RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/116
19 May 2003
(03-2524)
Trade Policy Review Body
TRADE POLICY REVIEW
KINGDOM OF MOROCCO
Report by the Secretariat
This report, prepared for the third Trade Policy Review of the Kingdom of
Morocco, has been drawn up by the WTO Secretariat on its own responsibility.
The Secretariat has, as required by the Agreement establishing the Trade Policy
Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the
World Trade Organization), sought clarification from the Government of the
Kingdom of Morocco on its trade policies and practices.
Any technical questions arising from this report may be addressed to
Ms Ulla Kask (Tel:  022/739 5627) or Mr  Jacques Degbelo (Tel:  022/739 5583).
Document WT/TPR/G/116 contains the policy statement submitted by the
Government of the Kingdom of Morocco
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on the Kingdom of Morocco.Kingdom of Morocco WT/TPR/S/116
Page iii
CONTENTS
Page
SUMMARY OBSERV ATIONS ...................................................................................................... vii
(1) E CONOMIC ENVIRONMENT .................................................................................... vii
(2) I NSTITUTIONAL FRAMEWORK ................................................................................ vii
(3) T RADE POLICY INSTRUMENTS ............................................................................... viii
(4) S ECTORAL POLICIES ............................................................................................... x
(5) T RADE POLICY AND TRADE PARTNERS ................................................................. xi
I. ECONOMIC ENVI RONMENT......................................................................................... 1
(1) M AIN FEATURES OF THE ECONOMY ...................................................................... 1
(2) R ECENT ECONOMIC DEVELOPMENTS .................................................................... 3
(3) T RADE PERFORMANCE AND INVESTMENT ............................................................. 4
(i) Trade in goods  and services......................................................................... 4
(ii) Investment.................................................................................................... 9
(4) O UTLOOK ............................................................................................................... 10
II. TRADE AND INVESTME NT REGI MES......................................................................... 12
(1) I NSTITUTIONAL FRAMEWORK ................................................................................ 12
(2) T RADE POLICY FORMULATION AND IMPLEMENTATION ........................................ 13
(3) M AIN TRADE LAWS AND REGULATIONS ............................................................... 15
(4) T RADE POLICY OBJECTIVES .................................................................................. 19
(5) T RADE AGREEMENTS AND ARRANGEMENTS ......................................................... 20
(i) World Trade Organization (WTO) .............................................................. 20
(ii) Regional ag reements.................................................................................... 21
(iii) Bilateral agreements  and arrangements ....................................................... 22
(iv) Other agreements and arrangements............................................................ 26
(6) I NVESTMENT REGIME ............................................................................................ 26
III. TRADE POLICIES AND PR ACTICES BY MEASURE.................................................. 30
(1) I NTRODUCTION ....................................................................................................... 30
(2) M EASURES DIRECTLY AFFECTING IMPORTS ......................................................... 30
(i) Registration an d documentation................................................................... 30
(ii) Customs cl earance ....................................................................................... 31
(iii) Customs valuation........................................................................................ 32
(iv) Tariffs, other duties and taxes...................................................................... 33
(v) Exemptions and refunds of duties an d taxes................................................ 40
(vi) Rules of  origin.............................................................................................. 41WT/TPR/S/116 Trade Policy Review
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(vii) Import prohibitions, quantitative restrictions and import licensing ............. 41
(viii) Contingency tr ade measures ........................................................................ 42
(ix) Standards and other t echnical specif ications ............................................... 44
(x) State trading ................................................................................................. 48
(xi) Government procurement ............................................................................ 49
(xii) Local conten t requireme nts.......................................................................... 52
