RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/M/42
29 February 2000
(00-0753)
Council for Trade in Goods
MINUTES OF THE MEETING
Held in the Centre William Rappard
on 24 January 2000
Chairperson: Ambassador R. Farrell
The meeting of the Council for Trade in Goods  was convened by WTO/AIR/1229. The
proposed agenda contained in do cument G/C/W/177 was adopted.
_______________
1. Status of the Harmonization Work Progr amme provided for in Part IV of the
Agreement on Rules of Origin Progress Report of the Committee on Rules of
Origin (G /RO/4 2) ............................................................................................................... ...1
2. TRIMs Agreement:  Requests for extensio n of the transition period pursuant to
Article 5.3.................................................................................................................... ...........3
3. Review of the Operation of the TRIMs Agreement...........................................................9
4. Review of the Understanding on the Interpretation of Article XXVIII of the
GATT 1994 ...................................................................................................................... ....10
5. Free Trade Agreements......................................................................................................116. Other Business............................................................................................................... ......12
(a) Customs Valuation:  Pr ogress report by Peru .......................................................................12
(b) FTA between Bulgar ia and Ma cedonia ................................................................................12
1. Status of the Harmonization Work Programme provided for in Part IV of the
Agreement on Rules of Origin Progress Report of the Committee on Rules of Origin
(G/RO/42)
1. The Chairman drew the attention of the Council to the progress report by the Committee on
Rules of Origin (CRO) on the Status of the Harmonization Work Programme provided for in Part IV
of the Agreement on Rules of Origin circulated in document G/RO/42 and invited the  Chairman ofthe CRO, to introduce the Report.  Reporting to  the Council for Trade in  Goods (CTG) on his own
responsibility, the Chairman said that in July 1998, the CTG had approved the recommendations of
the CRO contained in document C/RO/25.  The recommendations included that Members committed
themselves to make their best endeavours to complete the HWP by November 1999; and that in
October 1999 the Committee would provide the CTG with the third and last report on the progress in
the HWP.  The CRO completed its third report during its formal meeting on 16 November 1999G/C/M/42
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(circulated as G/RO/42).  Since June 1999, when the Committee provided its second progress report
to the Council for Trade in Goods, the CRO had he ld three formal meetings, on 23 July, 1 October
and 16 November 1999, respectively.  These formal m eetings were preceded by open-door plurilateral
and informal meetings which lasted two weeks each.  Members agreed that the open-door plurilateral
and informal meetings were a useful process for advancing the work.  Members also reaffirmed theCRO's decision-making process for endorsing proposals.  During these meetings, the Committee
discussed the overall architecture of the harmonized rules of origin, including extensive discussion of
the application of primary and residual rules.  Further progress had been made in addressing these
matters and Members had developed a better understanding of the architectural issues.  The
Committee also discussed 89 product-specific rules of origin relating to minerals, chemicals, leather
products, wood and paper, ceramics, precious stones  and metals, and iron and steel.  Consensus had
been reached on some of these product-specific issues and the number of options narrowed down onsome others.  In addition, the CRO had discussed concerns expressed by a number of delegations
concerning the implications of some major proposals for the harmonization of the non-preferential
rules of origin.
2. Overall, the Committee considered that very useful work and substantial progress on the
HWP had been made since July 1998.  However the remaining work could not be completed on a
best-endeavour basis by November 1999 as set out in  document G/RO/25.  During its last meeting in
November 1999, the Committee also discussed a proposal by one Member to make a recommendation
on a deadline of 30 July 2000 for completing the HWP in order to facilitate a decision on the deadline
by Ministers  at their third Ministerial Conference.  Several Members supported this proposal andindicated it would be appropriate for the Committee to make such a recommendation.  A number of
other Members, however, noted the issue was being discussed in the General Council and they felt the
discussion and decision should be taken to a higher level.  All Members agreed that establishing a
deadline was useful and that the results of the HWP should be a quality product.  A number of
Members indicated they were still considering what would be an appropriate deadline. In addition, anumber of Members indicated that the deadline had to be realistic and achievable.  Some Members
suggested that the Committee should first undertake an assessment of the current status of the work
programme and develop a management plan for completing the HWP.  The Committee also discussed
during its meeting last November a proposal that there be a suspension of interim arrangements.
While a number of Members supported this proposal, other Members expressed reservations.  Finally,
during the November 1999 meeting, the Committee agreed to meet on 27 and 28 January 2000 to
develop its management work programme for the HWP.  The Committee also agreed to meet from7-18 February 2000 to continue its work on the HWP and established a detailed agenda for the
plurilateral, informal and formal m eetings during that two-week period.
3. The representative of Pakistan said that the open-door plurilaterals and informal meetings had
been a good way to move forward and to have a clear conceptual understanding of the issues in hand.
He emphasized the need to expeditiously complete the HWP for the facilitation of international trade.
