PRESS/TPRB/56
26June1997
TRADE POLICY REVIEW BODY
Review ofCyprus
TPRB 'sEvaluation
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) concluded itsfirst
review ofCyprus 'trade policies on26June1997. ThetextoftheChairperson 'sconcluding remarks
isattached asasummary ofthesalient points which emerged during thediscussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairperson 'ssumming-up, together withthesetworeports,
willbepublished induecourse asthecomplete trade policy review ofCyprus andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992 &1996), Cameroon
(1995), Canada (1990, 1992, 1994&1996), Chile (1991), Colombia (1990 &1996), Costa Rica(1995),
Côted'Ivoire (1995), theCzech Republic (1996), Cyprus (1997), theDominican Republic (1996),
Egypt(1992),ElSalvador(1996),theEuropeanCommunities(1991,1993&1995),Fiji(1997),Finland
(1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991), Iceland (1994), India (1993),
Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992 &1995), Kenya (1993), Korea, Rep.
of(1992 &1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989
&1996), NewZealand (1990 &1996), Nigeria (1991), Norway (1991 &1996), Pakistan (1995), Peru
(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 &
1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995), Sweden (1990 &1994),
Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey (1994), theUnited States
(1989, 1992, 1994 &1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and
Zimbabwe (1994).
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TRADE POLICY REVIEW BODY
Review ofCyprus
CONCLUDING REMARKS BYTHE CHAIRPERSON
TheTrade Policy Review Body hasnowcompleted thefirstreview oftheRepublic ofCyprus '
trade policies andpractices. These remarks, made onmyownresponsibility, summarize themain
points ofthediscussion. Theyarenotintended tosubstitute forthecollective evaluation andappreciation
oftheCyprus 'trade policies andmeasures. Details ofthediscussion willbereflected intheminutes
ofthemeeting.
Prior tothestartoftheReview there wasanexchange ofviews onthepolitical aspects ofthe
situation inCyprus, asreferred toinparagraph 8oftheRepublic ofCyprus 'Government Report
contained indocument WT/TPR/G/25, where theirrespective positions wereexpressed bytheparties
concerned. Thisexchange willbereflected indocument WT/TPR/R/2.
Thediscussion ofCyprus 'tradepolicies wasunderscored bytheappreciation ofMembers for
theconsiderablestepsalreadytakenbyCyprustoliberalizeitsimportmarkets,reduceexportrestrictions,
andestablish arulesbased, transparent trading andinvestment environment. Theeconomy hadclearly
benefitedfromthereductionindistortionsbydevelopingtradeinmanufacturesand,particularly,services;
percapita income levels hadgrown considerably. Cyprus wasurged tocontinue itstradeliberalization
andtoembed itsolidly within therulesandprinciples ofthemultilateral trading system, particularly
byincreasingitscommitmentsintheWTO.InthiscontextMembersraisedanumberofissuesincluding:
- theoutlook forsustainable growth intheeconomy andtheprospects forexports and
investment ingoods andservices;
- fiscal discipline, partly linked totheMaastricht criteria, anditsroleinhelping tosustain
astable macroeconomic environment. Relevant tothisissuewerethelinkoftheCyprus
pound totheecu,monetary policy considerations andassociated prospects fortherate
ofinflation;
- thevulnerability ofCyprus 'economy totheexternal environment, asreflected ina
structural tradedeficit, andmeasures tostrengthen theproduction base,tolendstability
toeconomic growth;
- economic andlegislative preparations fortheintegration ofCyprus intotheEuropean
Union. Inthisconnection, several Members clearly expressed theview thatthis
integration should notbeattheexpense ofCyprus 'fullparticipation inthemultilateral
system, andemphasized theneedforgreater geographical diversification oftrade;
- investment objectives, especially equity participation limits onsomeFDIandthenature
ofthe"economic interest" clause;
- thetariff structure, notably divergences between applied andbound rates; surcharges
forsafeguard reasons; thestillsignificant number ofspecific rates; theuseofexcise
taxes; andparticipation intheITA;
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- theuseofstandards byCyprus thataremore stringent thaninternational standards
insome areas;
- taxation andstandards applied toautomobiles;
- Cyprus 'lawandpolicy onanti-dumping andpublic procurement anditspossible
accession totheGovernment Procurement Agreement; and
- certain aspects ofitscompetition, environment andintellectual property legislation.
Members alsoraised anumber ofquestions inconnection withCyprus 'sectoral policies. Thus,
inagriculture, questions wereposed ontheuseandlevelofsubsidies, andontheMFN andpreferential
implementation ofcertain tariff quotas, including onsheepmeat. Inmanufacturing, theuseofexport
subsidies related tolocalcontent wasquestioned. Members alsoraised questions onCyprus 'plans
forfurther liberalization infinancial services; itsposition onderegulation intelecommunications and
possibleWTOcommitments;planstoexpandthetourismsector,includingbyliberalizingtheinvestment
regime; andapossible relaxation ofrestrictions inmaritime andportservices. While twomembers
recalled Paragraph 4oftheSingapore Ministerial Declaration, theyposed questions relating tothe
observation of"core labour standards" byCyprus.
