RESTRICTED
WORLD TRADE WT/TPR/G/25
29May1997
ORGANIZATION(97-2243)
Original: English
TRADE POLICY REVIEW
CYPRUS
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
MarrakeshAgreementEstablishingtheWorldTradeOrganization),Cyprus'sGovernment'sinitialpolicy
statement isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onCyprus.Cyprus WT/TPR/G/25
Page iii
TABLE OFCONTENTS
Page
I. EXECUTIVE SUMMARY 1
II. ECONOMIC POLICY ENVIRONMENT 2
III. CURRENT INDUSTRIAL POLICY AND EXTERNAL TRADE DEVELOPMENT 4
A. CURRENT INDUSTRIAL POLICY 4
B. EXTERNAL TRADE DEVELOPMENTS 4
1. Total Trade 4
2. Total Imports 4
3. Domestic Exports 5
IV. TRADE AND INVESTMENT POLICY DEVELOPMENTS, 1994-1996 6
V. ECONOMIC RELATIONS BETWEEN CYPRUS AND THE EUROPEAN UNION 6
A. PLANNED ACTION FOR THE PROMOTION OFACCESSION 7
VI. FUTURE POLICY DIRECTIONS 7
1. Domestic Support -Export Assitance toAgriculture 9
2. Anti-Dumping andCountervailing Measures 9
3. Overseas andForeign Direct Investment 9
4. Insurance Activities 9
5. Agreements ontheReciprocal Promotion andProtection ofInvestments 9
6 Control ofConcentrations 10
7. Abolition ofPrice Controls 10
8. Intellectual Property Rights 10
9. Promotion ofexports ofgoods andservices andoverseas direct
investments tonewandexisting markets 10
10. Research andDevelopment 11Cyprus WT/TPR/G/25
Page 1
I. EXECUTIVE SUMMARY
1. Cyprus welcomes theopportunity toparticipate forthefirsttimeinthetrade policy review
process under which itseconomic andtrade policies arereviewed. TheWTO 'sTrade Policy Review
Mechanism, particularly through detailed research oftheSecretariat, provides valuable transparency
intheevolution ofMember economies 'trade regimes andtheirprogress towards theWTO idealof
freeandopentrade ingoods andservices.
2. This report bytheGovernment ofCyprus focuses ontrade policies anddevelopments
during 1994-1996, theperiod inwhich Cyprus signed theUruguay Agreement in1994 andbecame
aMember ofWTO on30July1995. Italsoevaluates theprogress ofthe1994-98 Strategic Development
Plan, theeconomic relations between Cyprus andtheEuropean Union andthefuture policy directions
invarious sectors.
3. Thegeneral objectives ofthe1997-98 Development Planaretoachieve thehighest possible
rateofeconomic growth, given external andinternal restrictive factors, themaintenance ofconditions
offullemployment andtheconsolidation ofconditions ofinternal andexternal stability. Abasic
condition isthecontainment ofthefiscal deficit andpublic debttolevels conforming withtherelevant
Maastricht Convergence Criteria. Fortheperiod 1994-1996, theCyprus economy registered anaverage
annual rateofgrowth ofGDParound 4.5percentinrealterms, slightly higher thanthetargeted value
intheplan.
4. InlinewithCyprus'firmcommitmenttotradeliberalizationwiththemultilateraltradingsystem,
itparticipated intheUruguay Round ofmultilateral trade negotiations which wereconcluded during
thatperiod. Cyprus hasputalotofeffort inimplementing thechanges stemming fromtheneworder.
Despite thedifficulties inadjusting tothenewtrade rulesandmarket opening commitments, teething
problems havebeenovercome. Thebureaucratic andinefficient regulations oftrade through import
licensing andquantitative restrictions havebeenabolished.
5. Thechallenge forCyprus liesincontinuing tosecure access foritsproducts andservices to
theglobal market. Tothisend,Cyprus aimstomaintain itscompetitive edgebyadhering tothefree
market principles, open competition andrational economic policies, aswellasinvesting inhuman
resources infrastructure, technology andinnovation. Cyprus 'ability tosellitsproducts andservices
depends onabarrier -freeworld trading environment. Inthatrespect, Cyprus isfirmly committed
tothemultilateral trading system astheprincipal andmosteffective platform fortradeandinvestment
liberalization.
