RESTRICTED
WORLD TRADE WT/REG12/M/2
WT/REG13/M/2
ORGANIZATION WT/REG14/M/2
WT/REG15/M/2
WT/REG16/M/2
WT/REG20/M/2
8July1997
(97-2845)
Committee onRegional Trade Agreements
Ninth Session
EXAMINATIONS OFTHE EFTA-BULGARIA FREE TRADE AGREEMENT,
THE EFTA -HUNGARY FREE TRADE AGREEMENT,
THE EFTA -ISRAEL FREE TRADE AGREEMENT,
THE EFTA -POLAND FREE TRADE AGREEMENT,
THE EFTA-ROMANIA FREE TRADE AGREEMENT, AND
THE EFTA-SLOVENIA FREE TRADE AGREEMENT
Note ontheMeeting of17March 1997
Chairman: H.E. Mr.Miguel J.Berthet (Uruguay)
1. Themeeting wasconvened inWTO/AIR/549.
2. TheCommitteeonRegionalTradeAgreementscontinueditsexaminationsoftheEFTA-Bulgaria,
EFTA-Hungary, EFTA-Israel, EFTA-Poland, EFTA-Romania, andEFTA-Slovenia Free Trade
Agreements under agenda items B.Ithrough B.VI ofitsNinth Session. Themeeting tookupthe
following topics:
A. General remarks
B. Remarks specific toAgreements
3. TheChairmanrecalledthatexaminationsoftheEFTAAgreementswithIsrael(WT/REG14/M/1),
Hungary (WT/REG13/M/1) andPoland (WT/REG15/M/1) hadcommenced intheCommittee 'sFourth
Session. Examinations oftheEFTA Agreements with Bulgaria (WT/REG12/M/1),
Romania (WT/REG16/M/1) andSlovenia (WT/REG20/M/1) hadbegun intheCommittee 'sSeventh
Session. Updated questions andreplies were contained inmultisymbol document WT/REG12/2,
WT/REG13/3, WT/REG14-16/2, WT/REG20/2. Today 'smeeting would provide anopportunity for
delegations tomake further comments andraiseadditional questions totheParties totheAgreements.
A. General remarks
4. Therepresentative ofNorway, speaking onbehalf oftheParties totheAgreements under
examination, saidhehadafewintroductory comments ontheprocess oftheexaminations. TheParties
hadbeenhesitant tomeetfortheday'sexamination, since nonewquestions hadbeensubmitted to
them; buttheyhadbeenpersuaded todosobytheChairman andtheSecretariat. Thelackofnew
questions indicated thatthefactual partoftheexercise wasforallpractical purposes concluded. TheyWT/REG12/M/2, WT/REG13/M/2
WT/REG14/M/2, WT/REG15/M/2
WT/REG16/M/2, WT/REG20/M/2
Page2
hoped thiscould bethelastmeeting devoted totheexamination, andthatwhatremained wasonlyto
decide onconclusions. Thesummary records would beanimportant partofthereport.
5. Therepresentative oftheUnited States expressed satisfaction withthesummary records and
saidtheywould bequiteuseful. Inthefirstreview sessions foreachoftheAgreements, hisdelegation
hadraised concerns withregard tothevirtual exclusion ofagriculture from eachAgreement. The
concerns hadnotdiminished overthepreceding months, though theyweredulyreflected inthesummary
records.
6. Therepresentative ofAustralia saidthat,liketheUnited States delegation, herdelegation was
concerned overthevirtual exclusion ofagriculture from theAgreements.
7. Therepresentative ofJapan saidhewould needtocheck withhisauthorities before saying
thefactual partoftheexamination wasfinished.
8. Therepresentative ofNorway saidtheParties totheAgreements would address newquestions
during themeeting andprovide anyadditional responses inwriting. Nonewmeeting should be
necessary. Hereminded theCommittee thattheParties hadsubmitted theStandard Format aweek
inadvance ofthefirstphase oftheexaminations, andthattheyhadtriedtoaccelerate theprocess
previously byproviding information.
9. Therepresentative oftheUnited States saidhisdelegation viewed EFTA ’seffort inthe
examination process asthestandard which alldelegations should follow.
