RESTRICTED
WORLD TRADE WT/REG3/2/Add.2
12June1997
ORGANIZATION(97-2415)
Original: English Committee onRegional Trade Agreements
ENLARGEMENT OFTHE EUROPEAN COMMUNITIES
ACCESSION OFAUSTRIA, FINLAND AND SWEDEN
Questions andReplies
Addendum
Thisdocument reproduces theresponses provided bytheEuropean Communities andtheir
Member States tooutstanding questions fromdocument WT/REG3/2, aswellastoother, additional
questions received fromMembers onthetrade-in-goods aspects oftheTreaty ofAccession ofAustria,
Finland andSweden totheEuropean Union.
_______________________WT/REG3/2/Add.2
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A. OUTSTANDING QUESTIONS FROM DOCUMENT WT/REG3/2
40. How theEuropean Union 'sfruitandvegetable regime willitbeapplied tothethree new
members, aswellasthetype ofgeneral measures being envisaged topreserve the
possibilities ofaccess tomarkets inthissector, especially markets forcitrus products?
Asfrom thedateofaccession, thenewMember States apply theEClegislation concerning
fruitandvegetables. Thepreservation ofthepossibilities ofmarket access inthissector hasbeensubject
oftheArticle XXIV:6 negotiations. Theresults ofthenegotiations andtheapproach followed are
contained intheEC15 Schedule CXL.
41. Howaretheacceding countries 'minimum access quotas going tobeintegrated intheEU's
listofconcessions? Willthenewquotas intheconsolidated listbetheaggregation ofthe
quotas thatexist intheEU12 andtheacceding countries 'Uruguay Round listof
concessions?
Inthecaseofproducts subject tominimum access tariff quotas intheEU,butonlyto
tariffs intheacceding countries, istheEUwilling tocommit itself toanewquota level
equal tothesumoftheEU12 minimum access quotas, theacceding countries 'imports,
andagrowth factor, according toprovisions ofparagraph 6oftheUruguay Round
Understanding onArticle XXVIII?
42. How willtheEU15 current access quotas becalculated? Incalculating thenewcurrent
access quotas forproducts forwhich theacceding countries hadcurrent access quota
commitments, willtheEUnetoutintrade (i.e.trade between theEUandtheacceding
countries)?
Inthecaseofproducts subject tocurrent access tariff quotas intheEU,butonlytotariffs
intheacceding countries, istheEUwilling tocommit itself toanewquota level equal
totheaggregation oftheEU12 current access quotas, theacceding countries 'imports,
andagrowth factor, according totheprovisions ofparagraph 6oftheUruguay Round
Understanding onArticle XXVIII?
43. How doestheEUplantoensure thattheUruguay Round market access commitments
regarding tariff-rate quotas ofboththeEU12 andthenewMember States aremet?
44. AspartoftheirUruguay Round market access commitments, Sweden andFinland agreed
tolower in-quota duty rates iftariff ratequotas were notbeing filled. How doesthe
EUplantoensure thatthese commitments aremet?
45. InitsUruguay Round country schedule, Austria incorporated itsAustrian High Quality
Beefquota aspartofitsmarket access commitments. Inaddition, Austria agreed tolower
thein-quota dutyrateifthequota wasnotbeing filled. How doestheEUplantoensure
thiscommitment, which includes aspecific definition ofhighquality beef, ismet?
46. The EChasproposed aggregation ofboth current andminimum market access
commitments. Doesitintend tocount against theaggregated MFN levels product imported
under thepreferential Europe Agreements? Ifso,towhat levelonaproduct-by-product
basis?
47. How willtheEUtreat products forwhich theacceding countries hadnotreserved the
right tousethespecial agriculture safeguard (SSG), buttheEUhas? Thisextension of
theSSGtoproducts andcountries notcovered previously represents aserious impairment
ofthose countries 'concessions.WT/REG3/2/Add.2
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IstheEUwilling toexclude imports ofthose products intotheacceding countries inits
calculation ofthetrigger level?
Theissue hasbeenaddressed intheArticle XXIV:6 negotiations. Theresults arecontained
intheEC15 Schedule CXL.
48. Willthevariable levymechanisms ofthenewmember States continue tobeapplied,
particularly inview ofArticle 153,which allows thenewMember States tomaintain
national rules during thetransitional period?
Thevariable levies havebeenabolished under theUruguay Round negotiations andArticle 153
relates totheinternal market.
49. Thethree new Member States have been allowed tocontinue toenforce some
environmental/health standards thatexceed thecurrent EUstandards during afouryear
transition period. Please describe these standards andexplain whytheexceptions are
needed.
Transitional periods areforeseen intheAccession Treaty fortheadoption oftheEClegislation
bythenewMember States incertain areas. These transitional periods weregranted mainly fortechnical
reasons andconcern parts oftheEClegislation related totheplant, health, seeds, organic farming
andtheanimal nutrition sectors.
50. What istheeffect onthird countries oftheextension oftheEuropean Union ’sbanana
regime tothethree newMember States? What would betheappropriate manner of
accounting forthisindetermining thebalance oftheeffect ofthenewcustoms union?
Please address trade ingoods andrelated services aswellastheeffect oninvestment in
theEC.
TheECbanana regime applies tothewhole oftheEC. There arenonon-tariff measures
foreseen.
53. What istheeffect oftheEuropean Communities ’moratorium ontheuseofbovine
somatotropin (BST) onthird countries ’exports ofBSTtothethree newMember States?
What istheeffect oftheBSTmoratorium on:
(a) royalty transfers which would have been generated byBST-related intellectual
property rights?
