RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG90/M/1
10 August 2000
(00-3274)
Committee on Regional Trade Agreements
Twenty-Sixth Session
EXAMINATION OF THE FREE TRADE AGREEMENT BETWEEN
BULGARIA AND THE FORMER YUGOSLAV REPUBLIC MACEDONIA
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.VIII of its Twenty-Sixth Session, the Comm ittee on Regional Trade
Agreements (hereinafter CRTA or the Committee) took up the examination of the Free Trade
Agreement (FTA) between Bulgaria and the Former Yugoslav Republic of Macedonia (FYROM).
The following topics were discussed:
A. G ENERAL REMARKS
B. S ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENT
C. S ECTION II - TRADE PROVISIONS
D. S ECTION III - G ENERAL PROVISIONS OF THE AGREEMENT
A. G ENERAL REMARKS
3. The Chairman said that the notification of the Agreement could be found in document
WT/REG90/N/1, with the text of  the Agreement appearing in document WT/REG90/1.  He proposed
to use the Standard Format, document WT/REG90/3, to guide the debate.  He recalled that the terms
of reference for the examination were adopted on 5 April 2000 and contained in document
WT/REG90/2.
4. The representative of Bulgaria said that Macedonia and Bulgaria were two neighbouring
States with traditionally strong ties, attaching particular importance to the development of their
bilateral relations.  The Agreement was a continuation of that policy and a contribution to the
strengthening of the political stability of the Balkans and the economic development in the region.
The relations between the two countries had intensified over the last few years, when a number ofagreements had been concluded:  on trade and cooperation; on mutual protection and promotion of
investments; on avoidance of double taxation; on customs co-operation and assistance; on the
establishment of new border check-points; and on the connection of transport networks.  In the period
1992-1995, bilateral trade had followed an upward tr end, reaching 602 million US dollars in 1995.
That considerable growth had been due to a great extent to specific circumstances in the region.  In1996, trade had dropped to 174 million US dollars, with a smaller decrease in 1997 and a slight
growth in 1998.  As a result, Macedonia ranked fourt eenth in the overall trade of Bulgaria and third in
Bulgaria's trade turnover with the Balkan countries.   Bulgaria ranked eighth in the trade of MacedoniaWT/REG90/M/1
Page 2
and fourth among Balkan countries.  During the first quarter of 2000, when the FTA was already in
force, trade between Bulgaria and Macedonia had increased by 15 per cent as compared to the same
period in 1995.  The FTA had been signed in October 1999 and had entered into force on
1 January 2000, after the completion of the ratification procedures by both Parties.  It had been
notified to the Council for Trade in Goods (CTG) on 21 January 2000 in accordance with ArticleXXIV:7(a) of GATT 1994.  Comprehensive background information in the Standard Format had been
distributed in document WT/REG90/3 of 20 June 2000.  The Agreement provided for the gradual
establishment of a free-trade area in conformity with Article XXIV of GATT 1994 and the
Understanding on the Interpretation of Article XXIV of the GATT 1994  (the "Understanding"), over a
transitional period ending in December 2004.  By the end of the transitional period, all duties and
other restrictive regulations of commerce would be eliminated on substantially all the trade between
the signatories.  The Agreement covered trade in industrial, agricultural, processed agricultural andfishery products, originating in Bulgaria or in Mace donia.  With the entry into force of the Agreement,
customs duties and other restrictive regulations of commerce on all industrial and certain agricultural
products had been abolished or decreased; hence the Agreement met the Article XXIV requirement
that a free-trade area cover substantially all the trade between the constituent territories in products
originating in those territories.  The Parties had agreed to periodically examine the possibilities of
granting further concessions on trade in agricultural products.  The rules of origin enabled only
bilateral cumulation of products between the Parties.  With a view to ensuring a proper functioning of
the free-trade area, the Agreement also contained provisions on State monopolies, competition, public
procurement and protection of intellectual property rights.  An Evolutionary Clause enabled the
Parties to develop and deepen their relations by extending them to fields not covered by theAgreement.  The Parties to the FTA expected that it would provide for a fair competitive environment
thus contributing to significant bilateral trade growth and sustainable economic development for both
countries.
