RESTRICTED
WORLD TRADE WT/REG22/M/1
6March 1997
ORGANIZATION(97-0907)
Committee onRegional Trade Agreements
Seventh Session
EXAMINATION OFTHE CUSTOMS UNION BETWEEN
THE EUROPEAN COMMUNITIES AND TURKEY
Note onthemeeting of23October 1996
Chairman: H.E. MrMiguel J.Berthet (Uruguay)
1. TheCommittee onRegional Trade Agreements took uptheexamination ofthegoods aspect
oftheEuropean Communities-Turkey Customs Union under Agenda Item B(ix) ofitsSeventh Session.
Theexamination wasconducted onthebasis oftheStandard Format forInformation onRegional Trade
Agreements andaccordingly followed itslayout.
A. General Statements
B. Section I-Background Information ontheAgreement
- I.1-Membership andDates ofSignature, Ratification andEntry IntoForce
- I.2-Type ofAgreement
- I.3-Scope ofAgreement
C. Section II-Trade Provisions
- II.1-Import restrictions
- II.3-Rules ofOrigin
- II.5-Safeguards
- II.7-Subsidies andstate aid
- II.8-Sector-specific provisions -intra-trade
- agriculture
- trade-related aspects ofintellectual property rights
- II.8-Sector-specific provisions -imports from third parties
- textiles andclothing
D. Section III-General Provisions oftheAgreement
- III.3 -Dispute Settlement Procedures
- III.4 -Relation With Other Trade Agreements
- III.5 -Institutional FrameworkWT/REG22/M/1
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A. General Statements
2. TheChairman welcomed delegates andsaidthattoday 'smeeting hadbeen convened toexamine
theCustoms Union Agreement ("Agreement") between Turkey andtheEuropean Community ("EC"),
which went into force on1January 1996. Byway ofbackground, hesaid thattheparties ina
communication (WT/REG/22/N/1) dated 22December 1995 formally notified their Agreement tothe
WTO. ThetextoftheAgreement wascirculated thereafter toMembers asWT/REG22/N/1/Add.1,
together with aDecision oftheEC-Turkey Association Council ontemporary exceptions toTurkey 's
application oftheCommon Customs Tariff inrespect ofthird countries. Herecalled thattheterms
ofreference fortheexamination oftheEC-Turkey Customs Union, asagreed bytheCouncil forTrade
inGoods were asfollows (WT/REG22/4): "toexamine inlight oftherelevant provisions oftheGATT
1994, theCustoms Union between Turkey andtheEuropean Community, andtosubmit areport to
theCouncil forTrade inGoods." Hethen referred totheUnderstanding which wasalsoadopted by
theCouncil: "Itisunderstood thatthestatement read outbytheChairman oftheCouncil forTrade
inGoods, under Item 7oftheAgenda ofitsmeeting on20February [1995], ascontained indocument 3/1
applies, mutatis mutandis ,tothisWorking Party."
3. TheChairman stated thattheparties hadprovided theSecretariat with information anddata
toenable ittocompute thegeneral incidence ofduties asrequired under Article XXIV:5(a), andfor
purposes offacilitating negotiations under Article XXIV:6 ofGATT 1994. Some important information
was, however, stillmissing butwould beprovided assoon aspossible. Herecalled thatTurkey and
theEuropean Coal andSteel Community hadnotified their Agreement inAugust 1996 (document
(WT/REG22/N/1/Add.1). ThisAgreement went intoforce on1August 1996, andthetextwascontained
indocument WT/REG22/1/Add.1. Finally, heobserved thattheparties hadsubmitted information on
their Agreement inaccordance withtheStandard Format forInformation onRegional Trade Agreements
(WT/REG/25/5).
4. Therepresentative ofTurkey said thattheparties were committed totransparency andthe
multilateral rules enshrined inArticle XXIV ofGATT 1994. Turkey sawitsmembership oftheCustoms
Union ascomplementary toitsparticipation inthemultilateral trading system, asembodied intheWTO.
TheAgreement wasconsistent with theterms ofArticle XXIV, astheparties hadeliminated allduties
andother restrictive regulations ofcommerce, with respect tosubstantially alltrade between them, and
were applying substantially thesame duties andother regulations ofcommerce tothetrade ofterritories
notincluded intheUnion. TheCustoms Union covered trade inallproducts, with theexception of
EURATOM andECSC products. ECSC products were presently covered byafree-trade agreement,
which reflected thenature oftheEuropean Communities 'own arrangement forthese products, and
would beincorporated intheCustoms Union in2002, theyear when theEC'sown temporary regime
forthese products came toanend. Given theextent ofcoverage, theAgreement could besaidtohave
complied with theterms ofArticle XXIV:8(a)(i) ofGATT 1994.
5. Turning toagriculture, theTurkish representative saidthatitwasclear from theadditional
Protocol andtheAgreement establishing theCustoms Union thatitwastheintention oftheparties to
have freemovement ofagricultural products within thecustoms territory. Itwasenvisaged thatTurkey
would, after atransition period, adapt itsagricultural policy inlinewiththeCommon Agricultural Policy
oftheEC. During thetransitional period, theparties hadcommitted themselves toimproving market
access onamutually advantageous basis. Already 91percent ofTurkish agricultural exports was
receiving preferential treatment inthemarket oftheEC.Outofthisfigure, 71percentreceived duty-free
treatment. Negotiations were currently underway between theparties tofurther liberalize trade inthis
sector. Aprincipal goal ofthenegotiations wastoaccord thesame level oftreatment thatTurkish
exports received intheECmarket toECagricultural exports totheTurkish market. With respect to
processed agricultural products, hesaidthatTurkey hadagreed toadopt theECclassification, andwouldWT/REG22/M/1
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accordingly differentiate between theagricultural andindustrial components ofduties applied onthese
products. Theindustrial component ofthecustoms duties hadbeen eliminated inintra-Customs Union
trade, andauniform ratewasbeing applied tothetrade ofthird countries. With respect totheagricultural
component, theparties continued tomaintain andapply their own duties tothetrade ofthird parties.
Theestablishment ofthissystem hadreduced thelevel ofprotection by50percent, thus conferring
asubstantial benefit onthird countries. Stressing that theAgreement was consistent with
Article XXIV:8(a)(i) ofGATT 1994, hesaidthatagriculture accounted foronly 10percentofthetotal
trade between theparties, andthatonly atinyproportion (1percent) ofexports ofthird countries to
Turkey would attract foraperiod offiveyears import duties inexcess oftheCommon Customs Tariff
(CET).