Interim agreements introduced by some Members were creating restrictive, distortive and disruptive
effects on trade, in particular the trade of developing countries.  This could only be minimized by the
adoption of harmonized rules of origin as early as possible.
4. The representative of India recalled that Members were obliged to establish clear and
predictable rules of origin to facilitate and ensure that the rules of origin were impartial, transparent,
predictable, consistent and neutral.   However, there were interim arrangements which did not
necessarily meet these criteria.  It was also well known to the Members of WTO that they had missed
not one, but two deadlines.  She recalled that the issue of all deadlines was now under theconsideration of the General Council and therefore urged that everyone show the willingness and
necessary flexibility so that that HWP could be completed in due time without causing further
disruptions to the trade of certain categories of Members.G/C/M/42
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5. The representative of the United States said that all Members realized how important it was
that they moved forward in the right way. Setting any deadline depended on the collective assessment
of the work that remained to be done as well as th e issues that needed to be resolved and the time
needed to complete the task.  This was a resource-intensive effort and the Committee should consider
the best means to ensure appropriate participation of all WTO Members and elements that needed tobe addressed, so that the work programme could move forward in the appropriate way.
The Council took note of the Report by the Committee on Rules of Origin contained in
document G/RO/42 and of the statements made.
2. TRIMs Agreement:  Requests for extension of the transition period pursuant to
Article 5.3
6. The Chairman stated that a number of devel oping countries had made requests, pursuant to
Article 5.3 of the TRIMs Agreement, for extensions of the transition period for various notified
TRIMs. In addition to the request of the Philippines, which had been on the agenda of the last formal
meeting, seven other requests had come in from Argentina, Chile, Colombia, Malaysia, Mexico,
Pakistan and Romania.  The request of the Philippi nes had been dealt with according to a "two-track"
approach:  one track had been for the Philippines to engage in consultations, with a view to assisting
in the presentation of a solution for approval by the CTG, and the other track recognized that the CTG
had a responsibility to carry out consultations on the request.  So far the CTG had held two informal
meetings to discuss the Philippines' request, with a written exchange of questions and replies
facilitating the process.
7. The representative of the Philippines emphasized the particular difficulties that the
Philippines would have in phasing out the subjected  TRIMs.  Since the last formal meeting of the
Council in October 1999, the lingering effects of the 1997 Asian financial crisis appeared to have
become even more pervasive, such that certain mult ilateral financial institutions had gone so far as to
revise downward their projected economic growth rates for the Philippines.  Furthermore, domestic
market volume remained severely contracted, such that capacity utilization remained at the 40% level
previously reported and the displacement of nearly 5,000 workers in the industry not only appeared
permanent but was likely to be tripled, should the Philippines' request be denied.  As previously
stated, it was in the context of the Philippine government's concern for the human dimension, that is,
on what would happen to the lives of another 50,000 individuals who were dependent on these wage
earners who would be retrenched should the subjected TRIMs be phased out, that the request had beenmade.  Since the last formal meeting, the Philippines had engaged several interested Members in
consultations which had progressed to the point where the Philippines discerned the appropriate
perspective and modalities with which to approach the decision-making process.  He thanked in
particular the US and EU, whose formal queries aided his delegation  in expounding on the basis for
its request.  A most significant development since the last formal meeting was the filing by severalcountries of requests for extension of the transition periods of their relevant TRIMs under Article 5.3.
Various Members had expressed the view that such decisions should be based individually and
separately on the respective merits of each case, although there might exist some underlying
denominators common to each of the cases from which the Council might formulate common
guidelines and standards for decision-making.  He underlined the unique situation affecting thePhilippine industry, especially in relation to the human dimension of the situation.
8. The representative of the United States stated that in terms of the process of looking at the
Philippines' request, she believed that the two-step formal and informal  process had worked very well
and had set a good example of how the Council could deal with the issues case by case.  Therepresentative of the European Communities also acknowledged the careful way in which the
Philippines had approached its request according to the two-track informal approach.G/C/M/42
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9. The Chairman noted that it was envisaged that the process would continue on a two-track
basis, both in terms of bilateral dialogue, initiated by the Philippines delegation, and informal
consultations within the Council and obviously also with formal consideration in the Council at the
appropriate time.  The Chairman then turned his attention to the seven other requests that had come
in:  Argentina - request dated 28 December 1999 in document G/C/W/176 and G/C/W/176/Add.1;
Chile - request dated 29 December 1999 in document G/C/W/172;  Colombia - request dated
29 November 1999 in document G/C/W/169 and G/ C/W/169/Add.1; Malaysia - request dated
29 December 1999 in document G/C/W/174; Mexico - request dated 20 December 1999 in document
G/C/W/171; Pakistan - request dated 28 Decembe r 1999 in document G/C/W/173; and Romania -
request dated 27 December 1999 in document G/C/W/175.