6. Inaddition tothefundamental andsuccessful trade liberalization objectives, Cyprus remains
committed topursuing anactive trading relationship andisharmonising itspolicies withtheAcquis
Communautaire, withaviewtoprepare thesmooth integration ofCyprus intheUnited Europe.
7. Bykeeping pacewithdevelopments within theEuropean Union (EU), Cyprus iswellonits
waytoachieving another major strategic objective: positioning itself tojointheEUduring thenext
round ofenlargement. Cyprus hasbeenworking towards admission since 1972, when itsigned an
Association Agreement. Itlatersigned aCustoms Union Protocol in1987 andsubmitted aformal
applicationformembershipinJuly1990.TheOctober1993seminardecisionoftheCouncilofMinisters
recognized theEuropean identity andcharacter ofCyprus anditsvocation tobelong totheCommunity.
TheCouncil "invited theCommission toopensubstantive discussions withtheGovernment ofCyprus
tohelpitprepare fortheaccession negotiations tofollow lateron...". These negotiations arenow
settobegin sixmonths afterthecompletion oftheIntergovernmental Conference, asconfirmed by
theCouncil inMarch 1995andreconfirmed since then. TheEUisthuscommitted toinclude Cyprus
inthenextphase ofitsenlargement.WT/TPR/G/25
Page 2Trade Policy Review
II. ECONOMIC POLICY ENVIRONMENT
8. Cyprus economy wasdestroyed bythe1974Turkish invasion andoccupation ofthenorthern
37percentofitsterritory which caused thedisplacement ofonethirdofCyprus population. By1978
however, thewartorneconomy hasrebounded, theeconomically-devastated refugees were housed
intemporary housing, unemployment dropped to2percentfrom30percenthighfouryears earlier,
GDP begun togrow byanaverage 6percentandinflation waskeptunder control.
9. Through hardwork, sacrifice andcohesive strategic Government plans percapita income in
Cyprus hasgrown rapidly inthelasttenyears fromUS$4,570 in1985toUS$13,650 in1996, which
providesCypriotsahighstandardofliving.Besidestheimportanceofservices,salienteconomicfeatures
ofCyprus aretheopenness oftheeconomy (trade ingoods andservices asapercentage ofGDPfluctuate
around 100percent), strong trade andeconomic relations withtheEuropean Union (EU), ahighly
educated labour force andfullemployment combined withlowinflation.
10. Thegeneral objectives ofthe1994-98 Strategic Development Planaretoimprove thestandard
ofliving inCyprus, andtoupgrade theenvironment andcultural development. Therealization of
theabove objectives fullyconforms withtheefforts forharmonisation withtheEU,andthepreparation
fortheaccession negotiations between Cyprus andtheEU,expected tobegin inearly 1998.
11. Atthemacroeconomic level, thePlan'smain objectives aretoachieve thehighest possible
rateofeconomic growth, given external andinternal constraints, themaintenance ofconditions offull
employment andtheconsolidation ofconditions ofinternal andexternal stability. Abasic condition
isthecontainment ofthefiscal deficit andpublic debttolevels conforming withtherelevant Maastricht
Convergence Criteria.
12. Theeconomy during theperiod 1994-1996 isingeneral positive, andtheaverage annual rate
ofgrowth ofGDP amounted toaround 4.5percentinrealterms, slightly higher thanthetargeted
value. Thisrateofgrowth isslightly lower compared tothatachieved during theperiod covered by
theprevious Plan. Itishowever stillconsidered satisfactory given theadverse external environment.
i.e.Thegradual reduction ofCustoms tariffs followed byCyprus since 1988, andthelowratesof
economic growth exhibited byEUmember States which areourmain trading partners.
13. Onthedemandside,economicgrowthreliedmainlyonprivateconsumption,whichwasbolstered
bythesurpassing ofthesetmonetary andcredit targets, despite thefactthataccording totheassumptions
andtargets ofthePlan, external demand should havebeenthebasic leverage togrowth. Investment
activity fellshort ofthetarget set,whereas itsrestructuring infavour ofmachinery andequipment
wasnotachieved tothedesired extent.
14. Thegapbetween investment activity andsavings grew significantly. Domestic savings fell
from 24percentofGDP in1993 to20percentin1996 (thetarget ofthePlanwas22.3percent).