(xiii) Other measures............................................................................................. 52
(3) M EASURES DIRECTLY AFFECTING EXPORTS ......................................................... 53
(i) Registration an d documentation................................................................... 53
(ii) Export taxes ................................................................................................. 54
(iii) Prohibitions, restrictio ns and export licensing............................................. 54
(iv) State trading ................................................................................................. 54
(v) Free export zones a nd industrial zones ........................................................ 54
(vi) Export su bsidies........................................................................................... 55
(vii) Tariff and fi scal incen tives........................................................................... 56
(viii) Export financing, insu rance and guarantees ................................................ 57
(ix) Export promotion, marketing aids ............................................................... 57
(4) M EASURES AFFECTING PRODUCTION AND TRADE ................................................ 58
(i) Incen tives ..................................................................................................... 58
(ii) Competition policy a nd price c ontrols......................................................... 59
(iii) Privati zation ................................................................................................. 61
(iv) Protection of intellec tual property  rights ..................................................... 64
IV. TRADE POLICIES AND PR ACTICES BY SECTOR...................................................... 68
(1) O VERVIEW ............................................................................................................. 68
(2) A GRICULTURE , FISHERIES AND RELATED ACTIVITIES .......................................... 68
(i) Major features .............................................................................................. 68
(ii) Policy objectives  and instruments................................................................ 69
(iii) Policy by  product ......................................................................................... 71
(iv) Fisheries products  and by-products.............................................................. 76
(3) M INING AND ENERGY ............................................................................................ 78
(i) Minin g.......................................................................................................... 78
(ii) Ener gy.......................................................................................................... 81
(4) M ANUFACTURING .................................................................................................. 83
(i) Textiles and leather goods ........................................................................... 83
(ii) Transport equipment .................................................................................... 84
(iii) Other ac tivitie s............................................................................................. 86
(5) S ERVICES ............................................................................................................... 87
(i) Touri sm........................................................................................................ 87
(ii) Telecomm unications.................................................................................... 88
(iii) Trans port...................................................................................................... 91
(iv) Financial services......................................................................................... 95
BIBLIOGR APHY ................................................................................................................... .. 99
APPENDIX TABLES ................................................................................................................ ..... 103Kingdom of Morocco WT/TPR/S/116
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CHARTS
Page
I. ECONOMIC ENVIRONMENT
I.1 Structure of imports, 1994-2001 6
I.2 Structure of exports, 1994-2001 7
I.3 Destination and origin of trade, 1995 and 2001 8I.4 Breakdown of foreign direct investment by sector, 1996-2001 9
I.5 Breakdown of foreign direct investment by country, 1996-2001 10
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Trend in variable customs duty on durum wheat, 2002 34
III.2 Breakdown of MFN duties applied, 2002 36III.3 Breakdown of MFN duties applied by sector (ISIC definitions), 2002 37
III.4 Tariff escalation, 2002 38
III.5 Revenue from privatization by country 63
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Morocco in figures, 1995-2001 1
I.2 Main economic indicators, 1995-2001 2
I.3 Balance of payments, 1995-2001 5
II. TRADE AND INVESTMENT REGIMES
II.1 Main Moroccan trade-related legislative texts in force, March 2003 16
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Morocco's MFN tariff structure, 2002-2003 35
III.2 Annual amount of government procurement and
share of procurement according to procedure followed 52
III.3 Trend in net consumer subsidies for food products, 1996-2001 59