6. The representative ofTurkey stated thattheAgreement was consistent with theterms of
Article XXIV:5 ofGATT 1994, which provided thatparticipants ofaCustoms Union should notimpose
onthetrade ofthird countries higher duties ormore restrictive regulations ofcommerce after the
formation oftheCustoms Union. Turkey hadbeen applying theCET oftheECsince thecompletion
oftheCustoms Union on31December 1995, theCET oftheEuropean Communities, which generally
speaking hadamuch lower incidence thanTurkish rates previously inforce. Before applying theCET,
theaverage Turkish tariff wasaround 18percent. Now, ithadcome down to5.6percentinlinewith
theCET, andwasprojected tofallfurther to3.5percentafter theimplementation oftheUruguay Round
Commitments. Notwithstanding theaverage reduction inTurkish tariffs, itwascommitted toholding
negotiations with anyMember which hadaclaim under Article XXIV:6 ofGATT 1994.
7. Therepresentative ofTurkey observed thatthedefinition oftheCustoms Union hadevolved
beyond theclassical concept inlinewith developments intheprocess ofEuropean integration aswell
aswith therules governing international trade. Turkey 'sadaptation totheEC'scommon commercial
andcompetition policies was, therefore, ofgreat importance totheproper functioning oftheCustoms
Union. These rules hadonthewhole benefitted third countries, although some countries claimed to
have been disadvantaged byTurkish adoption oftheEC'srules relating tothetrade inclothing and
textiles. Theadoption oftheEC'srules byTurkey wasnecessary toachieve thefreemovement of
these products between thetwoparts oftheCustoms Union. Any other rulewould have undermined
theoperation oftheCustoms Union. Itshould beborne inmind thattherestrictions inthetextiles
andclothing sector were temporary, andwould cease toapply on1January 2005, asforeseen inthe
Agreement onTextiles andClothing. Hestressed thatwithin thetransitional period, efforts would be
made toreduce thelevel ofprotection, which hadbeen reduced from 37percenttoaround 9percent
in1996, andwasprojected toprogressively fallfurther with theimplementation oftheUruguay Round
commitments. Itwasthusreasonable toconclude thatthird countries would enjoy much better access
totheTurkish market inthepost-Customs Union period than before.
8. Therepresentative ofTurkey continued bysaying thathiscountry wasdetermined toalign its
external trade policy with theEC'spreferential trade regime within aperiod offiveyears. Tothat
end,afreetradeagreementhadbeensignedwithIsrael,andanotherinitialledwithHungary.Negotiations
with theCzech andSlovak Republics andRomania were continuing, anditwashoped they would be
extended induecourse tocountries such asPoland andthose having trade agreements with theEU.
Hereiterated thatTurkey wascommitted totheWTO andwould notify theagreements thatitwould
conclude assoon astheywere ratified. Hestated thatTurkey hadadopted thefollowing EClegislation:
theCouncil Regulation onCommon Rules inExports andtheCouncil Decision onOfficially Supported
Export Credits. Theharmonization ofTurkish laws andregulations with those oftheECwould simplify
thelegalframeworkforthirdcountriesandreducetheirtransactioncosts.Addressingintellectualproperty
rights, hesaidthatTurkey hadadopted asignificant proportion oftheEC"acquis communautaire",
particularly with respect toindustrial designs, geographical indications, trade marks, etc. Since this
legislation wasapplied onanerga omnes basis, third countries would alsobenefit from theimprovedWT/REG22/M/1
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protection afforded tointellectual property rights. Theadoption byTurkey ofnewdisciplines inareas
such ascompetition standards, state aids, etc.,would eventually improve market access conditions for
third countries. Itwashoped thattheparties would cease toapply measures such asanti-dumping and
countervailing measures totheir trade inthenot-too-distant future. Tothatend, work hadjustbeen
concluded ondeveloping asystem ofstate aidscompatible with WTO rules andconsistent with the
system inforce intheEC. The"Decision onState AidinExports" which hadjustentered intoforce
limitedthescopeofstateaidtoresearchanddevelopment,protectionoftheenvironment,marketresearch,
training activities, exhibitions andpromotion activities abroad, export refunds onagricultural products
andother subsidies compatible with Turkey 'sobligations under international agreements, inparticular
theWTO Agreement. Fortheproper functioning oftheCustoms Union, Turkey hadadapted itsindustrial
standards andtechnical legislation tothose oftheEC. Theobjective oftheTurkish "Regime on
Standardization inForeign Trade" wastoregulate standardization andconformity assessment, ensuring
transparency andefficiency, having regard toWTO rules inthisarea.
9. TheTurkish representative concluded bysaying thattheCustoms Union Agreement with the
ECconstituted themost important stepforthemodernization oftheTurkish economy anditsintegration
intotheworld trading system. Since theobligations assumed byTurkey under theAgreement paralleled
those assumed under theWTO Agreement, itwashisconviction thatmeeting those obligations would
invariably facilitate andaccelerate Turkey 'simplementation oftheWTO provisions. Turkey was
confident thatitsAgreement with theECsatisfied theprovisions ofArticle XXIV, andinvited the
Committee toreach thesame conclusion.
10. Therepresentative oftheEuropean Communities observed thattheparties totheAgreement
hadcompleted theStandard Format; itwashiswish thatitwould shed light onthemechanics ofthe
Agreement, which toallintents andpurposes wasconsistent with theprovisions ofArticle XXIV. The
Ankara Agreements, which were signed inSeptember 1963, should beseen asapackage with three
main components: thefirst wasDecision No.1/95 oftheEC-Turkey 'sAssociation Council, which
established freetrade forallproducts with theexception ofproducts falling under theEuropean Coal
andSteel Community. Thesecond wasCouncil Decision No.2/95, which established atransitional
regime forcertain sensitive products. After theendofthetransitional period, there would befree
circulation ofallproducts within theCustoms Union. Thethird component wasthefree-trade agreement
between Turkey andtheEuropean Coal andSteel Community (ECSC), which wasnotified totheWTO
on31July 1996. Hereiterated thattheECSC wasduetobewound upin2002, andafter thatdate
itwasexpected thatCouncil Decision 1/95 would provide therelevant framework foralltrade ingoods.
Hestressed thattheCustoms Union between theparties would notsignificantly altertrade flows between
them, asbarriers totheir trade hadbeen progressively dismantled since thesigning oftheAnkara
Agreements, which made provision forthegradual establishment ofaCustoms Union.
11. Therepresentative oftheEuropean Communities stated thattheAgreement wasconsistent with
therules oftheWTO. TheroleoftheCommittee wastodetermine whether ornotanagreement was
inconformity withtheestablished rules. While theeconomic effects oftheAgreement could beahelpful
insight, theCommittee should notdeviate from thetestwhich hadbeen employed inthepasttodetermine
theconsistency ofanagreement. Itcould notbedisputed thattheAgreement would lower thegeneral
incidence ofduties andother regulations ofcommerce. Hepointed outthattheadoption byTurkey
ofthecommon customs tariff fornearly allindustrial goods would lead toasubstantial decrease in
Turkish import protection. Itwasestimated thattheoverall weighted decrease would beinorder of
35percentofduty actually collected. Thequotas which hadbeen introduced toreplace high customs
duties inthetextiles field would alsoleadtosignificant liberalization. Onthewhole, Turkish andEC
quotasfortextilesamountedtonearly93,000tonnes.Provisionwasmadeforanadditional16,700tonnes
ofimports totheTurkish-EC market, over andabove average imports between theperiod 1992-1994.