Thisdevelopment resulted inincreased dependence onexternal sources tofinance investment.
15. From thesectoral point ofview, theprivate services sectors, excluding tourism, havebeen
themain motor ofgrowth, asprovided inthePlan. Incontrast, thePlan'sambitious objectives to
modernize, upgrade thequality andrestructure thesectors ofagriculture, manufacturing andhotels
andrestaurants (tourism) werenotrealized totheexpected degree. Inconsequence, thegrowth rates
ofthese sectors fellfarbehind thetargeted ones.
16. Therateofunemployment was,onaverage, 2.8percentoftheeconomically active population
during the1994-96 period, implying arealization ofthePlan'sstrategic objective forconsolidating
conditions offullemployment.Cyprus WT/TPR/G/25
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17. Therateofimprovement ofproductivity wasanaverage of1.8percentinthe1994-96 period
asagainst thetarget of2.8percent. Thisreflects thedivergence asfarastheobjectives ofthePlan
areconcernedintheuseofadvancedtechnologyandmodernmethodsofmanagement,design,production
andmarketing, andconstitutes themainfactor forthedownward trend exhibited bytheexport sectors
oftheeconomy, particularly manufacturing.
18. During the1994-96 period salary increases roseannually by5.5percentinnominal terms
onaverage, aratelower thanthe6.6percenttarget ofthePlan. IntheEU,however, labour costs
exhibited anevenlower increase of3.5percentonaverage. Asaresult, despite therelative moderation
exhibited bythesocial partners inrecent collective bargaining agreements, therewasafurther erosion
ofthecompetitiveness oftheCyprus economy withregard tolabour costs.
19. Therateofinflation -excluding theeffects ofincreases intheVAT ratein1993 -fluctuated
ataround 3percentduring the1994-96 period andcompares favourably withthetarget ofthePlan
which wassetat3.6percent,simultaneously satisfying therelevant Maastricht Convergence Criterion.
Thisdevelopment reflects theverysmall increases intheprices ofimported goods andisattributed
tothepegging oftheCyprus pound totheECU asfrom June1992, inconjunction withthefallin
theaverage rateofinflation intheEUandtheliberalization oftheregime governing imports.
20. Thecurrent account oftheBalance ofPayments exhibited asurplus in1994anddeficits during
the1995-96 period, whereas thePlanprovided forasurplus of1.5percentofGDP. Deviations were
observed withregard tobothdomestic exports andreceipts from tourism, aswellasimports, which
increased theirshare inthedomestic market.
21. External debtcontinued itsdownward trend asapercentage ofGNP from33percentin1993
toabout 24percentin1996, duemainly totheGovernment shifting tointernal borrowing tofinance
itsdeficits. Thisdevelopment isinlinewiththetargets ofthePlan.
22. Foreign exchange reserves rosefromabout £1,350 million in1993to£2,015 million in1996
andcorrespond to11.5months ofimports ofgoods andservices. Thiscompares veryfavourably
internationally andisattributed totheincrease intheforeign exchange accounts ofnon-residents of
Cyprus, particularly off-shore companies.
23. AsfromJune1992, theCyprus pound waspegged totheECU. TheCyprus pound exhibited
vis-à-vis thepound sterling aslight appreciation, from1,34sterling pounds perCyprus pound in1993
to1,37in1996. Asignificant appreciation wasobserved vis-à-vis theUSdollar from 2$perpound
in1993 to2,14in1996. Thenominal appreciation oftheCyprus pound during the1994-96 period
helped consolidate conditions ofinternal stability asreflected intherelatively lowrateofinflation.
24. Therelatively goodpicture presented ingeneral bythebalance ofpayments situation, israther
anunstable one,given thegreat dependence ontourism. Moreover, ifthecurrent account deficit in
themagnitude observed during thelasttwoyears, continues inthefuture, thiswillinevitably lead,
inthemedium-term, toanincrease inforeign debt, andareversal ofthetrend ofthelastfewyears.
