
to the WTO, and to the CRTA, in the near future.  He hoped that this would help give a wider
understanding of the system.  Like the CEFTA Parties and other parties to the pan-European system,
his delegation was of the opinion that the system would bring positive benefits for all countries, both
members and non-members, through the confirmation of European origin and free circulation within
the area.  His delegation would be happy to deal with follow-up questions once the notification hadbeen made.
47. The representative of the United States asked how global safeguards applied with respect to
individual member states.  Were the CEFTA Members automatically excluded from a global
safeguard action or was a global safeguard action applicable between them?  If they were excluded,
what criteria would be used?
48. The representative of Japan said that in the two-line response to question 4.3 on general
safeguards the Parties had stated that the interests and rights of third countries would be protected as
no measures against them could be based on any provision of the Agreement which applied only to
trade between the Parties.  His delegation wondered whether the Parties would apply safeguard
measures against third-country products, if the injury came from products imported from the CEFTApartners.  In addition, he asked if the CEFTA Parties intended to change the safeguard provisions in
the future and if so, in what way.
49. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties,
reiterated that the quality of the answers was more important than the quantity.  He added that general
safeguards would not be applied against third countries on the basis of problems arising in the
free-trade area itself.  The CEFTA Parties had no plans to amend existing safeguard provisions.
50. The representative of the United States repeated his question.  Since there was no provision
excepting the application of safeguards between CEFTA Members, if one Member applied a global
safeguard would it also apply on an MFN basis to other CEFTA Members?  The representative of the
Czech Republic responded in the affirmative.WT/REG11/M/3, WT/REG33/M/3,
WT/REG41/M/3, WT/REG42/M/3
Page 12
51. The representative of Canada asked if th ere was a provision in the CEFTA Agreement
providing for the exemption of any of the CEFTA Parties in the case of a global safeguard action
taken by any of the CEFTA Parties.  The representative of the Czech Republic, speaking on behalf of
the CEFTA Parties, replied that if one country applied a safeguard it would not be extended
automatically by another country.  There was no provision for the exemption of the CEFTA Parties
from a global safeguard action.
52. The Chairman said that this concluded the day's review of the CEFTA Agreement.  If
Members agreed, an informal meeting would be held which would be devoted to the issue of the
scope and statistics of the CEFTA Agreement.  In the meantime he would hold informal consultations.
53. The representative of the Czech Republic, speaking on behalf of the CEFTA Parties, said that
the CEFTA Parties were convinced that they had exhausted discussion on the factual part of the
Agreement.  As a matter of principle, they were ready to raise outstanding issues under the systemic
debate.  The Parties were of the view the factual part of the review was concluded and that a
fourth round of examination of this Agreement was not necessary.
54. The Chairman said he would hold informal consultations in an effort to reach convergence.
55. The Committee took note of the comments made.
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