10. The representative of Colombia stated that the improvement of earnings and the standard of
living of farmers was a principle contained in the Colombian constitution and the state had a duty to
promote inter alia  marketing services for agricultural goods.  The government of Colombia had
implemented a policy of absorption of domestic production from the agricultural sector.  In 1995 this
measure was notified to the CTG pursuant to Article 5 paragraph 1 of the TRIMs Agreement.
Pursuant to Article 5 paragraph 3 in document G/C/W169,  Colombia requested Members to grant anextension of the transition period for the eliminati on of the notified TRIMs.  The fundamental reason
for the request for an extension was a deteriorat ion of the economic and social situation in the
Colombian rural areas.  There had been a decrease of more than 780,000 hectares of cultivated areas
and more than a million people had migrated from the countryside to urban areas.  Furthermore,
elimination of illegal crops, an objective to wh ich Colombia had serious international commitments,
had required enormous efforts in reorienting the population involved in these activities towards other
economically viable and competitive agricultural activities.  Now in the light of all this, the state's
participation in allocating resources was indispensable.  The mechanism of absorption agreements
was the least trade restrictive among applicable mechanisms and application of these absorption
policies, together with a low tariff level, had made it possible for trade in agricultural goods to beconducted without restriction.   Without this measure relating to absorption policies Colombia saw an
aggravation of problems of disinvestment in the agricultural sector and greater rural unemployment
which could result in an increase in poverty and social imbalances.
11. The representative of Chile said that her government had notified its automotive statute,
contained in law number 18483, and circulated to all Members of the WTO in document
G/TRIMS/N1/CHL1 of 19 January 1996.  The statute contained three TRIMs measures, one of whichallowed for exemption from payment of customs duties for imports of Completely Knocked Down or
Semi-Knocked Down units which were used for vehicle assembly.  This was to the extent that they
were offset by exports of domestic components for an equivalent amount within a period of 12
months in accordance with the programme approved by the Motor Vehicle Commission.  The two
other provisions concerned the entitlement to a tax credit: firstly for end-processors or assemblers inrespect of the local content of vehicles produced, transferred or sold within the country;  the second
concerned the offsetting exports or other exports of local components, both with a ceiling of 35% of
the customs value of the corresponding finished vehicle.  This was indicated in the notification itself
on measures concerning tax credit for local content and tax credit for exports of local components.
The measures contained in Article 9 of the automotive statute of Chile both expired on31 December 1998, as reported in paragraph 8 of the Chilean notification and therefore on these two
measures Chile had already fully and completely  complied with the dismantling of the TRIMs.
Unlike Article 9 which provided for a specific and early date of expiry with respect to Chile's WTO
commitments, the measure concerning exemption from customs duties contained in Article 3 of the
Chilean automotive statute  required express legislation in order to be dismantled.  Accordingly, adraft law had now been enacted, which among othe r things, would eventually bring the automotive
statute into line with Chile's obligations under the TRIMs Agreement by revoking Article 3 of the
statute.  The government of Chile, pursuant to paragraph 5 of the TRIMs Agreement, had requested
that the Council grant an extension up to 31 May 2000, thus giving further time to complete theG/C/M/42
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legislative process already underway, regarding the dismantling of the aforementioned measure and
bringing the Chilean automotive statute fully into line with the commitments under the TRIMs
Agreement.
12. The representative of Argentina  stated that his government saw the need to ask for extension
of the transition period in order to eliminate the measures that applied to the automotive industry
notified by Argentina in communications dated 30 March 1995 and 21 March 1997.   The request was
based on the fact that it had not been possible to finalize the whole process of adapting the automotive
sector.  During the period of operation of  the Argentine Automotive Regime (RAA), 1991-1999,
important advances had been made, as evidenced by the data.  However, the consolidation of the
industry was not yet complete.  In the early years of the Regime (1992-1994) the established
enterprises concentrated on restoring their output levels and market share, since at the outset of theRegime the industry was passing through the worst crisis in its history.  Accordingly, the real
restructuring and investment process did not begin until 1995.  Later, when the process was already
well advanced, the Mexican crisis led to a sharp decline in sales which was offset only by an increase
in exports.  Worse still, in the crisis that began at the end of 1998, the domestic and Brazilian markets
both weakened.  One of the reasons for requesting the extension of the Regime relates precisely to theneed to finish negotiating the MERCOSUR Common Automotive Policy.  Obviously in this context
the whole process of implementing the Automotive Regime in Argentina had not been fully
concluded.  The overall effort of concluding a Common Automotive Policy in the framework
remained an absolute priority for the government  because they believed that it was in this way
Argentina would be able to achieve a level of pr oduction which was efficient, which would increase
exports to the region and which also would improve general competitiveness.  It was in this context
that they put forward their request for an extension of the transition period concerning the application
of these measures, and this had been done in a manner which was compatible with the introduction of
the Common Policy and in the light of the mechanisms which would have to be progressively
dismantled.