25. Thefiscaldeficitimprovedsubstantiallyupto1995,butmorerecentlyitexhibitedadeterioration.
More specifically thefiscal deficit fellfrom about 5percentofGDP in1992 to1percentin1995,
whereas itroseto2.9percentin1996. Theimproved situation upto1995isduemainly toincreased
revenue, from 30.5percentofGDP in1993 to32.5percentin1995 andisbasically attributed to
theincrease intherateofVAT from 5percentto8percentinOctober 1993, andtotheimproved
effectiveness ofthetaxation system. Thedeterioration in1996isattributed, ononehand, totherelative
restraint ineconomic growth, which hadanadverse effect onpublic revenue, andtheincome taxreliefsWT/TPR/G/25
Page 4Trade Policy Review
granted, andontheother, thesignificant increase inpublic consumption expenditure, including defence
spending. Itisimportant tonotethatpublic revenue increased from 33.5percentofGDP in1995
toabout 35.5percentin1996.
26. Public debt, excluding intergovernmental debt1,amounted to54percentofGDP in1996 as
against 59percentin1993 and54.3percentwhich wasthetarget setbythePlan.
27. Despite theupward trend of1996, boththefiscal deficit andpublic debtremained atlevels
which satisfy therelevant Maastricht Convergence Criteria.
28. Monetary andcredit targets weresurpassed during the1994-96 period, resulting inarisein
private consumption, andwere reflected inaninstability inthecurrent account oftheBalance of
Payments.
29. Ingeneral terms, thetargets ofthePlanwithregard tothegrowth rateofGDP, therateof
unemploymentandinflation,havebeenrealized.Themaindeviationsconcernthestructureofproduction
(inparticular thefalling share ofmanufacturing toGDP), thefallofdomestic savings asapercentage
ofGDP, thecontainment intherateofimprovement ofproductivity, andthegrowing deficits inthe
current account oftheBalance ofPayments.
III. CURRENT INDUSTRIAL POLICY AND EXTERNAL TRADE DEVELOPMENT
A. CURRENT INDUSTRIAL POLICY
30. AvitalcomponentofCyprus'industrialstrategyisthemodernizationandtechnologicalupgrading
ofthecountry 'sindustrial base. Themargins fordevelopment based onthemass production model,
which wasplacing emphasis onlabour intensive products withlowtechnological content, havebeen
reduced. Thecomparative advantage ofthesector nowlieswiththeproduction ofhigher quality,
technologically more advanced products requiring skilled labour. Attention isalsofocused ontheneed
tostrengthen existing enterprises byimproving theirstructure. Thecreation oflinkages between local
industriesinordertoincreasethedomesticvalueaddedofmanufacturingoutputandtoachieveeconomies
ofscale isanother central aimofGovernment policy.
B. EXTERNAL TRADE DEVELOPMENTS
1. Total Trade
31. External trade isoneofthemain sectors oftheCyprus economy, contributing considerably
totheeconomic activity ofthecountry.
32. Overtheperiod 1992-1996 thevalue offoreign tradeincreased withamoderate annual average
growth rateof6.7percentreaching in1996 £2,506.5 million incomparison with£1,933.9 million
in1992.
2. Total Imports
33. Total Imports during theperiod 1992-1996, increased by24.6percentreaching in1996
£1,857.5 million from £1.490,8 million in1992.
1Itbasically constitutes theGovernment debttotheSocial Insurance Funds.Cyprus WT/TPR/G/25
Page 5
34. TheEuropean Union countries were in1996 themajor suppliers ofgoods toCyprus and
accounted for48.6percentoftotalimports, valued at£902,2 million. Themajor European Union
countries exporting toCyprus were theUnited Kingdom, Italy, Greece, Germany andFrance.
35. Imports from other European countries, including theformer socialist countries, account
for7.0percentoftotalimports andin1996theyprovided goods valued at£128,7 million. Themajor
supplier ofthisgroup wasRussia.
36. Imports from Arab countries reached in1996 £78,9 million andaccounted for4.2percent
oftotalimports. Syria andEgypt were themajor suppliers, mainly ofcrude petroleum products.
37. Imports fromtheUSA, oneofthebiggest suppliers ofCyprus, reached in1996£312,9 million,
corresponding to16.8 percentoftotal imports. Inthesame year, imports from Japan were
£110,8 million andaccounted for6.0percentoftotalimports (Seechart).