III.4 Companies to be privatized, March 2003 61
III.5 Number and breakdown of applications for industrial property titles, 2001 66
IV. TRADE POLICIES AND PRACTICES BY SECTOR
IV.1 Border taxes on alcoholic beverages, March 2003 74
IV.2 Energy production, 2000-2001 82
IV.3 Basic medium and high voltage rates, March 2003 82
IV.4 Vehicle assembly, 1996-2000 85IV.5 Indicative framework for investment in tourism 88
IV.6 Telecommunications:  Basic indicators, 1997-2001 89
IV.7 Rates for international calls (from a private fixed telephone) 90
IV.8 State enterprises in the transport sector, 2001 92WT/TPR/S/116 Trade Policy Review
Page vi
APPENDIX TABLES
Page
I. ECONOMIC ENVIRONMENT
AI.1 Structure of imports, 1994-2001 105
AI.2 Structure of exports, 1994-2001 106AI.3 Origin of imports, 1994-2001 107
AI.4 Destination of exports, 1994-2001 108
II. TRADE AND INVESTMENT REGIMES
AII.1 Notifications to the WTO, April 2003 109
III. TRADE POLICIES AND PRACTICES BY MEASUREAIII.1 Variable customs tariffs, 2002 112
AIII.2 Binding of tariff quotas 114
AIII.3 MFN tariff statistics by HS chapter, 2002 115
AIII.4 Number of tariff lines on which
the rate applied is higher than the bound rate, 2002 118
IV. TRADE POLICIES AND PRACTICES BY SECTOR
AIV.1 Customs duties by ISIC branch of activities, 2002 122
AIV.2 Summary of Morocco's sectoral commitments under the GATS 126Kingdom of Morocco WT/TPR/S/116
Page vii
SUMMARY OBSERVATIONS
(1) ECONOMIC ENVIRONMENT
1. Since the last review of its trade policy
in 1996, Morocco has continued to reform its
economy and to implement programmes tocombat drought.  Although the 1995 drought
had a serious impact on real GDP, the
measures put in place since then and the
continued diversification of the economy have
helped to limit the effects of the subsequentdroughts, more particularly those of 1997,
1999 and 2000.  Between 1995 and 2001,
there were three years of strong economic
growth.  In 2002, per capita GDP was
US$1,245.
2. Macroeconomic policy, more
especially the monetary component, has
helped to stabilize the national currency (the
dirham).  Competitiveness, measured in terms
of the real effective exchange rate, has been
relatively stable since 1995 and inflation has
been contained at an annual rate of around2 per cent.  The current account has
traditionally shown a deficit, however, and the
positive balance in services and transfers by
Moroccans resident abroad (the main source
of foreign exchange, followed by tourism,textiles and clothing, and mining products)
have not been able to cover the deficit in the
trade balance.
3. Morocco has a relatively diversified
economy.  Services, dominated by trade, arethe largest sector and account for around 60
per cent of real GDP.  Earnings from exports
of services amount to over 40 per cent of those
from exports of goods.  The manufacturing
sector is dominated by the textile, clothing andleather industries, chemicals and related
industries, and the food industry and accounts
for around 18 per cent of real GDP and two-
thirds of exports of goods in terms of value.  It
is followed by agriculture (including livestock
breeding, forestry and fisheries), which is the
country's largest employer (44 per cent of thelabour force), contributing almost 14 per cent
of real GDP and around 22 per cent ofexports.  Mining (mainly phosphates) and
energy account for around 8 per cent of real
GDP.
4. Morocco's major imports and exports
are manufactures (around 62 per cent of
imports and 65 per cent of exports of goods invalue terms in 2001).  Imports of textiles are
mainly in connection with sub-contracting,
particularly with partners in the European
Union (EU).  Morocco also imports
agricultural foodstuffs and mining products,including fuel.
5. In terms of share of trade, the order of
importance of the leading partners is the same
for imports and exports.  The EU is Morocco's
principal trading partner.  France aloneprovides over 20 per cent of total imports and
takes around 33 per cent of Moroccan exports
of goods, followed by Spain, the United
Kingdom, Italy and Germany.  Outside the
EU, Morocco also imports goods from the
United States and Saudi Arabia.  Trade with
other regions is negligible.
6. Foreign direct investment (FDI)
fluctuates, although there has been an upward
trend.  FDI and foreign private loans mainly
come from European Union countries, namely,
France, Portugal and Spain, and also from theUnited States.  The trend in FDI and its
sectoral breakdown are strongly marked by
the privatization or restructuring of State
enterprises and, to a certain extent, by the
conversion of external public debt intoinvestment.
(2) I
NSTITUTIONAL FRAMEWORK
7. Morocco is a constitutional monarchy.
The overriding principle of Moroccan law is
the precedence of international legalinstruments, including the WTO Agreements,
over domestic law.  Regarding the hierarchy
of regulations, the Constitution is followed by
laws, dahirs, decrees, and orders.  The
Ministry responsible for foreign trade
elaborates trade policy.  Depending on the
subject matter, he coordinates the policy withWT/TPR/S/116 Trade Policy Review
Page viii
the ministries concerned.  Changes to the
customs tariff are introduced by law;  they
may be made by decree, on a proposal by the
Government, but they must then be endorsed
in the finance law for the year following their
adoption.