10. Therepresentative ofNorway responded tocomments bytherepresentatives oftheUnited
StatesandAustraliaconcerningthescopeissueandwhattheycalled"thevirtualexclusionofagriculture."
HesaidtheviewoftheEFTA anditspartners could befound inthesummary records ofearlier meetings
examining theirAgreements.
B. Remarks specific toAgreements
11. Therepresentative oftheUnited States requested eachoftheParties toindicate whether any
MFN applied ratesforindustrial andagricultural products hadincreased inthemonths sincetheprevious
meetingsexaminingtheAgreements.Regardingstatistics,therehadbeensomediscussionatthemeeting
of6November, during which hisdelegation hadnoted thatstatistics hadbeenprovided onlyfromthe
EFTA point ofview-i.e.EFTA imports fromandexports toitspartners. Itwasimportant toknow,
inthecontext ofassessing theimpact onthirdparties 'interests, theimportance ofEFTA trade and
preferential trade intheCentral andEastern European Countries (CEEC) markets. Tothatend,his
delegation hadasked fortrade datafromthesixnon-EFTA partners totheAgreements under review.
TheEFTA response hadessentially beenthatEFTA exports weretheequivalent ofthepartners 'import
data, andthattheParties wereconfident thatsubstantially alltrade wascovered byeachagreement.
Tothis,hisdelegation would respond thatexport datawerenotoriously unreliable andthatCommittee
Members needed tojudge forthemselves whether substantially allthetradewascovered. Hereiterated
therequest forimport datafrom thesixnon-EFTA partners totheAgreements, andsaidthathis
delegation would alsoappreciate, ifpossible, anupdate ofstatistics provided lastAutumn.
12. Therepresentative ofNorway saidtherepresentative oftheUnited States deserved recognition
forparticipating actively andpromoting transparency; however, itwould havebeenhelpful ifthe
UnitedStates'questionshadbeensubmittedinadvance.FromtheEFTAside,theanswertothequestion
onMFN applied rateswasthatnonehadbeenincreased intheintervening months. AsfarasstatisticsWT/REG12/M/2, WT/REG13/M/2,
WT/REG14/M/2, WT/REG15/M/2,
WT/REG16/M/2, WT/REG20/M/2
Page3
went, heunderstood theconcern fortransparency. TheEFTA delegation hadprovided updated
information lastAutumn andhadsaidthatexport datarepresented import dataforitspartners. At
thattime, thestatistics were ascurrent aspossible. Itwasimpossible forhisdelegation toprovide
more updated statistics, asthose for1996werenotyetavailable. Although theprocess ofexaminations
haddragged on,hisdelegation would continue toshedasmuch lightaspossible ontheissues raised.
Finally, hedidnotsubscribe totheviewthatexport datawere unreliable.
13. Therepresentative ofPoland saidthat,withrespect tostatistics, hisdelegation would appreciate
itiftheUnitedStateswouldclarifywhethertheNAFTAPartieshadsubmittedstatisticsforintra-NAFTA
tradeonapreferential basis, orforgeneral trade. Trade within afree-trade area(FTA) wasconducted
inproducts originally made inthearea. Inparallel, there could betrade onanMFN basisduetonon-
compliance withtherules oforigin. What typeofstatistics weresupplied bytheNAFTA partners?
14. Concerning therequests bytheUnited States delegation forupdated information, the
representative ofRomania referred totheproblem ofcustoms duties. Hisdelegation considered it
normal tohaveinformation ontrends ofrecent months. Atthelastmeeting hisdelegation saidithad
notincreased tariffs, andtoday, aswell, hecould indicate thatthere hadbeennosuchincreases.
Statistics were reliable, reflecting therealcontent oftrade between Romania andtheEFTA States.
Atthelastmeeting hisdelegation hadprovided statistical datashowing roughly thesame trends as
those given byitsEFTA partners. Hisauthorities weredeveloping integrated database statistics that
would reflect notonlythetotaltradeandgeographical dataofRomania, butalsoRomania-EFTA trade
trends. Thatinformation would besubmitted when available.
