RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG22/M/3
4 January 2001
(01-0019)
Committee on Regional Trade Agreements
Twenty-Seventh Session
EXAMINATION OF THE CUSTOMS UNION BETWEEN TURKEY
AND THE EUROPEAN COMMUNITIES
Note of the Meeting of 12 October 2000
Chairman:  Mr. Jae Gil LEE (Korea)
1. The meeting was convened in document WTO/AIR/1389.
2. Under Agenda Item D.I of its Twenty-Seventh Session, the Committee on Regional Trade
Agreements (hereinafter the CRTA or the Committee) took up the examination of the Customs Union
between Turkey and the European Communities (EC).
3. The Chairman said that it was the third round of examination of the Customs Union as prior
examinations had taken place in October 1996 and October 1997.  Although three years had elapsed
since the Agreement had been last examined and he would not go through the details of theexamination process, he wished to bring the Committee's attention to three documents that had been
distributed since 1997, providing details on the quantitative limits applied by Turkey on imports of
certain textile and clothing products from certain WTO Members for the years 1997, 1998 and 2000
(WT/REG22/7, 8, and 9/Rev.1).  The Secretariat had also received that day replies in writing to
outstanding questions, which would be circulated within a short period of time
1.  He intended to
follow-up on the examination of the Agreement once the Committee had considered the Secretariat's
Note entitled "Weighted Average Tariff Rates and Customs Duties Collected" in documentWT/REG22/10.  He explained that while the calculat ion of average duties following the formation of
a customs union was in itself not a particularly difficult task, what had proved to be most laborious
was the actual collection of the required data, which was why the result of the mandated calculations
had not been available earlier and why the examination process had been delayed for such a long
time.  He recalled that Paragraph 2 of the Understanding on the Interpretation of GATT Article XXIV(the Understanding) set the parameters for such ca lculations and elaborated on the provisions of GATT
Article XXIV:5(a).  It referred in particular to the approach to be adopted in the "evaluation ... of the
general incidence of the duties ... applicable", which was to "be based upon an overall assessment of
weighted average tariff rates and of customs duties collected."  Relevant parts of the Understanding
spelled out that "the assessment [should] be base d on import statistics for a previous representative
period to be supplied by the customs union, on a tariff -line basis and in values and quantities, broken
down by WTO country of origin" and that "the duties and charges to be taken into consideration
[should] the applied rates of duty."  Furthermore, the Understanding explicitly mandated the Secretariat
to perform the calculation of "the weighted av erage tariff rates and customs duties collected in
accordance with the methodology used in the assessmen t of tariff offers in the Uruguay Round".  That
methodology had been applied in the assessment and th e details of all data taken into account in the
calculations were described in the document.
                                                     
1 The questions and replies were distributed as document WT/REG22/6/Add.2.WT/REG22/M/3
Page 2
4. The representative of the European Communities (E C) said that a considerable amount of time
had passed since the Agreement had been last exam ined.  His delegation was hopeful that the third
round of examination would be the last one.  The Parties had produced written replies to questions left
outstanding at the end of the last examination three years earlier.  He apologised that the document had
become available with such short notice.  He thanke d the Secretariat for undertaking the analysis of the
incidence of tariffs, which was an important part of the exercise and was also quite complicated in terms
of processing of all the necessary data.  The results of the calculations showed that the weighted average
tariff rate applied had fallen from 7.3 per cent be fore the entry into force of the Agreement to
6.7 per cent thereafter, which was an indication of th e positive impact of the formation of the Customs
Union for the trade of the Parties.  The Secretaria t's calculations on the basis of the methodology set out
in the Understanding had confirmed the Parties' earlier predictions.  Two particular developments had
taken place since 1997.  Firstly, as had been indica ted during the last examination round, the anticipated
additional concessions in trade in agriculture had indeed come into force in January 1998, constituting a
further step in improving the ex tent of liberalization between the Parties.  Secondly, although not
directly relevant to the specific aspects of the examination, negotiations had begun in the year 2000
between the Parties with the aim of reaching agreemen t on provisions in the areas of trade in services
and government procurement.  While it was too ea rly to say what their results would be, these
negotiations clearly indicated the way in which th e Parties expected to develop and deepen their
economic relations.  He reiterated the Parties' conf idence that the Agreement was compatible with the
relevant obligations of the WTO.
5. The representative of Turkey thanked the Secretar iat for its valuable work  in preparing the Note
and underlined the fact revealed by the calculations that the Turkish weighted average rates had fallen
by almost 33 percent - from 12.3 per cent to 8.3 per cent - following the formation of the Customs
Union.  He joined the representative of the EC in e xpressing confidence that the Agreement satisfied the
provisions of GATT Article XXIV and invited the Committee to reach the same conclusion.