Hereiterated theconformity oftheAgreement with theprovisions ofArticle XXIV. There wasampleWT/REG22/M/1
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evidence toprove thatthetestinArticle XXIV:5 hadbeen satisfied bytheparties, astheAgreement
hadresulted inasubstantial liberalization oftheTurkish market; thegeneral incidence ofduties and
other restrictive regulations ofcommerce hadcome down following theentering intoforce ofthe
Agreement. Itshould beborne inmind thatapart from tariff reductions, Turkey hadalsomade substantial
commitments inthefields ofintellectual property, competition andstandards. Thequalitative nature
ofthetrade liberalization should betaken intoaccount bytheCommittee initsexamination ofthe
Agreement.
12. Insumming up,theECrepresentative saidthatthearrangements under theCustoms Union
agreement andthefree-trade agreement incoalandsteel products satisfied theobligation thatduties
andother regulations ofcommerce should beeliminated with respect tosubstantially alltrade between
theparties. Theparties alsoapplied substantially thesame duties andother regulations ofcommerce
tothetrade ofthird countries. There would bealmost nobarrier tothetrade between theparties at
theendofthetransitional period. Thetransitional periods were short, andcovered only specific issues.
Theparties hadaclear timetable fortheir removal asrequired under Article XXIV:7(b). Itwashis
delegation 'sview thatthedecision which hadtobemade under thisprovision waswhether theAgreement
waslikely toresult intheformation ofaCustoms Union within theperiod contemplated bytheParties.
There wasnodoubt thattheagreements were designed tofacilitate trade between theParties, andnot
toraise barriers tothetrade ofthird countries. Infact, they hadbrought down barriers totrade from
which third countries would benefit. Hereminded delegations thatnegotiations under Article XXIV:6
were stillgoing on.
13. Therepresentative oftheUnited States saidthathisdelegation wasinsupport oftheAgreement.
However, itwasimperative thatallregional trade agreements complied with themultilateral rules.
Some agreements recently concluded bytheECincluding theonewith Turkey raised questions asto
their compatibility with Article XXIV ofGATT 1994. Theexclusion ofagriculture from most ofthese
agreements leftmuch tobedesired. Thereasoning bytheECthatArticle XXIV required newmember
countries toadopt certain restrictive anddiscriminatory arrangements soastoensure thesmooth
functioning oftheCustoms Union wasdubious, asitwasnotapplied across theboard. Theselectivity
ofthisreasoning confirmed thatitwasbeing used asadisguised restriction tothetrade ofthird countries.
Intextiles, Turkey wasrequired toadopt quotas, butinother areas itwasexempted. Regional trade
agreements should have theobjective ofstrengthening, rather than weakening themultilateral trading
system.
14. The representative ofIndia said thathisdelegation was particularly concerned about the
introduction ofquantitative restrictions andsurveillance measures onimports oftextiles andclothing
products byTurkey. Herequested Turkey toprovide fulldetails ofthemeasures andanyrelevant
information. Itwashisdelegation 'sunderstanding thatArticle XXIV didnotrequire acountry joining
aCustoms Union tointroduce quantitative restrictions which were being applied bytheCustoms Union.
Itcould therefore beargued thatthequantitative restrictions introduced inthetextiles andclothing sector
byTurkey wasaninfringement oftheprovisions ofArticle XXIV.
15. Therepresentative ofHong Kong saidthattheexamination hadhighlighted some systemic issues
which needed tobeconsidered bytheCommittee. Heagreed with thedelegate from India thatthe
quantitativerestrictionsintroducedinthetextilesandclothingsectorwasaninfringementoftheprovisions
ofArticle XXIV.
16. Therepresentative ofSwitzerland welcomed theefforts byTurkey andtheECtodeepen their
relations. TheAgreement would notonly increase trade between them, butalsoprovide opportunities
forthird countries. Itwasimperative thatalltrade agreements comply with themultilateral rules.WT/REG22/M/1
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17. Therepresentative ofThailand saidthat, while hiscountry hadinthepastborne thebrunt of
most discriminatory practices ofregional trading arrangements, itnevertheless supported thecreation
ofsuch arrangements provided they respected theletter andspirit ofthemultilateral rules. Itshould
beborne inmind thatArticle XXIV wasanexception tothecardinal M.F.N. principle, andassuch
itshould berestrictively construed. Itwasimperative thatMembers wishing toform RTAs comply
with alltherelevant multilateral rules including Article XXIV:6, which required theparties toRTAs
toenter intocompensation negotiations under Article XXVIII. Aunilateral withdrawal ofconcessions
under Article IIofGATT 1994 would thusconstitute abreach ofthemultilateral rules. Similarly, the
imposition ofquantitative restrictions bynew members ofaCustoms Union violated theprovisions
ofGATT 1994, asthiscould notbejustified under Article XXIV. Hisdelegation would welcome further
information ontherestrictive measures being implemented Turkey.
18. Therepresentative ofJapan saidthathisdelegation hadtaken noteoftheassertions oftheParties
thattheAgreement hadconsiderably lowered thegeneral incidence ofduties andother regulations of
commerce. However, there were certain issues thathisdelegation wanted toaddress including theone
relating totheintroduction ofquantitative restrictions inthetextiles andclothing sector. Hisdelegation
agreed with thestatements made byIndia, Hong Kong, Thailand andtheUnited States.
19. TherepresentativeofNorwaystressedtheprimacyofWTOrulesonregionalism;itwasimportant
thattheywere observed byallMembers wishing toform RTAs. Hisdelegation welcomed thedeepening
ofrelations between theECandTurkey andwasconfident thattheagreement would benefit third
countries aswell.
20. Therepresentative ofAustralia saidthathisdelegation hadthree preliminary concerns, namely
theintroduction ofquantitative restrictions inthetextiles andclothing sector; thegeneral incidence
ofduties andother regulations ofcommerce after theformation oftheCustoms Union; andwhether
there hadbeen anychanges intheagricultural policies oftheParties after theimplementation ofthe
Agreement, especially asregards export subsidies.
21. Therepresentative oftheEuropean Communities saidthattheCommittee needed tooperate
within itsterms ofreference andexamine agreements onthebasis oftherelevant multilateral rules.