15. Inresponse totheUnited States 'request fortheParties toupdate statistics, therepresentative
ofHungary pointed tothebiannual exercise. TheCommittee should notbeoverambitious, asitwould
havesubsequent opportunities toreview developments intheFTA. Itseemed theCommittee had
exhausted thefactual partoftheexamination. TheCommittee wasnowdealing withartificial problems
andsystemic issues thatwould notbesolved within thecontext ofthisFTA. Ofcourse, hisdelegation
would respond toadditional questions ingood faith.
16. Therepresentative ofJapan saidthattariffs wereimportant intheanalysis ofconsistency with
GATT Article XXIV:5(b). Could theParties confirm thattheywould notraiseMFN applied rates
inthefuture?
17. Therepresentative ofEuropean Communities saidthattheParties might wishtoaddtothe
rulesoforigin response toquestion 19ofthemultisymbol document, sothatitwould reflect thewider
introduction ofEuropean cumulation overthefirsthalfof1997. Thatwould simply beamatter of
factual updating. Referring tothecomments bythedelegations ofAustralia andtheUnited States
concerning scope, heasked whether those delegations wereineffect rejecting theprinciple setoutby
theParties inparagraph 28.Paragraph 9noted thegeneral principle thatseparate bilateral arrangements
should becounted aspartoftheinstruments creating theFTAs. Thatwasapoint ofprinciple which
theCommittee might needtoconsider indetail. What weretheviews ofthose delegations asking the
question?
18. Therepresentative ofCanada referred totheremark bytherepresentative ofPoland regarding
NAFTA trade statistics andsaidthathisrecollection ofthatexamination wasthatthere hadbeena
series ofquestions andreplies, andthattheParties hadtriedtoupdate theinformation. Regarding
themoresubstantive pointonchanges inapplied MFN ratesbytheEFTA andotherParties, ataprevious
meeting theUnited States delegation hadquestioned Poland 'sraising itstariffs while negotiating the
FTA withEFTA. Theresponses sofarindicated thatnoMFN tariff hadbeenchanged since lastWT/REG12/M/2, WT/REG13/M/2
WT/REG14/M/2, WT/REG15/M/2
WT/REG16/M/2, WT/REG20/M/2
Page4
Autumn, butitwould beimportant toinclude inthefactual record whether anyoftheParties had
modified theapplied ratesince theentry intoforce oftheAgreement. Thispoint regarding thenature
ofthemargin ofpreferences wasimportant fortransparency.
19. Therepresentative ofAustralia saidthatherdelegation, aswell, considered itimportant to
indicate whether there hadbeen anychanges intariffs since theAgreement 'sentry intoforce.
ConcerningthescopeoftheAgreementandtheECrepresentative'sreferencetoparagraph28onbilateral
arrangements forbasic agricultural products, shenoted thatparagraph 9read: "The bilateral
arrangementsconcludedbetweeneachEFTAcountryandtherespectiveEFTApartnercountriesimproved
market access conditions either byeliminating orsignificantly reducing tariff barriers onagricultural
products covered bythese Agreements." Thesentence seemed tohighlight thedifference between
theFTAcoverage andthebilateral-arrangement coverage byconfirming thatoneappeared toliberalize
tradewhile theotheronlyreduced tariffbarriers. If,astheECsuggested, theCommittee should include
suchbilateral arrangements asFTAs, itneeded tolookagain atGATT Article XXIV, where the
exemption wastoallow forafree-trade area,nottoallow forpreferential trade. Under the"substantially
allthetrade" criterion (where, again, there weredifferences ofopinion), duties orrestrictions would
nothavetobeabolished onallproducts. Article XXIV provided nojustification fornon-zero tariffs
lower thantheMFN ratethatwereaimed atproviding amargin ofpreference. Article XXIV permitted
thecreation ofpreferences onlyinsituations where freetrade wasattained. Paragraph 28described
theprovisions under which theParties totheAgreements haddeclared theirreadiness tofoster, in
asfarastheagricultural policies allowed, theharmonious development oftradeinagricultural products
andtocontinue toachieve progressive liberalization ofagricultural trade. Given whatseemed tobe
thevirtual exclusion ofagriculture fromthefreetrade scope oftheAgreement, herdelegation would
beinterested inreceiving areport inwriting fromtheParties astowhathadbeenachieved inthisarea,
astowhatstepswerecurrently being taken tofurther liberalize agricultural trade, andastowhatfuture
plans theParties hadinthatregard.