38. Theoverwhelming majority ofthe1996 imports were rawmaterials forthemanufacturing
sector. Intermediate inputs, (rawmaterials), in1996 amounted to£623,7 million andtheirshare to
totalimports was33.6percent.
39. Imports ofconsumer goods, followed with£614,2 million andaccounted for33.1percent
oftotalimports.
40. Imports oftransport equipment andparts were nextwith£188,8 million and10.2percent.
41. Inthesame year, imports ofcapital goods were£170,7 million andaccounted for9.2percent
oftotalinputs. Lastly, imports offuels andlubricants reached £156,8 million andaccounted for
8.4percentofthetotal.
3. Domestic Exports
42. Domestic exports during theperiod 1992-1996 increased by3.6percentandin1996amounted
to£228,4 million incomparison with£220,5 in1992.
43. Manufactured products constitute thebulkofCyprus 'sdomestic exports witha60.2percent
share in1996. Rawandprocessed agricultural products followed with24.1percentand14.1percent
share oftotalexports.
44. TheEuropean Union countries constitute themajor markets forCyprus andin1996
absorbed 55.4percentor£126,6 million ofCyprus 'domestic exports. Themajor EUexport markets
forCyprus products istheUnited Kingdom, followed byGermany andGreece.
45. Exports toArabcountries, followed, andin1996amounted to£43,8 million or19.2percent.
Cyprus 'major markets inthisgroup include Lebanon, theUnited ArabEmirates, Saudi Arabia, Syria
andEgypt.
46. Exports toother European countries, comprising mostly Eastern European countries were
in1996, £26,4 million withashare tothetotalof11.6percent. Themajor export markets wereRussia,
Romania, Switzerland andNorway.
47. Finally, domestic exports totherestoftheworld, mainly totheUSA, Israel andHong Kong,
were in1996 £24,5. Their share tothetotalwas10.7percent(Seechart).WT/TPR/G/25
Page 6Trade Policy Review
IV. TRADE AND INVESTMENT POLICY DEVELOPMENTS, 1994-1996
48. Cyprus'TradePolicyactivitiesoverthepasttwoyearshavefocusedparticularlyonimplementing
theUruguay Round Agreements andcoordinated efforts toharmonize withtheAcquis Communautaire,
withaviewtoprepare thesmooth integration ofCyprus intheUnited Europe.
49. These initiatives include developments inthefollowing areas:
(i) Discretionary import licensing, toprotect localproduction, wasabolished, along with
remaining quantitative restrictions, witheffect from1January 1996; tariffs arenow
themain instrument oftheimport regime. Surcharges, incorporated inthecustoms
duty, havereplaced quotas oncertain products, defined assensitive within theterms
oftheCustoms Union Agreement withtheEU.During theUruguay Round, Cyprus
bound approximately 80percentofindustrial tariff lines at40percent, andall
agricultural tariff linesarebound.
(ii) Implementation ofWTO Agreements.
(iii) Reductions intariffs andtariff simplification.
(iv) Elimination ofQuantitative Restrictions andQuotas.
(v) Application oftheprovisions oftheWTO Agreement onSanitary andPhytosanitary
Measures (SPS).
(vi) Competition policy toconsolidate existing legislative framework andtomake it
comparable totheEUregulatory framework.
(vii) Price controls onlocally produced andimported consumable goods werereduced to
alimited number ofgoods.
(viii) Protection ofintellectual property rights.
(ix) Environmental policies.
(x) Change inregulations regarding lifeandnon-life insurance activities regarding
foreigners.
(xi) Anewpolicy governing foreign direct andportfolio investment.
(xii) Standards andTechnical Regulations.
(xiii) Customs Valuation.
V. ECONOMIC RELATIONS BETWEEN CYPRUS AND THE EUROPEAN UNION
50. Theperiod sincetheissuing oftheAvisbytheEuropean Commission regarding theapplication
ofCyprus forfullmembership totheEuropean Union, inJune1993, ischaracterized bythecoordinated
andsystematic efforts onthepartofCyprus toharmonize withtheAcquis Communautaire, witha
viewtoprepare thesmooth integration ofCyprus intheEU.Cyprus WT/TPR/G/25
Page 7
51. Thedecision oftheCouncil ofMinisters on6March 1995 forthestartoftheaccession
negotiations withCyprus sixmonths afterthecompletion oftheIntergovernmental Conference, in
conjunction withthesubsequent confirmation ofthisdecision inallmeetings oftheEuropean Council
which followed, indicates theimportance attached bytheEUtoabalanced expansion tothesouth.