Itwould beerroneous tosaythatregional trade agreements were "tolerated" intheWTO. They were,
onthecontrary, desirable astheyhadthepotential forexpanding world trade. Hewasalsooftheview
thatthesecond sentence ofArticle XXIV:4 didnotmandate theCommittee toinquire whether trade
diversion orcreation hadtaken place. Itrecognized thelimitations oftrade policy, asthere could be
noguarantee thataregional trade agreement would definitely lead toanexpansion intrade. The
underlying economic forces should bethere: thebesttrade policy could dowastoprovide theframework
fortheexpansion ofcommercial activity. Hereiterated hisearlier statement thattheAgreement would
benefit third countries, asthegeneral incidence ofduties andother regulations ofcommerce hadbeen
lowered. Herebutted suggestions thatsome agreements concluded bytheECdidnottruly create free
trade. HesaidthatthetestinArticle XXIV didnotrequire complete free-trade inallsectors ofeconomic
activity. Itwould bewrong tousetheprocess ofexamination tochange therules. IfMembers wanted
achange inthetest, they should resort tothecorrect procedures. Hestated thattheWorking Party
Report ontheaccession ofSpain andPortugal made itclear thattheterm "regulations ofcommerce"
included quantitative restrictions. Turning totextiles, heargued thatArticle XXIV allowed Customs
Unions tomaintain restrictive measures, provided those measures were notmore restrictive than those
inforce before theestablishment oftheCustoms Union. Thus, issue could notbetaken attheimposition
ofquantitative restrictions bytheEC,which would bephased outinanycaseafter thetransitional period.
Citing Article 2:4oftheAgreement onTextiles andClothing (ATC), hesaidthatArticle XXIV was
arelevantprovisionwithinthemeaningofArticle2:4oftheATC,andthattheintroductionofquantitative
restrictions wasjustified. Heagreed with therepresentative ofHong Kong thatthisissue wasasystemic
oneforconsideration bytheCommittee. Hesuggested thattheCommittee discuss therelationship
between Article XXIV ofGATT 1994 andother agreements oftheWTO.WT/REG22/M/1
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22. Therepresentative ofHong Kong saidthatArticle XXIV:4 recognized thatthere would be
instances where barriers tothetrade ofthird countries might beincreased intheprocess oftheformation
ofaCustoms Union orafree-trade area. Itwashisview thatArticle XXIV:8 didnotprovide legal
cover fortheadoption ofmeasures which were otherwise inconsistent with theprovisions ofGATT
1994. Herecalled thatduring theWorking Party examination oftheaccession ofPortugal andSpain
totheEC,theECadmitted thatArticle XXIV didnotprovide awaiver from theprovisions oftheGATT.
23. Therepresentative ofThailand disagreed with theview expressed bytheECthatArticle XXIV
permitted Customs Unions toadopt quantitative restrictions torestrict trade ofthird countries. Hesaid
thatadistinction needed tobedrawn between "restrictive regulations ofcommerce" ascontained in
Article XXIV:8(a) and(b)andother "regulations ofcommerce" assetforth inArticle XXIV:5(a). A
proper reading ofArticle XXIV would prove thatitdidnotprovide legal cover fortheadoption of
quantitative restrictions.
24. Therepresentative oftheEuropean Communities agreed with therepresentative ofThailand
thatadistinction ought tobedrawn between thephrases "restrictive regulations ofcommerce" and
"regulations ofcommerce". Thecontext inwhich theformer wasused referred tointra Customs Union
trade, while thelatter referred totrade with third countries. He,however, disagreed with hisanalysis
thatArticle XXIV didnotprovide thelegal cover fortheadoption ofquantitative restrictions.
B. Section I: Background Information oftheAgreement
I.1 Membership andDates ofSignature, Ratification andEntry IntoForce
25. Therepresentative oftheUnited States requested theParties tofurnish theCommittee with
up-to-date information including 1995 keytrade dataforTurkey andfortheEC-15, ifpossible. Without
such data, itwasdifficult toassess theimpact oftheAgreement onthird countries.
26. Therepresentative ofHong Kong regretted that, while theAgreement under review went into
force on31December 1995, itwasnotuntil mid-February ofthefollowing year thattheWTO was
notified oftheAgreement.
27. Therepresentative oftheEuropean Communities saidthattheParties would provide information
which would beuser-friendly andshorten thelength oftheCommittee 'sdebates. Itwould enable
delegations toeasily compare thecustoms duties applicable before andafter theimplementation ofthe
Agreement. Delegations would discover thatthere hadbeen aconsiderable reduction inthegeneral
incidence ofprotection across therange oftraded goods, including textiles andclothing products.
Addressing theissue raised bytherepresentative United States, hesaidthatdetailed trade datafor1996
wasnotavailable, butonthebasis ofonavailable datacovering 1990-1996, EC-15 imports from Turkey
amounted to1.77 percentofitstotal imports in1995 and1.69 percentin1996. Thedifference was
very small. Based ondata fortheperiod 1992-1994, 93.4 percent ofTurkish imports (excluding
agricultural products) from EC-15 attracted noduties. Thefigure would riseto95.5 percent when
thetransitionalregimeunderCouncilDecision2/95andtherestrictionsimposedonprocessedagricultural
products were abolished. Correspondingly, EC-15 imports from Turkey (excluding agriculture) would
amount to86percentattheendofthefive-year period. Based onaverage 1992-1994 imports, there
hadbeen a35percent decrease induties actually collected bytheTurkish authorities. Addressing
thetransparency issue, hesaidthatitmight beimpracticable forParties toaRTA tonotify their agreement
before itsimplementation. Therepresentative ofJapan requested theECtomake available inwriting
thedata they referred tointheir statement.WT/REG22/M/1
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I.2 Type ofAgreement
28. TherepresentativeoftheUnitedStatessoughtclarificationofthelengthofthetransitionalperiod,
andwonderedwhetheritwasinconformitywiththeprovisionsofArticleXXIV,whichgaveanindicative
period oftenyears within which alltransitionary measures should have been phased out. Inresponse,
therepresentative ofTurkey saidthat, whereas theoriginal Association Agreement, signed in1964,
provided fortheestablishment ofaCustoms Union, itdidnotlaydown anyspecific time-table, given
thevastly differing economic conditions intheEEC andTurkey. However, itcontained provisions
aimed atreducing thediscrepancies intheeconomies oftheParties. TheAdditional Protocol of1970,
which went intoforce in1973, gave anindicative period fortheestablishment oftheCustoms Union.
Thetransitional period oftwenty-two years wastherefore notvery long. Inanyevent, theten-year
rulementioned bytherepresentative oftheUnited States wasonly adopted during theUruguay Round.
Itwasimportant tofocus ontheelements oftheCustoms Union rather than thetransitional period.
1.3 Scope oftheAgreement
29. Therepresentative ofAustralia wondered howTurkey would adjust itshigher tariffs forcertain
products totheCET: wasittobeinregular stages (similar reductions)over aperiod offiveyears?
Healso wondered whether additional products could beadded tothislistofexceptions. The
representative ofTurkey responded thathercountry hadnointention ofexpanding thelist.Shepointed
outthatproducts notsubject totheCET covered only 1.4percentoftheir entire tariff lines. Outof
18,132 products covered bytheCustoms Union, only 256products were onaneight-digit basis. It
wastheintention ofTurkey togradually align them totheCET within aperiod offiveyears.
