RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG77/M/1
10 August 2000
(00-3278)
Committee on Regional Trade Agreements
Twenty-Sixth Session
EXAMINATION OF THE FREE TRADE AGREEMENTS BETWEEN
THE REPUBLIC OF ESTONIA,THE REPUBLIC OF LATVIA
AND THE REPUBLIC OF LITHUANIA
Note of the Meeting of 7 July 2000
Chairman:  Mr. Jae Gil Lee (Korea)
1. The meeting was convened in document WTO/AIR/1339.
2. Under Agenda Item D.IX of its Twenty-Sixth Session, the Committee on Regional Trade
Agreements (hereinafter the Committee) took up th e examination of the Agreements between Estonia,
Latvia and Lithuania.  The following topics were discussed:
A. G ENERAL REMARKS
B. S ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENTS
C. S ECTION II - T RADE PROVISIONS
D. S ECTION III - G ENERAL PROVISIONS OF THE AGREEMENTS
3. The Chairman said that the Committee would be reviewing three separate Agreements:  one
dealing with industrial products, another with ag ricultural products and the third one with the
abolition of non-tariff barriers, which jointly led to the creation of a free-trade area among those three
countries.  The notification of the three Agreem ents could be found in document WT/REG77/N/1,
with their texts appearing in document WT/REG77 /1.  He proposed to use the Standard Format,
document WT/REG77/3, to guide the debate.  He recalled that the terms of reference for the
examination were adopted on 2 July 1999 and were contained in document WT/REG77/2.
A. G ENERAL REMARKS
4. The representative of Latvia welcomed the opportunity to submit the Agreements for
examination.  Two of the Parties, Latvia and Estonia, were new Members of the WTO and one,
Lithuania, was at the final stage of its accession process.  It was important to emphasize that the threeAgreements - the Free Trade Agreement (FTA) on industrial products, the FTA on agricultural
products and the Agreement on Non-Tariff Barriers - constituted a single undertaking from the
perspective of GATT Article XXIV.  Although the Ag reements had been concluded at different stages
of time, at that time they operated as a single set of interrelated legal documents and economic tools.
Two of the Agreements – the FTA on industrial products and the FTA on agricultural products - wereadministered by a single Joint Committee, and the Joint Committee of the Agreement on Non-Tariff
Barriers reported to it.  All three Agreements were trilateral and together constituted the basis of the
Baltic Free-Trade Area (BAFTA).  When negotiating the BAFTA, the Parties had been guided by theWT/REG77/M/1
Page 2
importance of the traditional, historic and spiritual bonds between the three States and the common
values which united them, as well as by their wish to strengthen those bonds and establish closer and
more durable co-operation and economic integration.  The Parties were convinced that the
establishment of a free-trade area significantly contributed to the increase of free trade, development
and closer integration of their economies.  At the same time, the BAFTA was an importantcontribution to the process of European integration.  The purpose of the BAFTA was to promote
intensification of trilateral and multilateral trade on the basis of mutual advantage without putting
obstacles to trade with third parties in accordance with GATT Article XXIV:5(b).  The three
Agreements set up a free-trade area between Estonia, Latvia and Lithuania in the sense of the
definition provided in GATT Article XXIV:8, covering all trade between the Parties.  Customs duties
for products originating in the Parties as well as quantitative restrictions and other equivalent
measures had been eliminated with the entry into force of the Agreements forming the BAFTA.  The
Parties were convinced that the Agreements were in full conformity with GATT Article XXIV.  In
examining the Agreements through the provisions of paragraphs 5 and 8 of GATT Article XXIV, in
particular the reasonable time-limit for the establishment of a free-trade area and the elimination of
customs duties, delegations should not interpret the provisions of the Agreements as a precedent, but
as a factual element which responded to the specific situation in relations between Estonia, Latvia andLithuania; the Agreements should have no impact on the examination of other free trade agreements
concluded by the Parties or on the Committee's systemic debate.  In conclusion, she drew attention to
the Standard Format prepared by the Parties, where detailed information on the BAFTA trade
regulations could be found, and to the extensive statistical information provided in Annexes to it.