(b) potential exports ofproducts andservices related totheuseofBST?
ThenewMember States apply theECrulesrelated toBST. ECrulesdonotprohibit theimports
ofdairy products from countries thathaveauthorized theuseofBST.
54. What istheeffect oftheEUbanontheuseofhormones inlivestock production onthird
countries ’exports ofmeat tothethree newMember States?
TheEClegislation onthebanontheuseofhormones inlivestock production onthirdcountries '
exports applies tothenewMember States. Inmany cases, thirdcountries export hormone-free meat
totheCommunity.WT/REG3/2/Add.2
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58. Annex IXestablishes import quotas onAustrian cigarettes. Arethese newquotas? Were
anyrestrictions applied totrade intobacco inorwithAustria prior toaccession? Ifthese
arenewquotas, howdoestheEUintend tocompensate third countries?
Priortotheaccession ofAustria totheEU,theimports ofcigarettes weresubject toamonopoly.
According toArticle 73,paragraph 2oftheAccession Treaty, theexclusive import rightconcerning
theproducts setoutinthelistinAnnex IXoftheTreaty shallbeabolished atthelatest onexpiry of
aperiod ofthree years fromthedateofaccession. Therefore, thequotas mentioned intheAnnex IX
oftheTreaty arenottariff quotas butimport quotas open toalloperators, without restriction, and
products imported under those quotas maynot,inAustria, besubject toanexclusive marketing right
atwholesale trade level; asregards retail saleofproducts imported under quotas, disposal ofsuch
products toconsumers must becarried outinanon-discriminatory manner.
60. What restrictions, whether governmentally imposed orasaresult ofprivate sector action,
exist onEuropean Community member state imports ofsteelfrom Japan orsteelpipe
andtubefrom South Korea? Dothese restrictions now, orwilltheyinthefuture, apply
toAustria, Finland andSweden?
Norestriction whatsoever isimposed onimports ofsteelproducts originating inJapan orKorea.
TheCommunity isunaware ofprivate arrangements which might havetraderestricting effects. Private
collusive practices ofthatnature would, presumably, beinbreach ofEUcompetition rules. Ifsteel
producers operating within theterritory ofother parties areoftheviewthatsuchprivate practices are
inforce, theyarefreetolodge aformal complaint withtheCommission, making available tothe
Community competition enforcement authority allrelevant information.
69. How doestheEUintend toassure third countries thatthecommitments onagriculture
products including tariff concessions, minimum accesses, tariff equivalents, special
safeguards, domestic supports andexport subsidies willnotimpair theexisting Uruguay
Round commitments?
Theissue wasaddressed intheArticle XXIV:6 negotiations. Theresults ofthenegotiations
andtheapproach arecontained inthenewEC15 Schedule CXL.
71. CantheCommunity advise oftheoverall effect ontrade with third countries ofthe
application oftheagricultural regime oftheCommunity tothenewMember States?
Theoverall effect ontrade withthirdcountries oftheapplication oftheagricultural regime
oftheCommunity tothenewMember States isexpected tobepositive onthewhole, since ataverage
thetariffratesinthenewMember States ofagricultural goods were, asaresult ofahigher pricelevel,
higher thanthetariff ratesforeseen under theCommon Customs Tariff.
72. TheEUEnlargement Treaty issilent onthesubject ofreconciling theEU12 'sWTO
commitments onmarket access, domestic support andexport subsidies with the
commitments concluded separately bythethree newMember States.
(a) What aretheEU'splans inthisregard?
(b) How doestheEUplantoadjust itspre-enlargement tariff quota commitments
toaccommodate theexisting trade thatthird countries havewiththenewMember
States?WT/REG3/2/Add.2
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(c) How doestheEUpropose toadjust itsWTO commitments ondomestic support
andexport subsidies?
Thequestions were dealt withunder theArticle XXIV:6 negotiations. Theresults ofthe
negotiations andtheapproach arecontained inthenewEC15 Schedule CXL.
73. HowdoestheEUplantoensure thattheUruguay Round commitments regarding internal
support measures ofboththeEU12 andthenewMember States aremet? Please also
provide legal justification forthemethodology theEUintends touse.
Thequestions were dealt withunder theArticle XXIV:6 negotiations. Theresults ofthe
negotiations arecontained inthenewEC15 Schedule CXL. ThebasetotalAMS oftheEC12 was
aggregated withthebasetotalAMS ofthenewMember States.
74. Please outline thetypes ofnationally funded andEU-funded transitional andpermanent
support systems foragriculture forthenewMember States, including thefunding levels.
Thenationally funded transitional aidsare:
- Thetransitional anddigressive national aidsaccording toArticle 138oftheAccession
Treaty granted toproducers ofbasic agricultural products inorder tooffset the
differences ofpricelevels andsupport levels existing between thenewMember States
andtheEU. These aidsamount, atmost, tothese differences. Theamount ofthe
aidsiscalculated bybasic agricultural product taking intoconsideration thesupport
measures ofprices aswellasthegrant ofaidslinked tosurface area, toprices, tothe
quantity produced ortheproduction unit,andthegrant ofaidstoholdings forspecific
products.
- Thetransitional anddigressive national aidsaccording toArticle 139oftheAccession
Treaty which arenotlinked toaparticular production andwhich, forthisreason, are
nottaken intoconsideration forthepurpose ofcalculating theamount oftheaidsunder
Article 138oftheAccession Treaty.
- Thetransitional anddigressive aidsaccording toArticle 140oftheAccession Treaty
related toafixed production volume; these aidsaregranted toproducers ofbasic
agricultural products inorder tooffset thedifferences ofpricelevels andsupport levels
existing between thenewMember States andtheEU.
