RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG32/M/2
14 July 1998
(98-2777)
Committee on Regional Trade Agreements
Eighteenth Session
EXAMINATION OF THE INTERIM AGREEMENT
BETWEEN SLOVENIA AND THE EUROPEAN COMMUNITIES
Note on the Meeting of 7 July 1998
Chairman:  Mr. Chul-Ki Ju (Korea)
1. Under Agenda Item D.II of its Eighteenth Session, as found in Airgram WTO/AIR/871, the
Committee on Regional Trade Agreements (CRTA) took up the examination of the InterimAgreement between Slovenia and the European Communities.  The following topics were discussed:
A. General Statements
B. Trade Provisions
- Scope- Quantitative Restrictions
- Rules of Origin
- Safeguards
- Sector Specific Provisions
A. General Statements
2. The Chairman said that this was the second round of examination of the Interim Agreement
between Slovenia and the European Communities (EC).  Summary records of the first round of
examination, held during the Committee's Sixteent h Session in February, had been distributed as
document WT/REG32/M/1.  The Parties had subsequently provided replies to a number of questionssubmitted to them in writing, recently distributed as document WT/REG32/4.  He had been informed
that it was the Parties' intention to respond to outstanding questions orally during the day's meeting.  It
was his hope that the Committee would be able to conclude its factual examination of this Agreement
in the day's meeting in order to enable the Secret ariat to begin drafting the report.  He proposed that
the Committee follow, as far as possible, the structure of the Standard Format for the EC-SloveniaAgreement (document WT/REG32/2 and Corrigendum 1), given that the recently distributed
document with questions and replies also adhered to this format.
3. The representative of the European Commun ities said that the Parties welcomed the
opportunity to  continue the examination of this Agreement.  They had worked together to produce
answers to the written questions submitted by Me mbers and they hoped that these answers, together
with the information already supplied and the oral  explanations they would provide in the day's
meeting would help advance the examination.  Me mbers were now in possession of a considerable
amount of detailed information on this Agreement.  He explained that the economic and commercial
relationship between the EC and Slovenia continued to develop in a positive manner.  The total
two-way trade for 1997 had amounted to ECU10.9 billion (or about USD11.9 billion) compared toWT/REG32/M/2
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ECU9.5 billion for the year before, representing an increase of 13 per cent.  Furthermore, in the
context of Slovenia's accession to the European Union, the screening process which was intended to
determine Slovenia's readiness to undertake all the obligations of the acquis communautaire  was
progressing well.  It was important that the Committee keep this broader context in mind when
considering this Agreement.  The eventual accession of Slovenia to the European Union would, bydefinition, involve full liberalisation of all trade between the Parties.  He reiterated a number of key
points about the Agreement: it covered all sectors, i.e. Chapters 1-97 of the Harmonised System (HS);
any transitional or implementation periods would last for a maximum of six years; two-way trade in
all industrial products would be duty-free at the latest on 1 January 2001; and no duties or other
regulatory barriers to the trade of non-parties had been raised as the result of the establishment of this
free-trade area.  It was his delegation's view that the Agreement provided for a free-trade area in the
full sense of Article XXIV of the GATT and was entirely in conformity with it.
4. The representative of the United States said  that given the fact that document WT/REG32/4
(dated 2 July) had not been included in the Airgram and had been circulated late, he had not yet
received instructions from his capital.  Thus, he did not consider that it would be possible to conclude
the examination in the day's meeting. The representative of Japan said that given the late arrival of the
document his delegation also needed further time to review it.
B. Trade Provisions
5. The representative of Australia said that he appreciated the responses to the questions he had
raised and the information which had been provided on particular issues, such as wine and duty
drawback, had been helpful in improving his delegation's understanding of the Agreement.  However,
his delegation continued to have concerns about the compliance of the Agreement with the
requirement to eliminate duties and other regulations of commerce on substantially all the trade.  He
had noted the Parties' comments in document WT/REG32/4 that various data which had been
requested were not available; his delegation was not sure how best to proceed in the absence of suchdata.  The Parties had stated that all HS Chapters were covered, yet the Agreement seemed to provide
for a combination of free and preferential trade.  A clarification of what proportions of trade were at
duty-free or preferential rates would be helpful, even if this was based on past trade flows.  He had a
number of additional questions, many of them detailed, which the Parties might not be able to answer
immediately.  The reply to the first question in  document WT/REG32/4 on scope referred to the
preferential treatment that Slovenia would enjoy with regard to wine exports to the EC.  Would
Slovenia's share of the quota previously granted to the former Yugoslavia be on a duty-free basis?