30. Therepresentative oftheUnited States saidthattheexclusion ofsteel from thecoverage of
theagreement injured third party rights. Itwasnotenough thatthere wasfree-trade insteel between
theParties. While theEChadargued onnumerous occasions thatArticle XXIV required ittohave
asingle market, ithaddemonstrated itspreparedness toignore theletter andspirit ofArticle XXIV
whenever itwasinitsinterest todoso.Theselective interpretation ofArticle XXIV undermined its
effectiveness. Inresponse, therepresentative oftheEuropean Communities saidthatthisissue had
been effectively covered byhisTurkish colleague inhisintroductory statement. Hesaid thatthe
Agreement didnotexclude anyimportant sector from itscoverage. Thefree-trade agreement insteel
should beseen asatransitional arrangement, which would bephased outgradually well before 2004
when theEuropean Communities wasrequired toabolish theremaining restrictions onsteel aspart
oftheobligations itundertook during theUruguay Round. After thetransitional period, there would
beasingle market andtheexternal tariff would beadjusted inaccordance with theundertakings which
were given during theUruguay Round. Turkey would notbeinaposition tomaintain restrictions,
asproducts infreecirculation intheECwould beentitled tofreeentry intotheTurkish market. The
argument thatthird party rights would beinjured could thus notbesustained.
31. Therepresentative ofSwitzerland inquired whether theParties totheAgreement intended to
submit acommon listofconcessions. Inresponding, therepresentative ofTurkey saidthat, whereas
itwastruethattheParties hadseparate schedules ofconcessions under theWTO, Turkey wasapplying
theCET initstrade with third countries.
C. Section II: Trade Provisions
II.1 Import Restrictions
32. Therepresentative ofAustralia wanted toknow theproportion ofTurkey 'stariff lines which
were affected bytheCET. Itwould behelpful ifTurkey could provide information onwhich tariff
lines were changed inorder tobeinconformity with theCET, aswellasinformation onthepercentageWT/REG22/M/1
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ofnon-preferential imports which were affected bythealignment ofTurkish tariff rates totheCET.
Healsorequested information onitems which were nowsubject totariff quotas instead oftariffs. Lastly,
hewanted toknow whether there hadbeen anyadjustments inECtariff quotas totakeaccount ofTurkish
imports, andifso,thebasis upon which thetariff quota volumes hadbeen determined.
33. Therepresentative ofTurkey saidthatadocument would bedistributed todelegations showing
protectionratesfrom1993-1996.Informationonatarifflinebasiswouldalsobesubmittedtodelegations.
About 98percentofTurkish tariff lines were higher than theCET. With theimplementation ofthe
Agreement, theaverage protective ratehaddropped tothelevel oftheCET, which was5.6percent.
Turkey hadalways preferred high tariffication asameans toprotect itsindustries from foreign
competition. In1995, theaverage protection rateagainst ECandthird country exports was14and
19percent, respectively.
34. Therepresentative ofAustralia referred toArticle 17oftheAgreement andrequested theParties
toprovide information ontheaffected products. Hesought clarification ofthescope ofArticle 18of
theAgreement, particularly how theagricultural component wastobeestablished inaccordance with
Article 19.Hisdelegation wasinterested inknowing which oftheitems listed inAnnex 1were subject
tothisagricultural component. Inresponse, therepresentative oftheEuropean Communities saidthat
thetreatment ofprocessed agricultural products intheAgreement wasnotunreasonable; almost all
thepreferential agreements concluded bytheEChadasimilar provision. Theadvantage ofthispolicy
wasitsflexibility: ontheonehand, itallowed fortherapid liberalization oftherestrictions pertaining
toprocessing aspect while ontheother hand, itpermitted adifferent regime togovern theagricultural
component.
35. Therepresentative ofTurkey referred totheannexes todocument WT/REG/22/1 andsaidthat
theAgreement required Turkey toadjust itsexternal trade policy inlinewith thatoftheEC. That
required ittoadopt therules relating toprocessed agricultural products. Processed agricultural products
were products which contained mixed sugar andcereals. Itwasforthisreason thattheir protection
rates should reflect thebasic elements thattheycontained, namely industrial components andagricultural
components. Theformer wasnotsubject toanyad-valorem duty within thecustoms union, while the
latter was. Each Party maintained different rates intheir trade with third countries, asfarasthelatter
wasinvolved. Turkey hadreduced itsprotection rateonagricultural components from third countries
by50percent.
36. Therepresentative oftheUnited States sought clarification ofthescope ofArticle 8ofthe
Agreement, particularly thecriteria fordetermining which important instruments oftheECthatTurkey
should adopt. Healsosought clarification ofthescope ofArticle 9oftheAgreement, which referred
toconditions under which trade would take place after theadoption ofcertain measures byTurkey.
Inresponse, therepresentative oftheEuropean Communities referred toArticle 10oftheAgreement,
andsaidthatthewhole issue revolved around technical barriers totrade.
Section II.3 Rules ofOrigin
37. Therepresentative oftheUnited States referred toArticles 17through to23oftheAgreement,
andrequested more information ontherules governing processed agricultural products. Hewasdoubtful
ifthedistinction could beproperly made. Thelatitude given toTurkey tomaintain restrictions onsome
products andtophase them outgradually wasnotinconformity with theterms ofArticle XXIV. He
requested theParties toexplain how these provisions would work inpractice, especially interms of
their effect onthird countries andonintra-trade between theParties.
38. Therepresentative oftheEuropean Communities saidthatArticle XXIV:8(a)(ii) required the
Parties tohave substantially thesame regulations ofcommerce. TheParties hadeliminated duties and
other restrictive regulations ofcommerce onsubstantially alltrade between them, including intheWT/REG22/M/1
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agricultural sector, although afewbarriers remained which were, however, duetobeeliminated after
thetransitional period. TheParties hadcommitted themselves tomutually improving market access
foreach other 'sagricultural products. Itwashoped thatadealwould bereached about better market
access bytheendoftheyear. Hepointed outthat91percentofTurkish agricultural exports enjoyed
preferential treatment intheEC. Outofthis, 71percententered theECduty-free. After theendof
thenegotiations, hehoped thattheECexports totheTurkish market would receive thesame level of
preferential treatment. Given thatagriculture constituted only 9percentofthetwo-way trade between
theParties, andthatthere wasagenuine commitment tofurther liberalize thissector, itcould besaid
thattheAgreement wasconsistent with theprovisions ofArticle XXIV. Themultilateral rules didnot
require parties toaRTA toabolish allbarriers totrade. Thekeyword was"substantial"; youcould
notinterpret ittomean "all". Given theextent ofliberalization under theAgreement, itwasclear that
theCustoms Union satisfied thetestlaiddown inArticle XXIV:8 ofGATT 1994. Theagricultural
sector wasonitsway tomeeting thetestinitsown right.
Section II:5 Safeguards
39. Therepresentative ofHong Kong inquired whether thecommon application ofcommercial
policy measures byacustoms union required newmembers toautomatically adopt measures imposed
bythecustoms union against thetrade ofthird countries. Healsowanted toknow whether there existed
adifference inthedegree ofharmonization orcommon application ofcommercial instruments such
assafeguards, anti-dumping andcountervailing measures intheCustoms Union.