- Non-product related direct payments forfarmers inmountain regions. These measures
apply toAustria foratransitional period oftenyears. These direct payments aregranted
inorder tooffset thedifferences ofthelevel ofdirect payments inmountain areas
existing between Austria andtheEU.
National funded permanent aidsare:
- National aidsaccording toArticle 142oftheAccession Treaty. Seeanswer to
question 80.
According totheAccession Treaty notransitional aidmeasures arefinanced bytheEU.There
arenopermanent support measures foragriculture specifically foreseen forthenewMember States
andfinanced exclusively bytheEU.WT/REG3/2/Add.2
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75. Paragraph 2ofArticle 138states thattheCommission 'sauthorizations ofnational aids
willbe"granted inconformity with theinternational commitments oftheenlarged
Community".
(a) How willtheenlarged Community ensure thatnewlevels ofagricultural support
areinconformity withitsexisting Uruguay Round commitments?
(b) What methodologies areusedinarriving atthenewlevels?
ThebasetotalAMS oftheEC15 Schedule results fromtheaggregation ofthebasetotalAMS
oftheEC12 andthebasetotalAMS ofthenewMember States. Please seeEC15 Schedule CXL.
76. CantheCommunity provide anexplanation ofhowprice alignment offeedaffects the
granting ofnational aidauthorizations? (Article 138,paragraph 2)
Ifprice alignment isnotrequired formost livestock products, whyisitnecessary forit
tobetaken intoaccount forpigmeat, eggsandpoultry?
Theprice alignment offeedrepresents areduction oftheinput costs andmust therefore be
taken intoaccount when measuring thedifferences ofthepricelevels andthesupport levels forpigmeat,
eggsandpoultry. Forthese products, theprice alignment offeedistaken intoaccount since cereals
arethemost important component (60percentto70percent) offeedforthese products.
77. CantheCommunity provide examples thatillustrate thevarious methods bywhich the
amount ofsupport iscalculated? (Article 138,paragraph 3)
Thecriteria according towhich national aidsunder Article 138oftheAccession Treaty are
granted aresetoutinthatArticle. Seeanswer toquestion 74.
78. Paragraph 4ofArticle 138explains when national aidsauthorizations canbeadjusted
bytheCommission. Would theCommunity provide examples ofdevelopments inthe
Common Agricultural Policy thatwould make suchadjustments necessary?
How areprice developments usedtojustify adjustments tonational aidsauthorizations?
Forthetimebeing there hasbeennochange intheCommon Agricultural Policy norchanges
inthepricelevels thatwould havemade adjustments oftheauthorizations bytheCommission necessary.
79. Would theCommunity clearly indicate theconditions under which itwould authorize
Finland toapply additional national aidunder Article 141?
CantheCommunity assure WTO Members thatsuch additional support measures, as
wellasthose permitted onatransitional basis under Article 140,willnotexceed itsWTO
commitments?
Additional national aidsauthorized under Article 141mustnotbeproduct related. TheArticle
onlyapplies toFinland andtheaidsauthorized under Article 141aregranted toproducers toallow
structuraladjustmentsandthereforetofacilitatetheirfullintegrationintothecommonagriculturalpolicy.
These additional national aidsaswellasthose foreseen under Article 140willnotexceed theEC's
WTO commitments.
80. WouldtheCommissionprovidemoredetailedinformationontheauthorizationoflong-term
national grants byFinland andSweden asoutlined inArticle 142? Inparticular:
(a) cantheCommunity provide anindication ofhowlongitenvisages authorizing
support foractivity inareas where agricultural activity isparticularly difficult?
(b) willthese grants becaptured bytheCommunity 'sUruguay Round commitments
ondomestic support?WT/REG3/2/Add.2
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(c) would theCommunity indicate the"pre-accession reference point" bywhich it
willdetermine thelevels ofproduction orofoverall support?
(d) cantheCommunity assure WTO Members thatsuchadditional support measures
willnotexceed itsexisting WTO commitments?
(a) National aidsunder Article 142oftheAccession Treaty authorized bytheCommission are
permanent aids.
(b&d) Thegrants arepartoftheEC15 commitments. Thecommitments oftheEC15 related tointernal
support aresetoutinitsSchedule. Asalready indicated, thebasetotalAMS oftheEC12
andthebasetotalAMS ofthenewMember States havebeenaggregated.
(c) Inaccordance withArticle 142oftheAccession Treaty, theCommission hasauthorized Sweden
andFinland togrant longtermnational aidwithaviewtoensuring thatagricultural activity
ismaintained inspecific regions, determined bytheCommission andcovering farming areas
north ofthe62ndParallel andsome adjacent regions affected bycomparable climatic conditions
rendering agricultural activity particularly difficult. These aidmeasures, which canbe
differentiated bysub-region mustnotbelinked tofuture production orleadtoanincrease in
production orinthelevelofoverall support recorded during areference period previous to
accession aredetermined bytheCommission. ForSweden, 1993 wasfixed asthereference
period forthelevelofagricultural production nottobeexceeded, andfortheoverall support
before accession. Fortheproduction ofmilk, softfruitandvegetables, 1994 hasbeentaken
asthereference period. ForFinland, thereference period covers 1991, 1992 and1993 as
regards theagricultural production, withtheexception ofcow'smilkandbeefandvealfor
which 1992 isthereference period andhorticulture forwhich 1993 waschosen asreference
period. Finally, 1993 wasfixedasthereference period fortheoverall support before accession.