Theshaping ofthenewEuro-Mediterranean Partnership enhances evenmore therolewhich could
beplayed byCyprus asafuture member oftheEUforthesuccessful promotion ofthisdesired
cooperation.
52. TheaccessioncourseofCyprusandothercandidatemembersiscloselyassociatedwithimportant
developments intheEUin1996, particularly theinauguration ofthesessions oftheIntergovernmental
Conference, aiming atrevising theTreaty ofMaastricht.
A. PLANNED ACTION FOR THE PROMOTION OFACCESSION
53. Following theissue oftheAvisbytheEuropean Commission ontheapplication ofCyprus
forfullmembership,theeffortsforharmonisationandadjustmenttotheAcquisCommunautaireconstitute
apriority forGovernment policy. BoththeStrategic Development Plan1994-98 andtheFourth Financial
Protocol between Cyprus andtheEU,covering thesame period, areconcentrated ontheachievement
ofthisgoal.
54. Asfrom 1994, 22working groups were setupwith aview tostudy indetail the
Acquis Communautaire inrelation tothepractices inCyprus, identify possible divergences andprepare
aplanofaction forharmonisation. Thereports oftheworking groups werepresented totheMinisterial
Committee onEUmatters. These proceedings made clear thatasectoral approach onitsownwas
notsufficient tosatisfy thesettargets, andthatasynthesis ofthepartial conclusions andsuggestions
wasnecessary within aunified planofaction covering allsectors ofeconomic andsocial activity.
55. UnderthisunifiedactionplantheGovernmentofCypruswillundertakesectoralandintrasectoral
comparison andanalysis andwillproceed toanevaluation, priority ranking andclassification ofthe
proposed measures, according totheexpected impact ontheeconomy. Thebasic objective ofthe
harmonisation programme willbetheachievement ofthegreatest possible degree ofpreparation for
accession, withaminimization ofthepotential adverse repercussions.
VI. FUTURE POLICY DIRECTIONS
(i) Regional Cooperation -Harmonisation totheEuropean Legislation Practices
56. Theintensive efforts oftheCyprus Government during thelastfewyears foranadjustment
oflaws, institutional framework, administrative, infrastructure andorganisation andingeneral ofall
policies andpractices withtheEuropean Acquis, continued during 1996 bearing inmind thefull
development oftheproceedings oftheIntergovernmental Conference andthetimelimits setforthe
beginning oftheaccession negotiations. More specifically:
- Theworking groups proceeded tothepreparation ofaction plans andtheadoption of
harmonizationmeasures,suchaslegaladjustments,regulationsandtechnicalandsanitary
standards.
- Systematic efforts were undertaken sothatthenewbillssubmitted totheHouse of
Representatives comply withthecorresponding Community legislation.WT/TPR/G/25
Page 8Trade Policy Review
- During 1996 measures were implemented liberalizing, toagreater extent, thetrade
relations between Cyprus andtheEU,resulting fromtheratification ofthelatest GATT
agreement andtheparticipation inthenewly created World Trade Organisation.
- Furthermore, asfrom thebeginning of1996, newinstruments fortheexercising of
monetary policy were introduced within theframework oftheliberalization efforts
ofthemonetary credit system.
- Therealization ofharmonization studies inbasic sectors waspromoted, suchasland
andairtransport, shipping andoffshore activities, whereas thestudy on
telecommunications wascompleted.
- Anagreement ofcooperation wassigned between theMinistry ofFinance andthe
European Institute ofPublic Administration inMaastricht, aiming atexpanding and
deepening theknowledge oftheCyprus Government onEuropean subjects suchas
legislation,organsandinstitutions,publicadministrationandspecificpoliciesoftheEU.
- Inparallel, afurther participation ofboth thepublic andtheprivate sector in
programmes andinitiatives oftheEUwasmade possible.
- InJune1996, theprocedure forthesetting upofaEuropean Institute inCyprus was
completed. TheInstitute isexpected, through itsplanned information, research and
educational activities onEUissues, tocontribute tothedevelopment ofaEuropean
conscience andthepreparation oftheCyprus economy andsociety forasmooth
integration intheEU.