6. The representative of Uruguay said that the calculation of the weighted average tariff rates was
a complicated exercise, as had also been experi enced in relation to MERCOSUR.  Comparing the
methodology used in the Secretariat's Note and the one stipulated in GATT Article XXIV and the
Understanding thereof, he asked for a clarification:  Paragraph 4 of the Note stated that the EC's bound
tariff rates and Turkey's applied rates had been used for the periods prior and subsequent to the
formation of the Customs Union.  He wondered wh ether the EC's bound and applied rates were the
same, and if so, why the latter had not been used.  If there was a difference between them, what criterion
had prevailed for using one type of rate for one Party and another for the other Party?
7. The representative of Japan said that the Secretariat's Note attempted to assess changes in the
Parties' duties and other regulations of commerce following the formation of the Customs Union.Paragraphs 4 and 5 of the document explained that the bound tariff rates had been used for the EC.
However, according to paragraph 2 of the Understanding, the applied rates of duty were to be used for
the calculation: had the applied rates been used, the results might have been different.  He asked the
Secretariat to explain why bound rather than applied rates had been used.
  It was important to follow
the methodology set out in the Understanding especially since it was the first Agreement for which
such a calculation was being performed.
8. The representative of the United States also wondered why the EC's bound rates had been
used.  In many instances, the bound rates would be the same as the applied rates, which were specified
in the relevant part of the Understanding.  If so, it needed to be made clear that the bound rates hadbeen used as a surrogate for the appropriate applied rates.  With respect to the specific case of the
EC-Turkey Agreement, her delegation was not sure whether the EC's bound rates, corresponding to
the first step of the implementation of Uruguay Round commitments, were the same as their applied
rates for the particular period that the calculations took into account.  For example, she recalled that
effective 1 January 1995, the EC had implemented a number of additional tariff concessions on top ofWT/REG22/M/3
Page 3
the Uruguay Round ones, following negotiations with the United States.  Such concessions needed to
be reflected in the calculation of the EC's weighted average tariff rate prior to the EC-Turkey
Agreement.  Her delegation had similar concerns about the data used for the post-Customs Union
situation described in paragraph 4(a)(ii) of the Secretariat's Note.
9. The representative of the European Communities said that in 1995, the EC's applied MFN
rates and bound MFN rates had been pretty much the same, unlike the case of Turkey.  That was the
rationale behind the approach taken in the methodology.  Further questions of a technical nature, if
any, could be resolved among technicians who worked with tariff schedules on a daily basis.
10. The representative of the United States said that the EC would have considered differences
between its 1995 bound and applied rates to be significant at the time since they had affected the
compensation offered to the United States in accordance with the provisions of GATT
Article XXIV:6.  While the results of the calculat ions, comparing pre- and post-Customs Union tariff
rates using one or the other rate, might be only marginally different, it was nevertheless important to
use the right benchmarks and stick to the text of the Understanding.
11. The representative of the European Communities said that the drafters of the Understanding
had not foreseen that a Customs Union would enter into force on the same day as WTO Members
began the process of implementation of the Uruguay Round results.  While the methodology set out inthe Understanding needed to be followed, it was also necessary to recognize the particular set of
circumstances.
12. The representative of the United States said that if the calculations involved rough estimates,
the Secretariat's Note should state so.  A calculation that was not quite right due to particular historical
circumstances was worthwhile for information purposes.  But the calculations relating to theEC-Turkey Agreement were historic and needed to be on a par with the requirements of the
Understanding, which stipulated that applied rates were to be used.  If, in the case of the EC, the
applied and bound rates were identical, a footnote needed to state that.  However, it was not the case
as the EC had already implemented certain additional concessions to its Schedule and its applied rates
were no longer identical to its bound rates at the end of 1995, which corresponded to the pre-CustomsUnion situation.  Her delegation insisted on compliance with the Understanding.
13. The Chairman noted that long-due replies we re available and would be distributed as an
official document and asked Members whether the information provided had clarified all the points
they had in mind, or whether they had further questions or comments.
14. Referring to paragraph 4(b) of the Note, the representative of the United States asked exactly
how the calculation of trade with parties with whom the Parties to the Customs Union did not have
contractual preferences had been performed.  She added that she would submit written questionsconcerning the Secretariat's Note.
15. The Chairman said that the third round of examination of the EC-Turkey Agreement had
allowed the Committee to clarify a number of questions, but that others were still pending.  He
proposed that some time be given to delegations to consider the additional information that had been
distributed that day and that delegations wishing to  ask additional questions could forward them to the
Secretariat, in writing, by 10 November.  The Parties should submit replies  not later than
20 December.  A subsequent, and hopefully last, round of examination would then be scheduled for
the first Session of the Committee in 2001.
16. The Committee took note of the comments made.
__________