81. Under what conditions willnational aidasdescribed inparagraph 3ofArticle 150be
approved?
National aidunder paragraph 2ofArticle 150oftheAccession Treaty isrelated tothe
devaluation ofstocks existing inthenewMember States atthedateofaccession. According tothis
Article thenewMember States maygrant national aidtoprivate operators holding, on1January 1995,
stocks ofbasicagricultural products orproducts processed therefrom. Thenational aidmaybeprovided
inordertocompensatethedepreciationofstocksresultingfromthedifferencebetweenthepricerecorded
inanewMember Statepriortoaccession andthatresulting fromtheapplication oftheAccession Treaty.
National aidisapproved under thecondition thatitapplies toinventoried stocks anditdoesnotexceed:
(a) Inthecaseofbasicagricultural products, thefallinprices recorded inthenewMember States
atthewholesale stage (oranadministrative price, inthecaseofproducts subject tomarket
organization) oranyother stage constituting thefirststage ofmarketing oftheproduct in
question, andforaperiod considered bythenewMember States asrepresentative oftheeffects
oftheapplication oftheTreaty ofAccession onprices, andnotextending beyond thestorage
lifeoftheproduct afterthedateofaccession.
(b) Inthecaseofprocessed agricultural products, thenational aidgranted forbasic agricultural
products from which theyarederived, multiplied byaprocessing co-efficient reflecting the
impact ofproducts from which theyarederived.
Furthermore, thenational aidmustnotentail duplication withtheaidprovided forinArticle 138
oftheActofAccession where thelatter isgranted onthesame products assuchafterprocessing.WT/REG3/2/Add.2
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82. How does theEUintend totreat theUruguay Round agricultural domestic support
commitments ofFinland, Sweden, Austria andtheEC12 following enlargement?
Thequestion hasbeendealt withunder theArticle XXIV:6 negotiations. Theresults are
contained intheEC15 Schedule CXL. ThebasetotalAMS oftheEC12 andthetotalAMS ofthe
newMember States havebeenaggregated.
83. Article XIII(b)(ii) and(iii)oftheAgreement onAgriculture provides thatsupport should
notbegranted toaspecific commodity inexcess ofthatdecided during the1992marketing
year. What steps willtheECbetaking toensure thatitdoesnotbreach thisprovision
initstreatment oftheagricultural domestic support commitments oftheEC15?
Domestic support commitments oftheEC15 aresetoutinitsSchedule. Article XIII(b)(ii)
and(iii)relate toexemptions from actions based oncertain provisions oftheWTO.
84. How willtheexport subsidy commitments included intheUruguay Round schedules of
theEU12 andoftheacceding countries betreated inthenewEU15 schedule ?
Theexport subsidies oftheEC12 andthose ofeachnewMember States werenetted outand
aggregated.
85. How doestheEUplantoensure thattheUruguay Round export subsidy commitments
ofboth theEU12 andthenewMember States aremet? Please alsoprovide legal
justification forthemethodology theEUintends touse.
Theexport subsidies oftheEC12 andthose ofthenewMember States were netted out,the
netting outbeing aneutral technical adjustment.
86. What procedures willtheEUfollow ingranting export refunds foroats?
Export refunds foroats, asforother products, arefixed inaccordance withcertain criteria
soastocover thedifference between thequotations andprices foroatsintheCommunity andthose
ontheworld market. Export refunds arefixed inthelightofthefollowing factors:
- theprices charged ontherepresentative Community markets (thatisinFinland andSweden)
andtheirtrends, andthequotation recorded onthemarkets inthirdcountries;
- themarketing costs andthemost favourable costs oftransport from therepresentative
Community markets totheportorother place ofexport, andthecostofforwarding onthe
world market;
- theprospects forandtheconditions governing thesaleoftherelevant products ontheworld
market;
- theeconomic aspect oftheexport contemplated.
Theexport refunds maybefixed byinvitation totender. Export refunds onoatsoriginating
inSweden andFinland havesofaralways beenfixed byinvitation totender.
87. OnDecember 19,1994, theEUadopted regulation number 3108/94, which requires the
collection oftaxes on“surplus ”stocks ofcertain commodities intheacceding countries.WT/REG3/2/Add.2
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How doestheEUjustify these taxes, which appear toviolate GATT Articles IIIandX?
HastheEUactually collected thistax? Ifso,howmuch wascollected?
Theregulation 3108/94 which waspublished intheofficial Journal concerns taxes onsurplus
stocks forcertain agricultural products which include both"domestic" and"non-domestic" agricultural
products. Themeasure wastaken inorder toavoid theriskofdeflection oftrade inrelation tothe
commonmarketorganizationofagriculturalmarketsduetotheaccessionofthethreenewMemberStates
totheEuropean Union. Taxes havebeencollected inoneofthethree newMember States.
88. Article 147outlines theresponse oftheCommunity tomarket disturbances inagriculture
affecting thenewMember States during thetransitional period. CantheCommunity:
(a) provide more detailed information onhowitdefines "serious disturbance" of
markets?
(b) provide anindication ofthetypeofmeasures envisaged under thisArticle?
(c) outline howsuchmeasures willtakeintoaccount theinterests ofcountries outside
theCommunity when taking protective action under Article 147?
89. Would theCommunity more fully explain theprovisions ofArticle 152? Inparticular:
(a) whatwilltheCommunity regard as"serious deterioration intheeconomic situation
ofagiven area"?
(b) would theCommunity provide details oftheemergency procedures andtypes of
protective measures that they would putintoeffect under paragraph 2of
Article 152?