13. The representative of Romania said that in March 1995 Romania had presented a notification
under Article 5.1 of the TRIMs Agreement, describing the measure in force at that date susceptible to
fall under category 1(a) of the Illustrative List of the TRIMs Agreement.  The notified measure,
introduced by Law no. 71 of 1994, represented a condition to obtain certain advantages (as an
exemption from customs duties for a seven-year period beginning from the date of a company's
registration, for certain imported goods subscribed as  participation in kind or paid from own drawn or
borrowed resources, or for the own company's pr oduction paid from own drawn or borrowed sources,
and a profit tax exemption for a five-year period, from the date of obtaining profit, but not more than
for seven years from the start of the productive activity).  It was applied only to newly established
companies in industry, having a foreign capital participation, to which foreign investors' share
represented at least US$ 50 million and a production with an integration value degree in Romania of aminimum 60 per cent and an export of minimum 50 per cent of the annual value of production.  The
request presented by Romania consisted of the ex tension of the transition period provided under
Article 5.2 of the TRIMs Agreement for the invest ments made in Romania under its Law no. 71 of
1994 and consequently concerned only the facilities already given to investors who decided to make
their investments under the above-mentioned Law.  Fully committed to comply with the multilateral
system rules, Romania had started even from 1997 the preparatory legal process aimed at the
elimination of the TRIMs.  Consequently, in Decem ber 1997 the Government of  Romania issued the
Emergency Ordinance no. 92 (approved in Decembe r 1998 by Law no. 241) regarding the stimulation
of direct investment, which established the general legal regime regarding the guarantees and facilities
the direct investors and investments in Romania enjoy.  Under the new legislation the incentives forinvestments were no longer subject to local content or compulsory export requirements.  At the same
time, the facilities in operation established according to Law no. 71 of 1994 were valid until the
expiry of the term for which they were granted.  Furthermore, in May 1999, the Government of
Romania issued the Emergency Ordinance no. 67 regarding measures for economic activityG/C/M/42
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development, which reiterated the fact that the incentives for investments were no longer subject to
local content or  compulsory export requirements.   In fact, at present, the notified criteria were no
longer applied, but for projects approved during the period when those criteria were in use were still
subject to TRIMs applied at that time.  Romania requested an extension of the transition period until
31 December 2004 in order to allow investors involved to accomplish their projects started under Lawno. 71 of 1994 and to ensure stability for the economic environment.  Law no. 71 of 1994 was
designed as a part of the Government programme of transition to a market economy with a view to
encouraging important foreign investments as a s upporting instrument for reshaping and modernizing
the economy. Romania would have serious difficulties to eliminate the above-mentioned measures
taking into account its development, financial and trade needs as well as the relatively low rate of
foreign investment.  In concluding, he expressed his delegation's openness for any request for
consultations with interested Members in order to resolve the issue as expeditiously as possible.
14. The representative of Pakistan said that the rationale for their request for extension of the
transition period was clearly set out in their application contained in document G/C/W/173.  It was
recalled that with issues relating to deadlines, it had been decided in the General Council meeting,
held on 17 December 1999, to further consult on these issues, and the Chairman of the GeneralCouncil had stated that "questions raised by a number of delegations concerning the provisions which
lapse and deadlines which expire on 31 December 1999, would be part of the consultations to be
continued.  The General Council will therefore revert to these matters when it resumes early next
year".  In this situation, it was appropriate that the consideration of this item be deferred until the
outcome of the General Council deliberations.
15. The representative of Mexico recalled that his delegation had repeatedly referred to the fact
that they had not made their request for an extension in advance of the Seattle Ministerial Conference
because they had hoped that after the Conference there would no longer be any need for making such
a request.  Like Pakistan, his delegation had preferred to wait and make a formal request for anextension until such a time as their discussions  in the General Council had concluded, in order not to
prejudge what might be their position or indeed what might be the results of these discussions of the
General Council.  In the particular case of Mexico, the so-called two-track approach  was not
necessarily the most appropriate.  Mexico preferred to have a multilateral approach in the course of
which the CTG determine what were the modalities to be followed in demonstrating that a Member
had particular difficulties in implementing the provisions of the TRIMs Agreement.   It was possible,
that under the concept of a case-by-case review, what would be a particular difficulty for one countrywould not be a particular difficulty for another.  There had to be some points in common.  How was
the CTG going to relate these particular difficulties to the other obligation that it had and that each
Member had in duly taking into account the development, financial and trade needs of the Members
who were making these requests?