40. Therepresentative oftheEuropean Communities saidthatacustoms union waspredicated upon
theelimination oftrade barriers soastopermit thefreecirculation ofgoods within theconstituent
territories. Ifmembers didnothave auniform policy towards third countries, goods prohibited inone
member country pursuant toasafeguard measure could well findtheir wayintothatsame country via
other member states. This legitimate concern hadprompted theParties toadopt thesame measures
towards third countries. Any measures adopted bytheCustoms Union would beWTO-consistent.
While hewasaware thataregime hadbeen putinplace, nomeasures hadbeen implemented bythe
Parties, reflecting thecareful approach with which theParties were approaching thisparticular issue.
TheParties recognized thesensitivity ofthisissue forWTO Members andwere conscious about the
need toaddress thisissue onacareful andacase-by-case basis, bearing inmind theoverarching rules
oftheWTO. Itwould notbeappropriate todescribe theregime asautomatic forthereasons given
above. Theadoption ofcommon rules onstandards, competition policy andstate aidsshould beseen
inthesame light; theywere intended toensure thatthecommitment tofreecirculation ofgoods between
theParties wasnotundercut byanyforces. Turkey 'sacceptance ofthese new disciplines wastobe
welcomed,asfewcountriesatthesamelevelofdevelopmenthadimplementedsuchwide-rangingreforms.
Hereiterated thatthereforms would notonly benefit Turkey butitstrading partners aswell. Hesaid
thatafter thetransitional period, theParties would harmonize their legislation andcease toapply
commercial defence instruments intheir relationship with each other. They would formulate andapply
common rules intheir trading relations with third countries.
41. Therepresentative ofJapan saidhisdelegation 'sview onthismatter: theautomatic extension
ofanti-dumping duties, countervailing andsafeguard measures, without taking intoaccount theactual
market conditions ofthecountries concerned wasinconsistent withWTO rules, andcould notbejustified
under Article XXIV ofGATT 1994. Hesaidthathisdelegation hadtaken note oftheexplanations
provided bytheECregarding theambitions oftheParties toform acoherent andharmonized trade
defence regime intheyears tocome against third countries. Hewasencouraged thattheParties had
not,asyet,applied anysafeguard measure against theexports ofathird country. Heasked iftheParties
could explain thephrase "substantially similar", appearing under thesection onsafeguards indocument
WT/REG22/5. Hefurther sought clarification oftheanti-dumping policy oftheParties.WT/REG22/M/1
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42. Therepresentative ofHong Kong saiditwashisunderstanding thattheAgreement would require
Turkey toadopt safeguard measures when similar measures were inforce intheEC,andthatany
measures adopted bytheParties would beconsistent with theWTO Agreement onSafeguards. He
wondered whether theParties would carry outseparate investigations before theadoption ofanysuch
measures. Heasked theTurkish delegate ifhecould provide information onwhether there hadbeen
anyamendment totheir laws onsafeguards, anti-dumping andcountervailing measures since the
implementation oftheAgreement. Ifso,hadthemodifications been notified totherespective WTO
committees? Thedebate regarding theextent ofharmonization oftrade policy instruments wasaquestion
ofcritical importance given theproliferation ofregional trade Agreements. Afundamental conflict
existed which needed tobeaddressed: ontheonehand thecommitment tofreecirculation ofgoods
between theParties, butontheother hand, thereluctance orinability oftheParties tofully harmonize
orintegrate their commercial policy instruments. ThefactthattheParties maintained different policy
instruments ortrade regimes raised thedistinct possibility ofconflict. How they were going tosolve
thisproblem wasofinterest toWTO Members. Hereferred tothepoint made bytheJapanese delegate
about theenlargement oftheEC,andsaidthattheextension ofanti-dumping duties without further
investigations wasnotjustified under WTO rules. Hehoped thattheECandother Members would
notfollow thatprecedent.
43. Therepresentative ofKorea agreed with theviews ofJapan andHong Kong andsaidthatthe
rules oftheWTO required Parties toaRTA toadopt substantially thesame regulations ofcommerce
intheir trading relations withthird countries, andalsotoeliminate duties andother restrictive regulations
including safeguard andanti-dumping measures ontrade between them. Notwithstanding theParties '
intention toharmonize their legislation inthefuture, itwould appear thatthey didnotmeet thetest
setoutinArticle XXIV. Hisdelegation wasconcerned about theautomatic extension ofanti-dumping
measures toacceding countries, andthatadistinction should bemade tomeasures inplace atthetime
oftheestablishment oftheCustoms Union, andmeasures which were freshly introduced after the
formation oftheCustoms Union. Protective measures could only beadopted after investigations had
been conducted inaccordance with WTO rules. The automatic extension ofduties without any
investigations appeared toconflict with WTO rules. Hisdelegation would nothave anyreservations,
iftheParties were tofollow thecorrect procedure.
44. Therepresentative oftheUnited States shared theconcerns raised bytherepresentative ofKorea.
Referring toArticle 44oftheAgreement, which seemed toexempt Turkey from trade defence measures,
heasked whether theexemption provided wasautomatic, andwhich were theECmeasures which Turkey
would beexpected toimplement. Hesought clarification ofthescope ofArticle 45oftheAgreement
which provided forcoordination between theParties intheadoption ofprotective measures against
third countries.
45. TherepresentativeoftheEuropeanCommunitiesreaffirmedthattheAgreementhadnoprovisions
onthecommon application ofanti-dumping andcountervailing measures. Hethought itfittodraw
adistinction between putting inplace similar mechanisms fordealing with particular cases, andtaking
what might becalled joint action, inanyparticular case. Hesaidthatthephrase "putting inplace similar
measures" hadapeculiar meaning, asitreferred tothelegislative instruments providing themechanisms.
Referring tothequestion posed bytheJapanese delegate, hesaidthatthephrase "substantially similar"
meant amechanism which wasintended todeliver aresult consistent with theresults, which might
beexpected tobedelivered bytheECmachinery. ItwastheParties 'intention toharmonize andlater
integrate their policies. With regard tosafeguards, hesaid thattheAgreement provided forthe
harmonization ofmeasures. Hereaffirmed thatnosafeguard measures currently inplace intheEC
hadbeen extended toTurkey. Turning totheenlargement oftheEC,hesaidthattheextension ofthe
"anti-dumping andsafeguard boundary" wasforproperly justified reasons. Hereminded delegations
about thelevel ofeconomic integration among theParties, andtheexistence ofacoherent andfully-
enforced competition policy framework within theEC,which wasextended tothenew members on
their accession. Hereiterated theParties 'commitment togradually harmonize their competition lawsWT/REG22/M/1
Page12
andother relevant legislation, andabolish theright ofeach party totakecommercial defence measures
against theother. Commenting ontheKorean statement, hesaidthattheobservation thatArticles VI
andXIX ofGATT 1994 were notexpressly listed asrecognized exceptions inArticle XXIV:8 was
correct. Both Turkey andtheECadministered separate regimes vis-a-vis third countries. Hemaintained
thattherelevant testunder Article XXIV:8 waswhether theParties hadcommitted themselves tothe
removal ofcommercial defence measures intheir trade, which theParties haddone. Their Agreement
could therefore tobeconsidered asconsistent with theprovisions ofArticle XXIV. Responding to
thequestion posed bytherepresentative oftheUnited States, hesaidthattheParties were expected
tocoordinate their trade defence instruments through theAssociation Council, which wasthejoint
decision-making body charged with thereview oftheapplication ofsuch measures byoneParty against
theother.