B. S
ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENT
5. The representative of the United States said he had a number of questions.  First, he noted that
Annex II of the Standard Format indicated that the provisional application of the Agreement was dealt
with in Article 40 but the rest of the document did not mention it.  He asked for a confirmation that no
tariff rates had been changed prior to the date of entry into force of the Agreement, namely
1 January 2000.  Second, under Section I.2 of the Standard Format, the Parties had indicated that the
Agreement provided for the gradual establishment of a free-trade area.  He asked for a confirmation
that the Agreement notified referred to an interi m agreement leading to the creation of a free-trade
area and not to a free-trade area Agreement.  Third, according to Section I.3 of the Standard Format,
Chapters 1-97 of the Harmonized System (HS) we re covered by the Agreement; however, no detail
was provided as to how certain items, such as ag ricultural products, obtained duty-free treatment.
Noting that Annex I to the Agreement listed products excluded from the scope of industrial products
and considered to be agricultural products for the purposes of the Agreement, he sought confirmationthat those agricultural products were excluded from the scope of the Agreement.  Fourth, again under
Section I.2 of the Standard Format, the Parties had stated that the transitional period would last a
maximum of five years.  He asked for a confirmation that there would be no items remaining to be
implemented after the ten year period contemplated in the Understanding.
6. The representative of Australia said that his delegation had a number of questions for the
Parties to be replied in writing.  Those related to the way the Parties had established which
agricultural products would be included in the Agreement; the percentage of trade in the agricultural
and industrial sectors which faced zero duties, less than MFN rates or MFN rates; the specific
agricultural product lines which faced zero duties, less than MFN rates, or MFN rates; and the plans
of the Parties to ensure that a greater proportion of trade in agriculture would be subject to a duty rateof zero per cent to meet the requirement of covering substantially all the trade.WT/REG90/M/1
Page 3
7. The representative of Bulgaria stated that the Agreement was creating a free-trade area, not
creating one in the future.  The Agreement provided for a very short transition period not even
reaching ten years.  He requested that the second question posed by the representative of the
United States be provided in writing.  He noted that data would be provided on percentage of trade
facing zero, less than MFN and MFN rates, as request ed by the representative of Australia.  However,
as stated during the examination of other agreements, his delegation was of the view that the provision
of information on specific tariff lines was not necessary.
C. SECTION II - T RADE PROVISIONS
8. The representative of Canada asked the Parties to first clarify further Article 18 of the
Agreement, which provided for the maintenance of an element of preference for the other Party when
tariffs were increased as part of a structural adjustment measure, and in particular how muchpreference was contemplated.  She also asked for a confirmation that the whole Article would become
null and void at the end of the transition period in December 2004.  Second, noting that the Parties
had indicated that they would endeavour to accede to the WTO Government Procurement Agreement,
she asked whether both Parties needed to accede at the same time or whether they could do so at
different times.
9. The representative of the United States said that his delegation was also interested in the
questions on structural adjustment and government procurement and on a number of other points.
First, referring to import restrictions in Section II .1 of the Standard Format, he asked for more specific
information on the sensitive products on which the Parties had retained existing protective measures
and on the nature of such restrictions.  He also asked for further details on the "existing protectivemeasures on imports and customs administration fees" referred to at that same sub-section.  Second,
referring to the introductory statement by Bulgaria that the Parties applied a bilateral cumulation of
origin regime, he wondered whether the Agreement contemplated the eventual adoption of the
pan-European system of cumulation, and if so, what change would be required in the Agreement
given that one of the Parties was already participating in that system.  Third, he asked on what basisand to which countries safeguard measures were applied and whether any such measure had been
implemented.  Fourth, he asked for more information on the exceptional treatment of agriculture
under the Agreement.  Finally, he was looking fo rward to receiving the statistical information
requested by the representative of Australia.