(c) howsuch measures willtakeintoaccount theinterests ofcountries outside the
Community?
(d) would these measures beconsistent withtherelevant provisions oftheGATT and
WTO?
ThemeasuresforeseenunderArticle147and152oftheAccessionTreatyareexclusivelyrelated
totheinternal market.
90. TheEChasproposed toaggregate export subsidy commitments fortheEC12, Finland,
Austria andSweden. What istheWTO legal basis forthisproposal?
TheWTO recognizes thepossibility oftheenlargement ofacustoms union. Inthis
circumstances, notonlymarket access butalsotheexport subsidy commitments alsohavetobeadjusted.
Thenetting outapproach followed bytheCommunity isthemost technical neutral approach.
91. Aggregation willleadtosubstantial increases inentitlement toexport subsidised product
byEUMember States tothird countries. How doesthiscontribute totheobjective of
theAgreement onAgriculture "toprovide forsubstantial progressive reductions in
agricultural support andprotection ....resulting incorrecting andpreventing restrictions
anddistortions inworld agricultural markets"?
Thenetting outapproach means thatthere willbenoincrease inentitlement toanexport
subsidized product bytheEUtothirdcountries.
93. Within thecontext oftheAgreement onAgriculture, howdoestheECjustify itsproposal
toestablish EU-wide export subsidies forsheepmeat andliveanimals?
Noexport subsidies areforeseen forsheepmeat andlivehorses inthenewEC15 Schedule CXL.WT/REG3/2/Add.2
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99. Inwhat waywilltheEUEnlargement impact theSwedish regulations which banorrequire
licenses onimports ofcertain fishery products? Forexample:
(a) Live American lobster andcrayfish -On1July1988, Sweden implemented a
requirement thatimports oflivelobster beallowed onlyifimporters arelicensed
andthelivelobsters areimmediately taken toanapproved "boiling" plant. They
alsohadtobefullycooked prior toentering Swedish trade. Thisregulation also
applies tolivecrayfish. Willtheaccession have anyimpact onthese Swedish
regulations?
(b) Liveeels-On1July1988,Swedenimplementedarestrictiveregulationthatallowed
"eelfry"imports onlyfrom England andonlyfrom eelscaught intheBristol
Channel. Inaddition, theeelsshould onlybeusedfor"rearing" andnotfordirect
consumption. Liveeelsother thaneelfrycannot beimported. Alicense isrequired
torelease theeels. Willtheaccession have anyimpact onthese requirements?
(c) Other livefish-Sweden alsoprohibits theimport of"other livefish." Willthe
accession have anyimpact onthisregulation?
(a) Ifregulations covering theimportation oflivecrustaceans (lobster andcrayfish) from the
United States arebased onenvironmental protection considerations (soasnottointroduce exotic
species intotheeco-system), therelevant regulation isnotmodified byaccession. Other
Member States havemaintained similar regulations fortheprotection oftheeco-system and
oftheindigenous species.
(b&c) Rules covering theimportation ofeels(both asfryandasadults), aswellasother livefish
aremodifiedbyCommunitylegislation,especiallydirectives91/67/CEEand93/53/CEE,which
address sanitary conditions foraquatically farmed species. These directives donotestablish
anapriori prohibition onimportation, butestablish thenecessary conditions toprotect the
sanitary status ofacountry oraregion (based ontheprinciple ofregionalization). Inter-
community trade andimports operate onabasis ofequality insanitary conditions. Sweden
must apply these directives.
102. Articles 75(1)(b) and(2),100and127-Austria, Finland, andSweden willapply bilateral
textile arrangements concluded bytheCommunity withthird countries. With which third
countries? What isthenature ofthearrangements, andwhat products arecovered?
Dotheagreements discriminate against U.S.exports orprovide preferences forcertain
countries? Please describe theeffects onother markets interms oftrade diversion from
theEUmarket?
Allbilateral textile arrangements withthirdcountries havebeendulynotified totheTextiles
Monitoring Body, asrequired bytherelevant provision oftheAgreement onTextiles andClothing.
Thenotifications taken intoaccount adjustments made following theenlargement oftheCommunity.
105. CantheCommunity provide more information ontransitional measures thatarenot
specified inthisAct:
(a) onagriculture?
(b) onother products?
(c) andonthose referred toinArticle 150(which arenotspecified intheEnlargement
Treaty)?
106. DoEUdirectives thatimpose areciprocity testoninvestment apply inthethree new
Member States? Inparticular, dotheBanking Directive, Hydrocarbon Directive, the
Satellite Directive, andtheGround-Handling Directive apply inAustria, Finland andWT/REG3/2/Add.2
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Sweden? Ifso,what willbetheeffect ontrade andinvestment flows caused bythese
directives?
107. Aside from thedirectives referenced above, doesaccession totheEuropean Communities
resultindiscriminationagainstforeign-ownedinvestmentsinAustria,FinlandandSweden?
108. How willtheEuropean Union ’sMFN exemptions intheservices areaapply tothethree
newMember States? Inparticular, willalloftheMFN exemptions intheaudiovisual
sector apply toAustria, Finland andSweden?
109. Howwilltheapplication ofthediscriminatory elements oftheEUUtilities Directive effect
third country trading opportunities intheutilities sectors? Please specify foreachofthe
four sectors covered bythedirective (telecommunications, electricity, water and
transportation).
110. Article 108-WillanewVAT apply intheAland Islands?
These questions largely relate toservices issues, andwillbetaken upinthatexamination.