8. The National Foreign Trade Council
(CNCE), composed of representatives of the
Government and economic operators, is
consulted prior to the preparation of any draft
foreign trade-related law.  An AdvisoryCommission on Imports (CCI), chaired by the
representative of the Minister responsible for
foreign trade, provides advice on all matters
relating to requests for tariff protection or the
adoption of contingency trade measures.Morocco also consults its trade partners on
trade-related matters through joint
commissions set up under bilateral, regional
and multilateral agreements.  The Moroccan
Export Promotion Centre (CMPE), a State
entity, is responsible for promoting and
developing exports of the majority of productsand services.
9. Commercial courts have been set up
to hear trade disputes and have been
functioning since 1998.  In 1996, under the
supervision of the Ministry of the Economy,Finance, Privatization and Tourism, a Foreign
Investment Department was established in
order to promote foreign investment in
Morocco.  In 1998, the Interministerial
Investment Commission (CII), an appeals andarbitration body chaired by the Prime
Minister, was set up.  The regional investment
centres established in 2002 are expected to
lead to an improvement in the investment
climate.
10. Morocco is an original Member of the
WTO and grants its trading partners at least
MFN treatment.  It considers the multilateral
trading system and trade liberalization to be
beneficial for growth, development and the
well-being of peoples, but that it is urgently
necessary for the benefits to be equitablydistributed among all countries.  It has
underlined the need to strengthen theprovisions on technical cooperation (including
capacity building), special and differential
treatment, and measures in favour of LDCs, so
as to make them more effective and
operational.
11. Morocco is a member of the Maghreb
Arab Union (UMA) and the Arab Free-Trade
Area.  Since 1996, it has signed bilateral
agreements with regional groups such as the
EU, the European Free-Trade Association
(EFTA) and other trading partners in itsregion, namely, Egypt, Jordan and Tunisia;
and it is currently negotiating a free-trade
agreement with the United States.  Morocco
signed the Agreement on the Global System of
Trade Preferences (GSTP) among DevelopingCountries.  A framework agreement on the
Trade Preferences System (TPS) among
Islamic countries entered into force in 2003.
However, belonging to several trade
agreements whose geographical scope,
liberalization programmes, and provisions on
rules or origin (inter alia) differ, is not onlydifficult to manage, but also makes Morocco's
trade regime more complex.
(3) T
RADE POLICY INSTRUMENTS
12. Since 1996, Morocco has made a
number of changes to its trade regime.  Theapplication of rates resulting from tariffication
in 1996 put an end to the imposition of
quantitative import restrictions on the majority
of products.  The continued computerization of
customs procedures, the development ofcustoms clearance warehouses and areas, and
the creation of domiciliation offices or on-site
customs clearance procedures have
substantially reduced the time taken for
customs clearance and enhanced transparencyin this area.
13. Customs duties have been lowered on
certain non-agricultural products.  In 2000,
the fiscal import levy (PFI) was incorporated
into the customs tariffs with the aim of
simplifying imposition at the border.
However, this integration, together withMorocco's application of rates resulting fromKingdom of Morocco WT/TPR/S/116
Page ix
tariffication and the disaggregation of tariff
lines from 8 to 10 digits in the Harmonized
System, has increased the simple arithmetic
average of rates applies from 23.5 per cent in
1995 to 33.4 per cent in 2002, with ad valorem
rates that can reach 339 per cent.  Overall,customs tariffs show mixed escalation with
higher rates on products at the first stage of
processing, rather than the second stage.
Imported goods may also be subject to a
number of other duties and taxes, includingthe parafiscal import tax of 0.25 per cent, the
value added tax at rates of up to 20 per cent,
and domestic consumption taxes.