16. The representative of Malaysia requested an extension of the transition period for one of its
two TRIMs as provided for under of Article 5.3 of the Agreement on Trade-Related  Investment
Measures.  In the communications to the WTO in documents G/TRIMs/N/1/MYS/1 dated
31 March 1995 and G/TRIMs/N/MYS/1/Rev.1 dated 18 March 1996, Malaysia had notified two
TRIMs under Article 5.1 of the TRIMs Agreement: a local content requirement related to investmentincentives and a local content policy on motor vehicles.  Malaysia was requesting a 2-year extension
(i.e. up to 31 December 2001) for one TRIM, namely the local content policy on motor vehicles.  This
request was made on the basis of its development, financial and trade needs.  The motor vehicle sector
had made significant contributions to the Malaysian economy with 1) investments of RM 13,668
million, 2) employment of 41,211 workers and 3) exports of RM 886 million in 1997,RM 1,373 million in 1998 and RM 1,007 million, in January to October 1999.  Imports amounted to
RM 7,400 million in 1997, RM 2,704 in 1998 and RM 3,646 million also in January to October 1999.
The financial crisis, which also had affected Malaysia, severely had impacted the development of the
motor vehicle industry in Malaysia.  It had set back Malaysia's industrialization programme in theG/C/M/42
Page 7
automobile sector which had been on track towards achieving economies of scale and global
competitiveness.  The economic downturn resulted in significant decline in demand where sales of
motor vehicles contracted by 59.5% from 404,837 units in 1997 to 163,924 in 1998.  Although sales
had improved marginally to 180,849 units in the first ten months of 1999, it was still markedly below
the sales achieved in 1997.  The significant depreciation of the ringgit had led to higher costs ofimported component parts and increasing costs of production.  This posed tremendous pressure and
financial constraints on the local vendors and motor vehicle manufacturers.  The removal of the
TRIMs on 1 January 2000 would have adversely affected the motor vehicle and the component
manufacturing industry.  It could lead to the closure of at least 200 companies.  This would result in
retrenchment of at least 6,200 workers and turnover loss of RM 995 million and put RM 1.6 billion
worth of investment in serious jeopardy.  It coul d also jeopardize the socio-economic objective of the
programme to nurture and spawn local entrepreneurs, particularly the indigenous community, as partof Malaysia's industrial development.  The entire Malaysian motor vehicle industry was undergoing a
period of consolidation and readjustment.  An extension of the transition period for TRIMs was
particularly crucial for industry's survival in the near term and recovery of reinvestment costs by the
motor vehicle industry.
17. The representative of the United States was prepared to consult individually with those
Members who had made requests and expected that they would be ready to address the issues quickly.
She did not believe that the CTG should attempt to develop modalities or guidelines for requests
under Article 5.3.  These modalities would be developed naturally and much faster as they moved
along in the process of the various requests case-by-case.  She hoped that countries would submit anyspecific questions to the requesting Members soon. Her delegation would individually consult with
requesting Members on a case-by-case basis to examine each country's needs which were different
and which each had their own individual situation that needed to be addressed.   The United States
would be considering offers made in consultation s, along with supplementary information provided.
Her delegation would submit questions in writing for circulation to all Members.
18. The representative of India agreed with Pakistan and Mexico.  With the General Council's
agreement at the meeting of 17 December 1999 in mind, the CTG should defer substantive
consideration of these requests until they had been considered in the General Council.  India took note
of the US comments and recalled that in a recent meeting of the Committee on Trade and
Development, the US had called for due restrain t regarding S&D and implementation since these were
being considered elsewhere.  India had agreed so long as a similar approach was followed in otherbodies.  The second point related to whether the specific requests should be dealt with individually or
multilaterally.  Individual consultations could in no way replace the multilateral consultations which
were provided for and which had been specifically mandated to the CTG in Article 5.3.  Individual
consultations could be at best in addition to the multilateral consultations.  Members had emphasized
both the non-discriminatory treatment of individual applications and the need to insure transparency
in the treatment of individual applications; these could only be ensured through a multilateral process.
The United States representative said that, concerning Pakistan's and Mexico's reference and to the
17 December 1999 meeting of the General Council, the Chairman had provided a statement on hisown responsibility as there had been no consensus.  The United States representative also said that
with regard to India's comment concerning the United States at the informal meeting of theCommittee on Trade and Development, the representative omitted the fact that the question was with
respect to the work programme to be decided in March and that the United States had accepted in the
informal meeting a two-track approach with regard  to the CTG's future work and work considered
elsewhere.
19. The representative of Japan was prepared to consult with countries in an expeditious manner.
His delegation was of the view that the requests should be considered on a case-by-case basis, as the
CTG had been doing with the Philippines, under th e presumption that the requesting country would
make serious efforts towards the ultimate removal of the TRIMs measure. A discussion on procedureG/C/M/42
Page 8
and criteria on the way of handling these requests could also be useful; it could for example ask the
requesting countries for a more detailed reason as to why they needed the extension or ask the
requesting countries to submit plans for the abolitio n of the TRIMs and enable them to monitor the
process.