B. OTHER QUESTIONS
Legal issues onprocedures
(i) Article XXIV:6 oftheGATT states thatifmembers ofacustoms union increase therate
ofduties toalevelhigher thanthatindicated intherespective country schedules, Article 28
procedure shall apply. Theguidelines ontheprocedures fortheArticle 28negotiations
(C/113) states that, iftheschedules aretobemodified, members oftheunion shallnotify
those countries concerned oftheitems forwhich theduties willbemodified, andthe
statistics oftherelevant trade. Furthermore, paragraph 4oftheUnderstanding onthe
Interpretation oftheArticle 24states thatArticle 28procedures mustbecommenced before
thetariffs aremodified.
TheEUconsiders thatsuchprocedures were commenced on15December 1994 when it
notified theSecretariat thatitwould beready tobegin negotiations from 1January 1995.
This view oftheEU,andtheeffectuation ofthemodification ofschedules without
consultations oragreements withother contracting parties, seem tobeinconsistent with
theguidelines setoutinArticle 28procedures andunderstandings ontheinterpretation
ofArticles 24and28.How istheEUabletojustify itsview?
When doestheEUactually think theformal negotiations commenced?
Seereplies toquestions 21,23and24.WT/REG3/2/Add.2
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Compensation
(ii) Onthematter ofcompensation, theEUconsiders itappropriate totake"debit andcredit
approach" inwhich theeffect oftariff reduction asaresult ofcommon tariffs aswellas
tariff increases should betaken intoaccount. Onwhich provision oftheGATT/WTO
aretheybased?
Ourapproach asinallprevious enlargements oftheCommunity hasbeentotakeintoaccount
decreases indutyrates, aswellasincreases. Webelieve thisisreflected intheterms ofthe
Understanding ontheInterpretation ofGATT Article XXIV inproviding forcompensatory adjustment,
which reads, "dueaccount shallbetaken ofreductions ofduties onthesame tariff linemade byother
constituents ofthecustoms union onitsformation" (para.5). Seealsoourresponse toquestion 24.
(iii) When willthecompensation measures benotified?
Seeanswer toquestion 38.Theappropriate reference isG/L/65/Rev.1.
(iv) Willthecompensation measures become effective retroactively from 1January 1995?
Willrefund ofcustoms duties bemade?
Compensation measures havenotbecome effective retroactively from 1January 1995, and
norefunds ofcustoms duties willbemade. Implementation ofGATT Article XXIV:6 compensation
commenced on1January 1996, although interim measures were inforce throughout 1995.
(v) What isthebaseyearfordetermining therateofduty? What isthereason forthat?
(vi) Iftherates ofduties usedafter fullimplementation ofthetariff concessions, andwhich
were committed during theUruguay Round, areregarded asthebasis forcalculating the
compensation, howwilltheEUtreat thediscrepancy between theEU'scommon rateof
duty, thatwillbeapplied during thestaging period until thecomplete implementation
ofthecommitment, andtherateofdutythatwould have beenapplied bythethree new
members oftheEU?
IntheGATTArticleXXIV:6process,theCommunitytooka"snapshot"ofthesituationin1995,
aswellasthatwhich willbereflected infinalUruguay Round rates. TheArticle XXIV:6 process
tookaccount ofthis. Theanswer toquestion 29isalsorelevant.
(vii) TheEUagreed toimplement thetariff quotas until30June1995asaresult oftheEU-U.S.
negotiations onaninterim agreement. IfArticle 24-6negotiations arenottobecompleted
by30Juneandrequests aremade byother contracting parties toextend thetariff quotas
measures, willtheEUextend suchmeasures beyond 30June? Ifso,willthesubstance
ofthemeasures bechanged?
Theinterim measures were extended toDecember 1995.
Application ofAnti-Dumping Duties
(viii) Weunderstand thattheEUhasapplied anti-dumping duties toimports tothethree new
member countries without conducting investigations stipulated intheAnti-Dumping
Agreement annexed totheWTO agreement. Wewould liketohaveclarifications onthis.WT/REG3/2/Add.2
Page13
Ifsuch isthecase, theapplication would seem tobeinviolation oftheArticle 6of
GATT 1994 andArticle 1oftheAnti-Dumping Agreement. Does theEUconsider the
measures tobeconsistent with thesaidprovisions? How does theEUexplain their
consistency?
Ifthemeasures prove tobeinconsistent withthesaidprovisions, theyshould beabolished
andtheanti-dumping duties should berefunded. IstheEUready totakesuchaction?
(The measures should notbejustified bythedifficulty ofinvestigating allofthe150in
alimited timeperiod.)
TheEuropean Communities (hereinafter referred toas"theCommunity") confirm thatupon
accession ofAustria, Finland andSweden anti-dumping measures inforce intheCommunity territory
asitwasbefore enlargement havebeenextended tothenewterritory oftheCommunity, including
therefore thenewMember States.
Asfarasthecompatibility ofthisextension withWTO isconcerned, theCommunity considers
thatitsapproach wascorrect and,inparticular, thatitisfullyconsistent withitscommitments under
theWTO Agreement anditsannexes. Thisapplies inparticular toArticle VIofGATT 1994 and
Article 1oftheAnti-Dumping Agreement, aswillappear from theconsiderations setoutbelow.
Inthefirstplace,therulesagainstwhichthelegalityofaWTOMember'santi-dumpingmeasures
istobereviewed arethose inforce atthetimewhen thecomplaint which lettotheadoption ofthese
measures waslodged.1AlltheCommunity anti-dumping measures extended toitsnewMember States
wereadopted consistently withapplicable multilateral rules atthetimewhen therelevant complaints
were lodged. Thisisafactwhich isnotchallenged byanyWTO Member.