46. Therepresentative ofTurkey saidthatfollowing theimplementation oftheAgreement, her
country hadamended andimplemented anumber oflaws andregulations with aview tobringing its
commercial framework inlinewith thecommon commercial policy oftheEC. Common rules had
been adopted onanumber ofsubjects including imports from certain third countries, surveillance and
safeguard measures, official support export credits andtextile imports. Sherecalled thatTurkey was
intheprocess ofconcluding preferential trade Agreements with countries which hadsuch arrangements
withtheEC.Theoverall objective wastoalign Turkey 'scommercial policy with thatoftheEC.Turkey
hadlaws regulating competition andstateaids, andalsolaws protecting industrial andcommercial policy
rights. Itwasasignatory tomany international conventions andhadimplemented laws toprotect the
consumer. Turkey hadadopted about 90percentofEC'sregulations covering abroad range ofsubjects.
47. Therepresentative ofHong Kong saidthathisdelegation would welcome receiving written
responses toitsquestions raised inrelation tothenotification ofchanges inTurkish laws andregulations
following theimplementation oftheAgreement. Hedidnotfully grasp thestatement bytheECthat
Turkey 'ssafeguard mechanism wasexpected todeliver thesame results astheEC'ssystem. Theway
itwasputsuggested thatthemeasure would beimposed regardless oftheoutcome ofinvestigations
intheTurkish market. Hewasunder theimpression thattheECwould invoke safeguards measures
only when investigations conducted initsmarket warranted theadoption ofsuch measures. Turkey
wouldsimilarlybeabletoimposemeasuresonlywheninvestigationsconductedinitsownmarketjustified
thatresponse. Ifthewhole oftheCustoms Union perceived thatthere wasathreat, then they could,
asaunit, take action based ontheevidence.
48. Therepresentative oftheEuropean Communities agreed withthestatement made byHong Kong;
heaffirmed thatmeasures would betaken bytheParties only after separate market investigations. His
earlier comment related todifferent nature oftheTurkish administrative system from thatoftheEC.
Heemphasized thattheParties hadcommon obligations byvirtue oftheWTO disciplines inthisarea.
These obligations, coupled with those assumed pursuant totheAssociation Agreement between the
Parties, constituted theexternal framework inforce intheterritories ofthetwoParties.
II:7 Subsidies andstate aid
49. Therepresentative oftheUnited States referred toArticle 34oftheAgreement andwondered
what constituted an"important project ofcommon European interest" within themeaning ofthatArticle,
andwhether they were anyexisting guidelines. Inresponse, therepresentative oftheEuropean
Communities saidthatnorules existed fordetermining which projects qualified foraid. This wasto
bedetermined onacase-by-case basis taking intoaccount allthenecessary elements. Theprovisions
ofArticle 34mirrored closely theexisting internal arrangements within theEC. This wasonemore
example ofTurkey assuming disciplines intended toensure theefficient functioning oftheCustoms
Union.WT/REG22/M/1
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II:8 Sector-specific Provisions -intra-trade
50. Therepresentative ofAustralia referred toArticle 24oftheAgreement andinquired when the
Parties would eliminate theremaining barriers toagricultural trade. WTO Members hadaninterest
inknowing when thetransitional measures would becompletely phased outconsidering thatithadtaken
over thirty years toestablish theCustoms Union. Healso asked whether, under Article 25ofthe
Agreement, Turkey wasrequired toadopt theCommon Agricultural Policy (CAP) oftheEC,particularly
theprovisions relating totheexport subsidy anddomestic support measures. Ifso,would themeasures
ofTurkey andtheECbeaggregated?
51. Therepresentative oftheUnited States saidthatthere wasnofreetrade inagricultural products
between theECandTurkey. Furthermore, itwasclear thatTurkey would adopt theEC'sCAP inits
trading relations with third countries induecourse. Hewondered when theremaining barriers to
agricultural trade would beeliminated inorder tohave freetrade inallagricultural products. Heinquired
whether Turkey would adopt theEC'sdiscriminatory trade legislation inthisarea, particularly the
Hormone Directive?
52. Therepresentative oftheEuropean Communities saidthatfreetrade inagricultural products
wastheultimate objective oftheParties. Henoted thatasubstantial proportion ofagricultural trade
hadbeen liberalized. Hereminded delegates ofthestatistics provided bytheParties andsaidthatthey
were onthewaytomeeting thisgoal. Regarding thelength ofthetransitional period, hesaidthatthe
Parties were committed tophasing outthetransitional measures asquickly aspossible; negotiations
were wellunder wayandwere expected tobeconcluded bytheendoftheyear. Heexpected theensuing
Agreement tofurther liberalize trade inagricultural products tothebenefit ofboth Parties andthird
countries. Heemphasized thattheAgreement metthe"substantial alltrade" testsetoutinArticle XXIV.
Hedisagreed with theUnited States 'view thatthetestdidnotonly require aquantitative analysis, and
suggested thattheCommittee consider thesystemic implications ofthetest. Hemaintained, however,
thattheAgreement wasconsistent with Article XXIV ofGATT 1994, andthattheParties hadgone
further intheir liberalization efforts than wascurrently required byWTO rules. Turning toaddress
thequestion onArticle 25,hepointed outthatTurkey would only adopt CAP measures which would
facilitate free-trade inagricultural products between theParties.
53. TherepresentativeofAustraliasaidthattherepresentativeoftheEChadnotgivenanytime-frame
onthelength ofthetransitional period, noranswered hisquestion onwhether theECandTurkey planned
toaggregate their export subsidy anddomestic support measures.
54. Therepresentative ofHong Kong agreed with therepresentative oftheECthattheCommittee
needed toexamine afresh the"substantial alltrade" test, asitwasacore element ofArticle XXIV.
Heregretted thatafter somany years, Members hadnotbeen abletoclearly delineate thescope ofthis
test.
55. Therepresentative oftheUnited States saidthatthe"substantial alltrade" testhadnotbeen
metbytheParties. Itwaswidely recognized thatforaRTA tobeconsistent with theprovisions of
Article XXIV nomajor sector ofeconomic activity hadtobeexcluded. Provision forfuture compliance
when theAgreement hadbeen inforce foralong period oftime didnotcomply with theletter and
spirit ofArticle XXIV.