20. The representative of Canada preferred that Members fulfil their previously agreed
obligations under the TRIMs Agreement.  Canada was willing to examine requests made before
1 January 2000 for extended phase-outs on a case-by-case basis, and it believed that the Council
should deal with all the requests that were before it as quickly as possible. Her delegation was open to
consultations but believed that each case should be considered on its own merits, although clearly it
was necessary to be cognizant of the fact that th ere would inevitably be comparisons. It was most
important that in each case there was a clear plan for the phase-out of the TRIMs and in the event thatthe Council gave consideration to extension, she wanted to see as short a phase-out as possible.
Referring to India's comment on the recent meeting of the Committee on Trade and Development, she
recalled that her delegation urged that the work programme be started.
21. The representative of the European Communities considered that it was appropriate for the
CTG to continue its consideration of these requests and to do so on a case-by-case basis according to
the two-track approach which had been followed. He considered that a number of delegations
requesting extensions would need to provide further and more detailed justification for their requests,
which would help in giving positive and sympathetic consideration to them.
22. The representative of Venezuela noted that in all the statements made by countries making
requests, there was effectively a wish to comply with commitments that had been assumed.  They had
also indicated that their requests were made on the basis of objective facts that had to do with
structural and social difficulties that they had encountered. The difficulties were not foreseeable at the
time when the commitments were assumed and these requests placed an obligation on the CTG toshow appropriate flexibility if it wished to contribu te to strengthening the multilateral trading system.
If the analysis were to take place on a case-by-case basis, this should be done as soon as possible.
There was a need for predictability on the part of the countries making the requests.
23. The representative of Brazil supported the idea that the broader context needed to be borne in
mind.  He reserved his position concerning the idea of case-by-case solutions and each specific
request presented.  Brazil would continue to look for balanced solutions with other Members to thisissue, taking into consideration the interests of all.  The representative of Bolivia said that her
delegation would be willing to consider favourably the requests made so far on the understanding alsothat the CTG had an interest in finding an appropriate solution for all the interested parties.
24. The representative of  Switzerland said that Switzerland was willing to participate in a review
process of the requests on a case-by-case basis in the context of the CTG on a formal and informal
basis.  In the light of a legal status of the measures in question (with the transition period having
lapsed), he thought that consideration of these re quests must be conducted as soon as possible. He
encouraged the countries in question to provide an y necessary information to Members so to be able
to reach a decision on reasonable transition periods including a timeframe for dismantling themeasures in question.
25. The representative of Hong Kong, China said that as a general principle each application
should be considered on its own merits, but at the same time, he welcomed discussions on the
identification of ways and means to facilitate the examination of Members' applications in asystematic, timely and transparent manner.  He ha d no difficulty with continuation of the two-track
consultation approach, provided that the solutions reached in individual consultations were subject to
endorsement by the CTG.G/C/M/42
Page 9
26. The representative of  the Czech Republic said that his authorities would be willing to accord
sympathetic consideration to those requests that were sufficiently justified and complied with the
respective provisions of the TRIMs Agreement.  The process should be expedited.  He expected the
countries seeking an extension would as a minimum sufficiently describe the background to their
request and provide the rationale, which was not the case with all the requests on the table.  Thesecond concern was the time-period contained in some of the requests;  he wanted to have a clear idea
concerning Members' plans, for making progressive adjustment and ensuring full compliance by the
end of the period in question.  He suggested that countries asking for the extension for more than one
year should submit a plan for the gradual removal of inconsistent measures to be reviewed by the
TRIMs Committee.
27. The Chairman said that,  first, he had heard a variety of views on the requests and on what the
appropriate process should be for treating these requests for extensions of the transition period;
secondly, it was widely appreciated that there would be a somewhat parallel dialogue taking place in
the General Council which could have a bearing on these requests and thirdly, at the same time the
CTG had a responsibility to give specific attention to the Article 5.3 requests.  He proposed to take
careful note of the comments made, and that the CTG provide for an informal two-track approach; ineach case each requesting Member was invited voluntarily to engage in consultations with a view to
assisting in the presentation of a solution for approval by the CTG.  It would be appropriate also for
the CTG to pursue informal consultations on the requests.  In addition it would be the obligation of
this Council to review the situation of the request s at the next formal meeting of the CTG.  He
proposed that any written exchange of questions and replies relating to these consultations should besubmitted for the information of the CTG.  The CTG would follow closely any relevant developments
in the General Council and he encouraged delegations to address requests for extensions of the
transition period as expeditiously as possible.
28. The representative of Mexico, supported by Pakistan and India, was not in a position to agree
that the other requests should follow the approach used in the case of the Philippines.  He did not see
reflected in the Chairman's comments  the concept su ggested by his delegation to the effect that there
should be formal and informal consultations which would guide all Members who had asked for
extensions, particularly in the light of the particular difficulties encountered by Members, and how
these related to the mandate to take into account the individual development, financial and trade needs
of the Member in question.  He did not wish to prejudge his position in the course of discussions
which were being held in the higher bodies of the WTO.