B. S
ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENTS
4. The representative of the United States noted that there were three separate agreements
concerning industry, agriculture and non-tariff barriers, which were legally integrated.  He wondered
whether each of the Agreements had separate provisions for items such as State-aid, subsidies and
rules of origin, or whether the FTA referred to in Section I.1(a) of the Standard Format governedthose various items.  The representative of Latvia replied that there was a separate Joint Committee
decision setting up one set of common rules of origin, which was that applied under the pan-Europeancumulation system.  With respect to State-aid, there were separate provisions in each of the
Agreements given the specific nature of subsidization of the related products.  Regarding other trade
regulations, the Agreements contained very similar provisions, for instance concerning safeguards or
anti-dumping.
5. Referring to the information contained in Annex 4 of the Standard Format and to the
statement made by the representative of Latvia that  all trade between the Parties was duty-free, the
representative of the United States asked whether there were any duties remaining on any product for
which no trade had occurred in the past, perhaps due to trade restrictive measures.  He also asked for aconfirmation that the elimination of duties and other restrictive regulations of commerce for all
products would take place within the ten-year period contemplated by the Understanding on the
Interpretation of Article XXIV of the GATT 1994 .  The representative of Latvia replied that all import
duties had been eliminated with the entry into fo rce of the Agreement and confirmed that, as there
were no exemptions, the ten-year period was not necessary.
6. The representative of Australia asked why the Parties had negotiated three separate
Agreements and whether the Parties were contemplating any other agreements to complement their
initial Agreements.  The representative of Latvia replied that it was due to historical reasons.  Initially
the Parties had tried to negotiate an agreement including both industrial and agricultural products, butthey had not succeeded on agriculture in the first rounds.  The negotiators had not wanted to lose the
achievements on industrial products and had therefore concluded first the Agreement on industrial
products and subsequently the Agreement on agricultural products.WT/REG77/M/1
Page 3
7. The representative of Canada asked whether there was any contemplation to negotiate an
agreement on trade in services.  The representative of Latvia replied that Parties had considered a
services agreement; however, as they had found that the legal regimes of the Parties were liberal
enough, no agreement had been concluded.
C. SECTION II - T RADE PROVISIONS
8. Referring to Article 11 of the Agreement on trade in agricultural products, which stated that
"export subsidies granted by a Party which distort or threaten to distort competition by favouring
certain undertakings or the production of certain goods shall, insofar as it may affect trade between
Estonia, Latvia and Lithuania, be incompatible wi th the proper functioning of this Agreement", the
representative of Australia asked how the Parties would judge whether the trade was distorting or
threatening to distort competition.  He wondered whether it would be more appropriate to
multilateralize that commitment to minimize trade diversion.  The representative of  Latvia replied
that there were no specific criteria as to how the Parties would establish whether the competition hadbeen distorted as a result of export subsidies;  that was exclusively under the competence of the Joint
Committee.  As for multilateralization, some kind of trilateralization had already taken place, in that
Estonia and Latvia had committed themselves not to use export subsidies and Lithuania would followsoon.  The representative of Lithuania added that Lithuania was the only Baltic state which
maintained export subsidies although in practice it did not apply them to its exports to Estonia andLatvia.  It was necessary to create additional rules in this respect for a proper functioning of the
Agreement.  He confirmed that Lithuania would make a commitment to eliminate export subsidies
upon its accession to the WTO.
9. The representative of the United States asked whether safeguards had ever been applied under
the Agreement.  The representative of Latvia said that no safeguard measures had been used either
exclusively between the Parties, nor by one Party to third parties where the other two Parties were
excluded.
D. SECTION III - G ENERAL PROVISIONS OF THE AGREEMENTS
10. The representative of the United States asked for a confirmation that there was nothing
contained in the Agreements that would in any way prevent or discourage the Parties from making
multilateral concessions, including MFN tariff reductions or commitments in services or agricultural
sectors.  The representative of Latvia so confirmed.
11. The Chairman said that the factual examination of the Agreements had been completed.  He
proposed that the Committee ask the Secretariat to be gin drafting the report of the examination so that
the Committee could then proceed to consult on the conclusions.
12. The Committee took note of the comments made.
__________