20. Therepresentative ofNorway saidthere were anumber ofquestions thattheParties would
wanttoanswer indetail. Intheinterest oftime, andbecause thequestions hadnotbeensubmitted
inadvance, hisdelegation preferred torespond tothequestions inwriting. Many ofthese subjects
hadbeentouched onalready inother examinations, forexample thetopicofcumulation intheEFTA-
Baltics examination.
21. Therepresentative oftheUnited States asked ifanyadjustments totheEFTA-Bulgaria FTA
hadbeen necessary asaresult ofBulgaria 'saccession totheWTO. With respect totheEFTA-
Poland FTA, thePolish delegation hadsaiditdidnotseeanyArticle XXIV conflict initshaving
increased applied tariffs when negotiating theFTA. TheUnited States delegation, however, wasof
theviewthatthere wasindeed aconflict. Could thedelegation ofPoland explain why, initsview,
raising applied ratesduring thenegotiation oftheFTAwasconsistent withArticle XXIV:5(b)? He
thensaidthatheappreciated theCanadian representative 'sresponding tothequestions pertaining to
theNAFTA.
22. Therepresentative ofJapan saidhisdelegation shared theUnited States 'concern overPoland 's
raising theapplied ratesduring negotiations.
23. Therepresentative ofBulgaria saidthattheresponse tothequestion putforth bytheUnited
States representative wasno,there hadbeennoneedforadjustment aftertheaccession ofBulgaria
totheWTO. TheBulgaria-EFTA FTAhadbeenadjusted tohonour thespirit andrequirements of
theWTO before Bulgaria entered theOrganization. Infact,Bulgaria hadhadobserver status inthe
GATT since 1967 andhadalways abided byitsprovisions andrequirements.WT/REG12/M/2, WT/REG13/M/2,
WT/REG14/M/2, WT/REG15/M/2,
WT/REG16/M/2, WT/REG20/M/2
Page5
24. Therepresentative ofPoland saidthatinhisview thesummary records reflected what had
taken place attheSeptember meeting. Henoted thatthere hadbeennoreaction atthattimebythe
United States delegation totheposition taken bythePolish Government. Hisdelegation hadreceived
thequestion, which hadbeenpromised atthatSeptember meeting, onlytoday; itwould answer itin
duecourse.
25. Therepresentative ofKorea saidthat,intheinterest oftransparency, hisdelegation would
appreciate itifthewritten communications could bedistributed toother Members, aswell.
26. Therepresentative oftheUnited States saidhisdelegation wished toexpress dissatisfaction
witharecurrent problem intheexamination process. ThesixAgreements under examination were
essentially thesame -eachhadcertain unique provisions, butthebasic Agreements were thesame.
Each oftheParties tothose Agreements wasparty toanumber ofother agreements, forexample
agreements withtheEC,theCEFTA, theBaltics, theFaroe Islands, etc.Moreover, some countries
(i.e.Austria, Finland andSweden) hadleftonegrouping andbecome partofanother. Inthereviews
ofallthose Agreements, hisdelegation hadposed questions related totheoverlap ofthevarious
agreements. Representing acountry outside thisnetwork ofagreements, theUnited States delegation
considered itimportant toknow howthose agreements worked witheachother. AttheCommittee 's
meeting of6November, inresponse tocomments made byhisdelegation about the"web ofEuropean
agreements,"therepresentativeofNorwayhadnotedthatthiswasaglobal,ratherthanstrictlyEuropean,
phenomenon. Yes,regional tradeagreements (RTAs) wereinallpartsoftheworld, butnowhere else
hadthere beenthesame typeofnetwork, which involved virtually every country inEurope. Itwas
inthiscontext thathisdelegation hadasked, asithaddoneineachreview, foranindication ofthe
shareoftradecoveredbypreferentialarrangements,brokendownbyagreement,foreachofthepartners.
Previously, therepresentative ofNorway hadopined thatthisquestion wasnotrelevant totheparticular
discussion, butmight berelevant elsewhere. TheUnited States 'frustration wasthatthispartofthe
discussion didnotseemtomove forward. Thiswastheforum Members hadforexamining agreements.