- Last, butnotleast, various programmes forthefamiliarization andspecialization of
thecompetentpublicandprivatebodieswiththeAcquisCommunautairewerecontinued
suchas(a)training onthejobofcivilservants attheEuropean Commission astothe
practical implementation oftheAcquis Communautaire andtheinternal operation of
theservices oftheCommission, (b)theorganizing ofeducational missions ofsenior
government officers totheEuropean Commission inBrussels, within theframework
oftheeducational programme forcivilservants from thirdcountries, organised and
financed bytheEU,(c)theorganizing ofinformative educational events/seminars in
Cyprus, withtheparticipation oftheprivate sector, onspecialized issues, suchasthe
research programmes oftheEU,thepolicy oftheEUforthedevelopment of
mountainous regions etc.and(d)theorganizing bytheAcademy ofPublic
Administration ofvarious introductory andspecialized courses onEUmatters, attended
byalarge number ofcivilservants.
(ii) Implementation offirstandsecond stage oftheCustoms Union Agreement withtheEU
57. Cyprus willimplement thefirststageoftheCustoms Union Agreement of1987, which provides
forgradual abolition ofallCypriot duties andquantitative restrictions onindustrial andanumber of
agricultural products originating intheEU,withtheexception forsome sensitive products, andthe
adoption byCyprus oftheCommon External Tariff forthesame products by31December 1997.
58. Customs duties arebeing abolished atarateof9percentperannum; bytheendof1997,
tariffs hadbeenreduced by90percentforcertain "sensitive" products theinitial ratewassetlow
tobeincreased progressively. TheCommunity abolished itsduties onindustrial products originatingCyprus WT/TPR/G/25
Page 9
inCyprus in1977. Duties onanumber ofagricultural products (mainly fruitandvegetables) originating
inCyprus were abolished bytheEUin1988 (forsome ofthem inthelimits oftariff quotas and/or
calendars).
59. Thesecond phase oftheCustoms Union Protocol (1998 to2001 or2002), provides forthe
elimination ofallremaining restrictions soastoachieve thefreemovement ofgoods covered bythe
Protocol. Rules oforigin willbeabolished, andsome principles oftheCommon Agricultural Policy
willapply toCyprus. Cyprus willapply therelevant agricultural policies andmechanisms ofthe
Community forthose products included intheProtocol. According totheprovisions oftheProtocol
Cyprus willapply alsosome otheraccompanying policies suchascompetition rules, stateaids,taxation
ofproducts andapproximation oflaws.
(iii) Sectoral Policy Direction
1. Domestic Support -Export Assistance toAgriculture
60. Under theWTO Agreement onAgriculture, Cyprus agreed toreduce levels ofdomestic support
toagricultural products fromatotalof£C58,4 million inthebaseperiod (1986-1988) to£C50,6 million
by2004. Thetotalaggregate measure ofsupport (AMS) in1995amounted to£C36,5 million, about
one-sixth ofagricultural value added. Significant reductions havetaken place inthetotaloutlay on
thefeedgrain subsidy, from £C17,9 million ayearin1989-91 to£C11,3 million in1995.
61. Export subsidies commitments ofapproximately £C9million inthebaseperiod (1986-1988),
mainly forvegetables, fruitandwinewillbereduced progressively by24percentby2004.
2. Anti-Dumping andCountervailing Measures
62. Cyprus hastaken sofarnoAnti-Dumping orCountervailing actions andhasnotified theWTO
accordingly. Itslawisintheprocess ofbeing amended inorder tobring itinlinewiththerelevant
provisions ofWTO Agreement andtheEUlegislation (Council Regulation No.3283/94 and3284/94).
3. Overseas andForeign Direct Investment
63. Anewpolicy governing foreign direct andportfolio investment wasintroduced witheffect
from 10February 1997. Restrictions onforeign investment havebeenrelaxed: thecurrent regime
allows foreign participation upto100percentinawider range ofactivities. Theprevious policy towards
foreign direct investment (firstsetforthinNovember 1986bytheCouncil ofMinisters) limited foreign
participation tominority control (49percent), withtheexception ofmanufacturing exclusively for
export. Thenewpolicy aimsatattracting more foreign direct investments toCyprus.