The Parties' reply stated that the Council had "decided that a maximum duty free tariff quota of
100,000 hl might be granted to Slovenia" and he assumed that the doubt expressed here referred to the
quantity, not the duty.  With reference to the second question in WT/REG32/4, the Parties had stated
that bilateral trade concessions on processed agricultural products were set out in Protocol 3 and that
trade in these products was not excluded from the coverage of the Agreement, "even if fullliberalisation [wa]s not immediately foreseen".  Since it was not apparent from the information
provided in document WT/REG32/2 when liberalisation was foreseen, he would appreciate further
information on this issue.
6. The representative of Australia continued, requesting other clarifications from the Parties.  He
said that Section II.5 of the Standard Format (document WT/REG32/2), de aling with safeguards,
referred to the "particular sensitivity" of agricultural markets and the fact that in the case of serious
disturbance to the markets of the Parties, the Party concerned could "take the measures it deem[ed]
necessary", pending solutions resulting from consultations between the Parties.  He asked if there
were any guidelines in the Agreement, or any restrictions on the measures that might be deemed
necessary by a Party, since it appeared from document WT/REG32/2 that measures could be takenbefore consultations leading to a solution.  He also had a question on Section II.8(a), sector specificWT/REG32/M/2
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provisions dealing with textiles, where the Parties had tried to clarify the relationship between
Protocol 1 of the Interim Agreement which applied to trade in textiles and clothing products and the
Provisional Protocol which had been applied until 1 January 1998.  He asked if the statement that "the
protocol contained the conditions under which quantitative limits may be introduced" referred to the
Provisional Protocol, which he assumed was no longer applicable.  If this was the case, was there, infact, no longer a provision for the possible introduction of quantitative limits in the textile sector?
Lastly, in Section II.8, sector specific provisions on agriculture (page 9 of document WT/REG32/4),
the Parties had been asked whether substantial barriers to trade in agriculture and fisheries between
the Parties would remain by 1 January 2003.  They had replied that the Agreement was consistent
with the provision of Article XXIV:8(b), but had not answered the question.  It would be helpful to
have an answer to this question in order to enable Members to make this judgement themselves.
7. The representative of Canada pointed out that, in response to some essential questions, for
example in pages 2 and 3 of document WT/REG32/4, the Parties' response was that the requested
information was not available.  It was his delegation's view that this information was necessary in
order to assess the Agreement's consistency with Ar ticle XXIV of the GATT.  He asked the Parties to
do their utmost to provide this information as it would facilitate the Committee's task of examination.
His second point concerned rules of origin.  Since this Agreement was governed by the so-called pan-European system of cumulation of origin, it was essential that further detailed information on the
nature of these rules be provided to the Committee in  order to assess their implication for consistency
with Article XXIV.  The representative of the  United States supported the requests for trade data and
further details on the rules of origin.
8. The representative of Japan supported the request for accurate trade data.  He pointed out that
page 2 of the Standard Format for Information on Regional Trade Agreements (document
WT/REG/W/6), stated that data on intra and extra-tr ade should be made available.  His delegation had
asked for an assessment of the trade creation and trade diversion effects of the Agreement and the
Parties should try to answer such questions wherever possible.  His delegation was interested in
details of extra-trade, according to major products and partners, for the most recent period for whichstatistics were available.  On page 3 of document WT/REG32/4, the Parties had stated that "it should
be noted, however, that the Parties do not consider that WTO rules in this area require any
consideration of the Agreement from the perspective of trade creation or diversion".  It was his
delegation's view that paragraphs 4, 5 and 7 of Article XXIV provided justification for Members to
request such information.  If Parties responded in this fashion it would set a bad precedent and would
shrink, rather than enhance, transparency in the Co mmittee's work.  With regard to import restrictions,
he appreciated the statement made by the representative of the European Communities that the Partieshad not raised MFN duties.  The Parties had stated in document WT/REG32/2 that they had abolished
all quantitative import restrictions, but it was his understanding that import quotas should also be
considered as quantitative restrictions and it was not clear whether or not the Parties maintained any
such import quotas.  He requested more detailed information on the operation of any remaining
preferential import quotas in favour of the Parties, not in favour of third countries.  Additionally, heasked whether the Parties had introduced any new quantitative restrictions or preferential import
quotas at the formation of the free-trade area.