Inhisdelegation 'sview, itwasrelevant, atleastinterms oftransparency, todiscuss theoperation
andrelationship ofsimilar agreements. Hisdelegation would likethisdiscussion tomove forward
andthus, intheinterest oftransparency, wasasking forthestatistics onshares ofpreferential trade.
27. Therepresentative oftheEuropean Communities requested clarification onthepoints made
bytheUnited States representative. Wasthedelegation oftheUnited States asking thepartners of
arange ofEuropean preferential agreements toallocate actual trade toparticular agreements? Orwas
thedelegation requesting arestatement ofthepercentage oftrade liberalized inaseries ofessentially
bilateral orregional arrangements? Iftherequest wastheformer -allocating actual tradetoparticular
agreements -thetaskwould bedifficult. Toillustrate, incircumstances where theMFN tariff was
zeroandtherewastrade, itwould beamatter ofarbitrary choice astowhether thepreferential agreement
ortheMFN ratewasusedasthebasis fortheallocation. Hewasunclear astowhattheunderlying
point was. Heunderstood thatthere wasconcern that"thewebofEuropean agreements" appeared
complicated andconfusing from theoutside; butthere wereprocesses which wereintended tomake
thesituation clearer, suchasthedevelopment oftheconcept ofEuropean cumulation. Hewould
appreciate itiftheUnited States delegation would provide further insight astowhatthequestion was
driving at.
28. Therepresentative oftheUnited States saidthetwodelegations could discuss thematter
informally andthenmake available anyclarification.WT/REG12/M/2, WT/REG13/M/2
WT/REG14/M/2, WT/REG15/M/2
WT/REG16/M/2, WT/REG20/M/2
Page6
29. Inrelation totheUnited States 'point, therepresentative ofJapan saidthatthepartners tothose
RTAs werestillWTO Members and,assuch, wereobliged toabide bytheWTO rules. Between the
multilateral trading system andRTAs, which were theygoing toattach priority to?
30. Therepresentative ofNorway agreed withthestatement bytherepresentative oftheEC
responding totheUnited States request forstatistical information ontradeinside thewebofagreements.
Theexercise being conducted wasaprocess ofexamining individual FTAs, notanexercise inexamining
awebofagreements. Hesaidhewassympathetic totheUnited States 'desire tounderstand these
aspects, buttherewasnodoubt that,individually, theAgreements wereconsistent withArticle XXIV.
TheEFTA countries hadtriedtocontribute asmuch clarity aspossible byproviding answers toany
questions submitted. Prior tothismeeting, there hadbeennonewquestions submitted. Thenew
cumulation aspect oftherules oforigin made iteasier toseetheconsequences ofthenumerous
agreements thatexisted. Hisdelegation wasprepared todiscuss thesequestions inthesystemic context.
Regarding theJapanese inquiry astowhich theParties attached priority to-themultilateral trading
system orRTAs -theanswer was"both." Hecalled attention tothechapeau ofeachoftheAgreements,
which emphasized thatnothing intheAgreements should conflict withtheprovisions oftheGATT/WTO
system. Thiswasimportant toEFTA anditspartners. TheFTAs hadbeennegotiated atthesame
timetheUruguay Round negotiations hadtaken place, sotheParties hadhadbothofthose tracks in
mind.
31. Therepresentative ofPoland wished tosupplement theremarks bytherepresentative ofNorway
concerning RTAs andthemultilateral trading system bysaying thattheParties 'viewwaspartofthe
consensus expressed intheSingapore Ministerial Declaration.
32. Therepresentative ofNorway wished tosaydirectly thathisdelegation sawFTAs andthe
multilateral trading system ascomplementary toeachother andnotinconflict. Much ofthedynamism
infreetrade around theworld hademanated from RTAs.
33. Therepresentative ofHungary saidthat,regarding theEuropean network ofFTAs, theonly
relevant issue wastowhat extent theParties 'FTA wasinconformity withArticle XXIV. The
coincidence ofother FTAs would beinteresting inanother forum.
34. TheChairman saidthatthiswould bethefinalmeeting fortheexamination oftheseAgreements.
Thedraftconclusions would beunder consultation assoonaspossible.
35. TheCommittee tooknoteofthecomments made.