56. Therepresentative oftheEuropean Communities inresponse tothefirstquestion posed bythe
representative ofAustralia saidthatthere wasnoplanforTurkey toadopt theEC'sinternal arrangement
fordomestic support andexport subsidies. With respect tothesecond question, hestressed thatthe
Parties hadalready satisfied thetestlaiddown byArticle XXIV, andthatanynewliberalization measures
including theoneunderway tofurther liberalize agriculture should beseen asvoluntary andnotasa
legal obligation. Hereminded delegations thatabout 71percentofTurkish agricultural exports enteredWT/REG22/M/1
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theECduty-free. This figure washigh andsatisfied thetestunder Article XXIV thatallmajor sectors
ofeconomic activity should beliberalized. Hefinally saidthatTurkey wasnotrequired toimplement
theHormones Directive, which wasnotadiscriminatory trade measure, asclaimed bytheUnited States.
II:8 Sector-specific Provisions -imports from third parties
57. Therepresentative ofIndia reiterated hisdelegation 'sview thatthequantitative restrictions
imposed byTurkey after theimplementation oftheAgreement with theECwere notinconformity
with theprovisions ofArticle XXIV. Itwasquestionable whether acombined reading ofArticle 2(4)
oftheAgreement onTextiles andClothing (ATC) andArticle XXIV ofGATT 1994 justified the
extension ofthequantitative restrictions toTurkey. Therepresentative ofHong Kong agreed with this
view. Theextension oftherestrictive measures could notbejustified under theprovisions ofArticle
XXIV:8 ofGATT 1994, which merely defined theconstitutive elements ofacustoms union andafree-
trade area. Inresponse, therepresentatives ofboth theECandTurkey argued thatthemeasures which
were introduced inthecontext ofArticle 2(4) oftheATC were justified under theprovisions ofthe
Article XXIV. They insisted thatthelexspecialis rulewasnotapplicable inthisparticular case, as
therelationship between Article 2(4)oftheATC andArticle XXIV ofGATT 1994 hadnotbeen defined.
D. Section III: General Provisions oftheAgreement -Exceptions andReservations
III.3 Dispute Settlement Procedures
58. Therepresentatives ofHong Kong andIndia wondered what theexact relationship wasbetween
thedispute settlement provisions oftheAgreement andthose oftheWTO. Areading oftheAgreement
seemed tosuggest thatalldisputes between theParties were tobesettled bilaterally.
III.4 Relation With Other Trade Agreements
59. Therepresentative ofJapan requested more information about preferential trading arrangements
concluded between Turkey andthird countries including Turkish membership oftheEconomic
Cooperation Organization whose members included Pakistan andIran. The representative ofthe
United States asked whether under Article 16oftheAgreement, Turkey hadcommitted itself to
concluding bilateral Agreements with allcountries having asimilar trading arrangement with theEC.
Hisdelegation wasconcerned about some ofthese Agreements whose scope waslimited bytheexclusion
ofcertain important sectors andanumber ofexceptions tothemajor rules. Hisdelegation would
appreciate receiving regular information from Turkey, including thestatus oftheagreements withTunisia
andMorocco. Hequeried whether Agreements between these two countries andtheEuropean
Communities had been notified totheWTO. Hesought clarification ofArticle 16(3) ofthe
Agreement,and asked therationale forlevying compensatory duties. Itwasdoubtful whether the
imposition ofthislevy could bejustified under Article XXIV ofGATT 1994.
60. Therepresentative ofColombia wondered what theimplications would beifTurkey wasnot
able toconclude bilateral arrangements with allcountries having asimilar trading arrangement with
theECwithin thefiveyears prescribed byArticle 16oftheAgreement. Healsowanted toknow whether
after thefiveyear period, thecompensatory levy would beabolished orreplaced byanother tariff.
Therepresentative oftheEuropean Communities said thattheprotection may notbenecessary in
fiveyears time, astheParties were expected bythattime tohave brought their respective preferential
trading regimes inlinewith each other 's.Heemphasized thattodate, noaction hadbeen taken by
Turkey pursuant toArticle 16.WT/REG22/M/1
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61. Therepresentative ofTurkey saidthatwhereas itwastruethatthey hadtoharmonize their
commercial policy with thatoftheECwithin fiveyears, theywere intent onachieving thataimwithin
theshortest possible time. Itwasnecessary toreduce theincidence oftrade diversion, andtoallow
greater market access forTurkish products inthose countries, which hadconcluded trade agreements
with theEC. Toredress thisimbalance, Turkey wasnegotiating anumber oftrade agreements based
onaglobal symmetric model. Insome cases, Turkey hadgiven more concessions tothecountries
involved; inothers theopposite hadbeen true. Theimposition ofcompensatory levy wasjustified
above acertain threshold, asitwould have disadvantaged Turkey, which wasapplying theCET. In
practical terms, theexports ofmost ofthecountries having preferential trading arrangements with the
ECcould enter Turkey duty-free given thatformost items, thebound ratefortheECwaszero. Turkey
could impose thecompensatory levy only incases where there were disturbances initsmarket; ifthe
difference between theCET andapplied ratewasmore than 5percent, thelevy could beimposed.
Todate, Turkey hadnotimposed anysuch levies. Responding totheJapanese question, shesaidthat
Turkey hadnotified theWTO ofitsparticipation inEconomic Cooperation Organization. The
arrangement wasofnoimportant commercial significance; itsimpact would belimited asitcovered
only 36items onasix-digit basis andthepreference margin was10percentlessthan MFN rates on
these products. Trade diversion, ifany, would bekept toitsminimum. Turkey 'sparticipation inthis
Agreement would notaffect itstrading relations with theEC,asmost ofthese countries were entitled
totrade preferences under theEC'sGSP.
III.5 Institutional Framework
62. Therepresentative oftheUnited States asked whether theTurkish government intended toaccede
totheAgreement onGovernment Procurement. Referring toArticles 52through to60,herequested
clarification ofthemeaning ofthe"proper functioning ofthecustoms union"; and"agreements with
third countries comprising acommercial dimension forindustrial products", assetoutinArt54:2 of
theAgreement.
63. Therepresentative oftheEuropean Communities saidthattheterm "proper functioning ofthe
customs union" wasabroad term which represented thedesire oftheParties toachieve theobjectives
they hadcommitted themselves to.Itwasmeant toensure thataspects oftheAgreement which had
been implemented would continue tooperate asintended, andthatunforeseen events anddevelopments
aswell astheusual day-to-day questions ofcommercial policy were handled insuch amanner asnot
todefeat theoverall objectives oftheAgreement. TheParties hadputinplace anefficient consultative
process which would ensure therealization oftheir objectives. Turning toArticle 54:2, hesaidthat
itreferred totheindustrial dimension ofother Agreements with third countries with apotential impact
onthefunctioning oftheCustoms Union. Thelistprovided intheparagraph wasnotexhaustive.
64. TheCommittee took note ofthestatements made andagreed tocontinue itsexamination at
alater stage.