Ontheother hand, nothing inthewording ofanyWTO provision allows theconclusion that
subsequent changes intheterritory ofaMember applying ananti-dumping measure (andtherefore,
possibly, intherelevant geographic market inwhich theinjurious effects ofdumping arefelt)ipsofacto
entails thesubsequent illegality oflawfully adopted measures.
Asrecently made clear bythePanel Report intheDesiccated Coconut case2inrespect of
countervailingduties,theonlymeanstointerveneinrespectofdutiesimposedconsistentlywithapplicable
law,andparticularly inrespect ofthecontinuing collection ofthoseduties, incaseofsubsequent changes
ofapplicable multilateral provisions, isareview.3
1SeeBrazil -Measures Affecting Desiccated Coconut ,Report ofthePanel, 17October 1996 (96-4287).
Ininterpreting Article 32.3oftheSCM Agreement, defining theAgreement 'sapplicability toexisting measures,
thePanelconsidered(para.230)that:"If...apanelcouldexamineinthelightoftheSCMAgreemen tthecontinued
collectionofadutyevenwhereitsimpositionwasnotthesubjectoftheSCMAgreemen t,andif...thatexamination
ofthecollection ofthedutyextended tothebasis onwhich thedutywasimposed, thenineffect thedeterminations
onwhich those duties were based would besubject tostandards thatdidnotapply -andwhich, inthecaseof
determinationsmadebeforetheWTOAgreemen twassigned,didnotyetevenexist-atthetimethedeterminations
were made. Inourview, suchaninterpretation would becontrary totheobject andpurpose ofArticle 32.3
andwould render thatArticle anullity".
2idid.,atparas. 228-230.
3idid.,atpara.230, where thePanel found that"Specifically, theSCM Agreement applies to'reviews of
existing measures 'initiated pursuant toapplications made onorafter thedateoftheentry intoforce ofthe
WTO Agreement. Itisthusthrough themechanism ofreviews ...,andonlythrough thatmechanism, thatthe
(continued...)WT/REG3/2/Add.2
Page14
Asclarified bytheCoconut Panel Report, considering thatasubsequent change turns lawful
measures intounlawful oneswould betantamount toapply retrospectively standards (likethenew
geographical market inwhich theinjurious effects occur) which werenotapplicable atthetimewhen
themeasures were adopted.4
Likewise, when thesubsequent change concerns factual circumstances, likeachange inthe
territory oftheWTO Member applying ameasure, thesame solution applies under theWTO Anti-
Dumping Agreement. Thatchange (whose implications forthecontinuing justification ofexisting
measures arenotcertain andinevitable, butonlypossible )cannot butberelevant asaground forreview,
andremains subject tothelatter'sregime, including theneedforarequest byaninterest party and
theburden ofproof, asmade clear inArticle 11(2) oftheAnti-Dumping Agreement.
Inviewoftheforegoing, replying tothethirdpartofquestion 1(ontheneedtorefund duties
resulting from theextension ofexisting measures tothenewEUMember States) doesnotappear
necessary.
(ix) TheEUintends todealwiththeissues bymaking "reviews" thatarestipulated inArticle 11
oftheAnti-Dumping Agreement. The"reviews" require thatmeasures already taken be
consistent withGATT 1994andtheAnti-Dumping Agreement. Anti-dumping measures
thatareinconsistent withthesaidagreements cannotbejustified bythe"reviews". What
istheopinion oftheEUonthispoint?
TheCommunity agrees withJapan thatreviews -andparticularly those baseonchanged
circumstances -normally apply inthecaseofmeasures which wereoriginally dulyimposed andapplied.
Asalready recalled inthereply toquestion (viii)thisis,however, precisely thecaseforthemeasures
extended tothenewEUMember States. Asstated above, precisely because ofthese "changes in
circumstances" occurred intheCommunity geographical market, areview wasconsidered tobethe
most appropriate waytore-assess thecontinuing presence oftherequirements fortheapplication of
themeasures themselves.
(x) TheEUpoints outthatcircumvention ofADduties occurs onitems byre-transferring
items from thethree newmember countries totheother EUcountries ifsuchduties are
nottobeapplied inthose three countries. Thisissue, however, canberesolved bysuch
measures aschecking end-use countries. What istheEU'sviewonthismatter?
TheCommunity would reiterate itsserious concern about theriskthatanti-dumping measures,
ifapplied onlytotheoriginal partofitsterritory, benullified bymassive channelling ofimports through
theterritories ofitsnewMember States. Inthisrespect toothedecisive factor isthat,having those
measures beenlawfully adopted andapplied toimports entering theCommunity territory, thechange
intheterritorial scope oftheWTO Member applying them doesnotinitself change theircharacter
andisnotamatter ofdiscussion. Thepractical difficulties implied inanyalternative solution were
pointed outasaveryimportant, yetadditional aspect militating infavour oftheextension ofthe
measures.
3(...continued)
Agreement becomes effective with respect tomeasures imposed pursuant toinvestigations towhich the
SCM Agreement does notapply."
4Seesupra ,note1.WT/REG3/2/Add.2
Page15
However, evenfrom apractical point ofview, theCommunity cannot butrecall thatother
solutions would bevirtually impossible: inpractice, toavoid thatgoods entering thenewEU
Member States arethensenttotheother Member States allsalesofallgoods subjected toanti-dumping
duties intheCommunity butentering thethree EUnewMember States foranypurpose (further
processing, sale,servicing orother) would needtobechecked atthepremises ofimporters andpossibly
ofdownstream purchasers.