10. The representative of Japan joined the representative of the United States in asking for more
information on the sensitive products and on the application of safeguard measures, in particular
whether the same procedures applied to both Parties.
11. Referring to the question on structural adjustment measures, the representative of Bulgaria
said that the provision calling for the maintenance of an element of preference had not been used thus
far.  That provision could only be applied under certain conditions.  There was a limit on the amount
up to which duties could be raised and it was only intended for industrial products, infant industries,
or sectors undergoing restructuring or facing serious difficulties, especially where there wereimportant social problems.  She confirmed that the measure could only be applied until the expiration
of the transitional period.  Regarding the Government Procurement Agreement, she did not see any
reason why the Parties would need to join it at the same time.  Bulgaria had the obligation to do so
and would start negotiations soon; for Macedonia, that would be negotiated during its accession
process.  The aim of the relevant provision in the Agreement was to open the Parties' publicprocurement markets, develop rules and conditions and grant other Party's suppliers access that would
be not less favorable than that accorded to compan ies of any third country.  She also clarified that
import restrictions on most sensitive products applied to a limited number of tariff lines, which were
described in the Agreement (Annexes II.C for Bulgaria and III.C for Macedonia).  In the case ofWT/REG90/M/1
Page 4
Bulgaria, they constituted 1.7 per cent of all tariff lines, covering fuels and oil, steel products,
aluminium articles, appliances, and electrical machinery.  In the case of Macedonia, they represented
3.2 per cent of all tariff lines, covering fuels and oil, textiles and apparel , iron and steel articles,
electrical machinery and equipment, and some vehi cles.  Details would be provided in writing on
customs fees mentioned in the same section, which only concerned Macedonia.  In reply to thequestion on cumulation of origin, the representative of Bulgaria explained that it was possible that the
Parties might change the Agreement to adopt the pan-European cumulation of origin; however,
Macedonia would first need to conclude a number of agreements and that was not contemplated at
that moment.  She also said that no safeguard measures had been implemented thus far; should
consultations be held to introduce such a measure, the Parties would consider the least restrictive
measures possible and in no way disregard their rights and obligations under the WTO Agreement on
Safeguards.  The Preamble to the Agreement stated that none of its provisions might be interpreted asexempting the Parties from their obligations unde r international agreemen ts especially GATT 1994
and the Marrakesh Agreement.  Finally with respect to the treatment of agriculture she referred
Members to the Agreement itself and its Protocol A.   Although it was not clear what was meant by the
"exceptional treatment of agriculture", her delega tion would be ready to submit additional information
on coverage of both industrial and agricultural products.  Another representative of Bulgariaconfirmed that all customs duties on industrial products would be eliminated by January 2005.
D. S
ECTION III - G ENERAL PROVISIONS OF THE AGREEMENT
12. The representative of the United States asked whether there was anything in the Agreement
that would prevent or discourage the Parties from making multilateral concessions, including tariff
reductions or commitments in agriculture and services.  The representative of Bulgaria responded in
the negative.
13. The Chairman said that the first round of ex amination of the FTA between Bulgaria and the
FYROM had allowed the Committee to clarify a number of questions, but some others were pending.
He invited delegations to forward additional questions to the Secretariat by 13 September 2000 andthe Parties to submit replies as soon as possible but not later than 15 October 2000.  The next round of
examination could then be scheduled for a forthcoming meeting.
14. The representative of the European Communitie s underlined that the Agreement, along with
some others examined in the Committee, was part of a bigger picture and contributed to stabilize that
particular region.  Despite the fact that all WTO Members had rights and obligations which they
should exercise, the special situation of some of the smaller countries in Central or Eastern Europe
and in the Western Balkans needed to be recognized and taken into account when posing questions.These questions often reflected the difference of views between delegations and were not relevant in
the context of agreements entered into by those coun tries.  He appealed to delegations to limit their
requests for information to the minimum.
15. The Committee took note of the comments made.
__________