29. The Chairman, in response to a question from Australia as to whether new requests could be
allowed after 1 January 2000, said that according to the Secretariat there was no specific date
provided in relation to transition extension requests.  In an effort to try to meet all delegation's
positions he wanted to invite those requesting delegations who wished to initiate informalconsultations on their requests to do so with the approval of the CTG; this would be for each
requesting delegation to decide without obligation.  Secondly, he planned to make a careful
assessment of the situation and, when it would be appropriate, to convene informal consultations on
requests bearing in mind the General Council process. In the context of these informal consultations it
would be in the hands of all the Members to decide the breadth of the discussion that should takeplace.  Finally, that by way of the obligations un der the TRIMs Agreement, at its next formal meeting,
the CTG would review progress in all respects of these requests. He proposed that the Council agree
to the procedure.  It was so agreed.
3. Review of the Operation of the TRIMs Agreement
30. The Chairman recalled that at the meeting of 15 October 1999, the CTG had formally opened
this required review.G/C/M/42
Page 10
31. The representative of the United States said that the review should be seen as an opportunity
not to lower the standards outlined in the TRIMs Agreement.  Also there was no need to dwell on
issues like competition policy that had their own prog ramme of work in the WTO.  One possible topic
the US had looked at for the review to address was the utility of additional disciplines in the area of
performance requirements.
32. The representative of Pakistan said the review was of immense importance.  There were
various reviews mandated on the WTO agenda. He was not in favour of carrying out this review in
isolation from the others and urged the CTG to await the outcome of the discussions in the General
Council meeting on 7 February 2000.  Clear instructions from the General Council for conduct of the
reviews would facilitate discussions on the substantive issues.
33. The representative of Mexico said that in the case of the TRIMs Agreement, it was provided
that Members should have the opportunity of making amendments to the text of the Agreement and
thus that it was as a mandated negotiation. It might be appropriate to leave this matter in abeyance
until further discussions in the General Council in or der to have a clearer idea as to how to proceed.
34. The representative of India supported Pakistan  and Mexico.  He thought it would be wrong to
prejudge, before the review had started, that the intention of the review was not to lower standards
outlined in the TRIMs Agreement.  It was difficult to go along with such a presupposition because the
review was to provide an opportunity for Members to  list the problems that they had in implementing
the provisions of the Agreement and thereby to see how they could perhaps best move forward.  Itwas important to have an open mind on where this review would lead.  He expressed his reservation
regarding the idea to exclude competition policy issues.
35. The representative of Malaysia agreed with the statements made by Mexico, Pakistan and
India to the extent that this review should be treated as a package  and as part of the in-built agenda.
He too had difficulties in accepting the US presuppo sition that any review should not result in a
lowering of the present standards.  Similarly too, this question of presupposing that competition
policy should not be part of such a review was prem ature.   The representative of Hong Kong, China
said his delegation had no preconceived views on the outcome on the review and shared the concerns
expressed by India and Malaysia in that elements of investment and competition policy should not a
priori  be excluded.  The representative of Switzerland hoped that the review would begin as soon as
possible and also that it be as broad in scope as possible without any a priori  exclusion.
36. The representative of Canada said that the built-in-agenda simply meant that negotiations
would proceed in certain areas, and reviews, too.  The review should take place as expeditiously as
possible.  She recognized that there may need to be consultations on the exact parameters of the
review. Discussions on trade and investment and trade and competition policy would moreappropriately be addressed in the context of the Working Groups that had been set up to deal with
these issues.
37. The Chairman proposed that the CTG take note
 of all the comments made associated with this
review.  Secondly, given the responsibility of the C ouncil for Trade in Goods in Article 9, he invited
Members to submit papers regarding the scope and the format of the review at the time they
considered appropriate. This issue would be on the agenda for the next meeting.
4. Review of the Understanding on the Interpretation of Article XXVIII of the GATT 1994
38. The Chairman recalled that paragraph 1 of the Understanding on the Interpretation of
Article XXVIII of the GATT 1994 stated that this paragraph would be reviewed by the CTG five
years from the date of entry into force of the WTO Agreement. He noted that during the Uruguay
Round of Negotiations, the Negotiating Group on GATT Articles (NG7) had reviewed a number ofG/C/M/42
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GATT articles including Article XXVIII relating to "Modification of Schedules".  Under
Article XXVIII there were three categories of Members which had a right to participate in the
negotiations and consultations with the Member proposing a modification to its schedule.  Those
holding initial negotiating rights, those having a principal supplying interest, and those having a
substantial interest.   One of the elements of Article XXVIII which had been discussed in the GATTArticles Group concerned the criteria pertaining to principal supplier interest and these discussions
had led to paragraph 1 of the present Understanding.