Thereality is,however, thatonceimport duties havebeenpaidandcustoms formalities have
beencompleted, imports from countries notmembers oftheEuropean Union arereleased intofree
circulation intheCommunity market. Thisentails thatfrom thatmoment ontheyareconferred the
customs status ofCommunity goods,5thereby enjoying, inallrespects, thebenefits ofthesingle market,
inparticular asconcerns thefreemovement ofgoods, justasgoods produced intheCommunity.6
Because ofthetotalfreedom ofmovement ofgoods within thesingle market nocontrols canbe
established totrack down thefurther circulation ofthegoods.
Thus, anacross-the-board system ofcontrols ofimports subject toanti-dumping duties would
seriously impair thefunctioning andtheveryessence ofthesingle market, which certainly could not
havebeeninthemind oftheGATT Drafters when recognizing thevalue ofcustoms unions liberalizing
trade ataregional levelinArticle XXIV ofGATT.
(xi) Article XXIV:5(a) ofthe1994 GATT provides thattheduties andother regulations of
commerce imposed attheestablishment ofanycustoms union shall notonthewhole be
higher ormore restrictive than thegeneral incidence oftheduties andregulations of
commerce applicable intheconstituent territories prior totheformation ofsuchaunion.
Automatic application oftheexisting anti-dumping duties inthecustoms union toimports
tothethree newmember countries would make their duties higher ormore restrictive,
thusmaking theapplication ofanti-dumping duties toimports tothose three countries
notincompliance withArticle XXIV:5(a). How canthisbejustified?
Asrightly recalled, Article XXIV:5(a) ofGATT 1994 isconcerned withduties andother
regulations imposed attheestablishment ofcustoms unions. Thisrefers tothecustoms duties applying
tocountries which, atthetimethecustoms union iscreated, arenotmembers thereof, which duties
constitute theessential feature ofacustoms union. Torefer toGATT rules, thismeans that
Article XXIV:5(a) applies totheduties andbindings falling within thepurview ofArticles IandII.
Ontheotherhand, anti-dumping duties arenotnecessarily "imposed attheestablishment ofanycustoms
union", andcannot, therefore, becovered byArticle XXIV:5(a).
Therefore, asalready stated indocument WT/REG3/2 of6June1996inreply toquestion 66,
theCommunity considers thatitsfunctioning asacustoms union legitimately entails theuniform
application ofanti-dumping measures attheexternal border.
5SeeCouncil Regulation (EEC) No.2913/92 of12October 1992 establishing theCommunity Customs Code
O.J.No.L302of19October 1992, p.1,Article 79:"Release forfreecirculation shallconfer non-Community
goods thecustoms status ofCommunity goods. Itshall entail theapplication ofcommercial policy measures,
completion oftheother formalities laiddown inrespect oftheimportation ofgoods andthecharging ofany
duties legally due".
6Ibid.Article 4(7), 2ndindent, pursuant towhich: "Community goods means goods:
- wholly obtained orproduced inthecustoms territory oftheCommunity (...)
- imported fromcountries orterritories notforming partofthecustoms territories oftheCommunity which
have been released forfreecirculation."WT/REG3/2/Add.2
Page16
(xii) Does theEUintended toautomatically apply similar anti-dumping procedures toimports
tofuture newmembers oftheEU?
Asconcerns pending applications forEUmembership, theCommunity iscurrently considering
thevarious options ontheirmerits andtherefore isnot,forthetimebeing, intheposition tocomment
onthematter, particularly within thecontext ofaprevious enlargement review bytheCommittee on
Regional Trade Agreements.
Agricultural export subsidies etc.
(xiii) Through theintegration oftheindividual schedules ofthethree newmembers intothe
EUschedules, tariffs, access commitments fortariff quotas, domestic support andexport
subsidies needtobemodified asnecessary. Inwhat manner willtheEUintegrate those
measures other thantariffs? Iftheso-called gross method ortheaggregate approach for
integration istobetaken, regulation forthereduction ofexport subsidies would berelaxed.
Thisiscontrary totheefforts made during theUruguay Round tostrengthen thediscipline
ontheexport subsidies which have themost distorting impact ontrade. Theunilateral
adoption ofamethod, which would significantly alter theUruguay Round Agreements,
isamatter ofgrave concern, especially when thesteady implementation oftheUruguay
Round Agreements isconsidered tobeveryimportant.
Forthese reasons, wewould liketorequest thefollowing dataforourfurther consideration:
(a) export subsidies
- regarding theexports from the12original members tothethree new
members, thequantity ofeachitemwhich issubsidized forexport, and
thefiscal expenditure oftheexport subsidies foreachitem;
- quantity andexpenditure referred toin(a)above oftheexports from the
three countries tothe12;
- regarding theitems inthe12countries thatarenotsubsidized forexport
inthe12countries, dothe3countries subsidize such items? Ifthe
3countries subsidize them, towhich countries aretheitems exported?
(b) tariff quotas;
- regarding exports from the12countries tothe3countries, theamount
oftheTQforeachitemconcerned inthebaseperiod;
- regarding exports from the3countries tothe12countries, theamount
oftheTQforeachitemconcerned inthebaseperiod.
(c) Theitems intheschedules towhich special safeguard (SSG) canbeapplied differ
between theschedules ofthe12countries andthose ofthe3countries. After
integration oftheschedules, howwilltheEUdealwiththeitems towhich SSG
canbeapplied?
Theissue wasaddressed intheGATT Article XXIV:6 negotiations. Theresults ofthe
negotiations arecontained inthenewEC15 Schedule CXL.