Inresponse, therepresentative oftheRepublic ofCyprus replied tothequestions raised under
threeheadings; macroeconomic andstructural policies, trade-related policy objectives andinstruments,
andsectoral issues. Cyprus undertook toprovide written answers tocertain other questions.
Cyprus 'economic growth ratehadbeenfavourable compared toother European countries;
theforecast for1997wasaround 3percent. Clothing andfootwear exports faced severe international
competition, while agriculture andpharmaceuticals tradeshowed favourable trends. TheGovernment 's
target wastomaintain afiscal deficit below 3percentofGDP; expenditure wastobeclosely monitored
andtaxefficiency increased, while public sector reform wasakeypolicy. ThelinkoftheCyprus
pound totheecu, which waspartly inconsequence ofCyprus 'aimtojointheEU,hadnotaffected
export performance adversely; thelinkreduced thevariability inexchange ratesvis-à-vis Cyprus '
European partners, which were itsmajor markets. Stability ofthelinkwasmaintained through a
combination ofexchange controls andmonetary policy, together withtheoverall health oftheeconomy.
Thevulnerability oftheeconomy toexternal shocks andthestructural tradedeficit werebeing
improved bymeasures toincrease productivity, especially toreduce unitlabour costs, andtostrengthen
theservices sector, including byinvestment incentives.
Regarding Cyprus 'preparations forjoining theEU,theapplication oftheEUcommon external
tariffwould result intariffs lower thantheratesbound intheWTO byCyprus, hence inmorefavourable
conditions. Nonewquotas orothertradebarriers would result fromthecustoms union; allquantitative
restrictions hadbeenlifted from 1January 1996, withatariff quota system introduced onvarious
products, including textiles.
Ontraderelated policies andobjectives, therepresentative ofCyprus sawnoconflicts between
acceptance oftheEUacquis communautaire andWTO objectives. Cyprus followed thecontinuous
progress ofEUlegislation oninternational issues. Foreign investment hadbeenlargely liberalized
andadministrative procedures simplified, with100percentforeign ownership allowed inmostsectors;
inafewareas, suchasfinance, applications wereconsidered onacase-by-case basistomonitor quality.
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Onmore specific issues, "surcharges" applied byCyprus wereincreased tariffs resulting from
theprocess ofelimination ofQR's;most surcharges would beremoved byend-1998, andresidual
surcharges would belifted by2002/3. The"refugee levy" would beremoved onallproducts contained
intheEUAssociation Protocol from 1January 1998; products outside theProtocol would remain
subject tothelevy. Import duties oncarswould bereduced toaMFN rateof10percentbyend1997,
with azerorateforimports ofcarsfrom theEU. Excise taxation ofcarswasanimportant
revenue-effective element oftaxation.
Therepresentative ofCyprus continued bynoting thatnewanti-dumping legislation, inline
withtheWTO Agreement, should becompleted bylate1997. Onenvironmental matters, adraft
framework lawwasinpreparation, while interest rateconcessions andother incentives weregranted
forpollution control. Similarly, restrictions onfishing netswereimposed forconservation reasons.
With respect topublic procurement, abillonthematter hadbeensubmitted inFebruary 1997 and
wasexpected topassParliament intheautumn ofthisyear. Detailed regulations andtender
specifications would beprepared inaccordance withexisting policy; Cyprus 'procedures would be
harmonized withthose oftheEUandwould beconsistent withitsobligations under theWTO.
Onsectoral matters, inagriculture thesystem ofadministration forthetariffquota onsheepmeat
hadbeenintroduced toensure fairandequitable treatment. Demand formeathadfallen in1996 as
aresult ofBSEandreduced tourist trade, butthemarket wasrecovering in1997. Inservices,
100percentforeign participation wasallowed onfreight andpassenger transport, inspecified
circumstances. Telecommunications liberalization wasunder wayandanofferonbasictelecoms would
besubmitted totheWTO before theendof1997. Conditions fortourism services would beharmonized
withthose oftheEU.
*******
Overall, Ibelieve wehavehadauseful review ofCyprus. Iknow whatdifficulties theCypriot
delegation havelaboured under inpreparing theirreplies atsuchspeed, andIthank them warmly for
theirefforts. Iamsurethat,asrequested bysome delegations, Cyprus willbackupitsparticipation
inthismeeting with written answers tosome ofthequestions towhich replies have been
promised.
END