39. Paragraph 1 of this Understanding stated that "for the purposes of modification or withdrawal
of a concession, the Member which has the  highest ratio of exports affected by the concession (i.e.
exports of the product to the market of the Member modifying or withdrawing the concession) to its
total exports shall be deemed to have a principal supplying interest if it does not already have any
initial negotiating right or a principal supplying interest as provided for in paragraph 1 of
Article XXVIII.  It is, however, agreed that this paragraph would be reviewed by the CTG five years
from the date of entry into force of the WTO Ag reement with a view to deciding whether this
criterion has worked satisfactorily in securing a redistribution of negotiating rights in favour of small
and medium-sized exporting Members. If this is not the case, consideration will be given to possibleimprovements including, in the light of the availability of adequate data, the adoption of a criterion
based on the ratio of exports affected by the concession to exports to all markets of the product in
question".
40. He added that since the entry into force of the WTO Agreement there had been only nine
Members who had invoked Article XXVIII and only one Member so far had concluded its
Article XXVIII negotiations.  The representative of the United States said that this was not a
controversial issue and was satisfied to having deemed  this review to have taken place if the Council
was so willing.  The representative of Switzerland wanted this issue to be discussed at a more
technical level in the Market Access Committee or on an informal basis under the umbrella of the
CTG.
41. The Chairman proposed that the CTG request the Market Access Committee to examine this
question and to provide a report on this matter to the CTG before the end of 2000.   It was so agreed.
5. Free Trade Agreements
42. The Chairman drew Members' attention to the three Agreements that had been notified under
Article:
A. Free Trade Agreement between Hungary and Lithuania
Notification from Hungary (W T/REG83/N/1 and WT/REG83/1)
B. Free Trade Agreement between Hungary and Latvia
Notification from the parties to the Agreement
(WT/REG84/N/1 and WT/REG84/1)
C. Free Trade Agreement between the Former Yugoslav Republic of Macedonia and
Slovenia
Communication from the parties to the Agreement (WT/REG36/N/1 and
WT/REG36/1)
43. As there were no comments, the Chairman proposed that the Committee on Regional Trade
Agreements carry out the examination of the Agreements in accordance with the following terms of
reference:  "to examine, in light of the relevant provisions of the GATT 1994, the Free TradeG/C/M/42
Page 12
Agreements – between Hungary and Lithuania;  between Hungary and Latvia;  and between the
Former Yugoslav Republic of Macedonia and Slovenia – and to submit a report to the Council for
Trade in Goods.  It is understood that the understa nding read out by the Chairman of the Council for
Trade in Goods under item 7 of the agenda of the meeting of the Council for Trade in Goods on
20 February 1995, as contained in document WT/REG3/1, will apply mutatis mutandis  to the
examination of the Agreements.  It is also understood that, during the examination, due account will
be taken of the intrinsic differences between customs unions and free-trade areas".  The Council so
agreed.
6. Other Business
(a) Customs Valuation:  Progress report by Peru
44. The representative of Peru stated that the decision on the waiver granted to Peru in July 1999
regarding the Agreement on the Implementation of Article VII of GATT 1994, stated inter alia  that
Peru had an obligation to give the CTG two progress reports in November 1999 and February 2000.
She indicated to Members that the 1999 November report and the tariff headings had been submitted
to the WTO within the deadline and had been circulated to Members in G/C/W/176 and G/C/3.
45. The representative of the United States said that Peru had shown leadership in moving ahead
in this matter.  Peru was well known for its achievements in bringing reforms and efficiencies to its
customs administration.  It was apparent from the reports submitted that these efforts to improve the
overall trade and investment environment are continuing in a rapid pace.  The representative of
Canada believed this was a model for the kinds of reports that should be provided and reflected Peru's
diligent work in advancing in its customs valuation system.
(b) FTA between Bulgaria and Macedonia
46. The representative of Bulgaria informed the Council that the Republic of Bulgaria and the
Republic of Macedonia had concluded a Free Trade Agreement which was signed 13 October 1999
and entered into force on 1 January 2000.  The Agreement provided for the gradual establishment of a
free-trade area between the Republic of Bulgaria and the Republic of Macedonia in the sense of
Article XXIV of the GATT 94 and the Understandin g on the Interpretation of Article XXIV of the
GATT 94 over a transitional period lasting a maximum of 5 years.  At the end of the transitional
period all duties and other restrictive regulations of commerce would have been eliminated on
substantially all the trade between the signatories.  A notification to WTO had already been made and
a copy of the FTA was annexed to that notification.
47. The Chairman gave an update on the situation regarding the appointment of officers for the
subsidiary bodies of the CTG.  His consultations on this question were taking place in the context of
other appointments to WTO bodies.  He was lookin g to conclude the consensus appointment of Chairs
of these bodies by the time of next CTG,  scheduled for 5 April 2000.
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