9. The representative of Japan continued, saying that his delegation would appreciate further
details on the operation of the pan-European system of cumulation of origin.  He said that his
following questions were addressed to the representative of Slovenia as his delegation assumed thatSlovenia might have raised restrictions against third countries during its harmonisation process.
Specifically, he asked if Slovenia had raised local-content ratios to grant origin in the process of
harmonising its rules of origin with those of the EC .  In what sector or products did Slovenia use the
value-added test to grant origin?  In what products did Slovenia require more than 50 per cent value-
added local content?  Had Slovenia changed its rules of origin criteria from a change in tariff heading
to a value-added test in the process of harmonization with EC rules?  Had Slovenia introduced a ruleWT/REG32/M/2
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which required regional material or regional content to grant origin to final products?  In the section in
document WT/REG32/2 dealing with safeguards, the Pa rties had stated that they applied safeguards
between themselves in certain cases.  When the Pa rties applied safeguards between themselves, would
they apply safeguards at the same time against third-country products?  If the causes were mainly
coming from within the Parties,  would the Parties still apply safeguards against third-country
products?  He also had a question with reference to the quantitative restrictions on agricultural
products mentioned in Section II.8, sector-specifi c provisions (document WT/REG32/2), where the
Parties had made reference to Annex VII.  Given the difficulty in reading this annex (and others), he
asked the Parties to provide a summary of this annex which explained these measures.
10. The representative of the European Communities said he was aware of the problems faced by
delegations due to the late circulation of the questions and replies.  He pointed out that the replies in
document WT/REG32/4 would resolve some of the issues on the different treatment of products
which had been raised in the morning's meeting.  He was not able to supply a comprehensive and
immediate answer to the detailed questions which had been asked in the meeting and he expressed a
desire to see them in writing to ensure that he understood the scope of them.  He reminded the
Committee that the Parties had supplied as much information as possible to Members and he hoped
that there was no doubt about the Parties' commitment to transparency.  They had suppliedinformation irrespective of whether or not it was strictly necessary, because it was their view that it
was in the Committee's interest to have information on this Agreement.  As regards trade data, the
Parties had provided information on bilateral flows, and with a certain amount of further research they
could provide such information on trade flows with third countries.  He doubted, however, that the
requested breakdown by tariff line was or would be available.
11. The representative of Slovenia said that the notification on the pan-European system of
cumulation of origin was currently being prepared and would be provided shortly to this Committee
and to the Committee on Rules of Origin.  This would provide an opportunity for Members to discuss
this notification and to raise questions.  He was not able to give an immediate response to the
Japanese representative's questions on rules of origin and safeguards, given that they were of atechnical nature and he requested that they be submitted in writing.
12. The representative of the United States said that given that a number of delegations had not
yet had time to review document WT/REG32/4, it was his understanding that the Committee would
revert to this document at the next meeting.
13. The representative of Australia said that his delegation would provide its questions in writing.
He wanted to comment on the point just made by the representative of the EC on the question of trade
data.  Several delegations had submitted written questions asking for basic data, i.e. on the amount oftrade conducted on both a preferential and duty-free basis.  It was his understanding that most
authorities recorded trade on the basis of HS nomenclature and it should not be difficult to provide the
requested data, which would facilitate the Committee's discussion.
14. The Chairman asked that Members submit their questions to the Secretariat in writing by
22 July and that the Parties respond by 31 July. He added that the questions posed in the meeting
would be part of the summary records.  In the meantime he would consult with the Chairman and
delegations about the appropriate next steps in the examination process.
15. The representative of the European Communities urged Members who had asked additional
questions to submit them to the Parties as soon as possible and his delegation would endeavour to
produce answers.  Given that Members were still digesting the answers pr ovided in WT/REG32/4, he
urged Members to review this document before submitting additional questions.  He added that some
of the questions posed in the day's meeting were new and would require a certain amount of research.WT/REG32/M/2
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The Parties would attempt to reply as soon as possible, but this might be difficult during the summer
holiday season.
16. The Committee took note of the comments made.
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