4. Insurance Activities
64. Cyprus hasmade commitments, according national treatment, inboththelifeandnon-life
insurance sectors during theUruguay Round negotiations. Allforms ofinsurance activities areopen
toforeign suppliers; thesector hasbeenfurther liberalized andisopen toforeign investment with
upto100percentforeign equity permitted under the1997 investment regime.
5. Agreements ontheReciprocal Promotion andProtection ofInvestments
65. TherightofpropertyissafeguardedbyCyprus'Constitutionwhichdoesnotdiscriminatebetween
citizens andnon-Cypriot aliens. Cyprus hasconcluded eight bilateral agreements forthereciprocal
promotion andprotection ofinvestments, while afurther 20areunder negotiation. In1996, CyprusWT/TPR/G/25
Page 10Trade Policy Review
ratified theConvention ontheSettlements ofInvestment Disputes between States andNationals ofOther
States administered bytheWorld Bank andisasignatory totheMultilateral Investment Guarantee
Agency Agreement which insures foreign investors against non-commercial risks.
6. Control ofConcentrations
66. ALawregardingtheControlofConcentrationsbetweenEnterprises,withnosectoralexceptions,
based ontheECMerger Control Regulation iscurrently discussed attheHouse ofRepresentatives
andisexpected tocome intoeffect during 1997.
7. Abolition ofPrice Controls
67. Price controls onbasic consumer goods were originally imposed during the1974 oilcrisis,
withaviewofrestraining inflationary pressures. Upto1994 theprices of62locally produced and
importedconsumablesweresetbytheMinistryofCommerce,IndustryandTourism.ByFebruary1997
thenumberofgoodsundercontrolwasreducedto14withtheviewofabolishingpricecontrolsaltogether
bytheendof1998.
8. Intellectual Property Rights
68. Laws toprotect intellectual andindustrial property rights inCyprus areextensive andmeasures
todealwithcases ofinfringement andcounterfeit havebeenenforced. Most ofthemaininternational
Conventions (Paris, Berne, Universal, Geneva, Trade Marks LawTreaty) havebeenratified byCyprus.
TheRegistrarforTradeMarksandPatents,intheMinistryofCommerce,IndustryandTourism,handles
registrations oftrade marks andpatents andimplements relevant legislation.
Trade Marks
69. Cyprus isadopting thenewinternational directives regarding registration procedures according
totheTrade Marks LawTreaty which willbesimpler andinlinewiththeinternational models.
Patents
70. Aforthcoming Patent Bill,toupdate thatinherited from theUnited Kingdom, willratify the
European Patent Convention andthePatent Cooperation Treaty andbring patent lawintoconformity
withtheWTOAgreementonTrade-relatedAspectsofIntellectualPropertyRights(TRIPS).Thechanges
required forconformity tobebrought about isthecreation ofanational registry, registration through
international search andnewprocedures. Cyprus isalsodrafting legislation toadopt theInternational
Convention fortheProtection ofNewVarieties ofPlants (UPOV). Under ourcurrent lawthere is
noprovision forcompulsory licence. Thenewlawprovides forcompulsory licence onlyifthepatent
isnotusedortheproduct isnotimported. Working ofapatent isallowed aftertheexpiration ofthe
patent protection (i.e.20years).
9. Promotion ofexports ofgoods andservices andoverseas direct investments tonew
andexisting markets
71. Cyprus willensure thatCypriot exporters capitalize onthebusiness opportunities presented
byanincreasing global market. This involves generating greater interest among exporters in
opportunities ininternational markets andattracting investment toCyprus. Cyprus willalsomaintain
theclose trade relationship withtheEUinorder totakeadvantage ofthebenefits thatCyprus derives
from itsmost important export market.Cyprus WT/TPR/G/25
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10. Research andDevelopment
72. Cyprus willbespecializing inspecific niches andinvesting inmore research anddevelopment
(R&D). Inaneffort tostimulate R&D activities theGovernment setupin1995 theFoundation for
thePromotion ofResearch, whose functions aretoextend grants forresearch projects inthePublic
orinthePrivate Sector, andtoadvise theGovernment onvarious issues related toR&D.WT/TPR/G/25
Page 12Trade Policy Review