14. Morocco has bound all its tariff lines
solely at ad valorem rates ranging from zeroto 380 per cent;  duties on non-agricultural
products have been bound at 40 per cent (with
the exception of those bound in 1987).  In
2004, the simple arithmetic average of the
bound rates should be 42 per cent.  Other
duties and taxes have been bound at 7.5 or 15
per cent.
15. Currently, over one-third of the tariff
lines are subject to rates higher than the
bound rates.  Moreover, imposition of variable
duties (on 40 tariff lines for agricultural
products), in reverse proportion to thedifference between the minimum threshold
price and the import price, does not ensure
Morocco's compliance with its commitments,
either as regards tariff bindings or in relation
to the WTO Customs Valuation Agreement,which Morocco has in principle been applying
since October 1998.
16. Morocco has also bound market
access for certain agricultural products by
introducing tariff quotas which, in practice,are not applied, all imports of the products
concerned being subject to the out-of-quota
rates.  The provisions on contingency trade
measures were amended in 1997;  a safeguard
duty of 130 per cent applies to out-of-quota
imports of fresh bananas (the only product
currently subject to import licensing intendedto administer the quota).  Recently, labelling
in Arabic for foodstuffs and details concerningthe Moroccan importer have been made
compulsory for all imported foodstuffs.
17. Subsidies have been abolished for the
majority of products, with the exception of
locally-produced sunflowers and sugar not
intended for industrial use.  Subsidies for thesetwo products are granted either in the form of
production support or in the form of consumer
price support.  A number of fiscal, customs
and financial benefits are given to investors,
especially exporting enterprises, through the1995 Investment Charter, customs regimes, the
free export zone regime, and the Hassan II
Fund for Economic and Social Development
created in 2002.  Subsidies are also granted
for the promotion of exports of certainagricultural products by air freight.  However,
levies are applied to exports of maize, plant
fibre and crude phosphates.
18. During Ramadan, reductions in duties
and taxes may be granted within the quota
limits for the import of certain products.
Exceptionally, in cases of drought and tosupport the selling price of certified cereal
seeds (common wheat, durum wheat and
barley), the State fixes maximum subsidized
prices for their retrocession.
19. In the automobile assembly industry,
60 to 70 per cent of locally-made components
is required in exchange for certain
advantages.  Compulsory reserves of
petroleum products and pharmaceuticals must
be kept.
20. Structural reform, including
privatization, has made progress.  Price
controls and marketing monopolies have been
abolished for almost all goods and services,
with the exception of tobacco, certaintransport and fixed telephony services and
crude phosphates.  The legislation on
government procurement and competition
entered into force in 1999 and 2001
respectively.  The Government Procurement
Code enhances transparency and incorporates
provisions to combat corruption;  a pricepreference of up to 15 per cent is given toWT/TPR/S/116 Trade Policy Review
Page x
Moroccan enterprises for contracts for works
and related design contracts.
21. Progress has been made in
harmonizing intellectual property legislation
with the international agreements signed by
Morocco.  New legislation has been adoptedin each of the following areas:  copyright and
neighbouring rights;  new varieties of plants;
and protection of industrial property.
Industrial property rights still continue to be
governed by the Dahir of 23 June 1916,however, although the relevant law should
enter into force six months after publication of
the implementing texts.
(4) S
ECTORAL POLICIES
22. Agriculture plays a key role in
Morocco's economy, particularly in terms of
jobs.  It is the most highly protected sector,
with ad valorem tariffs of as much as 339 per
cent and an average of 40 per cent.  Variable
duties apply to some 40 tariff lines for
agricultural products, including cereals,
oilseeds and sugar.  A safeguard duty of 130per cent is applied to out-of-quota imports of
fresh bananas.  In addition to drought, which
has been increasingly frequent in recent years,
agriculture faces structural constraints such
as the large number of small family farms,limited use of modern production and storage
techniques, high transport costs, and moderate
use of irrigation.
23. Fiscal, customs and financial
incentives have been implemented in order toboost domestic production;  agricultural
income is exempt from taxation until 2010.
Prices of a large number of products have
been liberalized and the import monopoly for
staple foods has been abolished.  The aim ofthe fisheries policy is to manage resources
with a view to their sustainable exploitation by
limiting catches of certain species and
prohibiting any action that would increase
fishing capacity.
24. The manufacturing sector focuses on
exports and is dominated by subcontracting(particularly in the textiles, clothing and
leather subsectors).  Morocco's automobile
industry assembles private and goods vehicles,
builds bodies for buses and motor coaches,
and repairs and manufactures certain spare
parts.
25. The average customs tariff in the
manufacturing sector is 33 per cent.  The
mixed escalation of customs duties, subject to
incentives, does not encourage investment in
certain industries, more particularly thosemaking semi-finished products.  During recent
years, the textiles and clothing industry has
seen a slowdown in growth due, inter alia, to
keener international competition on the
relevant markets.  The leather industry hasbeen facing difficulties in obtaining supplies of
hides and skins because of the diseases and
epidemics that have affected livestock in
certain countries.  The first adjustment
measures taken include reducing the cost of
energy, promoting investment through the
Hassan II Fund, and establishing the TextileSector Restructuring Fund (FORTEX).  Export
licensing was introduced and then remained in
place for certain types of leather.
26. Morocco is the world's leading
supplier of phosphates, which is the country'sprincipal mineral resource.  Their exploitation
continues to be a State monopoly.  Morocco is
also the world's second largest exporter of
solid fertilizer.  The mining sector has the
lowest tariff protection, with an averagecustoms tariff of 22 per cent.
27. Morocco is a net exporter of services.
Tourism is the second most important source
of foreign currency after transfers from
Moroccans resident abroad.  There are stillState monopolies in certain subsectors such as
fixed telephony, rail transport, and port and
airport services.  In recent years, there has
been an important flow of foreign investment
to the telecommunications and audiovisual
subsectors, due in particular to the sale of
GSM licences and part of the capital of MarocTélécom.  Regarding transport, the
Government has started to update theKingdom of Morocco WT/TPR/S/116
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legislative framework and embarked upon
privatization:  a 2003 law provides for the
liberalization of road transport, and while it
was not possible to privatize the national
airline in 2000, its privatization is still
planned.  A new Insurance Code was adoptedin 2002.  Other reforms in the financial
services subsector include, inter alia,
liberalization of interest rates and the lifting of
credit restrictions.
28. While Morocco undertook substantial
commitments in 1994 under the General
Agreement on Trade in Services (GATS) with
respect to tourism, telecommunications and
some financial services, its commitments
remain limited in the insurance andinternational road transport areas in
particular.  In 2000, Morocco completed its
schedule of commitments on
telecommunications services.
(5) T
RADE POLICY AND TRADE
PARTNERS
29. Morocco's active participation in the
multilateral trading system and in various
regional and bilateral agreements reflects its
attachment to the liberalism that it would like
to see instituted at the multilateral level.
Nevertheless, Morocco is currentlyexperiencing difficulty in meeting its
commitments on binding and customs
valuation because of its current system of
protection, particularly in the agricultural
sector.  In addition to variable duties, theproblem is the impositio n of customs tariffs at
levels that are higher than the bound levels.Moreover, the mixed overall escalation of
tariffs, subject to incentives, does not
encourage certain production activities
(particularly of semi-finished goods), for
which Morocco appears to have a
comparative advantage.
30. Reform of the trade regime, with
special focus on liberalization of the
agricultural sector, simplification of tariffs by
abolishing variable duties and reducing the
number and levels of rates would allowMorocco to comply more fully with its
commitments.
31. Recently, privatization, particularly in
the areas of telecommunications and air
transport, has been delayed as a result of thecurrent international economic situation.  In
such a climate, by strengthening its
commitments under the GATS, Morocco would
undoubtedly reinforce the predictability of its
trade regime in the areas concerned;  make its
economy more attractive for foreign capital;
encourage privatization;  and consolidatereforms in areas such as tourism, for which
commitments on binding are not equal to the
liberalization efforts already made.  Overall,
such changes would help Morocco to make
better use of its comparative advantages.